Lets say I had 150k that I wanted to invest. I am fairly clueless in equities, nevermind some of the more complicated investment vehicles. Would it be worth it to just hire an investment advisor that is well thought of in their field? If I invest 150-500k it looks like there will be a 1% annual fee but I would have a custom built and managed portfolio.

Would I be better off just buying some mutual fund or something?

depends on goals....if you want to set it and forget it....just dump it into a couple of the different big company retirement funds (like vanguard 2030 for example).....2030 is your retirement date, fund is actively managed to reallocate as time goes on.

the bigger companies have different flavors....

no need to pay someone 1 percent....that is ludicrous actually.

[QUOTE=jakhamma;9679686]Lets say I had 150k that I wanted to invest. I am fairly clueless in equities, nevermind some of the more complicated investment vehicles. Would it be worth it to just hire an investment advisor that is well thought of in their field? If I invest 150-500k it looks like there will be a 1% annual fee but I would have a custom built and managed portfolio.

Would I be better off just buying some mutual fund or something?[QUOTE]

If you can try to find someone in Canada to help you. US securities/mutual funds are weak. Pick some good stocks yourself. lots of $ to be made

lol

no it's not worth it, that 1% fee eats up about 10% of your annualized returns and over time means you'll lose huge value. Most advisors aren't just worthless, but dangerous. Some will try to take advantage by putting you into stuff that pays them kickbacks, er, commissions, that are lousy investments with high costs.

You can get much better value through buying a target retirement fund at vanguard. your portoflio will be automatically rebalanced yearly, and you will pay less than 0.2% a year for all costs, and no one will be getting a kickback or ripping you off.

Lets ask the next question: when DOES it become worth it?

when you have a unique situation that requires above average knowledge of the tax code and business planning.

I use the CPA/CFP plus tax lawyer. If you have no use for a tax/estate lawyer, then you have no use for a CFP in my opinion (because your situation is not complex or "unique" enough). ohh yeah, use the lawyer BEFORE the trouble, lol, to keep you OUT of the trouble....and use someone reputable, bad legal advise is NOT a defense (although you can then sue for maplractice).

(btw the lawyer is used to obviously give opinions and advice, but also sets up certain vehicles for tax sheltering and asset protection (DBPs, family trusts, s corps, llcs (althought in my state those are fairly easy))....etc

btw for me the above was worth it when the legal fees/planning fees would pay for themselves 2x over in tax savings or above average growth (pick an average to define as average, like the s and p....if someone can consitently get you a couple of points above it, and that amount equals at least 2x what you are paying them, then can really go wrong).......

I do both my own portfolio of index funds and have a separate financial advisor. I believe he is worth it because of the additional investment opportunities he provides me with. They include:

a) Life Settlement Fund: invests in discounted American life insurance policies that provide stable returns not correlated with any capital markets.
b) "High" Fixed Income Fund: invests in non-traditional fixed income investments such as medical receivables that display low correlation with capital markets.
c) REIT of commercial properties (although you can invest in these on stock exchanges).
d) Portfolio of Hedge Funds: gotta gamble a little bit, and without an advisor there is no way to get access to these without millions.

And he's in Vancouver

Dude, spend the few hours it takes to educate yourself on this and SKIP the advisor. Ultimately, YOU are responsible for your portfolio...if it goes south because your advisor is an idiot (though not negligent), then you only have yourself to blame. Wouldn't you rather just skip all that and do it yourself since you only have yourself to blame anyway?

Having an advisor gives a BAD excuse to not educate yourself. It gives a false sense of having someone else to blame if things don't turn out right.

also my guy can buy tax credits.....they go to auction and buy tax credits from companies that have done business in our state (fully legal), they may have to shell out millions to get the credits, so I wouldnt have access to those without them.

There were a lot of people some hundreds of millions that went with Madoff or high priced hedge funds and got slaughtered.

I don't think it's really possible to go out and buy good financial advice. So I don't think it's ever worth it.

If you can't be bothered to take the time to learn it yourself...you shouldn't be investing.

Financial literacy in North America is pathetic and makes me very sad. There is a plan to raise minimum wage in Ontario to 10.25 IIRC and CBC radio had some lady on from the canadian federation of businesses (forget the exact name). Predictably, she said that it was a horrible idea and that it would hurt businesses and that this is the worst time to push this through (this increase was planned before the recession).

It had a call-in portion and one min-wage earner called in and said "has there ever been a time that your group said that it WAS a good time to raise minimum wage?" A pause...and the lady ducks the question by simply commenting that raising min wage doesn't do what the government wants to do w/ it. So...that's a "no" to you ever suggesting that there's a good time.

But, that was just a lil right wing beef. Here's the real concern: this same caller tried to counter that raising min wage is GOOD for the economy because low wage earners aren't saving as it is, so raising it by 0.75 won't cause them to save it...they'll SPEND it...and that's good for the economy.

