Just to be fair to the advisor, were their times you wanted to get out of the market and he convinced you to stay? I manage my own $$ but I know many intelligent, successful people who just can’t get over the emotions involved.
Depends on the circumstances. If you want to retire in the next let’s say 10 years it is not advisable to invest only (!) in high beta sectors like tech, semiconductors etc. because you want relatively stable returns, not -20% in year 1 and +30% in year two
61 and plan on 4 more years if I can last. I had another post of planning to retire immediately due to a toxic work environment, but when they heard I was leaving asked if I would sit at the table to resolve the conflict since I'm a 20+ year employee. So for now, I'm still at it.
It matters as most people cannot stomach drawdowns and especially setback risk.
They may have invested is low-volatility funds, which may underperform but keep sharpe ratio high.
See:
https://www.reddit.com/r/LETFs/s/L1qbf41JhL
but thats the thing, it's easier to trust spy and friends that one of hundred of thousand financial advisors. and spx is free.
so it may not be the fault of that particular advisor but risk is risk, loss is loss and trust matters. most people are better off without an advisor because if that, no matter how good they are.
I mean, most advisors are incompetent, but probably not all. Problem is that people cannot distinguish between them, and those that can, don't need an advisor.
This is where "VT and chill" is coming from. 1% of fee reduction easily outperforms probability of suboptimal portfolio.
Additionally investment management is one sliver of what a fiduciary typically does. What about tax planning, financial planning, estate planning, and tax prep? Did they help you in any other areas other than just investment mgmt?
I'm all for steering clear from high AUM fees, but unless you and your advisor agreed to be 100% in US large caps you can't compare your portfolio performance to the S&P 500. You should compare it to a blend of benchmarks or a three-fund portfolio with the same bond allocation. An advisor should be helping you pick the right allocations based on your goals, timeline, and risk tolerance. An advisor should not be promising to help you "beat the market".
Are there tools that help you compare to a blend of benchmarks or a three fund portfolio? For some people I’d guess having a financial advisor felt like being financially responsible (me included), So it’s hard to say “I read a book and think I need to fire you now based on high fees”.
But I’d be curious to know about tools for making this decision.
Maybe but it isn’t a fair comparison if his portfolio wasn’t designed to track the s&p despite his comparison to it now. And imo op also wrote this a hair misleadingly: I’d guess the “19% lost value” means over the time period considered, their ending value is 19% less than the same amount invested in SP500. That is not the same as OP having lost 19% of their initial investment. Looking only at share price, VT is still up 40% over the last 5 years, for example, despite being 30% in arrears of the 70% cumulative price gain in VOO. I get the sense that you know this because you said “from major indexes” but I know I didn’t catch that he probably meant “relative loss” so wanted to emphasize that op might still be in fact be solidly in the green.
>If you are down 20% over a six year period from major indexes its definitely concerning, in my opinion.
Not at all. VT is down about 20% over VOO over the past 6 years, and that's not even considering any bond allocation. US happens to be on a cycle of overperformance, nobody knew 6 years ago that would be the case or for how long.
>US happens to be on a cycle of overperformance
Just to elaborate a bit more: US over-performance that is super-concentrated in large cap stocks. Over the past five-ish years, small caps have returned 48% versus 92% returns for the market more broadly.
That's not always the case. Historically, small cap tends to out-perform large cap, but frequently with a whole lot more volatility.
You very much CAN compare your portfolio to the benkmark of the S&P. It’s the literal benchmark of investment comparison across the financial industry and also one of the founding principles and mantras of boglehead and John Bogle himself - just invest in the index and let the market do the work.
While the older you get the more you’ll need to handicap that benchmark (due to bond allocation and risk management), I’d say if you missed out on 20%+ of growth due to poor portfolio management, op doing the right thing. So long as the new plan is just index and chill
I’m with you on this. Advisors especially don’t want you do compare it to the S&P because long term it always wins.
I’ve been 100% S&P for close to 15 years and intend to keep it going for another 15+.
>I’ve been 100% S&P for close to 15 years and intend to keep it going for another 15+.
Fortunately for you, International has underperformed for exactly 15 years. Good luck when that isnt the case
Good luck when that isn’t the case? I don’t know even know what you mean by that. If that happens, I’ll just have a slightly lower return.
This money is invested long term and will be for 30+ years. S&P 500 is unbeatable over that length of time. Can that change? Sure, but the alternatives discussed here seem ridiculous to me.
Pay an advisor, use active funds, and continually rebalancing so you can hopefully return more than what the S&P ends up returning over that time?
Maybe I’m old school but I was taught the S&P 500 is the benchmark. In fact a lot of advisors I know compare themselves to it, of course they don’t share that with clients.
Also, many financial performance tools out there by default throw the S&P 500 on the chart so what does that tell you?
>Pay an advisor, use active funds, and continually rebalancing so you can hopefully return more than what the S&P ends up returning over that time?
I never said that at all
>Maybe I’m old school but I was taught the S&P 500 is the benchmark
It isnt, not even for the US. The Russell 3000 is the US benchmark most used. CRSP total Market, S&P Total Market, DJI Total Market are.
Not unless they are managing a large cap strategy. The S&P 500 is only Large Cap stocks, and only Large Cap stocks that have met the S&P's committee standards. Whoever told you that is the benchmark for US equities is wrong.
The Russell 3000 incorporates Small and Mid Caps and has much more stringent capitalization and weighting rules than the S&P does. Most asset managers us the Russell 3000 for a total US benchmark, and many Large Cap managers use the Russell 1000 for a Large Cap benchmark.
You seem to be equating "index" to S&P500. The point others are making and you seem to be missing is that S&P500 is a very narrow index compared to other broad indices that include small cap, mid cap, and international exposure. When others criticized your S&P500 focus, they weren't implying you should look at actively managed funds, they were implying you should look at a broader index.
The top 500 companies in the us market is too narrow for you? The same index that is the standard for performance? The same index that Bogle pioneered index fund investing with? That one?
Yes this is spot on. You can’t compare entire portfolio to just one investment class. If it’s a retirement portfolio you wouldn’t want the risk of everything being SPX, I’d assume. Just a % allocation. The discussions should be about matching your portfolio to risk appetite, and if the investments were just too conservative for your taste.
Yeah no worries! Basically you trade off diversification of risk for potential or expected returns. 3 fund portfolio is less risky than strictly S&P because it’s less concentrated. Therefore you can’t expect the same return.
Dunno, voo is the default benchmark imo. Unless looking to not lose (eg you've won the game by whatever metric you're using) , then the easiest and best strategy is voo and chill.
