Are wealth managers valuable to Gen Z and Millennial DIY’ers

[mark45]

My friend and me are discussing if having a wealth manager is worth it? Most Gen Z and Millenials like us don’t use one because we can do most things ourselves and are pretty disciplined we don’t let emotions get in and allocate based in our profile. We have net worth of $2 million+

What do the rest of you do? What value do you get from wealth managers which really makes them worth the fee?

 

[equinelover]

@mark45 You are right, we are at a point where anyone can do it themselves. Also, people tend to surround themselves with likeminded individuals. Your questions sounds like these both apply to you.

But this isn’t true for everyone.
Financial Advisors/Wealth Managers are there for the people that don’t want to or don’t have the capacity to consistently stay disciplined + spend the consistent time, energy, and interest required to DIY. Also a good Advisor is a resource to go to for planning and non investment but financially related questions. If you are paying 1% for just investment advice you are probably over paying. After onboarding, maybe 5 calls a decade are where the true value lies. But you might not see it. They are also accountability partners to help keep someone on track, especially when emotional decisions might come into play (here is looking at the current down turn and the ridiculous hysteria about putting way to much into HYSAs)

There are many who an Advisor makes sense for, most in fact.
Multiple studies have shown, people on the whole are better off with an advisor than without by roughly 3% a year (after costs). Not true across the board, but with that and the peace of mind to not have to worry about it, a Financial Advisor makes sense for many

 

[daviddale3]

@equinelover Probably the real financial drag would be personal commitment and a reward based system. I know many Americans who made a livable amount of money in the military and them just seeing that number in their bank account, they felt obligated to go spend it all away. I've seen people spend near $10,000 over a weakened and claiming they had no regrets but the remaining year was quite a struggle for them because of their actions. As I get older I personally believe the traits are formed when a person is still just a child or even an infant.

 

[equinelover]

@daviddale3 A lot of it is behavioral and a push in the right direction can also do wonders.

When compared to your initial/recurring investments things move very slow at first but then seemingly take off. Compounding interest takes time to activate

 

[daviddale3]

@equinelover In a finical post a lady was asking about opening a credit card in her infants name to get a line of credit started, I recommended instead to open a brokerage account in the infants name and just simply try to feed a few thousand into it every year because of compounding growth. I was shocked how down voted and how many users were bashing this concept.

 

[equinelover]

@daviddale3 Yeah, people try to make things too complicated. Wait till they are 16-18 and do something joint if you want. They should really need their credit for 6-8 years outside of student loans and that is plenty of time to build the history to 750+

No need to over complicate and make your life more difficult.
That is high effort for minimal to no gain

 

[markinro]

@mark45 I've managed our investments for 30 years and haven't paid anyone.

I DID pay someone recently to answer some specific questions about optimizing tax consequences of various retirement withdrawal sequences.

 

[tomahawk777]

@mark45 nah. most of us don't have any wealth to manage.

 

[washedbyblood87]

@mark45 I’d say it’s dependent on your specific situation. I did it myself for a long time and did ok, but took a very large pay bump and became a partner in a company. Taxes and investment strategy changed quite a bit and it was worth it for me to have a wealth manager.

 

[resjudicata]

@mark45 As an advisor, I help people who know nothing about money and are just getting started saving, or people who are a bit older and have some money, but still don’t know anything about it and ‘just want somebody else to figure it out.’

 

[wyatt_michael]

@mark45 A good advisor will add value much the same way that a coach adds value to an athlete or someonetrying to lose weight. You may not find value in their services, though.

I certainly wouldn't hire one because I expected better investment performance, anymore than I'd hire a golf pro and expect to win golf tournaments.

 

[repenter]

@wyatt_michael I work in the industry and anyone promising “out-performance” is at minimum a red flag. Us honest ones are more about getting you that market return and depending on age may tilt to you more aggressive allocations like small cap value. But I’ve seen IRAs handled by these advisors promising to outperform and they’re all just a mish mash of individual stocks where an S&P500 would likely perform the exact same for way lower trading costs.

But you’re right, the real value is whipping people into financial shape. And most of the time they know the right answer, they just need the encouragement.

 

[wyatt_michael]

@repenter I hear ys, but read through the reddit comments n you'll find that most folks around here say stuff like: "why would I pay for an advisor when vanguard index is free?"

 

[repenter]

@wyatt_michael Yep and I agree with them. Vanguard is great for accumulating assets. I’ve just seen a lot of DIYers not know what they’re doing when they get into that $2-3m range and they’re spending down assets and actually make things more complicated but they’ll act like the smartest guy in the room because they used vanguard.

 

[drummerboy22]

@mark45 Advisors often act as therapists more often than money managers. If all you’re getting is investment advice, you’re not getting your money’s worth.

Also, Gen Z / Millennial with $2mm+ net worth? Wot lol

 

[joegoldbergswifey]

@drummerboy22 Yes Money Therapists is the exact term my old boss used when describing what they do.

 

[xabitxabi]

@mark45 Hi OP, here’s my educated response, yes.

I say Yes because it’s about the information you can extract from them and the people you’ll meet at their office and the people they introduce you to.

That’s the true value.

Otherwise, yes, mostly you can manage yourself as other have mentioned.

However, I’ve made a lot of smart investments decisions and had access to top teir mentors because my financial advisors were able to guide me to them or set up meets and make introductions.

 

[unideus]

@mark45

Most Gen Z and Millenials like us don’t use one because we can do most things ourselves....

This is not necessarily a generational thing yet a willingness to learn about basics. Some people don't care to learn nor the time and it's worth it to them for AUMs. The value a fiduciary brings, IMHO, is when one has more complexities than the average investor. For example, if someone owns a business, has a RE portfolio, leases land, etcetera. A fiduciary can bring expertise as how to maximize their assets while limiting the tax burden. It's not necessarily the amount of money, it's the complexity of portfolio.

For the average investor, perhaps a one-time fee for a comprehensive plan just for some peace of mind could very well be worth it to an individual but usually not necessary with the amount of information available on the internet and endless forums if someone is willing to learn.

 

[joegoldbergswifey]

@mark45 At 2M+ I'd say yes. Not even for the money management aspect but ones that provide additional services like at your income level which I assume is high, they can prepare for you some great tax mitigation strategies. Like investing in munis, actively trading your portfolio to harvest tax losses and many other things as well.

Purely managing your portfolio is kind of the easy part if you are knowledgeable and willing to put in the time and effort to manage your own money. Most people either aren't knowledgeable about investments or don't want to waste the time and effort on it when they could use that time more effectively on their own careers etc.

As far as fees go my advice would be find an advisor that's like your father's age. Someone with decades of experience that has seen it all you know? Imagine if you were 60s the advice you would give to yourself now in your 30s? Well you can get just that from an older advisor. At the 2M+ range I'd say hard line ask for a fee under 1%. I am sure you would find someone at around 0.8-0.9% advisory fee. If not then over 1% is not worth it imo it would be way too expensive if you are younger and aren't needing so much like retirement focused planning etc.

 

[repenter]

@joegoldbergswifey Ya, as someone in the industry it really feels like those folks in the $1m - $5m range trying to DIY like they did early on in their careers is when you run into trouble. A lot of them could benefit from an advisor but sometimes they are too proud.