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Although I have yet to make several millions of dollars in my 40s, I can relate to not understanding what financial advisors do, if it’s worth the money to hire one, or what your net worth should be to use one. I found a post called, “What do Financial Advisors Really Do? Is It Worth It? 10M NM.” It was in the subreddit r/fatFIRE.

The Original Poster(OP) Jazzlike_Outcome2189, says that he lives off of draws from his investments, $360,000/annually. He has $44 million in assets, $10 million net worth, and $6 million AUM (Assets Under Management). OP says he is on his second financial advisor who was recommended to him by his bank. He is going to fire his current advisor because they are not keeping their promises of obtaining advice from up the chain. At the time of OP’s post, he was interviewing potential advisors.

If OP were to hire a new advisor, it would cost him about $50,000 annually for that service. OP feels frustrated because all the advisors are promising to supply the same services. OP is questioning whether he should even hire a new one, or split up his money into a few mutual funds and balanced ETFs (exchange-traded funds) that track the market automatically. OP says he could manage everything himself because he is adequately financially literate, but spending the time doing it is something he fears he doesn’t have as an entrepreneur starting his second business.

Key Takeaways

Many commenters suggest using the Boglehead Approach rather than a financial advisor. The Boglehead Approach refers to a portfolio plan from the book, Boglehead Guide to Investing. This method uses three different investment funds: Vanguard Total Stock Market Index Fund ETF (VTI), Vanguard Total International Stock Index Fund (VXUS), and Vanguard Total Bond Market Index Fund (BND). As well as laying out how, how much, and when to invest. It is supposed to be suitable for all experience and wealth levels. Using these funds adds a fixed income component, diversifies your investments across geographical exposure, and invests in a local market EFT or the entirety of the U.S. Market. The Boglehead Approach is supposed to be manageable without advisors.

Another consensus is that if OP decides to use a new financial advisor, he should switch to a consulting basis or a fee-only advisor. Most seem to have the opinion that because OP has financial literacy, a traditional financial advisor won’t add much value, because they often have clients that know nothing about finances. Regular financial advisors have to construct financial plans from the ground up and don’t get into the sophisticated details that OP is seeking. OP would benefit from having a knowledgeable party to bounce ideas off of, or help him see blind spots.

The third consensus is to decide how much brain power he wants to spend on his finances on a daily basis. If the answer is not a lot to nothing, OP should hire a Financial Advising team that includes a CPA, is high-touch, high-contact, and can manage all of OP’s financial affairs including structure, investments, debt, and taxes. Some suggest hiring a CPA to work with a financial advisor/ advising team so they can check each other’s work and really make sure the returns are optimized. This one really depends on finding the right advisor, one that really can understand OP’s lifestyle, goals, and values. Some commenters point out that having a wealth advisor will give OP access to cheap capital, better tax loss harvesting, alternative deal access, and someone who works with his accountant directly. Outsourcing is worth the 1% fee to a lot of commenters.

One comment points out that most people overestimate their own abilities. This commenter suggests an approach of starting out by outsourcing all of it, and then little by little, take over the aspects of the finances that OP can definitely manage on his own, and then leave the rest to outsourcing.

The overall consensus seems to be that a wealth advisor is necessary for areas where OP might not be very competent or willing to spend great amounts of time managing.

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