My partner and I have been working with a financial advisor from Edward Jones for some time now. Our wealth has accumulated and we recently inherited a large windfall from a relative, too.
We love our advisor and have trusted him for some time, but at what point do you start to worry about an advisor's abilities with handling "larger" quantities of money? What even is considered large – $1M, $10M?
At what point do you "outgrow" a financial advisor?
byu/fascinated_dog ininvesting
Posted by fascinated_dog
44 Comments
Uh, immediately. Theyre useless. Everything they can provide can be learned within a week or so on your own.
Do you have a complex financial situation, or goals, or is it straightforward? Generally more important when choosing a FA than the amount involved.
Never pay AUM fees
Its really kinda the other way around. You should be asking at what point does a Financial Planner and team add true value? Because at very large amounts there will be value in long vision planning, tax optimization, estate planning et all. So at what number do you feel you need that advanced planning advice?
There are two reasons to use an advisor. 1: you don’t know how to invest, 2: you need an emotional backstop.
1 you outgrow quickly.
2 is highly dependent on the person.
EJ is trash. Should have left long ago
Why do you love and trust him?
There is no generic answer to that, but if you have an advisor now, and come into some new money, then invest some/most/all of the new money yourself if you want.
There is no rule somewhere that your only choices are to have either 100% or 0% of your investments with an advisor.
It’s not based on wealth – it’s based on understanding of financial markets. If you have enough background knowledge to know about / understand index investing — you’re set. Congrats! You just got an extra ~2% exponential compounded growth per annum.
Do it yourself ASAP. Keep shadow transactions to assess your investment decisions. They prey on the overwhelmed. Do your job and teach your inheritees to do the same.
What does your advisor charge? Hard to give an answer without knowing what they do and what they charge. I pay .003 (.3%) for a live advisor at Vanguard. I find it worth while for that rate. Yes, I can do stuff myself – I am smart – but I am also busy at work and my time off is when I enjoy my life and I don’t want to spend time reading, learning, and doing tax loss harvesting, rebalancing and figuring out optimal allocations for tax free bonds . . . . I pay other to do alot of stuff and know they are experts at it and I don’t worry about it.
The question isn’t about how much is too big for an advisor. If the advisor is helping you with estate planning, tax strategies and other things in addition to asset allocation then they may be worth it. If your advisor just helps you with asset allocation and charges a fee to do it they probably aren’t worth it. If you can replace your advisor by saying I am going to own x% in equities and y% in bonds they aren’t worth it even if you have $1,000 to your name.
$1 Bob
Fundamentally, your advisor works for you because of the money you pay him/her.
There is case for changing advisors occasionally just to shake things up.
If you have a vanilla portfolio and have no pending life-events, then there is no reason to be overly loyal.
If you are in a unique place, and your advisor is giving you quality, custom solutions — that counts for something.
I used Edward Jones as well, up until April of this year. I read “The Little Book on Common Sense Investing” by John Bogle and it changed my life. I wasted so much money in fees for so many years and did not realize there was an alternative. I removed my money from EJ and am now 65 VTI and 35 VXUS using Vanguard.
i hindsight, i should have used a financial advisor – it would have been worth it. i always “managed” my investments, but in reality just did not do the job. about 3 years ago, i turned over about 50 percent of my assets to two professional advisors, and they have done a pretty decent job, and while I know they are just following a program, at least it gets done.
if i could go back in time, i probably would have just deployed a 9 fund mutual strategy and just stuck to it. but when u are young, you have fun and think you can actually stock pick. then shit gets messy, the job gets complicated the family grows etc etc
so i think the statement “useless” depends on your situation. i don’t find them useless at all. they handle stuff I don’t want to handle.
An advisor is more useful when the sums are large.
The mistakes you will make with large money is likely more costly than their fees. Only time will tell though.
If you make a 15% mistake, tons did this 2022, that is easier on 200k than 2M.
At the first dollar
When you know what an index fund is and that you can invest in it
How much is he charging you
I’d say the moment their fees equal 5 digits they’re pointless. Imagine if they charge 1% AUM for 1 million you’re paying $10,000 for them to do the exact same thing they did at $900,000 for you. Once you’re at a million you’re not actively trading anymore. You rebalance semi annually. You could do on your own or pay a guy hourly to help. Look at what they have you invested in. It’s bunch of low cost index funds. I think they’re more useful in not allowing you to make emotional trades. But once you are disciplined to not do that you don’t really need them.
I have Fidelity and they assign you a financial advisor. He has a team of people that help out with specifics. I believe he is Vice president? of the branch.
I started with him 10 years ago. Have accumulated to a little less than 3M in that time. I met with him years ago about several knowledge based learning. Then I did not talk to him until last year…getting ready for retirement.
I really do not need investment advice, but they were there when I needed it.
Now he was there to figure out deferred investments, taxes, RMDs, and Roth conversions.
Not sure what the next level of an advisor would be….
I think the only benefit of an advisor is if they can recommend nifty ways of avoiding or reducing taxes.
I want to echo what someone else said, it’s better to be in the opposite position where you don’t need an advisor until your wealth management gets complicated, where a wrong decision could have say tax implications that really set you back.
The trouble is how you bootstrap into financial knowledge. You have to be curious enough to want to learn. Ask and seek answers to specific questions.
