More of the people reading this comment are likely to hire a financial advisor than try to become an investor.
With that in mind I’d like to hear more about why financial advisors don’t have our best interests at heart. I took a personal finance course in college that was 95% telling us how to create and execute financial plans and 5% telling us that in practice you should just hire a financial advisor. The former is to ensure that you know if your financial advisor knows what he’s talking about. Is this actually bad advice?
With that in mind I’d like to hear more about why financial advisors don’t have our best interests at heart.
In my experience, quite a few money managers generate a lot more fees then they strictly need to. Even some index funds will churn/rebalance more than necessary in order to generate a fee. When you consider the oft-cited statistic that very few managers outperform the market, and add in the fact that many they do eat the entire much of the surplus with fees, it becomes optimal to buy a good index rather than hire a financial adviser.
The problem with hiring advisers of all kinds is that you are hiring someone because they know more than you- which means you run the risk of them using their knowledge to rip you off.
Financial advisors aren’t exactly the same as money managers. They aren’t just there for advice on investing. They are there to help you create a financial plan, create financial goals, tell you how much you need to spend and save in order to meet those goals and if they are good, make sure you know when you are failing in those goals. At least in theory. Ergo, index funds aren’t exactly a replacement for financial advisors. I accept that if you just want to invest then index funds might be your best bet.
Moreover, even if I understand index funds and the basic of personal finance, it might still be a good idea to hire an advisor. I think that after many years of school, I understand the principles of how to learn a new subject effectively. Yet it is still far more productive for me to take a class than to try to self study a topic. This isn’t true for everyone (see Scott H Young) but its true for me. Having a structured environment keeps me on track. I suspect that managing my finances will be similar.
Probably good advice, although for middle class Americans you don’t really need a financial advisor if you understand index funds and the tax benefits of pensions.
More of the people reading this comment are likely to hire a financial advisor than try to become an investor.
With that in mind I’d like to hear more about why financial advisors don’t have our best interests at heart. I took a personal finance course in college that was 95% telling us how to create and execute financial plans and 5% telling us that in practice you should just hire a financial advisor. The former is to ensure that you know if your financial advisor knows what he’s talking about. Is this actually bad advice?
In my experience, quite a few money managers generate a lot more fees then they strictly need to. Even some index funds will churn/rebalance more than necessary in order to generate a fee. When you consider the oft-cited statistic that very few managers outperform the market, and add in the fact that many they do eat the entire much of the surplus with fees, it becomes optimal to buy a good index rather than hire a financial adviser.
The problem with hiring advisers of all kinds is that you are hiring someone because they know more than you- which means you run the risk of them using their knowledge to rip you off.
Financial advisors aren’t exactly the same as money managers. They aren’t just there for advice on investing. They are there to help you create a financial plan, create financial goals, tell you how much you need to spend and save in order to meet those goals and if they are good, make sure you know when you are failing in those goals. At least in theory. Ergo, index funds aren’t exactly a replacement for financial advisors. I accept that if you just want to invest then index funds might be your best bet.
Moreover, even if I understand index funds and the basic of personal finance, it might still be a good idea to hire an advisor. I think that after many years of school, I understand the principles of how to learn a new subject effectively. Yet it is still far more productive for me to take a class than to try to self study a topic. This isn’t true for everyone (see Scott H Young) but its true for me. Having a structured environment keeps me on track. I suspect that managing my finances will be similar.
Probably good advice, although for middle class Americans you don’t really need a financial advisor if you understand index funds and the tax benefits of pensions.