How To Select A Financial Advisor


Because we weren’t taught much about money in school, most of us run around naked as adults, before embracing the first person who hands us a towel to drape over our streaking bodies.

It’s best not to go out in the buff in the first place. When looking for a financial planner, don’t be the exposed one. Put yourself in a position of power. It’s the least you can do for yourself.

For starters, the industry is filled with really personable people. If they have a reputation for being “successful” that means they smile nicely, return phone calls, they’re really polite, and they’re walking epitomes of Dale Carnegie’s masterpiece, How to Win Friends and Influence People. Your community members will probably love them, they’ll come with “touchy/feely” referrals, but none of them will likely accompany a suitable benchmark of performance—one that really determines whether an advisor is a “nice guy/gal” or a true investment professional. It’s a good thing we don’t measure airlines the way most people measure financial planners:

“Oh Gertrude, yes, everybody loves them. They’re so kind when checking in, and they serve the best onboard peanuts. Too bad they dropped us off 1000km from our destination.”

Here’s the rub. Most people, when hiring an advisor, don’t have a clue what their destination is supposed to look like anyway. So tasty peanuts and fluffy on-board blankets with beautiful accompanying smiles more than suffice. And if financial advisors took a page out of Richard Branson’s Virgin Airlines, they’d offer on board massages that would really elevate business.

But what should you be looking for?

This is going to sound awfully selective, but the first thing to look for is gray hair. Sorry, but a financial advisor in his/her 20s is never going to cut it. You need to find someone who’s both qualified and old enough to remember Roger Moore, On Golden Pond, Natalie Wood’s mysterious disappearance, and 18% mortgage interest rates.

Show me yours.

Again, if it’s your personal life savings we’re talking about, you have to take the selection of a financial planner with at least as much seriousness as you’d take when hiring someone to re-model your kitchen. But too many people put far more thought into hiring a carpenter. With a carpenter, the work is transparent. You can see the work that they’ve done in the past. With an advisor, the work is opaque, and very few people know how to recognize success or failure. Instead, clients talk about fluffy blankets, and gush how happy they are

Here’s the benchmark—The Airport Destination You Need to Compare To

You’ll need to make a comparison with a globally weighted basket of stock and bond index funds. Don’t give up on me if that sounds Greek. Ask to see your financial advisor’s personal portfolio from 10 years ago, 7 years ago, 3 years ago and last year. All you want are samples of 4 statements. Get them to explain what they owned and why. And calculate what their returns would have been, based on what they owned. As much as you might want to select a planner based on “feel” I don’t think financial planners should be selected the same way you’d pick a sweater. Instead, you’ll need to make a long term, hard core comparison.

Let me explain why Warren Buffett says this:

“Full-time professionals in other fields, let’s say dentists, bring a lot to the layman. But in aggregate, people get nothing for their money from professional money managers…The best way to own common stocks is through an index fund”

The stock and bond markets dish out money over time to people who own them. Own a representation of everything the stock and bond markets have to offer, and you’ll reap the benefits of what they give out. But few people make anything close to what the markets generously offer because of middlemen who skim from the proceeds.

Investing to beat finance professionals is really simple. Here’s the recipe:

  1. Buy a total stock market index fund representing your home country stock market
  2. Buy a total international stock market index fund representing the global markets
  3. Buy a bond market index fund

If you’re lucky enough to have a decent pension coming, ensure that the bond market fund makes up about 1/3 of your total portfolio. Without a pension, make sure that you have a bond allocation that’s roughly equivalent to your age.

It’s so shockingly simple. But I have yet to see an investment account run by a financial advisor who performs even close to this over a lengthy period of time. Give up just 2% annually over an investment lifetime, and you’re giving up more than half your eventual nest egg, come retirement. If someone invested $1000 in the year 2000, it should have grown at least 34%, with no money added, by 2010—despite the hammerings that the markets have taken over the past decade. Here’s an example of what the markets have dished out, and why you should be at least 34% ahead of the decade game: Check the Historical Performance Table.

The world’s strangest industry

Strangely, the financial advisory industry lacks accountability because too few people know what kinds of questions they need to be asking.

That’s why Jack Meyer,  the head of Harvard University’s endowment fund says this:

“The investment business is a giant scam. Most people think they can find fund managers who can outperform, but most people are wrong. You should simply hold index funds. No doubt about it.”