(How to handle a large windfall isn’t specific enough because it depends on your overall financial health, so there are half a dozen more questions and possibilities to understand first.)
Tax advice and estate planning, sure, but they are more ‘one off’ jobs ‘as and when required’… general financial advice? kinda pointless to retain someone on a constant fee.
I manage all of my investments but I would question the “outgrowing” part of your question. If you felt there was value in an advisor at $10k or $100k why would you want to do it yourself at bigger amounts? At higher net worth a financial planner might be helpful. I would look to a fee only financial planner and/or a good accountant. I have found both of these to be more valuable than an investment advisor.
While most of the people on this sub want to do it themselves and some of them actually can when it starts getting to proper tax planning, distributing, and true financial planning most of them cannot. I would imagine if you are asking the question you should interview some advisor team preferably one with a cfp . Get a clear understanding of their fees and what the fee provides you. Good luck.
Go to a flat fee based planner if you need one.
The common 70/30 split is so they don’t look bad when the market tanks. It’s not for your benefit. Same with the complicated strategies.
Taking an X% cut year after year is a scam.
It’s the opposite imo
You don’t need one when you first start out
As your investment grows and gets more complicated is when you need one
Usually it’s 3 mil+
Their fees are exorbitant and they tend to steer you into investments that result in even greater expenses. If you need an advisor, pay a CFP by the hour, keep the hours to a few each year, barring an unusual circumstance, like a death, disability, retirement, a home sale, purchase, etc.
I think we scared the op away. Just realized how much they’ve been ripped off
My advisor charges .65% or so.
Access to structured notes and having them manage my tax loss harvesting for me is worth their fee. I also have them run covered call plays that I would likely have screwed up because I’m…busy working.
With that said, I’ll likely drop them in 10 years.
Hi, financial advisor here. It’s usually less about net worth and more about circumstances.
Retirement is a big one, for example. I would say that once you are within about 7 years of retirement, you’ll get good value from an advisor that knows taxes, investing, and income production, along with estate planning and insurance.
If your advisor doesn’t handle those things, I’d interview some others.
However, you may just want to be a squeaky wheel with your current advisor. If you have a good relationship with them and they understand your circumstances, let them know that your net worth has gone up significantly and you’d like a comprehensive review.
When you can watch your net worth fall 50% and not panic, you don’t need a financial advisor.
“Outgrowing” is not about the money, it’s about behaviour.
its not a $$$ amount, its maturity.
You can just buy an S&P500 index fund such as SPYM, and it is most likely out growing them immediately.
I hope you experience sequence of returns risk, lol.
You don’t need them, ever.
I self manage. Richest people I know do the same. EJ is a dumpster fire
Not a fan of EJ personally, and you’ll get a lot of anti advisor sentiment generally in this sub.
That being said, the job of an advisor changes depending on complexity more than AUM. If you have no say in how you receive the windfall and have an otherwise straight forward financial picture, the job of an advisor is to make sure you don’t hurt yourself more than anything else. In June of 2022, he’s the person who is making sure you don’t panic and sell out at the bottom. In December of 2021, he should be the person making sure you don’t throw half your net worth into a SPAC.
If you don’t think that provides any value to you, and you’re alright putting your money into a couple ETFs and tracking RMDs, Medicare premium cutoffs, and a couple other small things on your own, then you probably don’t need a financial advisor, assuming that your spouse feels the same way and can handle the finances themselves if you get hit by a bus tomorrow.
If you have a high AUM and a complicated financial picture (partial business ownership, limited partnerships, complicated estate plans, etc etc) then a good, competent financial advisor is absolutely worth the cost, both in terms of time and potential errors you could make without realizing it.
You’ll notice I didn’t mention performance above; if a financial advisor is pushing performance, fucking run. If they could consistently outperform an index fund, they wouldn’t be talking to you or me.
You don’t outgrow a financial advisor, if anything you grow into needing one. But you don’t need one to tell you where to invest.
When you realize every single index fund out performs them. So… Immediately.
I mean there are private wealth advisors. Idk what thresholds Edward Jones might have to qualify to meet with one. But I’d say like $10M investable/liquid assets or a $25M estate.
At that point it becomes more about optimization than anything. The retirement phase is different than the accumulation or working phase. Depending what you have done during that time, there are different strategies on how to live out the rest of your life. This is where an advisor can be useful.
There is also a difference between someone who is managing a brokerage account for you, and someone who is helping you financially plan for the rest of your life. Are they talking to you about life insurance? long term care coverage? legal documents (wills/trusts/POA)? social security strategy? what will happen with beneficiaries? These are all places where consulting with an advisor can be helpful as you approach/enter retirement.
You can have someone who manages your investments, a person who is an actual financial planner (taxes, will and estate planning), or someone who does both.
If it’s just managing investments, you can always do it cheaper, but you only have yourself to blame if you muck it up.
You can also file your own taxes, WebMD yourself, etc.
Depends what you mean on financial advisor and what services you are needing? Financial Advisor is a broad title that isn’t a protected title and can mean a variety of different services. If you mean an investment advisor that helps with portfolio selection and asset allocation, probably never. But if you need or want more help with financial planning (tax planning, tax efficiency, creating a will and trust, financial planning and with drawl), I think that would be the inverse of your question and more valuable the more wealth you have.