Dollars and Hops

012 | Why You Should Fire Your Financial Advisor | Introducing Favorite Life Hacks

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Episode 12: Why You Should FIRE Your Financial Advisor | Money Saving Life Hacks

In this episode we will be discussing why we think most people should FIRE their financial advisors.

Why do we say to fire your financial advisor?

Well, oftentimes financial advisors are holding you back from achieving financial success faster.

What do we mean by this?

  • Financial advisors typically charge anywhere from 1-2% of AUM (Assets under management) to have you as a client.
  • In addition to the AUM fee you’re paying with your advisor - you also have to pay “hidden” fees for the investments they put you in.  Sometimes the advisors get a kick back from the funds they recommend or put their clients in.
  • What do we mean by this?
  • If they put you in a mutual fund, that fund could charge an annual expense ratio anywhere from 0 to 1% or more.
  • They could be using front end load or back end load mutual funds

    • Explanation on front end and back end load mutual funds

    • Front end load mutual funds are mutual funds that charge a fee upon investing in them.
    • Back end load mutual funds are mutual funds that charge a fee upon redeeming or selling the mutual fund.
    • Selling point is that they will have LESS ongoing fees than a traditional fund that may charge 1% or so.
    • Obviously we know at D&H - that you can buy no-load mutual funds/etf’s with no or extremely low fees.
    • AVOID front end/back end load funds that some advisors recommend
    • This can be a HUGE drag on your overall investment success.

      • What should you do instead of hiring a financial advisor?

      • Invest in broadly diversified low cost ETF’s and mutual funds.
      • We have a full episode of some of our favorites- check out episode 005

        • If you do want to have an advisor:

        Make sure to hire someone who is held to the fiduciary standard AND who is FEE only

        What is a fiduciary?

        • Someone who is bound by law to put your interests ahead of their own interests
        • One would think anyone giving investment

          • Who is a fiduciary:

          • Any investment advisor who is registered with the SEC (Securities and Exchange Commission)

            • Who does not have to be a fiduciary?

            • Insurance agents, stock brokers, and broker dealers - They only have to adhere to the “suitability standard” - which lacks teeth

              • Two types of financial planners: Fee only and Fee Based

              Fee Based financial planners - Charge you a fee based upon assets under management.  As your portfolio grows, so does the raw dollar amount that they’re being paid for their services.

              • This fee can often get out of control as you accumulate a large sum of money.
              • $2m portfolio becomes 20k in fees at 1% and 40k in fees at 2%


                • Websites mentioned on the podcast:

                Headline: How to invest money based on advice from Warren Buffet

                How to find a fee only financial planner:  www.NAPFA.com

                Clark howard credit freeze guide: https://clark.com/credit/credit-freeze-and-thaw-guide/

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