Jump to content


Photo

How To Find The Right Financial Pro


  • Please log in to reply
40 replies to this topic

#31 davegrant82

davegrant82
  • Members
  • 74 posts
  • Gender:Male
  • Location:Cary, IL

Posted 16 February 2017 - 11:37 AM

I think we'll disagree on this topic until our dying days Steve :)

 

"the industry knows they can make more money with the AUM model! " Yep, that's true. Flip side - I'm also doing more work than a commissioned broker, so shouldn't I be earning more?

 

You're leaving out the behavioral side of finance here, Steve. Yes it may cost 1% or another fee to hire an advisor, but there's also been studies on "advisor alpha". These show by the very fact that you've hired an advisor, they will protect you from making mistakes when you get nervous about markets, life, etc. This can make up more than the fee you've paid in the long term. 

 

Like I said, we could go on for days discussing this, but I think you're the most passionate investor I've met in a long time. Not everyone has your desire!



#32 KFord

KFord
  • Members
  • 95 posts

Posted 16 February 2017 - 04:07 PM

I'm sure Steve will disagree with this linked article below.(written for advisors)  But my 20+ years of advising individual is that investing is too emotional for the majority of individuals(& even most professionals)  Fear & greed are powerful forces that most can't control. Most advisors sell products on fear & greed so they are adding to the problem.

 

So call it "stuck btw a rock & a hard place" 

 

https://realinvestme...s-for-advisors/

 

But the advisor who can help the client control their emotions is worth ever penny he is paid.

 

I leave you with the latest example:

 

"The net inflow for U.S. stock funds hit its highest monthly total since April 2000, at $27.8 billion. Taxable bond funds saw overall net inflows of $14.6 billion in December."

 

http://retirementinc...016-morningstar

 

So individual investors have sold out of bonds because they just experienced the greatest correction since 1994 &  investors are piling into US stocks at the greatest pace since the 2000 bubble. (FYI: we are in the 8th  straight year without a decline of 20%)

 

Is it logical to sell low (bonds) & buy high (stocks)?  In investing,  logic is rarely used ......Fear & Greed drive the decisions of investors.

 

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful." -Warren Buffett

 

good luck to all

 

KF



#33 tony

tony
  • Members
  • 3,331 posts

Posted 16 February 2017 - 05:54 PM

Ken

 

Glad to hear from you.



#34 sschullo

sschullo
  • Members
  • 4,227 posts
  • Gender:Male

Posted 18 February 2017 - 12:10 AM

I'm sure Steve will disagree with this linked article below.(written for advisors)  But my 20+ years of advising individual is that investing is too emotional for the majority of individuals(& even most professionals)  Fear & greed are powerful forces that most can't control. Most advisors sell products on fear & greed so they are adding to the problem.

 

So call it "stuck btw a rock & a hard place" 

 

https://realinvestme...s-for-advisors/

 

But the advisor who can help the client control their emotions is worth ever penny he is paid.

 

I leave you with the latest example:

 

"The net inflow for U.S. stock funds hit its highest monthly total since April 2000, at $27.8 billion. Taxable bond funds saw overall net inflows of $14.6 billion in December."

 

http://retirementinc...016-morningstar

 

So individual investors have sold out of bonds because they just experienced the greatest correction since 1994 &  investors are piling into US stocks at the greatest pace since the 2000 bubble. (FYI: we are in the 8th  straight year without a decline of 20%)

 

Is it logical to sell low (bonds) & buy high (stocks)?  In investing,  logic is rarely used ......Fear & Greed drive the decisions of investors.

 

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful." -Warren Buffett

 

good luck to all

 

KF

 

Hey Ken,

Haven't heard from you. How are the precious metal sales going for you? :- ) 

One answer to address emotions is Vanguard. The 20 million clients are pretty stable, and will not likely bail when the market gets shaky. I am confident you read that VG went over $4 Trillion in assets!? FOUR TRILLION! The word is getting around with more studies, books and even the financial media is chiming in that costs matter, and to make it very, very simple, use the passive strategy, ALWAYS! I simply love it. I am in good company with millions of rock solid investors. Did I mention that my expense is .07%, paid for going 100% green with solar energy and electric cars, home remodeling, trips abroad and my portfolio is higher than it was when I retired 8 years ago. It's the extremely low investment costs that I saved that matters. That alone is worth my time being a DIY. 

