Guest post from AR (Accidentally Retired)
Growing up, my Grandpa was a “financial advisor.” Or perhaps he was a stock broker? I’m not sure. Whatever you want to call his profession, there was no doubt that he was a brilliant salesman, a lover of people, and someone who would talk your ear off for days.
So whenever we’d spend time together we’d all hear all kinds of wild stories. We’d hear war stories that included run-ins with General MacArthur during his tour in Korea, or the story of how he was severely wounded in battle and lucky to be alive. Or we’d hear stories of his time growing up in Brooklyn and how he swept my Grandma off her feet. And of course we’d hear about stocks, mutual funds, and his favorite thing ever: annuities.
I loved my Grandpa.
I respected my Grandpa.
Most of all, after growing up with a financial advisor in my life, I never thought about becoming a DIY investor. In fact I didn’t even know it was possible.
My Grandpa handled my money for me from my 13th birthday on. I had an account with him, and it performed. Or maybe it didn’t? I’m not sure I would know, because I never checked.
Grandpa eventually retired in my early twenties and my investment account was left to his younger partner, who he had brought in years earlier to facilitate his retirement. I met with his partner and I liked him. I kept my small amount of investment money with him.
All was well for a few years. But then one day, POOF, he vanished.
My account was transferred to a new advisor without a word from my Grandpa’s partner. I didn’t get it. I was pissed. My Grandpa had worked to build up a huge book of clients over the years, the least the guy could do was keep me on!!!
But what did I do? Nothing. I was too focused on building up my own business.
By this time, I was in my mid-twenties and not the least bit concerned with my investment portfolio. I was working to build a successful startup, and I knew that the startup would one day build real wealth for me and my family.
So I simply ignored my taxable brokerage for years. Investing is not for twenty-somethings, I thought to myself.
Fast forward a few years, and now I was 30, and my business partners (the founders) were on the verge of selling our business (it was going to close any day now). I knew that the proceeds were going to come in soon (my F-you money), and I would want to invest my humble nest egg into the stock market right away.
I had heard that my uncle was working with a “very good” financial advisor. I had him make an introduction, and we started talking. He seemed to really know his shit. He was talking circles around me. Here I am, a 30 year old who is running a startup. What do I know about investing? You know nothing, AR.
The cold hard facts are that I didn’t bother to interview any other financial advisors.
I didn’t shop around.
I didn’t even ask any good questions. I didn’t know what to ask.
I’m too busy to even think about this.
And I was busy. Seriously. Selling a company to a billion dollar company, as you can imagine was involved. VERY involved. It took additional time, travel and frankly was a giant pain in the ass. I don’t recommend it.
But we closed the deal. We did it! I phoned my new financial advisor and started to set up the new account. My wife wanted to meet with him as well, so we drove over and met him in person at his office. Did we want to invest conservatively? Yes. “Take no risks”, we told him. “I am a fiduciary,” he said. “It is in my best interest to work for your best interests.” Sounds swell, we thought.
A few weeks or maybe it was months later, we had everything running smoothly. So smoothly, that I didn’t hear from this guy very often. The economy at that time wasn’t doing great and so our conservative investments pretty much went nowhere. Not up. But not down either.
Now, I’m sure by now you may be thinking “Uh, oh! This AR guy is about to get hosed out of all of his money.” – No, that is not what happened. This guy wasn’t a scammer. He was a real life financial advisor. And he was a salesman – like my Grandpa.
Nothing horrible happened from here. But nothing great happened either.
We paid our AUM fees of 1%+. Only we didn’t see them…they were tucked away nicely. And we had no idea of the real long-term damage that they were inflicting on our portfolio.
Every year I received a“Happy Birthday AR!” email and an invite to the swanky client party that always seemed to come a day late or perhaps not at all.
Even with conservative allocations, our portfolio still grew as the bull market took off. All was well. Only it wasn’t.
I couldn’t tell exactly what it was, but something was wrong. I just didn’t realize that the something was me.
Index funds? DIY Investing? I had never, EVER, considered it. Not possible. You have to have a financial advisor.
My gears continued to turn, and by now I knew in my gut that Index Investing was the path forward. I just didn’t have the guts to pull the trigger yet.
Then, I ended up Accidentally Retired. I had more time. I started reading investment books and personal finance blogs. Soon, I was more knowledgeable on investing than I ever hoped that I could be.
