The CFA / CFP thread in the Careers section got me thinking about this…
Since we have lots of charterholders on here (who because they have the charter know everything), and then inherently clueless candidates like me I ask this…
Do you any of you use a financial planner for any of your personal financial management? Outsource management of your investments to a guy who manages the money on a discretionary basis?
I don’t since I don’t have enough money to manage that it would be worth having somebody else do it. Also I feel as if I wouldn’t want to pay somebody else to tell me what I probably already know and can do on my own. Like I don’t need to pay somebody to invest my money in ETFs.
I’m not sure, but wouldn’t that be a slap in the face? A CFA letting someone else manage his/her money? I likely wont have time to do individual equity or fixed income analyses when I’m working, but I feel like I’ll have time to focus on ETF’s/indeces.
lol. I can get with this argument. I don’t see why most people who are in the industry would outsource managing their investments, unless of course you just didn’t want to deal with it yourself. That’s why I wanted to start this thread just to see if there is anybody who thought differently.
I understand what you’re getting at, but just because you’re a CFA doesn’t mean you work with equities or public markets…
If I had a net worth of eight figures, I could see myself hiring an advisor to manage it, just to save on the time and hassle, while I do more interesting things. I’d mandate that they keep the investments very basic and I’d bargain down the management fee.
Note: by advisor, I don’t mean the guy next door, but a well-established firm with a brand name… you know, someone that’s not going to steal the money and that I can sue.
I don’t have a financial planner or advisor. I wonder if it is worth taking CFP or something like that for personal use. CFA is useful for broad finance topics, but I imagine CFP would focus more on matching expenditures over your lifetime.
If you’re just going to have a sensible asset allocation via ETFs and rebalance, you don’t really need a financial advisor. However, if you want to do your own diligence on stuff, it may be unreasonable to expect to be an expert on stocks, REITs, CEFs, fixed income, and commodities. Offsetting that work to someone dedicated to staying on top of that research while you go and figure out whether KO is overvalued or undervalued for your boss may be a reasonable outsourcing of energy.
Also, some investors become emotionally invested in their own bets. Having an advisor whose job is to keep you from being overly emotional can be a help, even if you know what you are supposed to do.
So it isn’t necessarily ridiculous to have a financial advisor. Overpaying for run-of-the-mill advice is bad of course.
I believe there are 2 instances where an advisor makes sense for people in the investment arena:
similar to having someone mow your lawn, because your time/resources are better spent elsewhere. For instance, if I work instead of spend time putzing with my own stuff, perhaps I make more money at work…therefore there is a reasonable tradeoff to contract that work out to someone else while you focus on your income driver. This also applies to the “free time” idea where you just dont want to deal.
2)Things outside portfolio management that have a financial impact. Having someone think in terms of estate planning, tax considerations, etc all have their place and is likely not all in the wheelhouse of a single CFA. This doesnt mean handing over your investment discretion, but is a reason to have someone taking a peek at your financial life, this is similar to ohai’s comment.
I cannot imagine having someone else actually manage money for me, even for a nominal fee. I guess if I didnt work closely in the investment/port mgt area I might think differently, but seems like such a waste of skills/experience/knowledge to not put it to work for yourself (not to sound egotistical)
At some point, it would probably make sense to hire someone or buy software for taxes. That is one thing that I can never figure out, or don’t have the patience to deal with.
Mr. Leverage makes the points I was going to bring up. The majority of my work has been in the financial planning area for HNW clients. I have dealt with a lot of very smart people, perfectly capable of handling their own investments, but are simply too busy with their own work (this includes some clients in the financial industry). But, when your job is specifically managing investments for a living it’s not a lot of extra work to do your own.
However, I think the main reason a CFA would cosider using a financial planner would be more related to Mr. Leverage’s second point. There is a lot a planner can help with when it comes to taxes, estate planning, and managing company benefits. Investments are sexy, but there’s nothing like saving a client $50,000 in tax bills by doing a few simple changes. And if you can find a good planner (that does more than just sell insurance and benchmark hugging) you can get the whole package, exlcuding money management, for set annual fee.
Agreed. There’s a whole lot more to personal finance than Betas and NPV calculations.
I used to work as a CPA in a tax practice, and before that worked in retail financial sales. And there is a whole lot that most CFA charterholders miss in personal finance. In fact, I would say that the CFA curriculum is virtually useless for personal finance. (Although this is certainly not the case for someone who wants to work in a “traditional” CFA role.)
I think having someone not as emotionally attached to the outcome can be very useful. Also, they often have access to things you wouldn’t otherwise (research, bloomberg terminals, etc).
I’ve gotten a lot of 401k, IRA, tax questions, etc from friends. I finally had to sit down and study to get beyond the basics on 401ks and IRAs. Got tired of saying “I don’t know. I’m not sure. I dont know.” and feeling a like a reh-tard.