 

Happy Presidents day weekend,

Steve


Steve Schullo

Author and Co-Author of two books:

1. Late Bloomer Millionaires: A Financial Story and Investment Guide for the Late Starter (2013)

2. Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (2015)


#35 sschullo

sschullo
  • Members
  • 4,227 posts
  • Gender:Male

Posted 18 February 2017 - 12:27 AM



I think we'll disagree on this topic until our dying days Steve :)

 

"the industry knows they can make more money with the AUM model! " Yep, that's true. Flip side - I'm also doing more work than a commissioned broker, so shouldn't I be earning more?

 

You're leaving out the behavioral side of finance here, Steve. Yes it may cost 1% or another fee to hire an advisor, but there's also been studies on "advisor alpha". These show by the very fact that you've hired an advisor, they will protect you from making mistakes when you get nervous about markets, life, etc. This can make up more than the fee you've paid in the long term. 

 

Like I said, we could go on for days discussing this, but I think you're the most passionate investor I've met in a long time. Not everyone has your desire!

 

Hi Dave,

There is another side too. I spent four hours this morning with my friend who uses a fiduciary fee-only adviser. He uses a program that in my opinion makes the investing process more complicated. It was a lot of Monte Carlo simulation data to keep my friend from running out of money before the end. The program is about 50 pages long and her portfolio is very simple. I had a difficult time trying to figure out something simple and important, like last year's return! I made 5.9% (30% equity and 70% bond) and she made 7.2%, (We finally found it). But she has a 56% equity and 44% bond split. That is risky for a 66-year-old IMO. According to Vanguard model portfolios, her allocation should have returned 8.5% for the amount of risk she was taking. The other problem is that her adviser gets hyper when she asks him questions! She does not like HIS EMOTIONS! She deserves to get her questions answered, in a calm environment, don't you think? He fires back with a lot of data and complications.

 

I was not clear on why he is providing all of this data on a fairly small portfolio that is diversified with low costs. I showed her how I monitored my portfolio on M*. 

She is looking to dump him and just put all of her money in Vanguard Wellesley. She felt a sense of relief because she understands what she is getting into while her fee-only fiduciary adviser is not helping with her emotions. She called Vanguard and is thinking seriously about moving her money to them. Just watching her saying that she felt a sense of relief. 

 

In this situation, it looks like an adviser raises the emotional level rather than reduces it! 

 

In fairness to the adviser, I don't know why my friend hired him in the first place. She knew enough, and I told her that before. I think she is gaining confidence especially with something like a very simple balanced fund Wellesley. I have my Roth in Wellesley, its a GREAT investment, returning 8.0% in 2016.

 

BTW to all investors, Wellesley is now open to new investors. 

 

Steve 

 

I realize this is a dramatization, but a picture is worth you know what. I am learning how fee-only fiduciaries work with clients, and sometimes making the process and the relationship too complicated. Some of my friends are happy with this particular FA. But not Janet. She wants it simple. Janet and I are a bit overwhelmed by the sheer amount of data: 

 

IMG_3237.jpg


Steve Schullo

Author and Co-Author of two books:

1. Late Bloomer Millionaires: A Financial Story and Investment Guide for the Late Starter (2013)

2. Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (2015)


#36 DK

DK
  • Members
  • 136 posts

Posted 18 February 2017 - 11:55 AM

I tell people who are scare of doing their own investing to just put 100% of their contribution into a vanguard target fund and just leave it there



#37 sschullo

sschullo
  • Members
  • 4,227 posts
  • Gender:Male

Posted 18 February 2017 - 12:58 PM



I tell people who are scare of doing their own investing to just put 100% of their contribution into a vanguard target fund and just leave it there

 

Hi DK,

 

If every working person who has a 401k, 403b or 457b plan just invest in a Target Date fund as you suggest, they would be so much better off than all of the other strategies combined. Taking how Elon Musk, CEO of Tesla Motors, Inc., thinks when he says that it will be illegal for humans to drive cars in the future, I think it a similar situation will develop concerning having humans manage their own finances or others. Humans make too many mistakes or it's too expensive to hire a professional, and the pros make mistakes too. The way technology is improving, I envision an investing world so technologically advanced that investment products and services will be 100% combined. Now service and products are 99% separated.