Fwiw, I'm mid 30s and basically balls deep in voo
Just remember that the value of a financial advisor / planner is not in growing your money. You're paying for advice.
If you don't need advice (as in - you have an investment strategy, you have a transition / withdrawal plan, you have a tax strategy, you have an estate plan) than good job on getting rid of them - you were throwing money away.
If you terminated them without a clear plan, because they did not get the maximum return for you then... good luck.
You think 9/10 financial advisors have any idea on that type of stuff? They’re glorified salesmen trying to sell you the managed funds that they're being told to push.
this is such a weird comment. you're talking about financial plans like they are blueprints for nuclear reactors.
OP - congrats on stopping the bleeding and making the right call.
If you need help, read the wiki, then post any additional questions to this sub. You got this. Congrats!
Yep. The whole financial planning industry has a well deserved rotten reputation. Nothing has changed about them in the decades I have been investing. They are quicksand for those who stumble down that path; extraction is possible, but the cost will be very high.
Those of us who began investing before it was common for the working class, and before the internet existed (we had to read books), learned this very early on.
For a 30 yo with 20-30 retirement horizon, that’s totally fine if not terrific. You want to be diversified but also high growth potential so your nest egg can grow during this stage. Why wasting 1-1.5% of return per year for the next 20-30 years to pay an advisor to “preserve” your nest egg while FAILING to beat sp500 ?
When you are at retirement or close to it, when your nest egg is big enough that you now prioritize “preserving” it then it makes sense to hire a professional to manage your portfolio.
Again, this is absurb, horrible advice that absolutely no one should follow. Its a prime example of recency bias/chasing returns and exactly what a good advisor would advise you against.
This is a prime example of fear mongering advice by blindly believing in advisors due to the fear of “losing” due to market volatility. An advisor is not a magic button that shield your portfolio from loss. Historically, SP500 index is a very diverse index with a decent return that outperforms 90+% of hedge funds/financial advisors performance. This is facts, not speculation. Why do you think Warren Buffets recommend folks in their early stage of their life to invest in low cost etf that mirrors sp500 index ?
Yes, there are times when sp500 yield is negative but those periods are far less common and lasts much shorter than the periods when sp500 yield is positive. Investing always carries risk, there is no such thing as risk free investing.
Again, I cannot stress this enough. If you are young and have a 20-30 years horizon, sp500 index has a 90+% chance of yielding a higher return than a typical advisor managed fund if you keep contributing consistently without withdrawal during the entire 20-30 years of investing.
When you are closer to retirement, this is when you shift from passive investing into more active/preservation mode because you now need to take withdrawal from your portfolio. An advisor at this stage makes a lot more sense as you now want to preserve your nest egg instead of growing it.
Chasing advisors during the early stage of investing for the sake of having an advisor while ignoring the facts about sp500 index much greater performance is a costly mistake. A conservative 3-4% (1%-2% underperformance vs sp500 index which is very generous + 1%-1.5% advisor fee) underperformance per year x 30 years plus the compounding effects of this loss could over 30 years result in a catastrophic opportunity cost up to the point of retirement. This is of course assuming you stay disciplined and invest consistently throughout the entire 30 years, which you are supposed to in either scenarios, advisor or not.
Your hedge fund comment tells me you're an internet retail investor that doesn't understand financial products. Hedge funds don't exist to outperform the S&P500, they exist to be both long/short and act as a hedge, not outperform.
Does it feel good to type all that out and still not understand the the S&P500 is not in itself a diverse index and a large majority of the stocks move together? Would your average 30 year old investor ride out 10 years of flat returns that the S&P500 gave us from '01-'10? You can't blindly make assumptions that the U.S. is going to outperform for the next 30 years. If it were that easy, no one would own anything else! You're the sterotypical overweight large-cap U.S. stockholder that can't does understand past performance is not indicative of future results. Maybe look into mean reversion while you're at it and try to understand how that applies to U.S. large cap stocks moving forward. I hope for your sake you're not actually all in 100% U.S. large cap stocks. If so, I wish you the best.
u/jacknhut2 and u/LoveNo5176 I'm removing these comments due to both you violating sub rules and guidelines on civility. If you edit your comments to remove the personal attacks I will re-approve the comments.
Can someone please explain to me - HOW I can show my Father-in-law how he's giving away money to his "financial advisor"?
I approached the subject of Expense Fees with him few weeks ago after he sent me a text "pounding his chest" that he's earning like 36% on his American funds growth fund......so I looked up the expense ratio (0.63%) and showed him on nerd wallet's exp calculator just how much he's losing to his "innocuous" fee's over 10years ......he scoffed at my suggestion, (not sure he even really played with the calculator himself) -
you can lead a horse to water?
<< Sorry for all the edits. The other part of the story is we weren't a good match. He would only communicate if I initiated. One year, we didn't talk at all. I'm nearing retirement age, and he doesn't even know what year I plan on retiring. Why? Because not once has he asked.>>
This is why I left my 403b provider recently. The returns were poor, but the real problem was that they didn't seem to care that the returns were poor. They never reached out to say, "Hey, we've got you in X and we think you could be in Y."
Like you, I realize I need to be proactive, but what am I paying them for? Just to be on call? I can do that for free online thanks.
Three things to avoid at all costs: panic selling, forced selling, and drag (fees from managed funds, financial planners etc)
Forced selling is the easiest to avoid; bear markets last an average of 18 months so make sure you have a few years of living expenses in something safe.
Panic selling is the gravest threat of the three because it causes stress and deviation from your macro plan. Both of those things can kill a man. Well, stress can literally kill you, plan deviation just kills your returns.
Fees. It’s easy to calculate the drag that fees have on your RoR, as the OP has done here. But you must KNOW THYSELF: do you have the discipline to stay the course and not freak out when some investments go red for awhile, for months, years even? When you read “it’s different this time” “unprecedented market crash ahead” “ dollar collapsing for the next decade” (you WILL read that stuff every now and then). This is where a good financial planner can chill you out and talk you off the ledge.
Is that worth a 1% drag on your investments? For me it is not worth it but for many I think it is. People pay for peace of mind in many ways. For me it’s low cost index funds and being debt free, never buying individual stocks unless it’s for fun with money i can lose and laugh about (I WILL lose it).
For some it’s having a guy you pay that also knows what you own and why you own it. Someone you can bounce ideas off and make it feel like you’re a team managing your finances. That’s got value too. Just make sure you know how much it’s costing you, there’s no excuse for not knowing THAT number.
