Good Decision/Bad Decision: Financial Advisors

Good Decision/Bad Decision

Today’s subject will hopefully be part of a regular series of Monday posts.  As you recall, I recently started Gratitude Wednesdays.  This series will focus on my past decisions to shed light on some financial wins and losses.  My hope is to discover what I did right, and help others avoid my mistakes.  Whether epic fail or triumphant victory, these were my decisions.  The topic for today is nothing other than the controversial subject of financial advisors.

We all need them in one form or another.

Good Decision

You may be surprised after my post about firing my financial advisor, that I actually have a long-standing counselor that I consult with constantly.  I hired her when I was in my early twenties and she has been with me ever since.  She has given me great advice, pushed me beyond my comfort zone, and I couldn’t imagine making it to financial dependence without her.  Plus she comes at a highly discounted rate (just my unconditional love).

That’s right, I’m talking about my best financial partner as well as life companion.  My wife.  I can undeniably say that my net worth (our net worth) would be a fraction of what it is today without her.  Although we don’t agree on everything, we agree on enough.  Here are just a few of the many financial benefits she has brought to my life:

  1. She encouraged me to push for a higher income at the beginning of my career
  2. Our first foray into real estate was her idea
  3. She has an amazing eye for value, and knows when to spend
  4. Her income supported us through residency and catapulted our net worth
  5. She is great at teaching the kids about budgeting

I could go on and on.  By far, the best decision I have ever made, is marrying the right person.  She is smart and kind.

I could never have achieved financial independence without her.

Bad Decision

I hired a financial advisor at the beginning of my career because I thought I was too busy to manage my finances. He was a good guy, met with us quarterly, and truly tried to look after our best interests.  This is not at all to criticize the character of the person I hired.

He charged me a discounted AUM fee of 0.5% because we’re family friends.    And he managed my money for years.  My returns were good, but slightly below the market.  I was busy building my W2 income and beefing up my net worth.

Overtime, the AUM increased to 1%.  When I decided to educate myself on personal finance, I found that there were some gaping holes in my allocation.

  1. I was too stock heavy
  2. Expense ratios on my mutual funds were too high (0.5% and higher)
  3. There was no understanding of the back door Roth IRA conversion
  4. Retirement planning was extremely basic

It took very little time to realize that I could do better myself.  I moved all my assets to Vanguard In kind and the rest is history.  My expense ratios are far below 0.10 %.  I am now matching the market as a whole.  All of this, and I only spend a few hours on my asset allocations a quarter.

In this case, KISS (Keep it simple stupid) is the best option.

In Summary

We all need our financial advisors.  In my case, the best kind have been unpaid.  My spouse, my parents, and the personal finance blogosphere,  as a whole, have provided my greatest financial tailwinds

How about you?  Do you use an advisor?