(Article by new PF blogger, Tiffany, who ranted earlier about people thinking she was rich ;))
I just broke up with my financial advisor. Or to put it better – I tried to break up with my financial advisor. There’s something about the ‘it’s not you, it’s me’ sequence that is just so lacking, but in reality there are no better words for it. Many people think that the very role of a financial advisor provides a conflict of interest with that of the client, but I think it really comes down to what you want to get out of the ‘relationship.’
For me, this desire to ‘break’ represented my venture into adulthood – my desire to take control of my life finally. You can only read so many books on finance before you go stir-crazy. I don’t consider myself a controlling person (as far as other people) but when it comes to my own life, heck yes I am!
This has been a pretty recent development, but I think one that is right on time given that I’m still fairly young. When you think about it, baby birds don’t learn how to fly by reading or listening to other people (ahem, birds) – they get either get pushed or coaxed out of the nest and learn to fly PRETTY DARN QUICK or fall into the depths. Gruesome image, I know , but it’s one that illustrates exactly how some kind of learning has to progress. At least this has been my learning style.
You may remember J. Money posting about whether I truly knew enough to be managing my investments or not. I’m that “I”. And this is kind of the result of that period of reflection. It is definitely less stressful to have someone else manage your money for you, but I decided to change my strategy (less active trading, more buy and hold/rebalance when necessary). I still don’t maintain to know anything about investing beyond the basics (and even then I get tripped up), but my long-term goals were to eventually manage the account myself. And letting more time pass where I wasn’t actively involved was just kind of putting off the inevitable for me.
It’s now or never, baby!
So this wasn’t so much the decision I knew I had to make – but more the look of shock on my advisor’s face and her immediate exclamation of “What?!” that made me walk out those doors and mope the rest of the day. Despite the fact that everything was civil and professional, I still felt horrible as if I was letting her down or not trusting her judgment.
I’ve learned though that it is through tough and challenging situations that demonstrates a person’s true colors. I’m still working with my advisor, and will most likely continue to do so as she has proved her mettle and counseled me as she would her own daughter (her and my mom are friends, so it’s really not so farfetched), but from now on I’ll be the only one making the final decisions in my portfolio. It will no longer be actively managed. We’re still smack dab in the middle of decisions, but I’m hopeful as well as glad that this relationship has remained intact – and perhaps it will even strengthen.
Any of you manage your own accounts too? Or do you rely upon a manager?
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Tiffany, the author of personal finance/lifestyle blog Extraordinary Reasons, was inspired to start writing upon the realization that many of her peers were going through similar situations regarding money, budgeting, and life decisions. She feels compelled to share what she has learned, both from her personal experiences and under the wonderful tutelage of her super frugal mother. Her other passions include real estate and social entrepreneurship, and she maintains that she wouldn’t be where she is today without the amazing support of her loving friends.
[Photo by miguelpdl, tweaked by J$]
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I manage my own accounts. If I handed over my life to a financial adviser, he or she would dump me on the same track as everyone else. Under-performing index funds and retire at 65. By managing my own money I can work towards beating the market by buying stocks based on valuation and I can work towards hitting financial independence by age 45.
I hope by not being actively managed, but sticking with the advisor, you have arranged a lower fee arrangement?
Yes Lance, that is the case. It is really the “active management” definition that makes the fees so high. I’ll still be with the same company and same advisors, but they will be providing guidance rather than making the decisions. All I’ll be responsible for is a yearly account fee (it’s something like $100 per account) and associated transaction costs – which, yes, is still more than some COMPLETELY self-managed accounts, BUT I will be sort of getting the best of both worlds, and no more 1% account fee so I thought it was a pretty good compromise :-)
Yes, at the moment we pretty much handle our own investments. However, that may be changing in the future simply because we don’t have as much time to research them as we used to. However, while we will listen to our advisor’s advice, we would always make sure that we had the final decision.
I manage my own investment portfolio. Those financial advisors are a horrible, evil group of people I’d never been seen around. I think they have halitosis, too.
Wow, tell us how you really feel! ;)
I do both. I manage about half my portfolio and have someone else manage the other half. He is very good at what he does and because he also works with my dad his fee is extremely low. I don’t get hit with transaction fees and he does what I want him to do. I am probably his smallest client, but he still always takes the time to talk to me when I call (probably because of the relationship he has built with my dad over the last 15 years).
