Who can you trust best with your money? As you know my late hubby, Dan, and I have been doing it ourselves for 25 years. Since Dan died, I continue to self-manage my money. We stopped using a financial adviser back in the dark ages of the 1980s because we have gotten terrible and hideous conflicted advice. We never looked back even when we made massive diversification mistakes on our own. During those years there was nobody that we could trust especially in the 403(b) world with public PreK-12 school districts.
During the 2000-2002 tech wreck, we lost $1.1 million. Mistakes are the best teacher and once again, never looked back nor had any regrets that we still went about managing our money without an untrustworthy and expensive nonfiduciary financial adviser. This was long before the DOL started mandated fiduciary standards.
Since day one, we have always advocated that the best person to manage your money is the person you look at in the mirror each morning, YOU, educated in personal finance. I know that is a worn-out, hackneyed phrase but it is still accurate after all of these years. Yet millions of Americans don’t get it.
My Friend has read many investment books BUT…
for the last five years, Bob has been searching for self-confidence to do it himself or a financial adviser. He interviewed one fee-only financial adviser. The adviser wanted to charge .75% to manage his assets. Bob turned him away because he felt that the adviser’s fee was too much.
The following conversation is the latest between Bob and me.
“When I think of trying to do it all by myself, I feel like I might be jumping off the bridge, only offset by the cost of advisory fees that I might save to cushion the landing. I admire your self-confidence to manage your own funds.”
My response:
“I was thinking more about what you said yesterday (and you have said it before) that you read many investing books. And then you commented about my “confidence.” First off, I am very fortunate that I know how to manage my portfolio because I read a lot of investing books too and interacted with knowledgeable investors that are a whole lot smarter than I on Bogleheads.org and 403bwise.com investment related discussion forums. I have had the same 30/70 low-cost fully diversified indexes since 2005 (Click here to see my current portfolio). It has withstood the massive 2008 crash with only an 11.9% loss.
I think in your situation that it’s not the skills or the knowledge in that you are looking for. You were very adamant about that. You are looking for an adviser who will fill in your confidence gap. That has to be frustrating because that confidence will probably not come from an adviser or anybody else, as it has to come from you. I think you know that.
All I can say is how I think I got my confidence. I got it from experiencing huge losses from my mistakes and then watching the market recover, and my portfolio recovered too by NOT DOING ANYTHING (only after I constructed a fully diversified and boring portfolio).
At my age of 70, I have learned that good and bad times never last, and that goes for long-term marital relationships too. I got my confidence from constructing my portfolio to reap reasonable gains when the market gains and withstand reasonable losses when the market declines. I don’t know what will help you gain confidence all I am sharing is what gave me the confidence I needed to do this myself.
I think I also have an added advantage of getting ripped off by bad advice too, so I had to learn to invest and proper diversification and to do this stuff without an adviser. So, I also of had a built-in 2nd party, Dan, to help with the emotions of investing.
Here is the catch, I can only model what I do as a confident investor, and you can learn a little from that, as I learned from others, but at the end of the day, as I think you know where I am going is that you have to earn that confidence from your experience.
Both Dan and I had to learn this stuff because we could never trust somebody else to do this, and we wrote our book about the massive mistakes we made and because of those mistakes, we earned that confidence. Also, we were willing to listen to other do-it-yourself investors and make those difficult choices of getting out of individual stocks and reap those losses. Learning from experience is painful but it is LEARNING! And that’s good. That’s why we wrote Late Blooming Millionaires.
FYI, Garrett Planning Network told me that their advisers must take clients who only want to pay by the hour, but you have to manage the portfolio, do much of the work and take responsibility. The adviser would act only to calm the emotions when the market acts up. That’s when people panic and get out!
I would be curious if any adviser just supports you and your plan through thick or think.
Let’s keep up our conversation because there are many people who are in your situation.
Take care and have a great day,
Steve”
Your Call to Action
The fact that you are reading this post means to me that you are getting it, and “getting” means that you want to self-manage of your money. The bonus is not only confidence but you will save yourself tens of thousands of excessive advisory fees that the brokers, insurance agents, the big banks and brokerage firms will charge you. AVOID THEM ALL!
Besides being a role model, I have to offer in this blog post are four sources of information to begin your task of deciding if you really do need an adviser. If you do, how to ask the right questions and how to trust that he or she will be looking out for your best interests. Hint: If you know a little about investments and what your adviser is charging you, you can monitor his or her behavior with confidence and then trust with your financial adviser.
There are four ideas to remember before you interview any financial adviser:
- Your first responsibility is to commit to memory: Find a Fee-Only fiduciary financial adviser (FA).
- The Financial Adviser is your “employee.” They are not your friend, and never forget that you have power in this relationship, and a competent FA will recognize it.
- Take a look at how webmaster Dan Otter vetted the financial advisers he suggests on his 403bwise.com.
- Read the four resources listed below. Each one is jam-packed with insights and ideas so that you can be confident in recognizing what a fiduciary fee-only adviser can do for you.
After you have found your adviser learn what they do for you and your portfolio. Listen to how they follow the stock market and how the ups and downs affect your portfolio. After a couple of years, you might be confident enough to let your FA go and become do-it-yourselfer (DIYer). It has been rewarding to know how the stock and bond markets work and how portfolios are constructed with almost near nothing costs. More money in my pocket! Thousands of Do It Yourselfers (DIY) have successfully managed their portfolio’s. It’s all about quality and costs. The following four sources talk about getting competent advice and their costs. But your responsibility is to ask the tough questions needed to find an adviser that genuinely looks after your financial interests. The following information will help you prepare to find that elusive financial adviser.
- https://403bwise.com/directory
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http://napfa.org/UserFiles/File/PursuitofaFinancialAdvisorFieldGuidev14.pdf
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http://whitecoatinvestor.com/12-things-you-should-know-about-choosing-a-financial-adviser/
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http://paulmerriman.com/wp-content/uploads/2013/03/get-smart-or-get-screwed-how-to-select-the-best-and-get-the-most-from-your-financial-advisor1.pdf
Disclaimer: Steve Schullo has not used the services of any adviser from the links offered above. Steve claims no guarantees nor accuracies about the ultimate cost of any adviser or their fiduciary status. He presents this blog and the links to other authors, blogs, and a directory as a starting point, but the ultimate responsibility for finding a fee-only fiduciary who looks after your best interests is best assured only by your due diligence, your preparation and is the readers’ sole responsibility.
bio
Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the United Teacher-Los Angeles (UTLA) newspaper for 13 years. Thrice featured retirement plan advocate in the Los Angeles Times and U.S. News and World Report. He co-founded an investor self-help group 403bAware for teacher colleagues and wrote 7,500 posts in three investment forums since 1997. Frequently quoted by the media, testified at California State legislative hearings and honored with the “Unsung Hero” award by UTLA for his retirement planning advocacy.
For the last twelve years, he serves on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee contains collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457b/403b, of 55,000 former and current LAUSD employees, worth $2.5 billion in total assets.