Why I Fired My Financial Advisor

Like most busy young professionals, I convinced myself that I had little time to worry about my finances. My young adult mind argued that my energies were better spent building my career, pumping up my salary.  So I outsourced it.  I asked a few questions, leaned on a family friend that I trusted, and hired a financial advisor.

The advisor was kind, knowledgeable, and seem to understand the ebb and flow of the market.

Fast forward fifteen years, I found the financial independence community.  I delved deep into  blogs and podcasts, and started to understand that there was such thing as simplicity in investing.  I learned about the lazy portfolio and the benefits there in.  It was amazing how little work it took to become proficient.

I went a step further,  I ran to the library and found the ten most referenced financial books in the blogs that I was following.  I read.  For months.  Book after book.  Just to be sure that I wasn’t oversimplifying.

I wasn’t.

So I went back to my advisor and asked for him to chart my returns over the last decade. They looked something like this:

Overall returns 9%

AUM Fee: 1%

Average expense ratio for mutual funds: 0.75%

Stock to mutual fund balance 50/50

All things being equal, these were not horrible returns.  My money had grown nicely over the years,  I might have left everything as is, but I had a control experiment.  MY wife’s 401K.

Ten years ago my wife allocated her 401K based on a simple decision tree  provided by her company.  She then left it completely alone for 10 years.

Overall returns: 10%

AUM Fee: 0%

Average Expense ration: 0.30%

Stock to mutual fund ration: 0/100

Ding! Ding! Ding! We have a winner! I fired my advisor and moved everything to Vanguard and managed it myself.

Have I made a few mistakes? Definitely!  But overall, I understand my money and investments better than ever.  In fact, there were a few finer points that my advisor completely missed.

1)He thinks an expense ratio of 0.50 percent is cheap

2)He had me contribute to a non deductible traditional IRA but had no idea about Back Door Roth conversions.

3)He told me he always tries to hold some of the investments that he suggests to his clients.  I wonder what he does with the rest?  Maybe Vanguard index funds?

This is not to put down financial advisors.  I think mine actually treated me fairly well, and allowed me to outsource something that was causing distress.  I now know that distress was a sign that I should have dug in deeper, not backed off.  I had to do hours of research and studying to figure it out.  You may not.

The White Coat Investor has put together a wonderful course called Fire Your Financial Investor.

This is yet another resource in bringing everyone up to speed with minimal cost and time commitment.


Doc G

A doctor who discovered the FI community but still struggling with RE.

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8 Responses

  1. Ty says:

    I fired all my advisors too. Over the years, I’ve interviewed or worked with over 20 advisors. The worst ones are the ones who make buy/sell recommendations on individual stocks. That has cost me millions.

    After all these years, I have come to realize what you mentioned in another tongue-in-cheek post as the best investment move. Only buy, never sell.

    How did you deal with the tax burden of selling everything in taxable accounts and moving to Vanguard?

    • Doc G says:

      When I moved to Vanguard, I was heavy in stocks so I was able to balance the capital gains and losses. I also donated some very appreciated funds. Lastly, I decided not to liquidate some and move over in-kind.

      • Ty says:

        I want to clean up my portfolio of all the junk that’s accumulated over the years. Hard to do so because I have no losses to offset. Donated some highly appreciated stock but that only gets me so far.

        • Doc G says:

          I think you have to do it slow and steady. Donate here and there, sell appreciated stocks here and there. If the market drops, when the market drops, you will have your opportunity.

  2. They are in a tough position. They may like finance and want to help people but they also have the problem of wanting to make more money and keep their job like all of us. The profession needs to evolve or it will die. Well, I’m gonna immediately take that back. There are so many people that just don’t understand the fees they are paying. I tend to get myopic being immersed with liked-minded FIRE walkers.

  3. Good post! Once you understand the ins and outs of investing in the right stuff, there is really no need any longer for a FA. Sounds like you made a great decision.

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