[good2cu]

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Newt,
A financial advisor will almost certainly do worse than you could on your own in a few index funds. A lot of financial advisors get paid by directing you to loaded mutual funds or if they are buying individual stocks for you then they get paid by charging you a percentage (maybe 1) of your assets. These fees would put them in the hole against a low cost index fund right off the bat, and it would be very difficult to recover unless they got lucky or had some kind of real stock picking skill that Scorpion refers to. Unfortunately anyone with real stock picking skill would not be available to you unless you had a very high networth. Since they can beat the market, their only incentive to work for someone else would be to get access to larger amounts of money than they would otherwise have, increasing their returns. Basically financial planners are only out there to guide the "my mom" types of people who know they should invest, but are too scared to do it on their own and therefore are willing (or unknowingly do so) to pay someone else to do it for them.

If you invest in index funds across several different asset classes (stocks, bonds, real estate, foreign, maybe commodities) thats really all you can do, without spending a lot of time trying to pick stocks and hoping you are the one with the luck or skill who can beat the market.

Max

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Good post, Max. I agree with most of this. To answer Newt's hedge fund questions...one problem is they tend to have high minimums ($250k at least...this means you need to have at least a $1m (many would say more) portfolio to use them). They are also wildly tax inefficient much of the time. In addition, it is not clear to me that they have the opportunity to make money today they did 10 years ago because of the proliferation of funds. So...while I said all the talent has gone there (it has), it does not necessarily mean all your money should go there. I have about 15% of my assets in hedge funds...but I am long time personal friends with each of the guys I am invested with.

Max, the only addendum I would make to your post is that a good advisor does have some value to, I am guessing, more than the majority of people on these boards. I have an MBA, I worked exclusively with financial markets since 1990...and I still find it helpful to work with my guy in certain areas, for instance. And I have my muni portfolio 100% farmed out to an advisor with discretion, I don't even touch it because its a specialized area.

At the very least, I think a great advisor (and I agree that 90% of advisors meet your description) can keep people out of trouble. It also forces people to be diligent...for example I left too much in munis and it helped to have my guy bugging me to follow through and buy some indexes, which had not been part of my portfolio historically.

With all of this stuff, I just think its hard to make blanket statements. It may be true that Max does not need any help, is knowledgeable, and is diligent. I just don't feel that can be said of everyone. Also, particularly for younger people who have not seen failure, an advisor with a deep exeperience can lend some perspective to issues such as loaning money to friends and family, or investing in private companies (which is generally a disaster).

Lastly, if you get into buying individual stocks in size one day, I find it very helpful to have a broker because I am out and about and busy...I cannot sit at a terminal and keep moving limits around on ETrade to get the prints I want, particularly not in illiquid stocks. I think that is not very relevant for most folks here today...but its another example of why it's not black and white.

(I AM NOT A FINANCIAL ADVISOR)

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SM,

The main problem is finding a trustworthy finical advisor. Most young professional poker players are now making far more money then their parents and have no way to get in contact with or evaluate brokers/finical advisors/brokers etc. It is outside our social network, many of us are only one or two years outside of high school. To me it offers the same problems as buying induviail stocks, I fear not knowing what I'm doing and not having the tools necessary to evaluate the advisors/stocks, and end up being a "fish" and having my ignorance taken advantage of. I feel like all of us are better off playing poker, educate ourselves about investing and play it safe in CDs, Index funds etc. for the next few years.