Would you use a financial advisor?

NEW -> Contingent Buyer Assistance Program
I tried to. I went to American Express, they offered me one free consultation.





After quietly reviewing everything I brought for 10 minutes, the gentleman basically told me there was nothing he could do for me. He said, "You've done everything right. In fact, you have more saving than I did when I was at your age."





Well, he did give me one very useful advice - he gave me the phone number of a great tax guy. I was too young and too stupid not to hire a professional to do my tax.
 
I think advice is a good thing. It's always good to get other people's opinions. I laugh when I see these commercials that rip on commissioned brokers and make it seem like "you" can do better.





I actually saw a commercial that made me almost vomit. They were showing the trading pit on the NYSE/CBOE and in each shot was a plain-clothed person putting in orders. All the traders would stop what they were doing and look at this person with a WTF look on their faces. After about 3 or 4 shots of these people a voice-over comes on and says......





"Put your money in the best hands....your own."





Gimme a break. Some advisors make bad decisions, but these people went college for years and have worked in this industry for years. This is their profession! Yet a housewife w/3 kids is supposed to be able to make better investment decisions.
 
Considering how many actively managed portfolios and funds have negative alpha, I do wonder if 80% of Wall Street's Wise Men would've been better off waiting on tables.
 
<p>Heh heh eff..... </p>

<p>Like my grandfather used to say, "If they were that smart, they wouldn't still be stock brokers, they'd be rich" !</p>
 
I don't use financial planners, although I put in the instructions to my wife in my family trust for her to go to one if I die. I am a believer in "for fee" financial planning as they are not going to sell you a bunch of crap mutual funds that provide them healthy fees.
 
Eva - I am not taking new clients and try to talk most folks into using TurboTax. Except for Marty, everybody in here is smart enough to do their own taxes using TurboTax. Just kidding Marty.<p>


Seriously, tax returns are not so challenging or interesting. I much prefer audit representation and except for one exception recently, I only take audit rep for new clients. And I prefer audit rep compensation.
 
<p>Awgee,</p>

<p>Why not take audit rep for old clients? If someone screwed up on their tax filing. They basically just need to pay up? Or through representation, they can avoid paying? </p>
 
Janet - I will give you a hint. Knowing IRS procedures and how to use them to one's advantage is the best knowledge for negotiating a better than equitable solution for one's client. Tax code is tax code and gray becomes black and white during investigation, but knowing what the other side needs is paramount, and profitable.
 
reason - I will admit, I do not completely understand your questions, but here is a stab.<p>


<i>"Why not take audit rep for old clients?"</i> Wow! I certainly hope none of my current clients need audit rep. They may receive a notice, but that is usually because of an IRS mistake, or a call for doc.<p>


<i>" If someone screwed up on their tax filing. They basically just need to pay up?"</i> Usually a taxpayer has lied or has gotten bad advice. Either way, they will have to pay something, but if there is enough money on the table, there are tactics and strategy used to pay less than total compliance would dictate.<p>


<i>"Or through representation, they can avoid paying?"</i> With few exceptions, the taxpayer will alway pay something, but an IRS reviewer's motivation is not only amount based. And I don't think I am willing to share what other motivations they have. And no, I do not bribe or coerce IRS reviewers. I am strictly legit and legal.
 
<p>My guy is really good but if things start to get complicated awgee better be willing to take me as new client. </p>

<p>As for financial advisors I personally do not need one. I also wouldn't always take my investment advice. But you will know you need one when you are willing to pay for a fee based planner. They offer more than investment advice with advice on trusts and various legal ways to either avoid or limit estate taxes. More and more planners are using ETFs as part of their financial plans. Since they are fee based they can't double dip so to say and collect a commission along with the fee. Most are compensated quarterly by 25bps on the value of your portfolio. So they are more motivated to take your $1mil portfolio to $1.5mil rather than tell you to move from fund to fund to collect a commission.</p>

<p>I would say if you have a net worth excluding the paper money of your home of $200k or less you should be fine on your own. There plenty of sources to do research these days. I hate to tout CNBC but if you watch Fast Money you can learn more in one hour than you can in a month with Cramer. Eric Bolling makes the best calls of all of them. </p>
 
The financial planning community likes promoting solutions that are advantageous to them as alluded to in this thread. Favorite strategies:





1) Sell insurance policies -> More "assets under management." It is a bad idea in general to invest in whole life insurance but selling once you're in such an asset is not always the best idea.


2) Invest client assets in things with high front end loads! Something like Wells REIT that pays a juicy 4% front end load to the planner (16% total front end load!?) and has a fixed value is particularly attractive.


3) Sell illiquid assets. If you can't value the asset you can't derive fees from it. So say bye bye to limited partnerships, family businesses and the like





I am a fan of ETFs and CEFs to gain exposure to specific market segments but investing in something like Vanguard funds that offers diversification with low management fees and minimal front/back end loads is usually the best solution in the long run. I can assure you I am very unlikely to invest in a hedge fund or actively managed fund and pay 2 and 20.
 
<p>I would love to have a good financial advisor to recommend to friends in OC. I get asked this question at least once a week! Usually they just want me to advise them. But once you start doing that, it involves constant followup. I don't need that responsibility.</p>

<p>I recently found this calculator which measures annual return not the annualized return mutual funds like to advertise. </p>

<p>http://www.moneychimp.com/calculator/compound_interest_calculator.htm</p>

<p>I found out that BRK-A /B has a 12.5 % return for the last 10 years. That's more than 3X your money in 10 years. If I had known, I would gladly forgo the extra few percentage points and gained about 30 hours a week, every week for the last 10 years....</p>

<p>To figure out how your portfolio is doing</p>

<p>http://www.moneychimp.com/features/portfolio_performance_calculator.htm</p>

<p> </p>
 
<p>Sorry hit return too soon. </p>

<p>Most highly compensated people don't need financial advisors. There are plenty of good advice on the Internet. </p>

<p>But you do need a lawyer to help with </p>

<p>a living trust and will, especially if you have kids/real estate.</p>

<p>a durable power of attorney in case you are incapacitated</p>

<p>a medical directive so your family knows what you want if you are in a coma </p>

<p>But free advice is just that, you get what you paid for.</p>
 
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