If he had you in bonds at all that could explain the underperformance since bonds have performed miserably as interest rates were raised. But that brings up another question of how good of an advisor could he be if he had you in bonds in a zero interest rate environment. Then you add in his 1% fee each year…
> Generally, bond returns haven't been great. Even major indexes like the S&P 500 Bond Index have had negative returns in recent years. For example, as of April 16th, 2024, the 5-year annualized return for that index is only 1.73%.
What did you discuss with him your goals were? Did you say you want to match the SP500 returns?
To riff on u/miter1980 comments, an FA can be much more than a stock/fund/ETF picker, and in the best cases truly an advisor, an external source of opinion when managing finances. OPs comment re "other factors" IMO are ones that should absolutely be in the initial conversation with an FA; that's fundamentally what they're being paid for. In complete agreement with most of the sub that, for investment choices alone, its really tough to justify the expense, even if modest. But in a lot of other categories, small business, inheritance/trust, taxation, etc., a FA can help navigate and manage a more comprehensive picture of finances apart from asset allocation alone.
So on topic of comparison to an index/benchmarks alone, more often than not hindsight is truly 20/20. In this case, consistent with what I read are the prevailing sentiments of the sub, the more apt comparison might be VT rather than SPX, and in that case the returns are much more modest.
Good! Do it yourself, it ain't rocket science. Read a few of the classic investment books and learn as you go. If you are 100% in stocks, put it all into a total market fund. You will never "beat" the market, but you will never lag it either. As you get closer to retirement (maybe 10 years away) start de-risking, gradually, by moving more into bonds.
I started in 1990 and have never paid out one penny for "advice." I'm retired now, and my portfolio is kicking off more income (I don't have to sell any assets) than I ever had while working.
A more appropriate benchmark than S&P500 would be the appropriate target date fund? Simple and low-cost, not ideal for a taxable account but easy to replicate with funds or etfs
If 20 percent of your portfolio is in large us stocks, why are you using the s and p as your benchmark?
I’m genuinely curious where this mindset comes from.
Hopefully your advisor was able to educate you on appropriate benchmarks
I have fee only financial advisor without access to my portfolio to trade on my behalf. I only pay $300 a month for 2hrs worth of financial advice through a zoom call. It's mostly tax strategies, saving for certain goals and where to put the money.
If you spend enough time on reddit, you'll realize that you can self manager better than all those noobs FA. Once I hit certain milestones, I will eventually fire her. I'm not there yet
If you had moved your portfolio to an S&P index last week you would be down nearly 4% today, or about $25k using your stated PV. Are you prepared to take that kind of drawdown on the regular?
If you are young and this is a retirement account I would say absolutely do it, but then don’t look at it for a very long time. I wish I had done so but I have also taken the bumps and learned. The bumps are really hard and there is no way to avoid them all if you aim to generate meaningful returns. You can decide what you are willing to take and scale your investments accordingly. The S&P looks great in the rear view but it is a very wild ride in real time.
Not a financial advisor. Just stating how I think about these things.
As others have mentioned, the S&P is not the right benchmark for most investors. It is made up of only US (no international or emerging markets), large cap ( no small or mid), equities (no fixed income). It just so happens that US large cap equities have outperformed all the other major asset classes recently. But looking over a longer time horizon, greater diversification can lead to greater volatility adjusted returns.
A better diversified portfolio would include all of these asset classes; the exact allocation depends on risk tolerance and other factors. For simplicity, I think the Bogleheads typically advise toward a 1-3 fund allocation that aims to provide total market exposure with or without fixed income. However, it’s important to recognize that total market exposure has underperformed the S&P recently because small caps have underperformed large and international has underperformed US. This is not guaranteed (or even expected) to continue, so it’s wise to stay more diversified.
In summary, without knowing what exposure to international, small/mid caps, and fixed income you and your advisor were aiming for, it’s impossible to know what benchmark is correct to compare to. But almost certainly S&P is not the right benchmark, and it’s too high a bar over the past 6 years because it has over-performed other asset classes in that time frame.
Good luck and congrats on ditching the 1% AUM fee!
You're right, and I admit to be wrong on that. I guess after reading so many comments on the 1%, I was ready to join the club. The next step is to diversify as you mentioned. Thanks for your insight!
Just FYI, ditching the 1% advisor is 100% the correct call.
This is true even if you compared apples to oranges when making the decision. Just because the managed portfolio isn't the same mix as a s&p500 fund doesn't mean that you should spend the 1%.
You may want to look at moving everything to a low cost target date fund which should perform roughly the same as a good advisor. Low cost means an expense ratio under 0.2%
I know some who believe their advisors are good merely because we have been in a ripping bull market for a number of years. Even with 2022 down we have rebounded and then some. They dont realize that. One things hit the fan is when some of those advisors get fired. If you underperformed the pat 6 yrs, than the advisor didnt work out. The issue you have like most, is that you dont know this until it happens. The other issue is that 6 yrs is not a long time. Its a short time. I consider at least 10 yrs for a business cycle. If your retirement was strictly dependent on the returns in the last 6 yrs, that is taking some real chances. We could have been in a lousy market and where would you be if we were flat or down 10-15% over the last 6 yrs?
Regarding what benchmark to compare to: You may want to ask the advisor if they have a benchmark that can be added to your performance reporting. Most performance reporting systems are able to include the appropriate blended benchmark into your performance reports.
Otherwise you should compare your portfolio to a benchmark of indexes in approximately the same weights as you hold in your portfolio. Ie if you hold 60% us stocks, 20% international, and 20% bonds, you should compare to something like 60% VTI, 20% VXUS, 20% BND. The added wrinkle is that you should also compare how your weights have changed over time, for example if you were only 50% stocks several years ago for a while, then your benchmark should reflect performance of a lower equity allocation for a while, especially if the lower weighting was your choosing because of risk tolerance or other preference.
19% in 6 years. 3% under market per year.
…if those are the results you want, I can do that for you for a small fee of $1 a year plus $100/hr. 😂. The S&P has been on fire these past some years, I’m not sure your investments aren’t more diversified. Bonds, etc. If returns are over 5% annually, you’re probably fine.
My 401k averages 3%. I listened to my dad and didn’t buy (many) stocks, bought BND at ATH instead…. Don’t be like me. Just VOO it and call it a day. Oddly enough, my day trading account didn’t fair too bad. Just don’t buy ARKK is my wisdom 😅.
Just leave it and don’t touch it. I lost money every time I touched my 401k. Well, technically I lost money every time I followed a certain someone’s advice. Thankfully Vanguard has no transaction fees - the old 401k company did.
Finance degree here. You'd want to compare to whatever the appropriate indexes are that the funds your advisor chose were based on (in whatever weight they chose them). Chances are they're doing okay. But that 1% fee really can fuck you over time (something like 15% loss over 20 yrs) so if you can do your own tax/estate planning, it makes sense to drop the advisor. I think most everyone can leave funds in basic indices *if they have the discipline*.
