Experimenting with a Financial Advisor, Part II

Sunset in Turks and Caicos

For part I of this series go here and for part III go here.  So I just got off the phone with my financial advisor from Vanguard and it was a good experience.  Nothing paradigm shifting but I learned some new things which is the goal.  The initial consultation is more or less the same for all financial advisors across the board.  They want to get to know more about your financial goals, how you view money and risk, get the balance on all your accounts and how much you spend.  Vanguard was actually less invasive than other advisors I’ve met.  If you think about it, giving up all your financial information, how much you spend monthly, how much you make, how much you have in all your bank accounts is very personal.  The whole process is similar to getting a comprehensive health check-up.  Just as it pretty intimate getting naked, wearing a hospital gown that opens up in the back and getting asked questions like do you smoke, drink, do drugs?  How often do you have sex? What’s your family history of diseases? Giving up all the details of your financial life is pretty personal and gives your advisor a huge window into your life.  For this reason, I prefer advisors who are NOT the same ethnicity as me, who are not likely to run in the same social circle as me and preferably at least 5 years older than me. I do this with my own personal doctor too.  Is that weird?

My advisor Ted gave me a quick run down about Vanguard’s investing philosophy which if you invest heavily with Vanguard like us you should be pretty familiar with.  Vanguard believes in low fees and broad diversification through index funds that encompass the entire market.

But here were some other points I’m glad I learned about them:

-Fee is 0.3% assets under management (AUM) which Ted stated translates to roughly $300 for every $100,000 managed.

-The advice given to you comes from an investment strategy group, not just from Ted alone.

-All advisors at Vanguard are salaried and do not make a commission from the size or performance of your investments.

-They have a buy and hold philosophy, meaning they do not like to trade often or buy and sell often.  They will look at your portfolio quarterly to assess the need for rebalancing.

-They put your recommended designed portfolio through a “stress test” where they see how it would perform through various historical market situations to give you an idea of how it would perform in the best and worst case scenarios

We have another appointment next week to go over his plan for us.

I had been considering cancelling this appointment and to just continue “free-styling” our portfolio, but after this initial consultation, I’m glad I kept it and feel like Ted will help streamline our investments and give me more insight on our overall financial picture.  To be continued…

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