Originally Posted by
budwom
I do some friendly advising for a few friends, and am appalled by the "professional" advice most of them get, people who simply want to pump up their own fees. For that reason, I am a big fan of indexing, personally, though I certainly agree that really solid (if you can find some) fee based advisors are worth the investment.
But seriously there is a reason why the financial services industry has evolved from 10% of the economy to 20%. Lots of people fondling other peoples' money. And most of them have a huge conflict of interest.
Perfect example of what I see: I have a friend who has $800K in some very suitable index funds via Vanguard...I was pleasantly surprised by what he had, and some of the rudimentary advice
they gave him as he aged (at no cost), obvious stuff like fewer equities the older you are. The fees for these funds are VERY low, .1% kind of stuff. Terrific for most people.
But he had decided to go see a local financial advisor to see what he had to say. The advisor wanted to put him in some managed funds, and of course the advisor got 1% per year of the
managed money...SO, even before investment results are in, the advisor gets $8k/year, and then the managed fund he suggested had a fee of 1.5% per year, another $12k regardless of the investment performance..so he was going to pay $20k/ year to invest in a fund which had roughly a 70% likelihood of underperforming something like a S&P 500 Index Fund.
Clearly the advisor's motivation is a big fat commission from the managed fund. This is very very very common.
Yes, there are people with many other issues who would do well to have their money managed, but I have seen SO many examples of people like the above example who are simply being screwed.