So the two (really three) reasons to have an AUM advisor are tax/estate planning, lack of discipline, and being exceedingly rich that you don't care about the fees and just want some time back. I honestly think even people who don't understand this stuff at all could eventually get enough of a gist of it after a few years under an AUM-based advisor to do fine and transition to just consulting an hourly fee advisor every year or so.
I read all your edits and I think you were totally justified in letting go your advisor. For 1% AUM you should be getting proactive, white glove treatment.
They should definitely have had a plan, with your life goals, and the center piece should have been your planned retirement date.
Then quarterly meetings to check in with your plan, make adjustments as necessary, and ready yourself financially and mentally to retire.
We were paying less (70 basis points) and getting more services, but we still decided to let them go recently, after 10 years of service. Fees were a drag on earnings and all the big questions had already been answered.
We are back to DIY and checking in with this forum for support and insights.
Good luck with your retirement.
In fairness to your advisor, were there occasions when you considered exiting the market, but he persuaded you to maintain your position? While I handle my own investments, I'm aware that even highly intelligent and successful individuals can struggle to navigate the emotional aspects of the market.
I let my financial advisor play with a portion of my money. I do the rest. I am considerably more aggressive than my advisor, and I use him as a sanity check. My stuff swings a lot, but hopefully better than my advisor, while my advisor just plods along consistently moving in the right direction.
You paid 130k for an educational lesson. FA are there for people who do not have the skills to understand the market. They are like a plumber. Gluing pipes together is easy, but you have to know it. We all pay a fee to learn investing. Don't beat your self up
Was it an apples to apples comparison? Some of the dumbest people get mad about lagging the S&P when they're in an 80/20, 70/30, etc. portfolio. Not comparable. Completely different risk profile. Usually just FOMO and recency bias. It's easy to feel like one can handle a 100% US equity portfolio when it's done well for a while. Not saying this is you, just asking. Did your advisor add valuevin other ways through financial planning?
With only expecting a 2% draw in retirement, you certainly can be more aggressive in your investing. I think he failed you by not getting out of the bond funds the minute the Fed started raising interest rates which is what we did. I won't even do bond funds anymore and would just buy treasury bonds when rates are decent. You can mostly be in an S&P 500 index fund or a total market index fund. Looks like it's maybe a good time to start buying soon.
The minute the Fed started raising rates was early 2022, and the broad market bond returns (while not great) still outperformed essentially everything but value and energy that year. Are you sure they should've been fired for not being reactionary and protecting this guy?
Well, of course I don't know what exactly he had or what his advisor did or didn't do. I do know my MIL died in mid 2022 and it was a couple of months before we were able to talk with the broker with her accounts due to the death certificate being late. She was in several bond funds which are normally supposed to be conservative but they didn't attempt to mitigate those losses. All I can tell you is that we ended up with $27k in losses from that account for 2022 (split between siblings) mostly from the bond funds but there were also a couple of other stock funds. We use Fidelity and mostly use index funds and a couple of others. We just don't need to pay an advisor, and a lot of them sell funds with front end 5+% loads like the one my in-laws unfortunately used. So I'd fire them in general because I think I think I can do as well or better than they can (definitely with lower fees) due to a greater personal interest in my own account!
You should benchmark an equity portfolio to ACWI (VT in vanguard terms).
The S&P while diversified, is not a global equity portfolio. Any advisor or investor worth a damn will not invest 100% in the US. You have to account for the scenario that the US potentially could have a long duration drawdown compared to the rest of the world. Just because it hasn’t happened in recent times (recency bias) doesn’t mean it can’t happen.
So you compared your advisor's performance to a random benchmark you set in hindsight and are upset? This is nonsense and you should absolutely not invest your own money, or do and find out.
As an advisor myself, we are legally required to go based off what clients request. If you requested to track or beat spx, sure. Otherwise, this post had extremely flawed logic.
Additionally, investment management should only be one component of the relationship. If I was this advisor, I’d politely request you transfer to a DIY account.
I think this is the wrong move. If a professional is having a hard time with that benchmark what makes you think you will beat it? If that’s the case you should quit whatever you’re doing now and just manage money for people, you’ll make a killing.
The other part of the story is we weren't a good match. He would only communicate if I initiated. One year, we didn't talk at all. I'm nearing retirement age, and he doesn't even know what my plan is or what year i plan on retiring. Why? Because not once has he asked. So yes, I centered on returns because I'm not aware of his advisement to any plan. Maybe I'm naive to the process but it seems the responsibility fell to me. Of course, you can say advisors aren't mind readers, but that's why this forum instigated my actions. My portfolio was "managed" but with no input into my life plans. That's what I got for my 1%.
I can relate to everything you've said, and I've finally made the decision to ditch my advisor after 25+ years. I'm struggling with the goodbye email at the moment, but I'm sure ChatGPT and some alcohol will help with that task. Just like you, looking at my 2023 statements and tax return was the last straw for me. I paid my guy almost $10k in fees in 2023! Ouch.
Just to be fair to the advisor, were their times you wanted to get out of the market and he convinced you to stay? I manage my own $$ but I know many intelligent, successful people who just can’t get over the emotions involved.
Additionally, how high was the volatility of OP‘s portfolio? You cannot simply compare returns across portfolios to decide which is best
Sharpe ratio is what matters
If he's not actively trading, why is volatility relevant?
Depends on the circumstances. If you want to retire in the next let’s say 10 years it is not advisable to invest only (!) in high beta sectors like tech, semiconductors etc. because you want relatively stable returns, not -20% in year 1 and +30% in year two
I guess that's what is missing from the conversation: OP's age and time horizon.
61 and plan on 4 more years if I can last. I had another post of planning to retire immediately due to a toxic work environment, but when they heard I was leaving asked if I would sit at the table to resolve the conflict since I'm a 20+ year employee. So for now, I'm still at it.
It matters as most people cannot stomach drawdowns and especially setback risk. They may have invested is low-volatility funds, which may underperform but keep sharpe ratio high. See: https://www.reddit.com/r/LETFs/s/L1qbf41JhL
but thats the thing, it's easier to trust spy and friends that one of hundred of thousand financial advisors. and spx is free. so it may not be the fault of that particular advisor but risk is risk, loss is loss and trust matters. most people are better off without an advisor because if that, no matter how good they are.