And so a few months into my mini-retirement, I started to interview other financial advisors. I started to be able to “talk the talk” and understand the game. I met with advisors from Vanguard to Personal Capital to Merrill.
Then I read these words:
If you are a novice investor you have two choices:
1. You can learn to pick an advisor.
2. You can learn to pick your investments.
Finally, after all these years, it clicked. I can learn to pick my investments. I have already learned. I don’t NEED a financial advisor.
With my wife onboard, I called my financial advisor. I told him that I had to take a shot on myself. His response was “OK.” – He didn’t even TRY to talk me out of it. I had fired my financial advisor…and his reaction was literally NOTHING!
It was in that critical moment, that I finally really understood that I am the best person to pick my investments. I chose myself.
And like many of you reading this, I hope you have too.
But if you were on the fence like me, or if you have had a financial advisor for years, like me, I ask you to follow the great advice of JL Collins:
Pick your investments. Choose Index Funds.
The great irony of successful investing is that simple is cheaper and more profitable. Complicated investments only benefit the people and companies that sell them.
This was spot on for me. The great irony of my experience with my financial advisor was that it was far more complicated than it needed to be:
- We were invested too conservatively for our age and time frame.
- We were paying higher fees than we thought (it was 1.2%).
- We were invested in complicated and proprietary mutual funds, some of which required a 6 month notice to sell.
- We couldn’t move a majority of our holdings to another brokerage without taking capital gains.
- We had no idea what our tax implications were. No idea about dividends, capital gains or anything else.
- As a smaller client, we were largely ignored by our advisor, who was constantly on the road trying to drum up more business.
And this was all our financial advisor’s fault!
Except it wasn’t.
I only had myself to blame.
I might have been a busy partner in a growing startup. I had numerous direct reports to manage, strategic partners to meet with, operations to run, cash flow to manage. But it didn’t matter. That is all an excuse.
No matter how busy you are, you should always, and I mean ALWAYS, make time for your own investments. There is no other way.
There is only The Simple Path to Wealth. This is the path that I am now on.
I’ve been a DIY investor for nearly a year. It is easier than you think.
You don’t have to do it all in one night either. Here is what I did:
- Started to read financial books and blogs.
- Tested the waters by moving my former 401(k) into a self-directed Rollover IRA.
- Wrote out a financial plan for my family.
- Read more books and more blogs.
- Built out a transition plan by figuring out what could be easily sold or moved and what could not.
- Finally, I took the plunge.
It was not an overnight process. This took me 6 months of careful planning to get it right. It then took 6 more months to fully transition away from my former brokerage.
And while it WAS daunting to move away from my former brokerage and from my reliance on advisors – I did it. There was even a fund that took 6 months to get out of. It’s all transitioned now.
Growing up with a financial advisor in the family, I was programmed to believe that it was someone else’s job to manage my finances. It took me three financial advisors to realize that this is absolutely not the case.
Ironically, it was my own negligence that led me to become a DIY investor.
If you are considering becoming a DIY investor at all, then you already have the chops to do it.
YOU are the main driver of your financial future. And you can learn to manage your investments!
It doesn’t take as much work or effort as you think!
What would my Grandpa think of all of this? I would like to think that he would pat me on the back and cheer me on. He built up numerous businesses over his lifetime from nothing. One of them just happened to be a book of business as a financial advisor. He wasn’t a financial guru in any way – he was a salesman and a damn good one at that. I’m sure he is proud that I finally took the bull by the horns and plunged head first into DIY investing.
Afterword from JL Collins…
When I approached AR to write a guest post here, he came up with the idea of telling the story of his transition from using an investment advisor to handling his investments on his own — better, cheaper and more simply.
I loved it.
So, who is this guy?
AR is a 37 year old former CEO of a bootstrapped startup that he sold in 2015. His company was divested in early-2020 and, suddenly, he found himself Accidentally Retired. His newly minted blog of that name chronicles this new phase of his life, his…
“…journey to becoming a better father, husband, investor, and to conquer the ultimate question of how to live a happy life and be my best self.”
Launched just this year in January, his blog has already made its mark on the FI community and has been named a Plutus Finalist in two categories: “Best Financial Independence or Retire Early Content” and “Best New Personal Finance Blog”
In this post, he has been very generous in crediting my work, but pressed he confesses that early on these books also really drove it home for him:
Speaking of books, here are three I’ve recently enjoyed: