Should I feel bad about letting someone outsource my investments?

April 5, 2013 12:31 PM

I have been getting started with Vanguard, but spoke with an investment adviser today, and it all just seemed so much easier. I've spent hours trying to figure out what kinds of accounts to open, which offer tax deductions, what kind of investments to make, etc. It seems really tempting to just let someone handle this all for me, but I feel like I've never heard from people who are satisfied doing it that way. Countless articles I have read on the subject always make it sounds like someone is a sucker for paying higher management fees.

Part of this might be a class thing, I grew up blue collar where nobody had investments, and if even if they did you handled things yourself. So I don't have experience around people who outsource this sort of thing.

I'm 31, self employed with two businesses that suck up all of my time, plus married with two children who I would rather be playing with than reading about IRA's.

But at the same time I've spent time on the Bogleheads forums, and I know Vanguard is the cheapest way to do all of this, and possibly the biggest bang for your buck.

This is not something I'm passionate about. The main reason I'm even investing is as a tax minimization strategy (I'm happy to pay taxes, but of course if the government wants to incentivize retirement savings I know I should take advantage.)

Because I'm self employed almost everything about my finances is somewhat unique, to the point I feel like I have to do a mountain of research to figure anything out on my own. This might just be a flaw on my part though, I'm not sure if other people find it all easier.

I'd like to hear from people who have used advisers/financial planners and were happy, or unhappy, and I'd really love to hear from people who moved their money from Vanguard to a planner or vice versa and what they thought.

posted by imabanana to Work & Money (11 answers total)

I love our financial planners/advisors. One works for UBS, where we ended up with money through a variety of mergers. The other one works for our bank. They advise us on different kinds of accounts and other instruments like insurance. They do charge quarterly fees but i am happy to pay them for their professional advice. We also have retirement accounts through employers that they advise us on but do not take fees from - just advice with overall diversification and choices.
posted by dpx.mfx at 12:37 PM on April 5, 2013

We see a fee-only (no commissions) financial advisor, who recommended that we invest with Vanguard (as well as our employer retirement programs), and suggested what funds were smartest for our family's situation. We check in with her every couple of years (as big life changes happen, like job changes and promotions) that change our financial outlook.

She doesn't get commissions or make money by shuffling our money around; she gets a flat fee for a meeting and for followup contacts by email. She does the research for us and suggests to us how to invest.
posted by BrashTech at 12:40 PM on April 5, 2013 [3 favorites]

I'm not sure if it's clear but even if you have a planner they can help you manage your money that is already in Vanguard, or anywhere else. I have a planner that sort of came with my father's estate when my father died. I have my own personal accounts that I manage myself but having a planner (who is deputized to make trades with my father's Fidelity accounts but does not work for Fidelity) for this chunk of money has been helpful. A few things I like

- retirement planning - I can toss the guy my list of goals and some info about my life and he can run some charts and suggest some strategies. He can implement those strategies if I want. He can basically go on auto-pilot if I want, or do only what I want.
- mortgage planning - same thing for the house we inherited. Sell it or keep it? Pay off the mortgage or not? Make capital improvements now or in the new year?
- 5-10 year plan - this money is only sort of mine and my sister's. We mostly use it to run the house we are keeping. I mostly use my personal money to run my personal life which is very simple and I earn more than I spend anyhow. Using investments to manage investments is confusing to me even though I'm very good with math and I'm happy to toss money at the problem (we pay them a set yearly fee based on the dollar amount of our investments, they are independent and do not work for a bank or stock firm) to get someone who is confident and assured and has a good track record (my father used these guys for decades before he died) and it's worth the amount of money they cost even though it seems like a lot at first.

The things that our guy is not good at... taxes. He tells us to talk to a CPA for all tax-related things. I appreciate that he's honest about this but sometimes I need someone with more of a tax background. I think some planners are good at this, mine is not. Also lifestyle stuff. They're technically a "wealth management" firm and cater to a certain sort of person. I am not that certain sort of person and my guy (though he is otherwise a sort of nice guy and will do suck-up things like travel to the house to talk to me, return phone calls on the weekend, whatever) can't really understand that. Their general approach is "Of course everyone wants to maximize wealth right?" and they made some... odd comments about the current administration from time to time as they see them as somewhat at odds with maximum wealth attainment. This is not a feeling I share and at some point when this estate is settled we'll be jettisoning these guys for a person or company that is more in line with my own values and those of my sister.

So it really comes down to how you value your time. You seem to have a good handle on where you want your time to go and it seems like this might be a decent time to outsource. You can ALWAYS change your mind, learn some stuff, your life changes a little. It's very much not a permanent thing. There are even some people who just charge you for a consult ($750-1000 is what I've seen) to help you set up a plan which you mostly run with. That might be a good first step for you.
posted by jessamyn at 12:44 PM on April 5, 2013 [1 favorite]

You can go to the /r/personalfinance subreddit and post your situation (under an anonymous account) and somebody will gladly do your portfolio for you.

If you want a professional, a fee-only advisor is a way better bet than a commission based.