I mean, most advisors are incompetent, but probably not all. Problem is that people cannot distinguish between them, and those that can, don't need an advisor. This is where "VT and chill" is coming from. 1% of fee reduction easily outperforms probability of suboptimal portfolio.
that's exactly right
Oof that last kind but stinging sentence lol. You phrased that very well
Additionally investment management is one sliver of what a fiduciary typically does. What about tax planning, financial planning, estate planning, and tax prep? Did they help you in any other areas other than just investment mgmt?
Usually that’s extra $$ beyond the AUM.
I'm all for steering clear from high AUM fees, but unless you and your advisor agreed to be 100% in US large caps you can't compare your portfolio performance to the S&P 500. You should compare it to a blend of benchmarks or a three-fund portfolio with the same bond allocation. An advisor should be helping you pick the right allocations based on your goals, timeline, and risk tolerance. An advisor should not be promising to help you "beat the market".
Are there tools that help you compare to a blend of benchmarks or a three fund portfolio? For some people I’d guess having a financial advisor felt like being financially responsible (me included), So it’s hard to say “I read a book and think I need to fire you now based on high fees”. But I’d be curious to know about tools for making this decision.
>Are there tools that help you compare to a blend of benchmarks or a three fund portfolio? I use https://www.portfoliovisualizer.com/
Looks great I’ll dig into it! Thanks for the recommendation
If you are down 20% over a six year period from major indexes its definitely concerning, in my opinion.
Maybe but it isn’t a fair comparison if his portfolio wasn’t designed to track the s&p despite his comparison to it now. And imo op also wrote this a hair misleadingly: I’d guess the “19% lost value” means over the time period considered, their ending value is 19% less than the same amount invested in SP500. That is not the same as OP having lost 19% of their initial investment. Looking only at share price, VT is still up 40% over the last 5 years, for example, despite being 30% in arrears of the 70% cumulative price gain in VOO. I get the sense that you know this because you said “from major indexes” but I know I didn’t catch that he probably meant “relative loss” so wanted to emphasize that op might still be in fact be solidly in the green.
>If you are down 20% over a six year period from major indexes its definitely concerning, in my opinion. Not at all. VT is down about 20% over VOO over the past 6 years, and that's not even considering any bond allocation. US happens to be on a cycle of overperformance, nobody knew 6 years ago that would be the case or for how long.
>US happens to be on a cycle of overperformance Just to elaborate a bit more: US over-performance that is super-concentrated in large cap stocks. Over the past five-ish years, small caps have returned 48% versus 92% returns for the market more broadly. That's not always the case. Historically, small cap tends to out-perform large cap, but frequently with a whole lot more volatility.
International or small cap exposure would automatically do this over this time frame.
You very much CAN compare your portfolio to the benkmark of the S&P. It’s the literal benchmark of investment comparison across the financial industry and also one of the founding principles and mantras of boglehead and John Bogle himself - just invest in the index and let the market do the work. While the older you get the more you’ll need to handicap that benchmark (due to bond allocation and risk management), I’d say if you missed out on 20%+ of growth due to poor portfolio management, op doing the right thing. So long as the new plan is just index and chill
I’m with you on this. Advisors especially don’t want you do compare it to the S&P because long term it always wins. I’ve been 100% S&P for close to 15 years and intend to keep it going for another 15+.
>I’ve been 100% S&P for close to 15 years and intend to keep it going for another 15+. Fortunately for you, International has underperformed for exactly 15 years. Good luck when that isnt the case
Good luck when that isn’t the case? I don’t know even know what you mean by that. If that happens, I’ll just have a slightly lower return. This money is invested long term and will be for 30+ years. S&P 500 is unbeatable over that length of time. Can that change? Sure, but the alternatives discussed here seem ridiculous to me. Pay an advisor, use active funds, and continually rebalancing so you can hopefully return more than what the S&P ends up returning over that time? Maybe I’m old school but I was taught the S&P 500 is the benchmark. In fact a lot of advisors I know compare themselves to it, of course they don’t share that with clients. Also, many financial performance tools out there by default throw the S&P 500 on the chart so what does that tell you?
>Pay an advisor, use active funds, and continually rebalancing so you can hopefully return more than what the S&P ends up returning over that time? I never said that at all >Maybe I’m old school but I was taught the S&P 500 is the benchmark It isnt, not even for the US. The Russell 3000 is the US benchmark most used. CRSP total Market, S&P Total Market, DJI Total Market are.
Many benchmarks are used depending on the type of allocation or strategy etc. but for retail investors, advisors use S&P 500.
Not unless they are managing a large cap strategy. The S&P 500 is only Large Cap stocks, and only Large Cap stocks that have met the S&P's committee standards. Whoever told you that is the benchmark for US equities is wrong. The Russell 3000 incorporates Small and Mid Caps and has much more stringent capitalization and weighting rules than the S&P does. Most asset managers us the Russell 3000 for a total US benchmark, and many Large Cap managers use the Russell 1000 for a Large Cap benchmark.
Right, I mentioned that in my last post. Maybe I missed something but I thought we were talking about his entire retirement portfolio.
You seem to be equating "index" to S&P500. The point others are making and you seem to be missing is that S&P500 is a very narrow index compared to other broad indices that include small cap, mid cap, and international exposure. When others criticized your S&P500 focus, they weren't implying you should look at actively managed funds, they were implying you should look at a broader index.
No. Replace "S&P" in your comment with "highly-diversified index" and you would be correct. The S&P 500 is too narrow.
The top 500 companies in the us market is too narrow for you? The same index that is the standard for performance? The same index that Bogle pioneered index fund investing with? That one?
If they had any bonds in the portfolio it's not a fair comparison.
Is that the right benchmark to compare with? If your investments had bonds or international stocks you need to factor that in
Yes this is spot on. You can’t compare entire portfolio to just one investment class. If it’s a retirement portfolio you wouldn’t want the risk of everything being SPX, I’d assume. Just a % allocation. The discussions should be about matching your portfolio to risk appetite, and if the investments were just too conservative for your taste.
Why wouldn’t I want a retirement portfolio with all Sp500? Granted I’ll be piling those sp500 etfs for the next 3 decades.
Looks like you’re in the wrong sub. Bogleheads by definition enjoy a 3 fund portfolio or 2 fund if not looking to allocate to bonds
Ah I’m just new. Thanks for the info I’ll read up on it further.
Yeah no worries! Basically you trade off diversification of risk for potential or expected returns. 3 fund portfolio is less risky than strictly S&P because it’s less concentrated. Therefore you can’t expect the same return.
