Madison MoneySports - Personal Finance Thread

[WRXtranceformed]

Some good articles about FA's worth reading:
https://www.fool.com/retirement/2017/07/...th-it.aspx

Just how worthwhile are financial advisors?
Beyond getting your overall finances in shape, a good advisor can also improve your investment performance. A Vanguard study found that by tapping the services of a financial advisor, you might improve your results by as much as three percentage points annually. Here's a look at just how powerful those three points can be -- the following table shows how an annual $8,000 investment can grow over time, at 7% annually and at 10% annually:

$8,000 Invested Annually For:

Growing at 7%

Growing at 10%

10 years

$118,269

$140,249

20 years

$350,951

$504,020

25 years

$541,412

$865,454

30 years

$808,584

$1.4 million

DATA SOURCE: CALCULATIONS BY AUTHOR.

That's pretty powerful, no? Even over just a single decade, the difference was almost $22,000 -- and over 30 years, it was close to $600,000! Of course, not everyone who uses a financial advisor will see their returns juiced this much. But even a two-percentage-point bump can make a big difference, and some might enjoy a bump of four points or more.

By the way, Vanguard broke out how they arrived at the three percentage points, finding, for example, that being able to consult an advisor at any time, such as when they were thinking of selling during a market correction, added as much as 1.5% to their returns because the advisor kept them sticking to their plan. On top of that, advisors setting a sensible asset allocation to follow added up to 0.75%. Advisors can also help keep fees low, by guiding clients to low-fee options. That can add another 0.45% to performance.

Robo vs. Digital advisors (Robo-advisors often cost money too): https://www.nerdwallet.com/blog/investin...l-advisor/

This dives more into that Vanguard study and another from Morningstar which is really interesting: https://www.forbes.com/sites/wadepfau/20...abe5461333

Overall net impact of good advice: about 3%

Suppose a good comprehensive financial advisor who does all these things charges a fee of 1% of assets under management. An investor who is capable of doing all of the above on his or her own is able to keep all of these advantages. However, an investor who doesn’t know how to effectively implement the above, or who wishes to instead devote their energy elsewhere, misses this extra Advisor Alpha. Even though they saved the 1% advisory fee, they end up worse off.

Justin Wagner from Vanguard offers the following example. Suppose the overall market return is 8%. Without good financial decision making, the combined impact of fees, taxes, and poor investment decisions is around 4%. This leaves a net return of 4% to the investor. However, for someone working with a capable advisor, they eliminate poor investment decisions, minimize taxes, and only pay the 1% fee, leaving a net return of 7%. That is the Advisor Alpha. The value added by good advice can greatly exceed the fees.

Link to the Vanguard whitepaper: http://www.vanguard.com/pdf/ISGQVAA.pdf

I realize opinions are like buttholes, but IMO it's worth doing the research into an advisor before you commit to turning your own financial wrench for your entire life. Don't get me wrong, I have a very active role in our retirement planning (including a hard pass on a recent employee private stock purchase, because the deal was not favorable at all to the buyer. I got free FA advice from the Weber-Wise team on that btw) but it helps having someone who helps you design a plan and execute. "A man without a goal is a ship without a rudder." - Thomas Carlyle