But there are advisors who do the job admirably

They offer advice, and you pay for that advice. You bring out your chequebook and cut them cheques, rather than allowing them the “ease” of taking money out of your account. For an upfront fee that you’d place on the table, they’ll assist you with financial planning, college savings plans and taxes.

Find one of these advisors, and then ask them about their money. You can’t afford not to.


andrew hallam

andrew hallam

I'm a freelance finance writer, lucky enough to have been nominated as a finalist for two Canadian National Publishing Awards. I'm also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, a book explaining how I became a millionaire on a teacher's salary, while still in my 30s. Working to empower people financially, I'm available to motivate and inspire people on basic retirement planning and index investing. I'm happy to comment on your questions, first, please read the Terms of Use.

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40 Responses

  1. Hi Andrew! You offer great advice. As a young advisor, 22, and the co-owner of a wealth management firm in Dallas, TX I find your advice on not choosing a young advisor. We are aligned with very reputable alliances…DFA, DKE, CEG. Secondly, a personal CFO should not be judged just on his/her investment performance. The solution is easy for all families: hold a low-cost, globally diversified portfolio of market exposed funds. The true value of an advisor shines with wealth enhancement, transfer, protection, and charitable gifting. For example, titling of assets, mortgage issues, education issues, 401(k) selection, second home alternatives, business valuations, etc.

    You do share wonderful insights on the psychology on investor's choosing an advisor. You may be interested in reading a piece on our blog:

    All the best,

    Scott Wisniewski

    Arianna Capital

  2. Thanks Scott,

    If you're a fee based advisor, charging an annual fee and not a percentage of the client's assets, then I wholeheartedly take my hat off to you, my friend. Truly, that kind of service (and that type of charge) is very rare. You would also pass the benchmark test if, after a year with you, your client asked you how they did, relative to a diversified basked of indexes. You'd have the answer (especially if you used Dimensional Fund Advisors) and your answer would be a fair one that represented what the markets dished out during that year.

    I also have a friend who charges 0.4% annually, and trains his investors to go it alone, while providing educational support for them. This is also highly admirable.

    My post came as a result of an emaill from a friend in Canada. She has hooked up with a new advisor (new for her) who charges 1.28% on assets, doesn't have a transparent fee model outlined on his website and after I emailed him about his fee structure to ask him what it was (before I found out what she was paying), he suggested that it "depended on the service rendered". He buys ETFs and individual stocks that he selects. Considering that some Canadian ETFs can charge up to .5% or more, I didn't think it was fair that she should be paying so much for a guy who might make some mistakes with his individual stock picks. After all, 1.28% + .5% can be a killer fee weight.

    I'm 100% behind a fee based advisor who doesn't make more just because his client has more. So well done Scott. I would still, however, be biased about age. Granted, there can be some exceptionally historically minded young people, but experience, when dealing with the toughest part of investing (the emotional part) is pretty important. And if I was going to ask a carpentar to build me a house, I'd want to see the house he built for himself. We're far too polite when it comes to money. It's a cultural problem that can keep too many good people in the dark.

    Again, congratulations Scott, on doing the right thing and charging a flat fee for your service. You're a rare breed. And I offer you the very best professional wishes going forward. Thanks for the comment–and I'd love to hear from you again, at some point.

  3. Kevin@InvestItWisely says:

    Nice post, Andrew. I love the part about Dale Carnegie. These guys can be experts at getting you to feel smart when you go with what they want, and likewise stupid if you go against their recommendations. Thing is, they'll smile and pat you on the back with one hand, and take your money with the other…

  4. @Kevin@InvestItWisely

    You're right Kevin, in almost all cases, that's true. But I do like these fee based sorts who charge a fee that you pay with a cheque, to give non biased advice that doesn't leech off the size of the account.

  5. Kevin@InvestItWisely says:

    @Andrew Hallam

    Do you think that we could spread awareness of MERs, the problems with charging % of assets, etc… and see a real change in consumer sentiment that whips these guys into shape? One can hope… looking forward to the book. :)

  6. @Kevin@InvestItWisely

    I do hope so Kevin! I've written a book that most advisors certainly won't want their clients reading. I do commend fee based advisors though. Recently, I read a book by a longtime fee based advisor called, Why Do Smart People Do Stupid Things With Money

    He urged advisors to be ethical and charge a flat dollar rate for service. He certainly pulled no punches when referring to most advisors.

