Investing - Theory, News & General • Re: Fidelity's pitch for the use of financial advisors

This is just a FWIW item. If you have a Fidelity account, you might have received an email in the last day or two in which they talk about the tax considerations of the 2024 election. In their write-up, they cite "5 investing mistakes you may be making right now".

One of the 5 mistakes, according to Fidelity, is "going it alone'. In their words, "the truth is, mismanaging your portfolio has a cost. And whether the mismanagement is the result of an honest mistake, an understandable overreaction, or a simple oversight, ultimately the cost is coming out of your pocket." They fail to mention, of course, that engaging with a financial advisor can lead to far worse consequences.

Fidelity goes to say that "studies have estimated that professional financial advice can add up to 5.1% to portfolio returns over the long term, depending on the time period and how returns are calculated". Their source for the 5.1% number is Russell Investments, an investment management company and hardly an impartial source. (Russell Investments is not to be confused with FTSE Russell stock market indices.)

I know that Schwab, Vanguard and other firms market similar material from time to time, but I'm always a bit disappointed when one of the firms that Bogleheads often hold in high regard puts out such one-sided opinions. I guess I set the bar too high.

Yes, Fidelity is in business and they make money on their Advisory services. People should be wary of offers for Advisory services. A good rule is to be a buyer and not a sellee, if one needs Advisory services it is better to do a search rather than to just respond to sales pitches.

On the other hand, I did taxes for a number of years and was amazed at the cluelessness of much of the public regarding personal finance and investing. It seems that the less people know about stock picking, the more they want to do it. The less they know about the markets and the economy, it seems the more that people want to market time their investments. People hear and read bits and pieces of information from various media sources and they think that makes them an expert. Plus, there is the desire to buy when investments and the markets are hot and to sell when things look bad, the old story of buy high and sell low.

So absolutely, Fidelity sends these messages out hoping to drum up business and wanting do-it-yourself investors to switch to their more expensive Advisory services. This is the upsell and it is as American as apple pie. There are such things as Asset Allocation funds and Target Date Retirement funds that will manage a portfolio for you at much lower cost and that are offered by Fidelity.

So while I think there is reason to be cynical here, I do think there is also a concern that clients could be making big mistakes with their accounts. The tire place sends me an e-mail probably four times a year, reminding me to come in and have my tire pressure checked. They are hoping that this will help drive business but I think there is concern for their customers.

I do notice that Fidelity's three offices in my local Metropolitan area each have at least one Certified Financial Planner on staff and really the value in an Advisory relationship is in the Financial Planning. They do offer a certain amount of advice for free, I took advantage of this once and had a good meeting with the Advisor. Their videos on their YouTube channel do encourage their customers to come in and talk to their Advisors and this might be helpful to some people. Just be a bit wary though. People do get pitched the more expensive Advisory services, annuities, direct indexing, and SMA's but from my experience it isn't a hard sell.

I have advocated in the past getting whatever free advice that is available from your investment providers. I have found this to be helpful and I have received good suggestions, some of which I executed. But keep in mind, they will only do so much for free and they will let you know about other services they provide. As long as you don't push the limits of free advice, you should be fine. Don't think they mind an annual visit and their videos do say they will help you put together a plan. They have a really good retirement planning feature on their website which I have used.

For whatever it is worth, those are my thoughts. If you have zero sales resistance, you probably should then ignore such messages. I have found that meeting with their people can be a good experience. As they say, your mileage may vary.

Statistics: Posted by BitTooAggressive — Sat Oct 19, 2024 1:33 am