 

The 1.0% is the Target Date approach with index funds and are the beginning of that integration. Robo investing is another approach. It's catching on and it will take another five years. At which time, I can just put my portfolio in one of these programs and it will do EVERYTHING automatically, calculate dividends and cap. gains for taxes, rebalance, tax harvesting, backdoor Roth conversions, distribution plan in retirement, contribution plan and projections during the working years, predict how long my portfolio will last taking money out, etc. There are separate programs that do that now, but it is not integrated just yet. I am sure there are some in the beta stage at the moment. Releasing them to the investing public is a huge risk without adequate testing for ease of use, and taking consideration of all types of individual investor's unique financial situations. Plus the industry would not want this as it might impact their business model of keeping the investing process complicated and intimidating, when it isn't AT ALL!

 

Vanguard will welcome this new technology because it will require their passive strategy. And it's so incredibility simple! Vanguard's $4 Trillion has already impacted Wall Street and 20 million clients seem to understand. 

 

Once again, the Target Date Fund is sooooo simple! My 80 something Italian Grandparents could understand even though they died in the 1930s at the Wisconsin farm where I grew up and never spoke English!

 

Sorry, I had to show off my grandparents. Aren't they cute?: 

 

My_grandparents_001.jpg

 

Exciting times are ahead,

Steve


Steve Schullo

Author and Co-Author of two books:

1. Late Bloomer Millionaires: A Financial Story and Investment Guide for the Late Starter (2013)

2. Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (2015)


#38 KFord

KFord
  • Members
  • 95 posts

Posted 21 February 2017 - 11:08 AM

 

I'm sure Steve will disagree with this linked article below.(written for advisors)  But my 20+ years of advising individual is that investing is too emotional for the majority of individuals(& even most professionals)  Fear & greed are powerful forces that most can't control. Most advisors sell products on fear & greed so they are adding to the problem.

 

So call it "stuck btw a rock & a hard place" 

 

https://realinvestme...s-for-advisors/

 

But the advisor who can help the client control their emotions is worth ever penny he is paid.

 

I leave you with the latest example:

 

"The net inflow for U.S. stock funds hit its highest monthly total since April 2000, at $27.8 billion. Taxable bond funds saw overall net inflows of $14.6 billion in December."

 

http://retirementinc...016-morningstar

 

So individual investors have sold out of bonds because they just experienced the greatest correction since 1994 &  investors are piling into US stocks at the greatest pace since the 2000 bubble. (FYI: we are in the 8th  straight year without a decline of 20%)

 

Is it logical to sell low (bonds) & buy high (stocks)?  In investing,  logic is rarely used ......Fear & Greed drive the decisions of investors.

 

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful." -Warren Buffett

 

good luck to all

 

KF

 

Hey Ken,

Haven't heard from you. How are the precious metal sales going for you? :- ) 

One answer to address emotions is Vanguard. The 20 million clients are pretty stable, and will not likely bail when the market gets shaky. I am confident you read that VG went over $4 Trillion in assets!? FOUR TRILLION! The word is getting around with more studies, books and even the financial media is chiming in that costs matter, and to make it very, very simple, use the passive strategy, ALWAYS! I simply love it. I am in good company with millions of rock solid investors. Did I mention that my expense is .07%, paid for going 100% green with solar energy and electric cars, home remodeling, trips abroad and my portfolio is higher than it was when I retired 8 years ago. It's the extremely low investment costs that I saved that matters. That alone is worth my time being a DIY. 

 

Happy Presidents day weekend,

Steve

 

 

"precious metal sales"   not much in the way of sales ......looks like investors are doing more buying then selling!   FYI: Vanguard PM fund was #1 last year & is #1 so far YTD    But that is normal action for assets that scrape the bottom for 3-4 years...... like cream they rise to the top.    Funny how all those assets that investors fled since 2011 have had fantastic recoveries (Emerging, Natural Resources, Foreign) past losers become winners.

 

http://mebfaber.com/...assets-down-80/

 

Currently I see very few opportunities left in markets w/ investors clambering to get in and keep up the the Dow Jones......so cash levels are higher than normal.