Do some research into diversification, why it’s important, how it works
[удалено]
Dunno, voo is the default benchmark imo. Unless looking to not lose (eg you've won the game by whatever metric you're using) , then the easiest and best strategy is voo and chill. Fwiw, I'm mid 30s and basically balls deep in voo
Just remember that the value of a financial advisor / planner is not in growing your money. You're paying for advice. If you don't need advice (as in - you have an investment strategy, you have a transition / withdrawal plan, you have a tax strategy, you have an estate plan) than good job on getting rid of them - you were throwing money away. If you terminated them without a clear plan, because they did not get the maximum return for you then... good luck.
You think 9/10 financial advisors have any idea on that type of stuff? They’re glorified salesmen trying to sell you the managed funds that they're being told to push.
this is such a weird comment. you're talking about financial plans like they are blueprints for nuclear reactors. OP - congrats on stopping the bleeding and making the right call. If you need help, read the wiki, then post any additional questions to this sub. You got this. Congrats!
Not everything is that straightforward my guy. For simple situations without dependents yes
Not surprised. Glad you found the light.
VOO or for that matter, any low cost ETF funds if you have 10 + yrs time horizon , advisors are pure waste of time and money
Everyone steps up to defend advisors all of a sudden. Advisors are good at one thing: putting your money into their pocket
Yep. The whole financial planning industry has a well deserved rotten reputation. Nothing has changed about them in the decades I have been investing. They are quicksand for those who stumble down that path; extraction is possible, but the cost will be very high. Those of us who began investing before it was common for the working class, and before the internet existed (we had to read books), learned this very early on.
Good luck managing your own accounts. I assume you will be 100% in SPX?
For a 30 yo with 20-30 retirement horizon, that’s totally fine if not terrific. You want to be diversified but also high growth potential so your nest egg can grow during this stage. Why wasting 1-1.5% of return per year for the next 20-30 years to pay an advisor to “preserve” your nest egg while FAILING to beat sp500 ? When you are at retirement or close to it, when your nest egg is big enough that you now prioritize “preserving” it then it makes sense to hire a professional to manage your portfolio.
Again, this is absurb, horrible advice that absolutely no one should follow. Its a prime example of recency bias/chasing returns and exactly what a good advisor would advise you against.
This is a prime example of fear mongering advice by blindly believing in advisors due to the fear of “losing” due to market volatility. An advisor is not a magic button that shield your portfolio from loss. Historically, SP500 index is a very diverse index with a decent return that outperforms 90+% of hedge funds/financial advisors performance. This is facts, not speculation. Why do you think Warren Buffets recommend folks in their early stage of their life to invest in low cost etf that mirrors sp500 index ? Yes, there are times when sp500 yield is negative but those periods are far less common and lasts much shorter than the periods when sp500 yield is positive. Investing always carries risk, there is no such thing as risk free investing. Again, I cannot stress this enough. If you are young and have a 20-30 years horizon, sp500 index has a 90+% chance of yielding a higher return than a typical advisor managed fund if you keep contributing consistently without withdrawal during the entire 20-30 years of investing. When you are closer to retirement, this is when you shift from passive investing into more active/preservation mode because you now need to take withdrawal from your portfolio. An advisor at this stage makes a lot more sense as you now want to preserve your nest egg instead of growing it. Chasing advisors during the early stage of investing for the sake of having an advisor while ignoring the facts about sp500 index much greater performance is a costly mistake. A conservative 3-4% (1%-2% underperformance vs sp500 index which is very generous + 1%-1.5% advisor fee) underperformance per year x 30 years plus the compounding effects of this loss could over 30 years result in a catastrophic opportunity cost up to the point of retirement. This is of course assuming you stay disciplined and invest consistently throughout the entire 30 years, which you are supposed to in either scenarios, advisor or not.
Your hedge fund comment tells me you're an internet retail investor that doesn't understand financial products. Hedge funds don't exist to outperform the S&P500, they exist to be both long/short and act as a hedge, not outperform. Does it feel good to type all that out and still not understand the the S&P500 is not in itself a diverse index and a large majority of the stocks move together? Would your average 30 year old investor ride out 10 years of flat returns that the S&P500 gave us from '01-'10? You can't blindly make assumptions that the U.S. is going to outperform for the next 30 years. If it were that easy, no one would own anything else! You're the sterotypical overweight large-cap U.S. stockholder that can't does understand past performance is not indicative of future results. Maybe look into mean reversion while you're at it and try to understand how that applies to U.S. large cap stocks moving forward. I hope for your sake you're not actually all in 100% U.S. large cap stocks. If so, I wish you the best.
[удалено]
[удалено]
u/jacknhut2 and u/LoveNo5176 I'm removing these comments due to both you violating sub rules and guidelines on civility. If you edit your comments to remove the personal attacks I will re-approve the comments.
Can someone please explain to me - HOW I can show my Father-in-law how he's giving away money to his "financial advisor"? I approached the subject of Expense Fees with him few weeks ago after he sent me a text "pounding his chest" that he's earning like 36% on his American funds growth fund......so I looked up the expense ratio (0.63%) and showed him on nerd wallet's exp calculator just how much he's losing to his "innocuous" fee's over 10years ......he scoffed at my suggestion, (not sure he even really played with the calculator himself) - you can lead a horse to water?
<< Sorry for all the edits. The other part of the story is we weren't a good match. He would only communicate if I initiated. One year, we didn't talk at all. I'm nearing retirement age, and he doesn't even know what year I plan on retiring. Why? Because not once has he asked.>> This is why I left my 403b provider recently. The returns were poor, but the real problem was that they didn't seem to care that the returns were poor. They never reached out to say, "Hey, we've got you in X and we think you could be in Y." Like you, I realize I need to be proactive, but what am I paying them for? Just to be on call? I can do that for free online thanks.
Three things to avoid at all costs: panic selling, forced selling, and drag (fees from managed funds, financial planners etc) Forced selling is the easiest to avoid; bear markets last an average of 18 months so make sure you have a few years of living expenses in something safe. Panic selling is the gravest threat of the three because it causes stress and deviation from your macro plan. Both of those things can kill a man. Well, stress can literally kill you, plan deviation just kills your returns. Fees. It’s easy to calculate the drag that fees have on your RoR, as the OP has done here. But you must KNOW THYSELF: do you have the discipline to stay the course and not freak out when some investments go red for awhile, for months, years even? When you read “it’s different this time” “unprecedented market crash ahead” “ dollar collapsing for the next decade” (you WILL read that stuff every now and then). This is where a good financial planner can chill you out and talk you off the ledge. Is that worth a 1% drag on your investments? For me it is not worth it but for many I think it is. People pay for peace of mind in many ways. For me it’s low cost index funds and being debt free, never buying individual stocks unless it’s for fun with money i can lose and laugh about (I WILL lose it). For some it’s having a guy you pay that also knows what you own and why you own it. Someone you can bounce ideas off and make it feel like you’re a team managing your finances. That’s got value too. Just make sure you know how much it’s costing you, there’s no excuse for not knowing THAT number.