  7. Good post, Andrew. Everyday vanilla financial advistors are about as useful as piano salesmen, they'll sell you the one with the highest commissions. You said it right, that asking for their own personal performance is the litmus test that most of them will do wel on. How do they vote with their own wallet? Just for kicks, I've had a couple phone session with (alleged) advisers at my insurance providers, who got a little uncomfortable when the tables were turned. All I did was ask them the same personal questions they were asking me, e.g. what is your yearly income, what's your level of debt, etc.

  8. Excellent post Andrew.

    Personally speaking, dentists, doctors and quite a few other professions offer services, knowledge and expertise that is not in my comfort zone. This is why I choose not to pull my own teeth, perform my own surgeries or build my own home. Kidding aside, because my comfort-level with personal finance and investing has always been there and continues to grow, this is why I feel I don't need a financial advisor. Others may feel differently and have every reason to feel that. I think it's important for folks to assess what is within their circle of competence and willingness to learn and apply. If financial matters aren't it, then so be it. Not everyone wants to know how to build their own home either :)

    Maybe someday my view will change but until then, this body of knowledge is not only something that's within my grasp; something I can mature into, but something I find enjoyable as well.


    My Own Advisor

  9. DIY Investor says:

    Really good post and good quotes. I actually like to lead with quotes when I talk with people because it gets their attention. Besides being financially illiterate the country is also mathematically illiterate. Also it is easy to manipulate numbers.

    Along these lines I was interested in the chart presented in the link referenced by your first commenter. I've always been interested in DFA and wondered about fees charged by advisors along with the fees charged by their funds. I've wondered if they aren't defeating the overall goal of capturing close to market returns with their overlapping fees.

    At the advisor level many firms don't audit their numbers so they can pull out anything. The president of a company I worked at liked to pull out a graph showing how the money had grown for the firm's first client over 15 years. What he forgot to mention was that the first client was his aunt and he never charged her a fee.

    Thanks for the plug.

  10. DIY Investor says:

    @Financial Cents

    Good points though I would argue that for the big ticket items in life – major surgery, architectural work on building a house, investing and living off a nest egg and even pulling wisdom teeth – people should explore various alternatives.

    You are exactly right that some people aren't interested in doing the manual labor of managing a portfolio. Still I don't think they should just hand the nest egg over to the family broker who works at Morgan Stanley without seeing if there are other approaches.

  11. @Mel Marten


    I'm very impressed with your business. I'm not sure how many advisors you have in your data base, but I put the only American zipcode I knew "90210" and only one fee based planner came up. I figured that would be a reasonably affluent area, don't you think? Any idea how many advisors are in your database?

  12. @DIY Investor

    Hey Robert,

    Have you heard of groups like Claro-Connect before? You can see the rep's comment above. I'd be interested to get your thoughts, as I'm sure some others would as well. Thanks!

  13. @Financial Cents

    And from watching and reading your blog, you're doing really well Mark. But here's a question for you: what kind of fee structure is fair is someone is going to hire an advisor?

  14. @Andrew @ 101 Centavos

    Andrew, turning the tables on them? Brilliant. And why not? I want to take nutritional advice from an embodiment of health, not the average donut eating Joe–even if Joe has a degree in nutrition.

  15. @Andrew Hallam


    Sorry for the late response. I was expecting an email when someone commented – did not happen to the best of my knowledge.

    I appreciate your advice and warm acknowledgment. We developed our practice in order to change the industry and attempt to do the right thing for people (after seeing many malpractices). People have pointed out our youth, but we have a solution for that. We have teamed up with a firm called DKE, who have been in the business for over 30 years. We consult with them on a daily business, and are virtually an extension of our business. Any advice that we give is passed through them. Not only that but we are partnered with CEG and DFA. These two alliances have taught us about handling the emotional aspects of clients. We also attend various Landmark conferences.

    On the other end of the spectrum (since you are skeptical about age). Let's take a 40, 50, or 60-year who has been in the business for quite some time. Let us look at their client tenure, experience, and results. I would suspect we would find very lackluster results. 95% of the industry within that age sector are not servicing the client, rather their firm (selling products, high fees, focusing solely on investments, etc).