 

Good luck

 

KF



#39 April7th

April7th
  • Members
  • 41 posts
  • Gender:Female
  • Location:Northern NY

Posted 23 February 2017 - 10:27 AM

I tell people who are scare of doing their own investing to just put 100% of their contribution into a vanguard target fund and just leave it there

 
Hi DK,
 
If every working person who has a 401k, 403b or 457b plan just invest in a Target Date fund as you suggest, they would be so much better off than all of the other strategies combined. Taking how Elon Musk, CEO of Tesla Motors, Inc., thinks when he says that it will be illegal for humans to drive cars in the future, I think it a similar situation will develop concerning having humans manage their own finances or others. Humans make too many mistakes or it's too expensive to hire a professional, and the pros make mistakes too. The way technology is improving, I envision an investing world so technologically advanced that investment products and services will be 100% combined. Now service and products are 99% separated.
 
The 1.0% is the Target Date approach with index funds and are the beginning of that integration. Robo investing is another approach. It's catching on and it will take another five years. At which time, I can just put my portfolio in one of these programs and it will do EVERYTHING automatically, calculate dividends and cap. gains for taxes, rebalance, tax harvesting, backdoor Roth conversions, distribution plan in retirement, contribution plan and projections during the working years, predict how long my portfolio will last taking money out, etc. There are separate programs that do that now, but it is not integrated just yet. I am sure there are some in the beta stage at the moment. Releasing them to the investing public is a huge risk without adequate testing for ease of use, and taking consideration of all types of individual investor's unique financial situations. Plus the industry would not want this as it might impact their business model of keeping the investing process complicated and intimidating, when it isn't AT ALL!
 
Vanguard will welcome this new technology because it will require their passive strategy. And it's so incredibility simple! Vanguard's $4 Trillion has already impacted Wall Street and 20 million clients seem to understand. 
 
Once again, the Target Date Fund is sooooo simple! My 80 something Italian Grandparents could understand even though they died in the 1930s at the Wisconsin farm where I grew up and never spoke English!
 
Sorry, I had to show off my grandparents. Aren't they cute?: 
 
My_grandparents_001.jpg
 
Exciting times are ahead,
Steve


Love the grandparents pic! Thanks for sharing.
Here are my questions about Target funds:

Do you think they re-allocate often enough?
Is the extra cost worth it for someone just starting out?

I have a friend who is using a Target fund, upon my advice, because she has absolutely ZERO interest in educating herself about investing. She has about 15 years left before retiring. In her case, I definitely think it is the way to go.

But I do like an even cheaper alternative:
Vanguard Total Stock Market Index Fund (VTSMX)
Vanguard Total International Stock Index Fund (VGTSX)
Vanguard Total Bond Market Fund (VBMFX)

But that requires, obviously, reevaluating.

(By the way, less than a year ago, I was the absolutely clueless investor that most teachers are. This blog has been amazing. I am no pro...but I have learned sooooo much!)

But I digress!
So, more thoughts on Target Funds?

I am invested in Vanguard through Aspire, so there is that extra fee to consider, also. Still, I feel am so much better off than I was.

#40 krow36

krow36
  • Members
  • 238 posts

Posted 23 February 2017 - 12:49 PM

I like this Vanguard table showing the impact of fees over time. Compare a low-cost index fund's fee of 0.10% to that of an AXA annuity based 403b fee of about 2.5%, over say 20 years:  -2.0% vs about -38%! 

 

Cumulative impact of fees on ending wealth at various time horizons

.....................................Annual Fee Rate

Time Horizon .....0.10% 0.25% 0.50% 1.00% 2.00% 3.00% 

3 years................ –0.3% –0.7% –1.5% –2.9% –5.8% –8.5%

5 years................ –0.5% –1.2% –2.5% –4.9% –9.4% –13.7%

10 years.............. –1.0% –2.5% –4.9% –9.5% –18.0% –25.6%

20 years.............. –2.0% –4.9% –9.5% –18.0% –32.7% –44.6%

30 years.............. –3.0% –7.2% –13.9% –25.8% –44.8% –58.8%

40 years.............. –3.9% –9.5% –18.1% –32.8% –54.7% –69.3%

The numbers above only make it more shocking to me that the average expense ratio for equity mutual funds remains above 1% per year.

Even in times like these, with very low risk-free rates of return, I don’t think most people appreciate that fees of “as little as 1% a year” amount to giving away more than a quarter of your wealth over 30 years.

https://vanguardblog...ler-of-returns/

 

The table is also useful when considering paying for an advisor.