If you have a whole bunch of money to put into Vanguard, I believe they also have a free financial advisor for you. Also, in general, Vanguard is very helpful and you can call them and ask if you have any questions.
posted by ethidda at 12:45 PM on April 5, 2013

I believe Vanguard had financial planners that you can work with over the phone. The advantage being that presumably they have zero incentive to put you into high fee investments that will generate higher commissions for themselves.
posted by COD at 12:50 PM on April 5, 2013

Getting a financial advisor makes sense if you don't want to do the research, just like it makes sense to hire a landscaper if you don't enjoy gardening. You just want to make sure you have the right one. There are a lot of lousy advisors out there who will charge you high fees for for services you don't need and even get lower-than-market pre-fee returns because they're constantly trading.

I think there are two main options: Get a fee-only advisor who will tell you what to you, and then you do it through Vanguard or a similar low-fee firm. (Note that Vanguard offers advising services.)

Or if you want to just turn over your whole account and let them do the trading, check out Wealthfront; I have no experience with them but they have very reputable people and reviews.
posted by Mr.Know-it-some at 12:51 PM on April 5, 2013

We got a financial adviser about 18 months ago and while my husband likes to dabble in stocks and thus makes individual stock picks that account for about 25% of our investments, we let the advisers figure out an allocation plan for the rest. One thing that they did for us that would have been pretty daunting on my own is to help me set up a self-employed 401(k) ("single-K"). We are able to tax-shelter more money through that than we could through the Vanguard SEP-IRA that I had previously.

I'm really, really happy with the arrangement. Our asset mix is something we would not have been able to arrive at on our own (including some alternative investment vehicles) We paid a flat fee for an initial series of meetings and then since then are just paying a 1% management fee on the funds in my single-K, for which we get, in addition to the work of managing those assets, an annual meeting to review the "state of the state" including the parts of our portfolio that they're not handling directly (e.g., they made specific suggestions for reallocating my husband's 403(b) even though they're not getting paid to manage that money).
posted by drlith at 12:51 PM on April 5, 2013

You can still invest with Vanguard if you have an investment adviser. If they recoil at your insistence that the majority of your investments be in Vanguard-style funds, then go elsewhere!

Alternately, Vanguard should offer paid guidance.
posted by acidic at 12:52 PM on April 5, 2013 [1 favorite]

No! Don't feel bad.

For sure, listen to your advisor, but use some common sense. Don't blindly buy stuff, only buy after someone has explained it to you, and you understand it. Ask every question you can think of. Don't EVER give your broker permission to trade on your behalf. You have to sign off on EVERYTHING.

Investing for retirement is a long haul deal. You put your money in a few funds, and you park it there. Be suspicious if you're getting a call to move your money around all the time. That's called Churn, and it's a way that your broker gets rich and you lose money.

Take the time to know a bit about what you're doing. I only have a couple of funds in my account, but I know a lot about them.

SPDR, Standard And Poors Indexed Fund. This one is based upon the Standard and Poors 500 Index. Low management fees because it's tied to the market. Not a smart guy making stock picks.

Fidelity has Freedom Funds, I forget what Vanguard calls theirs (and my current 401(k) is in Vanguard) Basically, you invest in one with a target year of your retirement, Freedom 2025. The money automatically allocates from the day you invest until the target date. So it starts out in the market, and then as it matures, it moves into more conservative investments.

Those two are pretty good for aggressive growth and no need to sit on them and think about them on a daily basis.

Check your balances about once a month, more often and you'll make yourself nuts, but you do want to be sure that things are perking along.

Also, if you hear about it on the radio or TV, so did everyone else. You're not getting in on the ground floor of anything. Don't listen to financial news, it just makes you crazy. Jim Cramer isn't in on anything.

Once you find someone you like, keep in contact. Have a conversation every so often. If you have a question, ask. It's your money, it's your future, it's okay to want to keep a watchful eye on it.
posted by Ruthless Bunny at 1:16 PM on April 5, 2013 [1 favorite]

There are plenty of funds that have low or no management fees. But high management fees aren't necessarily bad- if an index fund gets you 5% a year and a high growth fund gets you 10%, but you have to pay 2% management fees, you'd be silly not to do it.

Also, consider what you'd pay the investment advisor and express it as a percentage of your holdings. Probably ends up looking not too bad.

Third, it costs money to make trades. If it is done inside a fund, you pay for it in fees. If you invest in raw securities, you pay with every trade.

There is no free lunch. The people who are getting screwed are the ones with awful company provided retirement plans, and idiots who buy stuff people try to sell them over the phone or off of a TV ad.
posted by gjc at 7:06 PM on April 5, 2013

I've recently been thinking of getting a financial advisor and am considering the services Vanguard offers. You can work with someone to make a one-time plan for somewhere between free and $1000, depending on how much money you have at Vanguard. This is considerably less than what local fee-based planets in my area charge.

They also offer full asset management services if you have at least $500K at Vanguard. This means they help you make the plan and then implement it for you, give you quarterly reports, and revise the plan as needed. This is what's usually called "wealth management", and the fees are a percent of assets. Vanguard charges .5-1%, which is half or less of what I've had quoted by other firms.

In summary, it appears that whatever you want, the answer is Vanguard.
posted by medusa at 7:34 PM on April 5, 2013