Some thoughts on using Fidelity Financial Advisement services or any other Brokerage Investment Advisor

Some thoughts on using Fidelity Financial Advisement services or any other Brokerage Investment Advisor

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I wanted to share an experience I had back when I originally went to the Fidelity Advisor since it was a relatively free service (No direct fee but…well read the books to understand the true cost). I was ignorant of how the Financial System and Companies are setup and their purpose. The Fidelity Advisor asked me a series of questions and then with my approval did a bunch of transactions. Having educated myself, I now know that any of those Financial Advisors that work for the trading companies (or get a financial incentive from having you trade) are there to advise you to trade. This is how the Financial Companies are setup. They are there, for the most part, to make money off your money. In some situations, they can even make more money off your money then you do. Read these books to find out how that works. It is crazy to me that it is possible, but it is. Now they are not “bad” or “evil”. They are a company. Their goal is to make profit for their shareholders (for those publicly traded). Or to make money for the family that owns them. And the investments are probably okay investments. They will not have you buying penny stocks, bit coin, or any individual stocks typically. They just might have a higher long-term cost then the lazy portfolio’s and the target date funds. There is a low-cost brokerage firm that is owned by the people who own funds with that company, which means it is kind of like a Credit Union in a way (Not exactly, but more than the Family owned or the Publicly traded companies). I bet you can guess which one it is.

So, what the Fidelity Financial Advisor did is what the Financial Industry does. Luckily, I didn’t have enough Net Worth at the time that it mattered a whole lot. I say all of this to helpfully you understand the system. Once you understand the rules and how it works then we can make better educated decisions. The question we must ask ourselves is how much of our hard-earned money do we want to give to the Finance Industry and how much do we want to make money off our money. I personally like to minimize the amount of money the industry makes off me and maximize how much I make off my money instead. Others pay load fees, high E/R’s, more taxes from high turnover, Sales fees, and Advisory fees.

I was so close to paying a CFP 4.5-5% E/R to go through him. Had he not suggested buying an Annuity I would have probably gone through him from my ignorance of the Finance Industry. It was the research into an Annuity that sent me down the path of reading all those books and reading through the boglehead forums. And reading the personal finance subreddits.

Now I pay 0.07% E/R compared to what would have been close to 5.00% Annually. So, I’m happy with my efforts. I am very glad I educated myself. Saving myself over 4% per year for 30 years is going to make a little bit of difference due to compound interests 😊

One final note is that I do think there is value in a Financial Professionals advice. But only the “Fee Only” based type of CFP where you pay them for their advice, and they aren’t providing “free” investment advice and then charge you 4-5% E/R or sales commissions for trading. The ones that are a fiduciary and do not take part in the actual profiting of trades you make. Be wary of anyone that gets a Kickback from their advice. For example, an annuity will usually provide an immediate payment to an Advisor of somewhere between $5-15k if they sell you an annuity.

If you would like to learn the low E/R funds I mentioned watch my YouTube Video here.

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