I guess I am just not as anti-advisor as some people are, but then again I’m not dealing with someone who is really just a glorified salesman.
That’s a good way of doing things – the half and half route. I like that.
I would second Lance and hope that maybe you got a lower fee arranged. But, then again, with her being a family friend I can understand if it might be tricky to broach that. We manage our own investments as I am more comfortable with that and have a pretty good background with investing. If we did have an advisor it would be to help save us time, but would make sure it would be with someone who was along my same lines of thinking.
John, I like that you know what you would want from an adviser and I also like that you would use what they say as ‘advice’ and still exercise your own judgement, that’s great :-) you are the kind of client advisers want!
I work in a financial planning office and it’s extremely hurtful when all financial advisers get lumped into an ‘evil’ bunch of people. Despite what some people think, we’re not all out there trying to rip money out of people, just like not every mechanic is out there trying to confuse females and not every car salesperson is trying to sell you a lemon for big bucks (BIG GENERALISATIONS).
Financial planners / advisers exist to serve a purpose – to help provide guidance to people who don’t have the time, interest or understanding to manage their finances to reach their goals. THINK about exactly what YOU WANT to get out of your relationship with your adviser. Not everyone will need or want the same kind and level of service. If you aren’t getting what you want, then ask for it. If you still don’t get it then ask why not? Treat your adviser like a person and give them a chance to give you the service you want. They aren’t mind readers. If you are still not happy then check out other advisers and give them a call or pay them a visit. It usually costs nothing to have a chat to an adviser about what you would like to achieve.
One more thing… advisers need to pay bills, put food on the table for their families and make a living too. If you think your fees are too expensive, ask your adviser HOW they calculated them. We have spent time working out how much it costs us to provide each part of our service so we provide our clients with a break down of how we’ve calculated the fees. You might be surprised how much work actually goes into providing you with a service. Good advice is not quick or easy (and is not cheap to provide). It takes a lot of education, experience, time, genuine interest in our clients and ongoing effort.
Agreed!! Not all advisers are the devil :) Good for you for standing up and saying so – I was hoping we’d get some advisers in the commenting mix, so thanks for sharing!
We have an advisor who is the daughter of the man that took over management of my late father’s investments 20+ years ago after the former manager passed away. She took over once he retired. So there’s a long family connection, and I think she does pretty well, though it’s a little harder since we live a state away. Her strategies seem to match our long term goals. I’ve considered moving our investments to a advisor we know closer to home, but either way I’m not inclined to manage things myself. I don’t have the time to become an expert, and that’s what we need.
I manage my own invesents. I have etfs right now but may branch into individual stocks at some point.
I managae my own accounts currently, but we also don’t have a ton of liquid assets at this point. We’ve been paying down our debt, so we don’t have a ton of investments. That being said, I think I’ll always want to manage my own accounts. I may go to a financial planner for a session or two (flat fee) to get their opinion on what to do, but then I’d go do it myself.
I’m surprised no one has brought this up: there are lots of different types of Financial Advisers. There are those at a brokerage house who really are just salesmen, who make a commission off selling you certain things and have no incentive to give you whats best for YOU. And there are those percentage guys, who make more money the more money you have, so they do have an incentive to grow your money (but once you have a lot of money, they are making WAY more than is appropriate). And there are the advisers who are ‘flat-fee’, meaning you have your money wherever you want it, and you pay them to sit down once a year, or once a quarter, or whatever you are comfortable with. And they don’t care if you are a gajillionaire or just starting out, because they make the same hourly rate regardless. And they tailor their advice based on whats best for you, so you keep coming back to them. Its inherently trust-building.
Find one of these guys and then you can have the best of both worlds: control over your money, and expert advice on how to manage it from someone who is not trying to sell you anything. http://garrettplanningnetwork.com/ (And no, I don’t work there.) I’ve had a great experience working with one of their CFPs.
