I am 34 now, and five years ago, after getting laid off, I was approached by a financial advisor from Morgan Stanley to help with my finances. I transferred about $150k from my 401k and Roth IRA to him since I didn’t know much about investing and thought it would be a good idea. I later started working in sales, made a decent amount of money, and decided to invest more. I opened a brokerage account with Morgan Stanley and started making regular deposits. Now, I have about $480k between my brokerage, Roth, and 401k accounts.
I haven’t added any money to my Morgan Stanley account in the last 18 months because I’ve been doing my own investing, mostly in index funds and large companies. This year, my advisor got me a 12% return, which is fine, but I’m wondering why I am paying him $6-7k a year for something I could easily manage myself. My own investments have done better than his over the past 18 months. While I’m no expert, I don’t think I should be paying someone when I could have just invested in VOO for the last five years and probably done much better. I want to manage my money myself and save the $550 a month I’m paying him.
Two questions:
Am I being overconfident? I don’t think I am, as I’m not planning to day trade, just stick with index funds.
If I withdraw my money from Morgan Stanley, what are the tax implications? Can I transfer the money without paying taxes on the gains, and how does that work?
If you have a long investment horizon, simple indexing can be very effective.
While I’m not a fan of Morgan Stanley or many financial advisors who take advantage of the middle class, a good financial advisor should focus on downside risk. It’s difficult to evaluate their effectiveness until you’ve experienced a full market cycle, and we haven’t seen a prolonged bear market in a while.
Additionally, it’s important to remember how risk-tolerant you indicated to your current advisor you were. Based on that information, they might be managing a much more conservative portfolio than what you describe as simply
investing in standard index funds and big companies.
I agree, and you should be able to assess your FA’s value based only on the last few years. After all, the Fed promised to hike interest rates. What is your man up to? After the crash in 2022, how did your portfolio perform? What advice did your guy provide you? Do you have any ideas on how to reduce taxes on losses? Following a slowdown in inflation, the Fed began announcing rate cuts. What did your boyfriend do again?
That may have led to a variety of risk management strategies and even suggestions for maximizing profits. The average useless FA probably wouldn’t have even spoken to the average client, let alone taken any action.
Those are all valid points, but to engage with them effectively, you need a foundational level of knowledge that likely indicates you don’t really need a typical middle-class financial advisor in the first place.
This is also why I believe the shift toward self-managed retirement accounts could lead to significant challenges. But that’s a topic for another discussion.
That’s what I experienced. I had some money with Fidelity, and when equities and bonds fell in 2022, they did nothing at all to reduce risk. I had assumed that they would have been the professionals who knew when to sell bonds before interest rates increased. They had no value. regained control of those monies.
For the majority of advisors, the value lies in the services they offer, such as estate planning, tax management, retirement planning, and charity initiatives. There will be negative consequences for both parties if advisors lead with performance or clients anticipate high performance.
My wife utilized a financial advisor at $1,000 per year to keep all of her investments safe, but I have never used one. Because you have to go through a middleman, they only make it difficult to make any changes. Since then, we have moved everything to Vanguard, where we will keep the $1,000 and not touch her accounts.
I believe they exploit women’s insecurities about money. As a 59-year-old woman, I’ve witnessed this happening with my friends who are nearing or entering retirement.
It all comes down to temperament. Is it possible to weather a significant downturn without making significant adjustments? Will you refrain from acting impulsively and emotionally? You should be all right if you can answer “yes” to that. As long as you don’t tamper with the plan, it works perfectly. I have not had a financial counselor in over a decade.
Just exercise caution. Perhaps start small, maintain a financial reserve, and use caution, my friend! I hope your commitment leads to a prosperous future. Wishing you luck on your adventure.