    Any attachment or aversion can be overcome, whether it is age or money – and we help with that. I would love to show someone how we have overcome the age factor and our now trumping experienced advisors all of the country. We have strong, meaningful relationships with the knowledge and resources to construct the best possible solution. Can't be skeptical about that :-)

  16. @DIY Investor

    A great thought: Do DFA advisors justify their fee, even with their low-cost solution?

    Here is a research paper by Duke intimately examining the issue:

    In summary, they showed a DFA advisor does justify a fee of even 1%.

  17. Mich @BTI says:

    You're gonna love my post today Andrew, check it out.

  18. @Mich @BTI

    Mitch's post made me smile. Check it out.

  19. Has anyone wondered what to say at a cocktail party when asked, "What do you think the market is going to do?"

    Let's look at a few logical responses:


  20. @DIY Investor – Good points as well.

    @Andrew – what about billable hours instead of a on-going management fee? In most other professions, the customer decides what level of service they wish to receive in trade for the professional's knowledge, expertise or work – at a point in time. There is a baseline or market norm for what those services would be and the client would decide if they want to pay the fee for the service. You don't pay your dentist when you're not having work done? One quick example, getting advice about a real estate transaction from a lawyer. Folks can certainly buy what they want, when they want, and by-pass this service for advice, alternatively, some folks may take advantage of that service depending upon the complexity of the transaction or their circle of competence.


    I have to check out Mich's post now :)

    Great discussion Andrew, you're good at facilitating these…must be that teacher in you.



  21. @Scott Wisniewski


    The data suggested here in this article is both correct and incorrect. I've pasted the gist of the article:

    "Over the long term, investors in unhealthy stocks are rewarded. The stocks of distressed companies have outperformed the stocks of healthy companies on average since the dawn of recorded time in the US,1 and by more in other markets around the world. It should be mentioned that individual stocks have a lot of "noise" in their returns, which means there will always be individual distressed stocks that perform terribly and individual healthy stocks that perform well. In diversified portfolios, distressed stocks are expected to outperform healthy stocks over the long run."

    The "long run" that's being referred to here might not be what you think it is. In any given year, if you take the distressed businesses and select those stocks, versus the businesses of sound, healthy businesses, then as an aggregate the "Dogs" will outperform the "stars" based on the probability of what Siegal refers to as "earnings surprise" and valuation. The expectations are low, so the prices are, in Buffett's words "cigar butt cheap": which he uses to refer admirably to Benjamin Graham's deep value system.

    However, if you were to buy and hold a collection of distressed businesses, versus well-priced great businesses (and you couldn't trade them) the great businesses would be better long term stocks if bought at valuation yields that exceeded the yields on 10 year bonds. One of the subtle differences is this: annually picking distressed businesses and getting those final puffs on a regular basis is only more effective when it's done regularly. Fama's "long term" is the reference of the regularity of buying deep, distressed value, but not buying and hold those same businesses. It doesn't work when buying and holding a set of distressed businesses, long term. When Eugene Fama refers to long term, he's referring to a long term strategy of regularly buying cigar-butts on the ground and getting a final puff (Benjamin Graham-style). That's what the "long term" data refers to. So the article is correct, but also misleading. Long term, deeply discounted, distressed companies are better investments. But the same deeply discounted, distressed stocks, in a portfolio meant to buy and hold, versus those with high returns on capital bought at sound prices that are also meant to be held….well, the distressed stocks lose out. This is why and how Buffett was influenced by Philip Fisher and Charlie Munger–to seek great companies at a fair price, rather than poor companies at a great price.

  22. @Financial Cents

    Mark, you're absolutely right about "billable time". That's probably how I should refer to it. I think I referred to it before as "Fee-based" but that's misleading and corruptable.

    You've nailed it with the "billable time" label. An advisor should charge by the hour. Should they be compensated more just because a client has amassed a larger account? Is it really harder to manage a $1 million account rather than a $100,000 account. It certainly isn't. And thanks for the facilitating compliment. I was fearing that I was too opinionated. Cheers!

  23. @Andrew Hallam


    I am sorry, but your comments are confusing and hard to make-out. We know that picking individual stocks is a loser's game – no argument there. Your justification to pick individual stocks/companies is unclear.

    We know that over the long-term we can expect value companies to outperform growth. Also, small companies will outperform large companies.