#41 sschullo

sschullo
  • Members
  • 4,227 posts
  • Gender:Male

Posted 20 March 2017 - 06:35 AM

 

 

I tell people who are scare of doing their own investing to just put 100% of their contribution into a vanguard target fund and just leave it there

 
Hi DK,
 
If every working person who has a 401k, 403b or 457b plan just invest in a Target Date fund as you suggest, they would be so much better off than all of the other strategies combined. Taking how Elon Musk, CEO of Tesla Motors, Inc., thinks when he says that it will be illegal for humans to drive cars in the future, I think it a similar situation will develop concerning having humans manage their own finances or others. Humans make too many mistakes or it's too expensive to hire a professional, and the pros make mistakes too. The way technology is improving, I envision an investing world so technologically advanced that investment products and services will be 100% combined. Now service and products are 99% separated.
 
The 1.0% is the Target Date approach with index funds and are the beginning of that integration. Robo investing is another approach. It's catching on and it will take another five years. At which time, I can just put my portfolio in one of these programs and it will do EVERYTHING automatically, calculate dividends and cap. gains for taxes, rebalance, tax harvesting, backdoor Roth conversions, distribution plan in retirement, contribution plan and projections during the working years, predict how long my portfolio will last taking money out, etc. There are separate programs that do that now, but it is not integrated just yet. I am sure there are some in the beta stage at the moment. Releasing them to the investing public is a huge risk without adequate testing for ease of use, and taking consideration of all types of individual investor's unique financial situations. Plus the industry would not want this as it might impact their business model of keeping the investing process complicated and intimidating, when it isn't AT ALL!
 
Vanguard will welcome this new technology because it will require their passive strategy. And it's so incredibility simple! Vanguard's $4 Trillion has already impacted Wall Street and 20 million clients seem to understand. 
 
Once again, the Target Date Fund is sooooo simple! My 80 something Italian Grandparents could understand even though they died in the 1930s at the Wisconsin farm where I grew up and never spoke English!
 
Sorry, I had to show off my grandparents. Aren't they cute?: 
 
My_grandparents_001.jpg
 
Exciting times are ahead,
Steve


Love the grandparents pic! Thanks for sharing.
Here are my questions about Target funds:

Do you think they re-allocate often enough?
Is the extra cost worth it for someone just starting out?

I have a friend who is using a Target fund, upon my advice, because she has absolutely ZERO interest in educating herself about investing. She has about 15 years left before retiring. In her case, I definitely think it is the way to go.

But I do like an even cheaper alternative:
Vanguard Total Stock Market Index Fund (VTSMX)
Vanguard Total International Stock Index Fund (VGTSX)
Vanguard Total Bond Market Fund (VBMFX)

But that requires, obviously, reevaluating.

(By the way, less than a year ago, I was the absolutely clueless investor that most teachers are. This blog has been amazing. I am no pro...but I have learned sooooo much!)

But I digress!
So, more thoughts on Target Funds?

I am invested in Vanguard through Aspire, so there is that extra fee to consider, also. Still, I feel am so much better off than I was.

 

 

Sorry April for taking so long to respond to your questions. 

 

My theory is that once people, especially those who are currently not interested, start investing in a Target Date Fund and one day realize that they have 30,000 40,000 or $100,000 saved for retirement, they might get interested! Interesting how motivation works. I was never interested in investing until my 40s because I made minimum wage until my middle 30s and had some money saved in my 40s. At which time I got ripped off by the annuity industry is when I got interested quickly. 

 

Are Target retirement funds worth the extra cost? Depends on the company offering them. Vanguard fees are reasonable. We have BlackRock in our 457b plan which also has low costs. Target retirement funds are very popular because it's a great starting point, and even if people only use one fund for their entire working career (and low cost) they are much better off than those who do not save, or get sold an expensive insurance product. 

 

The three fund plan you suggest is what most of us who frequent this forum use. I have most of my money in those three funds, and had them for over a decade with great average return results! But it requires discipline, reading up on investing and a psychological courage with rebalancing.  Psychology messes with newbies especially when the market acts up. Target Date Funds do the rebalancing automatically which is a real advantage for lots of people, especially newbies. 

 

Steve


Steve Schullo

Author and Co-Author of two books:

1. Late Bloomer Millionaires: A Financial Story and Investment Guide for the Late Starter (2013)

2. Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (2015)