This is for the sake of my brother. He’s got anywhere between 10-50,000 that he’s thinking about giving to a “pro”, and he asked me a good question - what’s the difference between going through your typical financial advisor through the local bank, or going to a buyside fund and opening an account? I told him to look into the buyside, but literally all I know about that industry at this point is what I’ve seen in CFA prep. But I do assume they’re a more hands on approach - advisor would just throw your money in a couple of his banks mutual funds and whatnot, but a PM would do the whole IPS/tailored portfolio for you… am I correct? Is the limiting factor for buyside that you need huge account balances? What tradeoffs are there between the two?
In Australia this is the way it works, maybe it is the same in Canada.
Access direct to funds is limited by the amount you need to invest and many funds will not directly sell you units regardless of what you have to invest.
You can open an account on a platfom that has the fund you want as an investment option. You will then need to pay platform fees in addition to the management fee the fund charges.
Some platforms don’t let you open an account yourself and you need to go through a financial adviser.
Would be handy if there was a online discount brokerage that didn’t charge platform fees and you paid just transaction fees when you buy sell funds. I’m talking a brokerage that has a large range of active funds to select not just ETFs.
Hope this helps.
Buyside - Small Cap Value fund with a ‘qualified’ client base and minimums in the 6 figure range. They manage the SCV fund and could give a sht less about other implications.
Bank/RIA Firm - Financial plannning for the average individual seeking retirement advising, investment allocation, insurance, tax, and estate planning.
A buysider worth his salt would laugh at $10k. I’d be weary of one taking the account.
Even at $50k, I’d suggest fund allocation per a reputable advisor. Schwab has a good platform for the little guy like this and they won’t sell you insurance sht.
Yep, $50k isn’t enough to get anything customized. Accounts at or below $50k normally get handed to the rookie in the office. Good, seasoned FAs won’t touch anything that small.
Vanguard the money. As other people noted, he’s too small of a guppy to consider. He probably also doesn’t have the expertise to really pick managers or understand what’s going on so Vanguard is the “safe bet”. It may not be optimal though.
Yeah, even 50k is small for a buyside fund to manage, unless by buyside you mean sending it to a mutual fund directly from an online broker.
The value of a financial advisor is that they can think more fully about your financial situation and perhaps identify aspects of your risks and risk tolerances that the ordinary guy on the street might not consider. However, spending a day researching this on the net might be enough to identify risks and suggest a sensible allocation. Just remind him to rebalance periodically.
50k… just open an online broker account, buy cheap ETFs and call it a day. Anybody you want managing that money won’t manage that little, and anybody who is willing to do it for so little I wouldn’t want touching my money. Also the fees to pay somebody to deal with that little may be sizable
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Tell your brother to spend $15 on this, read it, then get back to you.
Funny you mention that, for the last couple years I’ve religiously preached that at our levels of wealth we’re best off just buying SPY and calling it a day. I think he just wants to see what a pro can do for him after seeing some of the returns a local firm’s claiming (30% YTD…or maybe that was 2012 total but you get the idea)
Respect.
The local firm may actually have had a 30% return YTD - though this charterholder would be interested to see a GIPS-compliant return history - but all of us here should know that they only achieved a market-beating return by 1) taking on more risk than the market and 2) such performance is not consistently replicable.
Also, I’ve met too many people in the wealth management arena who have significant personal accounts with Vanguard for it to be an accident.
[quote=“frisian”]
This. Like my man Seth Klarman said, beware a chef who doesn’t eat his own cooking.
Many financial professionals have to buy index funds or ETFs for compliance reasons. The guys I know that can buy actively managed funds, they know who to put their money with.
If you’re really concerned about paying 1% for an equity fund then you’re not doing your homework. While there are dozens/hundreds of funds that completely suck, there are plenty of examples of getting what you pay for.
The only thing Vanguard guarantees is you’ll never outperform the market. Have fun with that.
Word.
I’d say, for 50k, just plop in mutual fund that is 50/50 equities and fixed income. Set it and forget it until another 20 years.
^ On the right track, but I would index.