    "However, if you were to buy and hold a collection of distressed businesses, versus well-priced great businesses (and you couldn’t trade them) the great businesses would be better long term stocks if bought at valuation yields that exceeded the yields on 10 year bonds." & "But the same deeply discounted, distressed stocks, in a portfolio meant to buy and hold, versus those with high returns on capital bought at sound prices that are also meant to be held….well, the distressed stocks lose out." – This is based on speculation, the return on speculation is zero. No one can predict the future and know when prices are "sound."

    Rather, invest where expected returns and risk are compensatory.

  24. @Andrew Hallam

    Advisors who charge hourly run the risk of not fully servicing their clients. The advisor's focus will now be based on ONLY serving the client when working FOR the client. An advisor should be providing value to his/her clients at all times (mortgages, taxes, gifting, education, transfer, etc.). Since an advisor is always working to add value (under pay per hour structure), the bills would run considerably high.

    I think there is confusion and a focus on the investing portion aspect of advisor-client relationship. The advisor should not only focus on investments but all aspects of a client's life. This is something that cannot be valued by an hourly "charge". Advisors offer a huge spectrum of value. Is a pay/hour client going to be billed for a phone call or email or meeting with his/her advisor? In this case, the client may be reluctant to call or make any contact – giving the client further anxiety about the situation. A pay/hour is not mutual. It actually lays a large burden on the client, both financially and emotionally.

  25. @Scott Wisniewski

    Hi Scott,

    This isn't based on speculation any more than suggesting that small cap stocks outperform or that value outperforms. It's based on history. Investors should never ignore price. Great business with low debts, high returns on total capital with owner earning yields exceeding those of 10 year bonds will outperform, as an aggregate, distressed business with no secondary quality measurement. If you buy distressed businesses, as Graham did, and traded them when you could get that final puff, that would be better than buying and holding them. But a guy like Buffett, buying business with high consistent returns on total capital, low debt, and an opportunistically high earnings yield would win out. History suggests this more than speculation.

    As Buffett suggests, those who distinguish between value and growth investing are revealing their ignorance, not their sophistication. Those are Buffett's words, not mine. They're pretty harsh. But here's his point. Growing businesses bought cheaply is the way to go. So is that value investing or growth investing? In his book, no stock should be bought unless the buyer is getting good value. Check out my published articles on picking stocks like Warren Buffett for a further explanation of what I'm talking about.



  26. @Andrew Hallam

    Hi Andrew,

    You are giving advice to pick stocks/companies, which has been proven, exhaustively to be futile. Hence, Buffett's suggestions to buy an index and buy-and-hold. I can provide plenty of research on both claims if you'd like. Here is a quick summation on the failure of active management:

    Buffett picks stocks through his company, similar to private equity. The difference between an average investor and Buffett is he is allowed a managing stake in the company to influence his investment via all sorts of strategies that the average investor obviously does not have the resources.

    Don't confuse Buffett's holding company's strategy with what the average investor should do. By the way, BRK has underperformed a 100% DFA Equity strategy since 1990.

    Again, picking stocks is a loser's game. It has never worked for the average investor (even professional money managers). It is nearly impossible to consistently beat the market. And if someone happens to do so we cannot distinguish luck from skill. The idea of stock picking futility has been around for decades and is bolstered by volumes of academic research.

  27. @Scott Wisniewski

    Hi Scott,

    Who has said that stock picking will beat an index fund, statistically speaking? Certainly not me, if you read my other posts.

    I was suggesting that when comparing value stocks with the index, and suggesting that value stocks do better over the long haul, it's a rotating system of replacing value stocks with new value stocks that Fama is referencing–not a buy and hold method of picking distressed businesses and holding them forever. If you're going to do that (and not index) you're better off buying well priced business of high quality (with owner-earnings yields easily exceeding 10 year bond interest rates) and holding those indefininetly instead. If the price is right, the returns will be good–which is what Buffett and Fisher did. As for the DFA portfolio beating Berkshire, I can shift the end point and the start point by less than 2 years in either direction, and then show you a different result. The start and end points of such a comparison are key.

    As for indexing beating active management, you are preaching to the choir, however.

  28. Take for instance, the small value index, any companies that qualify into that asset class will be bought and any companies that move out of it will be sold. So, Fama professes an asset class approach b/c these are the risks we know we are compensated for. If a value stock stays a value stock you hold, if a new one enters you buy, if one drops out you sell. This is an index in it's most pure form – an exact representation of the market (asset class).

