My financial adviser is a great guy – real smart too.
But, over the time frame of a couple of years I started feeling less and less comfortable about the investing partnership. So, in early 2008 I jumped into the driver’s seat. I moved all my funds into a self directed account at TD Ameritrade, and with the guidance of the Sound Mind Investing Newsletter, I took control of my investing. You may be nervous about doing your own investing because you don’t know deep investing terms like P/E ratio, but that’s alright. All you need to do is follow a simple guide on how to start investing.
Why I didn’t need an independent financial advisor
Photo by Rednuht
- I struggled to find a financial adviser that fit my needs. This is mostly due to the fact that I live overseas and am forced to do all my interactions via email. It was difficult for me to have a clear sense of what he was advising and why. I think he was frustrated to communicate everything by email and I felt like the information he was providing was not sufficiently providing me the information I needed.
- Because my investment accounts ( IRAs, ESAs, investment account) were smaller (total under $ ) I felt like I was not getting a lot of personalized or customized investing advice. My account simply did not generate enough income for my adviser to spend much time with my account, and honestly I felt like it was unfair for me to expect him to provide me with more information.
- My wife and I have young children (two with one more arriving in two weeks – all under four). From the day they were born we started saving $ per month for their college. We opened Educational ESA accounts for our kids’ college once they accumulated enough for fund minimums. It seemed inefficient (costwise) to pay a flat account maintenance fee on an account with such a low balance.
- I felt like too much of my investments were going towards loads. I paid 5% to be directed towards a mutual fund.
- Poor performance. Let me mention that we remained with the same brokerage (couple different advisers) for eight years. I didn’t have a bad year, but consistently my investments were under performing the market averages. I basically thought I was smart enough to under perform on my own.
- I felt like my investment experience (I bought my first mutual fund years ago) was enough for me to begin making informed decisions. I came to realize that financial advisers do not have some secret knowledge for making good decisions. They have some wonderful analysis tools, but no secret knowledge.
- I decided that I cared more about my investing than anyone else.
- I decided that I was willing to devote more time to my investing than any one else.
- I think the straw that broke the camel’s back was when I wanted to add a mutual fund to my IRA and was told I could not because it was not a load fund. It was clear that I was only permitted to invest in mutual funds that made him a commission. I felt that his profits were taking priority over my portfolio.
Can You Trust Your Financial Advisor? In my case I couldn’t.
How to transition from financial advisors to your handling your own investing:
I decided that I would take a year and learn everything I could about investing. I read books, surfed the web, and read articles. It is amazing how little I really knew about investing afteryears of doing it. My financial adviser provided me an emotional security blanket, but because I had him I felt a lesser responsibility to need to know the details. I trusted him so I took a pass on educating myself. That year of learning was the greatest investment decision I have ever made. It will provide returns for the rest of my life.
Then I fired my financial adviser. Actually, I just sent him a nice email saying I was moving my funds. Honestly, I think he was glad because I was demanding more of his time than I knew he wanted to give.
Being a Christian I was seriously considering value-based investing, but ultimately decided (for a million reasons, but that’s another post for anther day) that it was not a necessary part of my investing strategy. Ultimately, I came across Sound Mind Investing. I liked the fact that it provided me with an ongoing education, insight, guidance and some tools to analyze the market.
So I moved my funds to TD Ameritrade, buckled up my seat belt and enjoyed the furious downhill ride of 2008. What a wild ride! Regardless, I do not have any regrets about jumping into the driver’s seat with my own investments.