I’ve made posts railing against financial advisors and wealth managers in the past. I’ve come around on the topic lately. I think they get a raw deal on here.
I used to focus on the millions (!!) I’d be paying my advisor over my investing lifetime. As the esteemed Chapelle once said, “I’m rich bit$c!”. In my case I’d be paying hundreds of thousands annually to a 1% advisor. That 1% fee compounds to tens of millions in my advisor’s pocket in a few decades, but it’s totally worth it!
After all, I don’t fix my own faucet or write my own trust and will docs. I get the experts to help. That is why I am also happy to have a plumbing contract for 1% of my residence value each year and pay my attorney a measly 0.75% of my net worth annually. They keep me from doing stupid stuff. Worth it!
Wealth management gets a bad rap
byu/firechoice85 infinancialindependence
Posted by firechoice85
10 Comments
Strongly disagree and agree to disagree
Bait
You spend $10k (or so) a year on plumbing?
I know people who have net worth over a few hundred million who spend their entire weekends vacuuming and cleaning their own house, because they think it’s a waste of money to use cleaners. They said over their lifetime, that shit would’ve compounded.
I make a lot less and have much less wealth… but yeah, I’m not fucking doing a deep clean myself wtf I’m happy to be out of a few hundred dollars.
Everyone has different tolerances – and that should go for financial advisors. It’s definitely incorrect to just shit on financial advisors. When you’re passing down more than your future generations can spend, being down a little isn’t that bad.
I have a friend who claims (I don’t care to verify) that he became a multi millionaire with crypto but said he’s terrible with money who asked me what he should he do. For people who genuinely can’t manage money and don’t understand taxes or investments wealth management does make sense. For people who do or are willing to learn, it often makes sense to DIY. I think if you are rich enough to exploit weird tax loopholes and unique investments and/or want to explore trusts for your family it may also make sense
Man it sounds like you spend a lot of money to feel like you don’t have to worry about some things. More power to you. Some of us would rather get similar (and often better) returns without spending the money.
I guess the issue is:
Good wealth manager, expert private fund manager and similar folks mostly offer well diversified portfolio, including the similar well performing stocks.
20+ years ago it would have been too much of a hassle – but nowadays you can just get a few cheap ETFs and call it a day.
Sure, some may say “we also use short positions to reduce downside risks” -> which you could also do, but as nobody is able to predict the markets, it is more likely to underperform.
It takes like <5h one time in your life to set it up. And maybe a few hours a year, if you need to change – but why pay someone 1% of your net worth for it?
About your other advisors: guess it depends on your net worth and property value: but I pay less than 0.3% and just every few years to get a plumber.
Same for attorney: had a Specialized one, one time – but 9/10 year I won’t need legal support.
Just don’t do stupid stuff – and the one time consultancy fees are cheap – I am no where near FIRE yet, as I am just starting, but even I paid like 0.35% of my net worth on lawyers, and <0.1% on plumbing 😀
In your age & FIRE state, I would hope for <0.01% 😉
Well done OP
Only hundreds of thousands? Damn who let the pours in? See also r/fijerk
I mean when you get to a certain point, sure. Were I a billionaire I’d happily hand it off to someone with expertise to manage it for me and pay them for the service. At that level, managing those amounts is complex enough that “VTSAX and chill” probably isn’t the soundest strategy.
But like, for the more typical investor saving for retirement and who will never have more than a few million in their lifetime? It’s just pissing money away given the existence of pretty simple, straightforward and proven strategies involving low-cost funds.