    Buying individual issues is an uncompensated risk. Taking sector risk or business/company risk is not compensated = speculation. The only compensated risks we can take are whole asset classes, thus buying your strategy of buying well priced businesses of high quality is an uncompensated risk.

    I am sorry your last statement regarding Berkshire beating DFA Equity portfolio is wrong. I can provide numbers if you'd like. Regardless, would you rather put all of your eggs in a company who is taking uncompensated risks and managed like a private equity fund or take a scientific, empirical approach focused on delivering compensated risks?

    Best wishes

  29. So the DFA U.S. Total Equity index beat Berkshire during every possible 20 year span, given the one to two year parameter leeway from the dates you suggested? That would have taken a lot of research on your part.

    January, 1987 to December 2007?

    I just threw out a random date; I really don't know what the comparison would have been during the above 20 year period. But unless you really did loads of research on the monthly adjustable prices, it would be tough to make that assessment.

    Regardless, I suppose there's another interesting concept to consider. After someone pays you a percentage on assets, and after you buy them DFA funds in a taxable account, do they still do better than a disciplined rebalancer would do with a total Vanguard U.S. index, an international index and a total bond index, rebalaced annually—after taxes. The taxable drag with DFA would add a further taxable liability because of the turnover rate, which is higher than Vanguard's indexes. Then there's your fee. So you'd likely have to beat that rebalanced account by quite a bit. An account created in January, 2005, with the three-way split of Vanguard funds mentioned above would have returned 20.1% (total) since that date. It would be more tax efficient than a DFA account, and wouldn't have the fee drag that you would charge.

    All that being said, Scott, I do love DFA. And I wouldn't suggest that anyone should have a portfolio of Berkshire Hathaway stock. We are far more similar, in our ideologies, than our discussion is revealing—because we're both enjoying playing devil's advocate. And I very much appreciate that and enjoy it….so thank you.



  30. Andrew,

    I appreciate your inquiries.

    Yes, I did that research. I have a program which enables me to do quick rolling periods calculations.

    To answer your DFA vs. Vanguard question: Volumes of research show that a DFA strategy will outperform a Vanguard strategy over time, even after the advisor fee. I cannot answer your specific example in confidence, I would have to run the numbers. Which I can do so, if you'd like. To take a look at one of the more popular studies conducted regarding the DFA vs. Vanguard go here:

    You are also asking a lot of an investor to buy-hold and rebalance (sell the winners and buy losers) over a long-term horizon. We find people usually have great intentions until the it comes down to nitty-gritty time. Individuals should began placing more of the focus on achieving their goals instead of achieving a particular return. What do the returns matter if you we can help identify and achieve your goals, with great confidence? Among that, the advisor adds value in a numerous of other areas (wealth protection, transfer, gifting, etc.)

  31. Yeah, that would be cool to see the comparison Scott: DFA total stock market index versus Berkshire Hathaway A shares from January, 1987 to December 2007—if you have time to do it.

  32. I am finding that Berkshire Hathaway was only public back to Jan 12, 1990. True?

  33. Hey Scott,

    Public stocks didn't always sell on the same kind of exchanges—but in some cases, "over the counter". Berkshire was always available for public purchase, just not off the NYSE.

    The opening price for the A shares in 1987 was $2,820 per share.

    The closing price for A shares in 1987 was $2,950

    The closing price in 1990 was $6,675

    It would be fun to run the numbers—thanks for doing that


  34. And why are we going to December 2007?

  35. @Scott Wisniewski

    Because I mentioned that we could shift the timeframe a couple of years and end up with a different result. Sometimes (as you can see by my cheeky selection) differences can be interpreted in the data when slightly different start/end times are used.

    Not to worry though. We're both proponents of rebalancing asset classes with indexes. You mentioned investment services you use, other than DFA. Why not just stick with DFA?

    I'm a big fan of assetbuilder (they use DFA) and I have tried to convince them to visit Singapore to help some of our American teachers to invest with them.

  36. DIY Investor says:

    My 2 cents is this: there are a lot of people out there who benefit from sitting down for an hour with a professional and going over their accounts, the types of funds/investments they are invested in, and talking about their plans for retirement, funding their kids education, and how they will generate an income stream once they are no longer working. In my experience, two meetings goes a long way towards giving people peace of mind in terms of providing an approach for meeting their goals. I charge face-to-face time at $150/hour. I don't make any money from this.

