The True Cost of a Financial Advisor | People I (Mostly) Admire

Steve Levitt illustrates the potential gap in wealth accumulation between going it alone with low-cost mutual funds and hiring an advisor to manage your portfolio.

[Dupuis]

Financial advisors don’t just handle investments. You’re generally paying for all their services. And the market doesn’t average 11.5%

[MisterLobb]

It’s even worse than that. Long term avg expected return in the stock market is ~ 7%, but there have been several periods where the return was negative or zero spanning a decade or more. (I used to value pensions - determine the required annual investment by the sponsoring entity to pay all the contractual benefits in the future. Any estimate using a rate higher than 7% was a huge red flag). California public pension plans became insolvent because they used very optimistic rate of return assumptions like 11.5% was the primary reason they were underfunding. So, often an investment advisor fees will eliminate most if not all of the return.

[FranklinPiens]

I bet the advisor will have some other tricks up his sleave