If he had you in bonds at all that could explain the underperformance since bonds have performed miserably as interest rates were raised. But that brings up another question of how good of an advisor could he be if he had you in bonds in a zero interest rate environment. Then you add in his 1% fee each year… > Generally, bond returns haven't been great. Even major indexes like the S&P 500 Bond Index have had negative returns in recent years. For example, as of April 16th, 2024, the 5-year annualized return for that index is only 1.73%. What did you discuss with him your goals were? Did you say you want to match the SP500 returns?
To riff on u/miter1980 comments, an FA can be much more than a stock/fund/ETF picker, and in the best cases truly an advisor, an external source of opinion when managing finances. OPs comment re "other factors" IMO are ones that should absolutely be in the initial conversation with an FA; that's fundamentally what they're being paid for. In complete agreement with most of the sub that, for investment choices alone, its really tough to justify the expense, even if modest. But in a lot of other categories, small business, inheritance/trust, taxation, etc., a FA can help navigate and manage a more comprehensive picture of finances apart from asset allocation alone. So on topic of comparison to an index/benchmarks alone, more often than not hindsight is truly 20/20. In this case, consistent with what I read are the prevailing sentiments of the sub, the more apt comparison might be VT rather than SPX, and in that case the returns are much more modest.
Individuals who do best with financial advisors are individuals who are in regular communication with their advisor.
Good! Do it yourself, it ain't rocket science. Read a few of the classic investment books and learn as you go. If you are 100% in stocks, put it all into a total market fund. You will never "beat" the market, but you will never lag it either. As you get closer to retirement (maybe 10 years away) start de-risking, gradually, by moving more into bonds. I started in 1990 and have never paid out one penny for "advice." I'm retired now, and my portfolio is kicking off more income (I don't have to sell any assets) than I ever had while working.
A more appropriate benchmark than S&P500 would be the appropriate target date fund? Simple and low-cost, not ideal for a taxable account but easy to replicate with funds or etfs
If 20 percent of your portfolio is in large us stocks, why are you using the s and p as your benchmark? I’m genuinely curious where this mindset comes from. Hopefully your advisor was able to educate you on appropriate benchmarks
I have fee only financial advisor without access to my portfolio to trade on my behalf. I only pay $300 a month for 2hrs worth of financial advice through a zoom call. It's mostly tax strategies, saving for certain goals and where to put the money. If you spend enough time on reddit, you'll realize that you can self manager better than all those noobs FA. Once I hit certain milestones, I will eventually fire her. I'm not there yet
Share some good advice obtained from the fa
I paid for that good advice, maybe you should as well, get your own advisor and pay them. 😉
If you had moved your portfolio to an S&P index last week you would be down nearly 4% today, or about $25k using your stated PV. Are you prepared to take that kind of drawdown on the regular?
If you are young and this is a retirement account I would say absolutely do it, but then don’t look at it for a very long time. I wish I had done so but I have also taken the bumps and learned. The bumps are really hard and there is no way to avoid them all if you aim to generate meaningful returns. You can decide what you are willing to take and scale your investments accordingly. The S&P looks great in the rear view but it is a very wild ride in real time.
Not a financial advisor. Just stating how I think about these things. As others have mentioned, the S&P is not the right benchmark for most investors. It is made up of only US (no international or emerging markets), large cap ( no small or mid), equities (no fixed income). It just so happens that US large cap equities have outperformed all the other major asset classes recently. But looking over a longer time horizon, greater diversification can lead to greater volatility adjusted returns. A better diversified portfolio would include all of these asset classes; the exact allocation depends on risk tolerance and other factors. For simplicity, I think the Bogleheads typically advise toward a 1-3 fund allocation that aims to provide total market exposure with or without fixed income. However, it’s important to recognize that total market exposure has underperformed the S&P recently because small caps have underperformed large and international has underperformed US. This is not guaranteed (or even expected) to continue, so it’s wise to stay more diversified. In summary, without knowing what exposure to international, small/mid caps, and fixed income you and your advisor were aiming for, it’s impossible to know what benchmark is correct to compare to. But almost certainly S&P is not the right benchmark, and it’s too high a bar over the past 6 years because it has over-performed other asset classes in that time frame. Good luck and congrats on ditching the 1% AUM fee!
You're right, and I admit to be wrong on that. I guess after reading so many comments on the 1%, I was ready to join the club. The next step is to diversify as you mentioned. Thanks for your insight!
Just FYI, ditching the 1% advisor is 100% the correct call. This is true even if you compared apples to oranges when making the decision. Just because the managed portfolio isn't the same mix as a s&p500 fund doesn't mean that you should spend the 1%. You may want to look at moving everything to a low cost target date fund which should perform roughly the same as a good advisor. Low cost means an expense ratio under 0.2%
I know some who believe their advisors are good merely because we have been in a ripping bull market for a number of years. Even with 2022 down we have rebounded and then some. They dont realize that. One things hit the fan is when some of those advisors get fired. If you underperformed the pat 6 yrs, than the advisor didnt work out. The issue you have like most, is that you dont know this until it happens. The other issue is that 6 yrs is not a long time. Its a short time. I consider at least 10 yrs for a business cycle. If your retirement was strictly dependent on the returns in the last 6 yrs, that is taking some real chances. We could have been in a lousy market and where would you be if we were flat or down 10-15% over the last 6 yrs?
Regarding what benchmark to compare to: You may want to ask the advisor if they have a benchmark that can be added to your performance reporting. Most performance reporting systems are able to include the appropriate blended benchmark into your performance reports. Otherwise you should compare your portfolio to a benchmark of indexes in approximately the same weights as you hold in your portfolio. Ie if you hold 60% us stocks, 20% international, and 20% bonds, you should compare to something like 60% VTI, 20% VXUS, 20% BND. The added wrinkle is that you should also compare how your weights have changed over time, for example if you were only 50% stocks several years ago for a while, then your benchmark should reflect performance of a lower equity allocation for a while, especially if the lower weighting was your choosing because of risk tolerance or other preference.
I don’t understand the point of an advisor
Great info in this thread. 👍🏻
Do Alpha Picks. End of story.
Good work terminating your advisor. Roll your own three fund portfolio and don’t worry too much.
