Hey everyone. I got a financial advisor (FA) about 4 years ago because I thought I needed one. Lately, I’ve been questioning the value. For example, I asked him why we have so much in fixed income (around $60k). Over the last year, I’ve stopped putting money with him and started investing on my own. In the past 2 years, just using index funds, I’ve outperformed his returns.
I know we’re in a bull market and everyone feels like investing is easy right now, but I really think I could do this myself. Why pay monthly fees if he’s just tracking the Dow and keeping a chunk in fixed income? I’m 35 years old, not afraid of market swings, and just want my money to grow for the next 20 years. Thinking about firing him and going all-in on index funds. Am I crazy for thinking this?
Here’s the email he sent when I asked about the fixed income:
Email from my FA:
“We are 85% in equity and 15% fixed income earning 5%.
If we want to be more aggressive, I can adjust this, but I like keeping some fixed income for volatility.
We are up 14% YTD and 7.15% annually since inception, compared to the Dow’s 7.11% annually. You’re outperforming the market with 15% less risk.”
When you started with your FA, you likely signed an Investment Policy Statement (IPS). This document outlines the asset mix they’re supposed to stick to. The 85% equity and 15% fixed income he mentioned is probably what’s in your IPS.
Advisors aren’t hedge fund managers. They can’t time the market for you—they just follow your risk tolerance and the IPS. If you wanted a different mix, you’d need to revisit the IPS. That said, comparing to the Dow is a poor choice. Ask him to compare to the S&P 500 instead.
Ditch him. You’ve done the work to educate yourself, which many people don’t do. If you’re confident you won’t sell during a downturn, you’re fine managing your own money.
At 35, with steady income and no big upcoming expenses, going 100% equities is perfectly fine. If you have a house fund, you might keep that more conservative.
Also, using the Dow as a benchmark is a joke. Before firing him, ask how he’s done compared to the S&P 500. The difference will probably be eye-opening.
@Rylan
I’m cashflow positive, already own a home with a low-interest mortgage. Appreciate the reassurance! What I don’t get is why he’s even comparing to the Dow. Shouldn’t he be focused on the S&P 500?
@Keegan
It’s a trick. He’s cherry-picking the Dow because it makes his performance look better. The S&P 500 has crushed the Dow lately, so he avoids bringing it up. It’s all smoke and mirrors.
Rylan said: @Keegan
It’s a trick. He’s cherry-picking the Dow because it makes his performance look better. The S&P 500 has crushed the Dow lately, so he avoids bringing it up. It’s all smoke and mirrors.
That makes sense. I feel a bit dumb for not realizing this sooner. Time to make a change.
@Keegan
Don’t feel bad. The financial industry thrives on making things seem complicated. When you move your account, you can do an in-kind transfer to a brokerage like Fidelity or Schwab. That way, you don’t trigger taxes by selling the holdings. For new money, just start building VOO or VTI positions.