If you are looking for a financial adviser, you may wonder if all
those dazzling claims of brilliance by financial companies on TV advertisements
can be true. The ads imply that if you pay the boastful adviser $10,000 every year
(on a $1 million portfolio) then they will do all kinds of magic to add so much
value to your portfolio that you will be glad you forked out more money than you
pay for anything else in a year except maybe your mortgage or real estate
taxes. Advisers will claim they have a
crystal ball that lets them time the market and outperform a boring buy-and-hold
allocation. They even say that they are especially
talented in a volatile market like the one we have seen since Covid began. The facts are very different than the
claims. Morningstar recently reported
that far more than half of actively-managed portfolios did worse than a simple,
boring, buy-and hold portfolio in the same category. They further reported that over the past 10
years, the actively-managed funds as a group did abysmally. Why? The managers couldn’t add just a small
amount of value to offset the large fees they take from client accounts. An adviser is useful to help you create a plan
and invest properly. But paying an
adviser giant sums for false confidence is likely to cost you money compared to
hiring a flat-fee or hourly adviser that helps you create a buy-and-hold mix of
investments, tells you to sit tight and takes reasonable fees for their effort.
Larry Pike, CFA
Client Priority
Financial Advisors LLC
www.clientpriority.com
Blog: clientpriority.blogspot.com
Hourly, Fee-Only Financial Planning
and Advice.
No Commissions. No
automatic, annual fees.
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