Financial Adviser vs. Individual Financial Products

SilverEternity

My husband and I are looking to start investing. At this point in time we are just interested in a Roth IRA, but may look into other Mutual Funds, 529 plans, etc. in the future (in addition to the IRA). What are the advantages/disadvantages to having a personal financial planner (i.e. I set up an appointment to meet with a reputable financial adviser at our house or at his office) vs. buying individual investment products online (or directly through specific companies)?

Deebaser

Pros: -They're good at printing/filling out forms
-They can help you balance your 401K if you aren't familiar with terms like "mid cap"

Cons: -Most of them are life insurance salesmen in disguise.
-At the end of the day they're all salesmen and primarily concerned with what moves will net them the most gain. They only care about your gain as it pertains to you continuing the relationship.

Cauld

Deebaser wrote: »

Pros: -They're good at printing/filling out forms
-They can help you balance your 401K if you aren't familiar with terms like "mid cap"

Cons: -Most of them are life insurance salesmen in disguise.
-At the end of the day they're all salesmen and primarily concerned with what moves will net them the most gain. They only care about your gain as it pertains to you continuing the relationship.

I agree with this. If you're looking for solid advice try to find an advisor that charges a flat fee instead of one who's 'free' but works off of commision.

Mr Blonde

Their rates can really eat away your money. My dad went to Fidelity and they charge 1.1% of your portfolio annually. With that compounding over time it really reduces what you'll have to retire on, plus they take their cut in up and down markets. So if your portfolio drops 20%, it's an extra kick in the balls to lose over 1% for Fidelity's commission.

Also some advisers charge for each purchase or sale of any fund or equity. Find out if the adviser likes to actively manage the client's funds and if they charge for each move in positions. Try and find one that will charge a flat fee.

You could go with services like Vanguard or Schwab that has low expense ratio ETFs (like .1-.3%). It's easy to diversify, and Vanguard has an incredible range of products (Schwab is just starting to role out their low cost ETFs and only have about 15 at the moment). You both should also start reading up on investing.

Kathris

Mr Blonde wrote: »

You could go with services like Vanguard or Schwab that has low expense ratio ETFs (like .1-.3%). It's easy to diversify, and Vanguard has an incredible range of products (Schwab is just starting to role out their low cost ETFs and only have about 15 at the moment). You both should also start reading up on investing.

Do this.

Get a small cap, mid cap, large cap, and an international one. Put the same amount into each of them each month.

Quartely at the most, Yearly at the worst, "rebalance them" (Tell the company to make all the amounts in them even) (Ie. if one is worth $1000, another is worth 900, another 800, another 700, make them all $850 or round abouts, doesnt need to be exact)

Doing this and making sure they have low low low expense ratios (I look for less than .2) you will do better than 90-95% of the portfolio managers out there.

Once you get within 17 years of retirement, you should start slowing adding in bond funds to reduce your volitility.

Investing in gold, commodities, bonds, or anything else is a losing proposition over any period of investing longer than 17 years.

Kakodaimonos

It's useful to visit a financial planner when you're getting started with this because they'll help you work out various things like your cash flow, insurance, saving for purchasing a home, college funds, and everything else you're investing and saving for.

Look for a Certified Financial Planner (CFP). That's a professional certification with a fairly strict code of ethics. They will be on a fee basis. Do not use the "free" planners that the various brokerages and banks provide. They make their money off of product fees they sell to you.

Saammiel

The financial advisor will hopefully have knowledge you do not. Maybe you could gain that knowledge, but then you would be incurring a cost anyhow, it would just be your time instead of your money.

And most of the smarmy crap that goes down are from people who work on a commission basis. Luckily that isn't the only type of financial advisor out there. What you want is a flat fee financial advisor. They will set you up for a finite and stated fee and are far less likely to have a hard on for things that may not be in your best interest (exotic life insurance products, I'm looking at you). He/she should be able to tailor your investments to your goals.