What an eyeful it would be for advisers to see the flow of questions I get from readers.
Like this one, from a retired doctor. She asks whether she should leave her adviser and take over her own investments to save on fees.
A retired doctor? That’s a prime client. How could an adviser neglect a relationship with a person like this to the point where she’s asking about leaving?
The answer is by keeping the relationship all or mostly about portfolios and investments at a time when DIY investing has never been easier or cheaper. There are trading apps and digital brokers that charge nothing to buy stocks and exchange-traded funds. There are low-fee asset allocation ETFs that offer professionally diversified portfolios suited to different risk profiles. There’s even a cheap advice-light option – the robo-adviser.
In a positive sense, investing has been commodified. You can buy widely available, low-cost products that do a great job. Why pay an adviser a 1-per-cent fee to do the same work?
Advisory fees look different to a client who is getting financial planning as well as portfolio management. An adviser who plans considers not just what stocks and funds a client should own, but also their goals. For example, helping adult children buy a home or grandchildren go to university or college, and leaving a legacy for family members or a charity. Planning also helps with managing retirement income to minimize taxes and preserve capital. If you’re overspending – or underspending – in retirement, an adviser with a plan can help you take the right steps.
Advisers who conscientiously provide these services plus portfolio management are worth 1 per cent. To be honest, paying 1 per cent for someone to pilot your retirement finances is a deal.
Is portfolio management alone worth 1 per cent? For a retiree, the answer could actually be yes. While many retirees do exceedingly well in managing their portfolio, there is a time when cognitive sharpness declines and it becomes harder to manage investments. Family members may be able to take over, but some DIYers will need to make the transition to an adviser a point in their life when changes like this are hard.
Still, there’s no reason to settle for an adviser who only does half the work. Ask for more services like financial planning if you don’t currently receive them. If that doesn’t seem doable, then a better adviser is as much an option as going DIY.