    Where I do make money is when I run into people who just don't want to be bothered with the day to day nitty gritty business of managing assets. They don't want to continually monitor exchange traded funds ( indeed many don't even want to be bothered hearing about what they are – sort of like the way I get when my mechanic explains what he did to get rid of the strange noise when I start my car on a cold morning). Some will come to me, introduce their mother and we talk about her income needs and constructing a conservative portfolio and managing the portfolio, making sure she gets her monthly check. For this I charge 0.4%. After setting the portfolio up this is easy money. Charging 1 to 2 % for the next 10 years or however long she lives is a bit pricey to me.

    My goal is to get as close to the market return over the long term after all fees for whatever asset allocation (i.e. model) we decide on. At this point I'm convinced that the best way to do that is with low cost, low turnover, ETFs.

    I'd add also that some clients want to trade the market. In my approach I'm comfortable if they limit this to no more than 20% of total assets. These clients view what I do as boring and are willing to pay 0.4% of assets.

    The point is that every client is different.

  37. @Andrew Hallam

    I must point out that shifting time frames is very similar to data mining and subject to the hindsight bias. Something investors LOVE to use but HATE to practice because portfolio returns are looking forward not backwards.

    I can only get BRK-A returns back to 01/1990 (which is why it has taking me some time to get back to you).

    You may have misunderstood me about using other investment services. I am sure I was meaning to communicate the fact that we are independent and not tied to an all-DFA solution. But the fact that we currently use only DFA funds points to the DFA's prominence.

    Assetbuilder is solely an online portal for access to DFA funds. I can think of many reasons why this could be dangerous for both Assetbuilder and individual investors. Reaching a family's goals should not just be a focus of investment returns. Rather the investment solution is just a tool to reach their goals. Without other areas intact (titling, charitable gifting, wealth protection, etc.) the investment returns are futile, hence the family will not achieve their goals. Unfortunately, I see individuals so focused on the investment solution they lose sight of what they are trying to achieve, and end up achieving nothing. I see too many examples of that scenario.

    Assetbuilder offers a great service for a particular small niche; a niche that must have the expertise to properly know how to refinance, determine estate planning issues, determine gifting goals, remain disciplined, send money without meeting face-to-face, allocate money to their goals, determine insurance needs. Unfortunately, I think a lot of investors think they have this expertise but will eventually realize they don't/didn't.

    Arianna Capital serves as the personal CFO, handling all of the family's financial issues, while taking a fiduciary role. We offer peace of mind plans not just investment plans. We educate families to focus on goal-achievement because that's really what will lead them to maintaining their lifestyle, sending their kids to a private college, buying a second-home, providing for heirs, and/or affording an expensive purchase (plane, boat, etc.)

    Advisors who have access to DFA are not all equal. Some have different methods.

    For one, the academic community knows commodities should not be used within an investor's portfolio 😉

    How can we go about helping the teachers in Singapore achieve their goals?

  38. I think the portfolio of the firm is the most important thing. And people associated with is another important aspect. So if you are having any financial crunches and you are willing to deal with it then make sure that the firm has a good repute and experience in handling such issues.

  39. @financial advisory

    As long as the firm's portfolio is "low cost" and passive, I agree. If your advisor is Michael O'Higgins, or Warren Buffett, that's something else. But how many Michael O'Higgins or Warren Buffetts are there out there. Looking for another genius of their ilk, I believe, is futile and it's bound to be expensive. A passive approach would be better, unless you can find a genius….with a dash of luck on his/her side as well.

  40. Andrea says:

    Hi Andrew,

    My dad lent me your book – wish i had read it years earlier! It's making me uncomfortable while reading though, because i have lots of my money with an investment advisor and just don't know how to go about getting it out! (i did go through your comments but can't seem to find any on firing your investment advisor!) I did switch advisors over concerns with high fees (that brokerage renames existing mutual funds under their own name and charges even higher fees for them!) but when i switched i ended up losing SO much money on fees! It still makes me ill to think about! So…my thought was trying to get my online brokerage to pay my account transfer out fees and have everything transferred 'in kind'. That still leaves me with a whole handful of mutual funds!

    Do you or your readers have any advice on how best to do this?

    Thanks, and great job on the book. It was so simple and easy to read!


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