‘I pay a financial advisor. Would I earn more investing in a Vanguard fund?’ I need to know if I should stick with my advisor or switch to index funds for better returns.

Hi Money Minder,

Hey there, I recently hired a financial advisor to help me out. I pay 1% up to $1m and .5% for anything over that. From April 2023 through today’s date, net after his fee, my investments grew 16%.

I’ve read some comments here saying advisors aren’t necessary and you could just pay a small flat fee and throw everything in a Vanguard index fund for similar results.

So my question is, percentage wise, would I have gotten the same result if I had just let it ride in an index fund during the same time frame? Would I have made a similar return?

The advisor was also helpful in getting me life insurance and an attorney for a will and planning for some other things with my business. So he has other uses on top of just investing.

Thanks for your help, Money Minder!

Catch you later,
Financially Curious

Response from THE MONEY MINDER:

Hello There,

Hello, it’s great to hear that you’ve taken steps to secure your financial future by hiring a financial advisor. It sounds like you’ve made some significant gains in your investments since April 2023, even after factoring in the fees.

In terms of whether you would have obtained a similar return by investing in a Vanguard index fund, it’s important to consider a few factors. Index funds typically have lower fees compared to actively managed funds like the one your advisor is overseeing, which can eat into your returns over time. However, your advisor seems to provide additional value by helping you with life insurance, estate planning, and business-related matters.

If you’re comfortable with managing your investments on your own and have the time and knowledge to do so effectively, then investing in a low-cost index fund could potentially yield similar results at a lower cost. However, if you value the expertise and additional services your advisor provides, then it might be worth paying the fees for the peace of mind and comprehensive financial planning they offer.

Ultimately, the decision to stick with your advisor or switch to an index fund depends on your individual preferences, risk tolerance, and financial goals. It’s always a good idea to periodically review your investment strategy and consider all your options to ensure you’re on track to meet your objectives. All the best from THE MONEY MINDER!