WAIT! What?! So you're already spending all the money you have (let's assume that they make ends meet and aren't going into debt)...you claim you don't have money to save, and she EXPLICITLY says that she'd use the extra money for going to more movies/more pizzas, etc. ******! Financial illiteracy incarnate. If you're already making ends meet, and claim you can't find money to save...a wage increase just gave you that money.

So sad.

I don't even understand what your post is trying to say.

I also don't get what you are trying to say, it seems like your argument is that bringing someone's income above sustenance level will make them save that money? You seem to be ignoring a lot of factors here such as the consumer's marginal propensity to consume and such.

The standard model says that higher min. wage raises unemployment, but empirical analysis hasn't proven that, and it seems the effect is rather ambiguous. See more here: http://en.wikipedia.org/wiki/Minimum...e_minimum_wage

I think he's saying that min wage earners are ******ed for not saving their $ if they got a raise. Well, there's a reason they are min wage earners.

My point is partly a rant...but the point is that if they claim they can't find money to save, they aren't looking hard enough. So when they get an extra $120/month from a wage increase, they don't view that as money they 'could' save...they spend it. Financial illiteracy.

It's part of my larger beef that far too many people claim that they JUST can't find money to save...and yet they spend 300/month going to restaurants. It's bull**** and we all know it. We have a great show called Till Debt Do You Part and a principal way people get into debt trouble is that they go from having X income to a lower income, but keep the same standard of living as X. So, the shortfall becomes debt and they just DON'T understand how they got there!

There have been psych studies that show that retirement investment enrollment goes up if you pledge to put a percentage (say 50-100%) of any raises (up to 12%...so if you get 3%/year, the most you would be putting away is the value of the first 4 raises...after that you'd be actually receiving the subsequent raises on your paycheque) into retirement accounts. Since it's not an actual LOSS (since you do this a year before the next pay raise), loss aversion doesn't take over.

The moral being that if you want a REALLY easy way to increase retirement savings, you maintain your current standard of living and put pay increases into savings. The other is to put tax returns all into savings.

If you take hold of the new raise and THEN expect to put it in savings, then loss aversion takes over and people don't tend to increase savings. But, if you pledge to do it BEFORE you get the raise (well before), then you're likely to maintain your standard of living of the lower wage and save the difference of the new wage.

This caller clearly was making ends meet by her discussion...so it was the point she couldn't find extra money to save AND that in the next sentence she's saying that she would INCREASE her spending if her income was increased.

Here's a hard to understand concept: people often use pay increases to both save and spend more money!

Financial advisers can give you access to investment vehicles that you otherwise wouldn't have available to you.

They offer structured products as well as much lower minimums to investing in hedge funds and other managed funds. If you're taking advantage of those it can make it worthwhile. In addition, peace of mind and having someone else worry about it for you is definitely worth something as well. They're also very useful because they can do a lot of the legwork when it comes to estate planning that you don't know how to or want to do.

With that said, there are plenty of financial advisor's that are just glorified salesman who will offer you nothing and just place you in some premade investment plan. You want to avoid using these people.

In addition, if you're younger and looking to be more aggressive then a financial adviser is less valuable because their business is built around being cautious with their clients' money. Once they get you as a client they don't want to lose you and the surest way to do that is to ensure as best as possible that you don't lose money in your account, or if you do, that it's less then the S&P or other benchmarks. People aren't going to switch over 10% returns (even if the market is doing 15%) but they will if you're losing more.

do NOT invest in hedge funds. They take usually ~20% of profits and ~2% of amount invested. This is a recipe for making a lot of money... for them, not for you. They cannot reliably beat the market by that much. Also it is in their best interest to increase volatility even if it doesn't increase average returns. Financial advisors usually dump you into mutual funds that charge loads so they can get their cut, or they only charge u directly and will just tell you to put it into index funds, which you can do yourself. There is absolutely no need.

Yes, investment advisors can be worth the money.

Obviously, if you know as much as them, then you execute their strategy yourself and save yourself plenty of money.

But the majority of individuals will not and should not reach that level of expertise. Unfortunately, you can't be completely ignorant. You need enough knowledge to discern the terrible (typically commission-based) financial advisors from the great financial advisors (fee-based, cheap, index funds).

A 1% fee is significantly more than you need to be paying. It sounds small, but it will compound into a large number.

Good hedge funds return great uncorrelated alpha and do fine for their investors. Most of the big loss hedge funds last year weren't really hedge funds, they were schemes by investments banks to take 'deposits' to hold the very bad assets we're discussing now.

True middle range hedge funds can be excellent investments. I mean, come on, you wouldn't pay a percentage of your fees for an alpha generator, look at the last 10 years of investing in an index with buy and forget.

+1

The problem with the retirement date funds is the expense ratio's, if you are going to pay 1%+ in expense ratio's, someone without investment experience may as well buck up the extra ~20-40 BP's to have a professionally managed account where they can offload the fiduciary responsibility and have a wider array of investment choices

Steve