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Anonymous User
Delegation can be hard! What helps you?
Additional Posts in FIRE Financial Independence Retire Early
Conversation Starter
Decided to payoff my mortgage.
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Subject Expert
They can be worth it but also can be expensive or steer you into investments that generate fees for them instead of being most suitable/cost effective.
One point of caution, you may be at risk of over-confidence in your stock picking ability. Outperformance by picking good stocks is far more luck than good judgement.
If you can recognize your good fortune, and adjust your approach then you probably do not need an advisor, at least during your accumulation stage.
First of all - Congratulations on being ahead of your peer group. In your mid 30s, you are doing really well for a $1.3m net worth. Sounds like you have sound financial grounding… however, good stock calls may not be a great long term strategy specially as your portfolio grows larger. Having a financial advisor lowers your overall growth potential by 20% - the studies that consider 100 bps as the advisor fee have established that over a 20+ years time horizon. However, you will need a retirement “planner” when the time comes to tax diversify your retirement income streams (brokerage, IRA, 401K, Social security, pension). For that scenario, I would recommend a time based or a fixed fee consultation rather than a full retained advisor. Since you mentioned kids, please do your will and estate planning now. If you decide to launch a small business, you will need a tax consultant/planner more than a financial advisor. All the best!
90% of people can't invest by themselves because of behavioral bias. IE OP exhibiting overconfidence bias ("we made good stock picks"). That's why those Fidelity retail investor studies show self directed accounts averaging 5% annually
Subject Expert
An advisor might be well worth their fee if they could convince you to stop picking stocks and instead buy and hold a strategic allocation of total market index funds.
I’m 31 and my Wife is 36 and our net worth is right at 2M. We’ve never engaged a financial advisor and I don’t believe they are worth it. You guys are young enough like us to continue doing what you’ve been doing which is simply buying and holding good funds. Advisors rarely beat the S&P 500 so just keep buying that which is what I’m expecting you’re already doing and keep expenses low.
An advisor’s job isn’t to beat the S&P 500, it’s mostly to make sure you don’t do anything stupid trying to beat the S&P 500 haha
I feel like there are a good chunk of people (especially those who thinking about FIRE) that assume you can or should DIY for everything—taxes, financial planning, estate planning, etc.
It’s easier when you’re a single W-2 employee, but life can get complicated. Suddenly you’re 40 with kids, a side business, an accidental rental property in another state, aging parents who might need some help, and no idea what you’re doing! It’s worth finding credentialed professionals as soon as you’re feeling uncertain if you’re “doing it right”. A good financial planner will help with more than just investment decisions. Find a CFP who is “fee based” to help avoid some of the things cautioned about above.
Mentor
Whether an advisor is worth it is very much personal situation driven. If you have the time and expertise to do your own analysis, then it may not be necessary. However, they may help structure certain aspects of your portfolio in areas you may not have as much knowledge in, such as tax efficiency.
I do my own investing as most financial advisors don't want to deal with all of crazy independence rules I am subject to (I'm a big 4 accounting firm partner), but do use a firm financial advisor for help with structuring my investment accounts (e.g., personal brokerage account, 401k, Roth 401k) so that I can know how best to fund my impending retirement and ultimately transfer assets to my heirs.
Figure out what you are good at and where you need help, then talk to a few advisors. Once you talk to a few, you will know pretty quickly which ones follow the same basic playbook/sales pitch and which ones actually want to work with you. It amazing how many of these guys have basically the same pitch and can't really answer probing questions with thoughtful responses. If you get one of those - run away. Good luck!
I made my client $5M+ on one investment (they invested $1M) in 2+yrs, you tell me? Haha…..joking aside…if you can DIY and have the discipline to stay the course through different market cycles, then you don’t really need one. But if you are the type that can’t stomach the ups and the downs, then a FA might be helpful. Also, not all FAs are made equal, some are extreme knowledgeable and ethical, some are lousy, some are shady, and some are just greedy. So you have to find a good one.
Would be a great idea to place your assets in a LLC or trust to protect yourself.
I find a fee-only financial planned is cost-effective and helpful in portfolio structure, tax structure, risk management etc. And not that expensive - worth it with significant assets in my mind.