“He’s just another used car salesman.” “They charge 1% and do nothing.” As an analyst, I was the biggest skeptic, and card-carrying member of the advisors don’t add any value club. Yes. Me. Yours. Truly. The practicing financial planner. Let’s back up.
Working as an analyst, I harbored a secret feeling about my chosen vocation: Numbing, mindless, excel spreadsheeting: putting the “right” numbers in the box, and writing analysis that existed in quiet desperation for 50 hours a week was not for me. But the thought of… Living as another fleecing advisor charging a 1% asset-based fee while adding no real value made me ill. I can’t do that. I needed to know I could add value both tangibly, and intangibly.
Alas, I found a few studies on the “value” of using an advisor: Vanguard: using an advisor can increase your returns about 3%. The report details some important drivers. Many are becoming automated or obvious though: asset allocation, tax location, and low cost (expense ratios). Adding 1.5% for “behavioral coaching” seemed like a (BIG) stretch, but I guess we’ll find out when the market goes red again. The report seemed to lack the real drivers of value. Even Vanguard employees knew it… One said, “the whole company lacks transparency…they pitch the service like it’s wealth management. They make employees and advisors tout the estate planning, tax planning, and insurance planning we can do. In reality, we have only surface discussions. We are not financial advisors…” Morningstar: using an advisor can increase your retirement income on average 23%. This report mainly overlapped Vanguard’s report, but included dynamic withdrawal rates, and a few other areas. Ok, we were getting closer to what I considered valuable, but we’re stil not there yet… And everywhere I searched brought more questions…
The most important was: How can I curate specific and personalized value that creates a tangible AND intangible return far greater than my fee for a select group of families? Many “knowledge” workers spend a lifetime dealing others intellectual drugs they don’t personally believe in for money. I can’t do that anymore… Just look at all the other financial advisor websites: We are “fiduciaries” not really; most are only part-time fiduciaries. We are “fee-only.” Who cares!? Asset-based 1% pricing creates many conflicts of interest even if you don’t charge commissions. We do “comprehensive” financial planning. Prove it. Printing out data-entry from software reports is not planning. It’s not personal. It’s not rigorous. It’s a joke. And… Why don’t you list the exact price you charge CLEARLY on your website? Finally, once I started to discover what really created value, I was stuck as a deeply conflicted cog in another financial machine unable to offer any real rigorous advice… Stay tuned for part two.