Exactly. My advisor was “a percentage guy,” so they made more money the more money I had. I can’t remember if this was in my post regarding managed vs. unmanaged accounts, but I was a little more comfortable with having my money professionally managed given that fact. There’s no way I would go with a broker. I’m not completely naive though and I realized that there might have been some incentive plans that I wasn’t aware of, which is why I decided to go my own way but still keep them around. Mostly because — and this is a huge reason — I learned enough on my own to figure out that they ACTUALLY knew what they were talking about. I came to them with one plan, and they said well that may not work for YOU specifically and here’s why… and that really added to my trust in their judgment. But at the end, it’s still ME that controls what happens.
Very true! Lots of different kinds of advisers out there – good reminder.
Unrelated, but I have experience with “trying” to break up with someone. My second girlfriend refused to let me break up with her! The farce went on for another month before it ended VERY badly.
As far as financial advisers go, I’ve never had one. I don’t know much about investing, but my resources and my goals are pretty modest. An adviser would probably cost more than any return I could get from them.
Edward, that’s the worst! Glad you were able to finally get away…. refusing to break up with someone reeks of desperation. I mean I know nobody WANTS to break up (for the most part) but REFUSING to??? Hmmm…
At first, that’s kind of how I felt… I know it’s in their best interests to keep me around. Nobody wants to lose a client. I felt like during our initial discussion when they suggested our ‘compromise’ that I was being a pushover, but I realized that I still could benefit from having mentors that have years of experience behind them in the financial sector.
Haha… I tried breaking up with someone once too who wouldn’t allow me to :) And actually I had the same outcome as you did too! One month later I finally cut it off for good and she went all crazy on me – threatening to slash my tires and all kinds of stuff, it was wild.
Btw have you ever seen that Seinfeld episode on this same stuff? Haha… hilarious. http://www.youtube.com/watch?v=vKQHJaGmkSw
Tires? pfft. She threatened to slash my neck!
I manage my own accounts and investments. I cannot trust financial advisers enough to manage my money. I simply find their strategies ridiculous and not applicable to my situation and goals. I would rather do it on my own. Besides, I do not have much assets yet. And should I fail (knock on wood), I would only put the blame to myself and not other people.
Here’s the question that swung me: will you ask a realtor to look for a house for you, then buy it, then just call you when it’s all done, with the address and the move-in date? No, even though you don’t know much about houses, you make it your business to find out everything you need to know. Why? Because you’re the one going to have to live in it. And it’s not rocket science.
If you make the effort to schlep from house to house when you’re shopping, why not do that for your investments? Investing is not that much different from buying a house. (Hey, come to think of it, buying a house IS an investment). Granted, you have many more options, but fundamentally, it’s not all that different.
William, that’s a good point, and fundamentally why I made the move that I did. I’m young and to be honest I didn’t really want to have to worry about my investments too much (especially while still in school, etc.) But I got to that point where there’s not much more I could learn short of doing it myself. You know like when you start a job — you can only go through so much training before you just have to go on the floor and DO it. And having to navigate it all yourself is the best kind of learning you can get (in my opinion). So, that’s why I just bit the bullet and did it, even though professionally I’m not in the “right place” yet. Oh well, I have to learn now – no choice!
Good analogy but you have to LIVE in your house where you don’t with your money :)
I have always managed my own accounts. When I first started I definitely had no idea what I was doing. I just started small and expanded operations over time. Now I’m still pretty young (28) and I feel absolutely comfortable with managing my financial life.
I selected my 401k investments after consulting some professionals for advice. My Roth IRA is professionally “managed”, though I haven’t spoken in person with my advisor for year. Should probably do something about that, even though there’s only like $15k in there…
I always forget to call for re-evaluations too! We should probably put it on the calendar or something yearly so that we’re reminded a lot easier :)
I do my own investments. I and I alone must bear consequences for better or worse.
I think both options are valid — getting a financial advisor or going at it alone. They appeal to different people with different interests, skills, goals and desires — but both are totally valid choices. I’m glad that you were able to think through it clearly and make the decision that was best for your personal circumstances.
Oh totally. I would have walked away from her ages ago (unless she’s doing it for free). It’s tough to consistently make up the difference in fees that a manager brings along.
I signed up with Learnvest. I really like it so far. I got an asset allocation, but I do my own actual trades and find funds/stocks based on what they recommend in the general allocation.