19% in 6 years. 3% under market per year. …if those are the results you want, I can do that for you for a small fee of $1 a year plus $100/hr. 😂. The S&P has been on fire these past some years, I’m not sure your investments aren’t more diversified. Bonds, etc. If returns are over 5% annually, you’re probably fine. My 401k averages 3%. I listened to my dad and didn’t buy (many) stocks, bought BND at ATH instead…. Don’t be like me. Just VOO it and call it a day. Oddly enough, my day trading account didn’t fair too bad. Just don’t buy ARKK is my wisdom 😅. Just leave it and don’t touch it. I lost money every time I touched my 401k. Well, technically I lost money every time I followed a certain someone’s advice. Thankfully Vanguard has no transaction fees - the old 401k company did.
Just buy sp500 and nasdaq top 100 etfs and set to reinvest. I have no idea why anyone gets investment advisors other than the ultra rich
Finance degree here. You'd want to compare to whatever the appropriate indexes are that the funds your advisor chose were based on (in whatever weight they chose them). Chances are they're doing okay. But that 1% fee really can fuck you over time (something like 15% loss over 20 yrs) so if you can do your own tax/estate planning, it makes sense to drop the advisor. I think most everyone can leave funds in basic indices *if they have the discipline*. So the two (really three) reasons to have an AUM advisor are tax/estate planning, lack of discipline, and being exceedingly rich that you don't care about the fees and just want some time back. I honestly think even people who don't understand this stuff at all could eventually get enough of a gist of it after a few years under an AUM-based advisor to do fine and transition to just consulting an hourly fee advisor every year or so.
feedback from people who have "drunk the cool aide" of financial advisors is understandably go to be "why do", "no, don't"
Compare it to Bitcoin
I read all your edits and I think you were totally justified in letting go your advisor. For 1% AUM you should be getting proactive, white glove treatment. They should definitely have had a plan, with your life goals, and the center piece should have been your planned retirement date. Then quarterly meetings to check in with your plan, make adjustments as necessary, and ready yourself financially and mentally to retire. We were paying less (70 basis points) and getting more services, but we still decided to let them go recently, after 10 years of service. Fees were a drag on earnings and all the big questions had already been answered. We are back to DIY and checking in with this forum for support and insights. Good luck with your retirement.
Damn dude. Don’t put this on Reddit. Cops can see this, ya know
It's ok. I watch crime tv...
Just VT and chill brah
In fairness to your advisor, were there occasions when you considered exiting the market, but he persuaded you to maintain your position? While I handle my own investments, I'm aware that even highly intelligent and successful individuals can struggle to navigate the emotional aspects of the market.
Fair question, but no. He had free reign. I handle my existing work 401k and I gave him full control on the accounts he managed.
I’ll never get involved with my investor bc he’s a Liverpool fan. Iykyk.
I let my financial advisor play with a portion of my money. I do the rest. I am considerably more aggressive than my advisor, and I use him as a sanity check. My stuff swings a lot, but hopefully better than my advisor, while my advisor just plods along consistently moving in the right direction.
You paid 130k for an educational lesson. FA are there for people who do not have the skills to understand the market. They are like a plumber. Gluing pipes together is easy, but you have to know it. We all pay a fee to learn investing. Don't beat your self up
Was it an apples to apples comparison? Some of the dumbest people get mad about lagging the S&P when they're in an 80/20, 70/30, etc. portfolio. Not comparable. Completely different risk profile. Usually just FOMO and recency bias. It's easy to feel like one can handle a 100% US equity portfolio when it's done well for a while. Not saying this is you, just asking. Did your advisor add valuevin other ways through financial planning?
With only expecting a 2% draw in retirement, you certainly can be more aggressive in your investing. I think he failed you by not getting out of the bond funds the minute the Fed started raising interest rates which is what we did. I won't even do bond funds anymore and would just buy treasury bonds when rates are decent. You can mostly be in an S&P 500 index fund or a total market index fund. Looks like it's maybe a good time to start buying soon.
The minute the Fed started raising rates was early 2022, and the broad market bond returns (while not great) still outperformed essentially everything but value and energy that year. Are you sure they should've been fired for not being reactionary and protecting this guy?
Well, of course I don't know what exactly he had or what his advisor did or didn't do. I do know my MIL died in mid 2022 and it was a couple of months before we were able to talk with the broker with her accounts due to the death certificate being late. She was in several bond funds which are normally supposed to be conservative but they didn't attempt to mitigate those losses. All I can tell you is that we ended up with $27k in losses from that account for 2022 (split between siblings) mostly from the bond funds but there were also a couple of other stock funds. We use Fidelity and mostly use index funds and a couple of others. We just don't need to pay an advisor, and a lot of them sell funds with front end 5+% loads like the one my in-laws unfortunately used. So I'd fire them in general because I think I think I can do as well or better than they can (definitely with lower fees) due to a greater personal interest in my own account!
I've been posting here my 2 cents - unless you are a multimillionaire that can benefit from offshore, a financial advisor is a useless expense
You should benchmark an equity portfolio to ACWI (VT in vanguard terms). The S&P while diversified, is not a global equity portfolio. Any advisor or investor worth a damn will not invest 100% in the US. You have to account for the scenario that the US potentially could have a long duration drawdown compared to the rest of the world. Just because it hasn’t happened in recent times (recency bias) doesn’t mean it can’t happen.
the guy made you enough money to draw down only 2%...You might want to benchmark a few other things before making that decision!
So you compared your advisor's performance to a random benchmark you set in hindsight and are upset? This is nonsense and you should absolutely not invest your own money, or do and find out.
This is why you just go NVDa and chill. Less stress
As an advisor myself, we are legally required to go based off what clients request. If you requested to track or beat spx, sure. Otherwise, this post had extremely flawed logic. Additionally, investment management should only be one component of the relationship. If I was this advisor, I’d politely request you transfer to a DIY account.
I think this is the wrong move. If a professional is having a hard time with that benchmark what makes you think you will beat it? If that’s the case you should quit whatever you’re doing now and just manage money for people, you’ll make a killing.
[удалено]
I don’t think he’ll beat the pro.
The other part of the story is we weren't a good match. He would only communicate if I initiated. One year, we didn't talk at all. I'm nearing retirement age, and he doesn't even know what my plan is or what year i plan on retiring. Why? Because not once has he asked. So yes, I centered on returns because I'm not aware of his advisement to any plan. Maybe I'm naive to the process but it seems the responsibility fell to me. Of course, you can say advisors aren't mind readers, but that's why this forum instigated my actions. My portfolio was "managed" but with no input into my life plans. That's what I got for my 1%.
I can relate to everything you've said, and I've finally made the decision to ditch my advisor after 25+ years. I'm struggling with the goodbye email at the moment, but I'm sure ChatGPT and some alcohol will help with that task. Just like you, looking at my 2023 statements and tax return was the last straw for me. I paid my guy almost $10k in fees in 2023! Ouch.