I started to get serious about saving and investing around the birth of my second son in the mid-1990s. That’s when I began to feel the responsibility for creating a plan for my children’s future. It’s often the thing that gets people thinking beyond their own needs. But, I wasn’t comfortable doing something on my own.
I’ve always tended to get financial advice through word of mouth—talking with friends and colleagues to find someone with a good track record I could trust. That’s how I found my first advisor. He was with a big brokerage firm.
I was very much a novice. There was a lot of lingo and acronyms that were intimidating. And I was concerned about fees. The advisor told us that we didn’t have to pay them anything and there weren’t any up-front fees. The pitch was the firm pays you. It wasn’t until I matured in my understanding about how financial instruments really work that I realized the advisor wasn’t being transparent. I still had to pay transaction fees, and you have to know what percent of the transaction you’re paying. I still don’t entirely understand how the value chain works.
I muddled along that way for a while. My portfolio had its ups and downs. Then, about 10 years ago, I started to feel we weren’t getting enough attention and switched to another advisor. About five years ago, because of my work in digital innovation, I began to be curious about new approaches. Robinhood, an app that lets you invest in stocks and other investments without any commissions, seemed very attractive. It’s definitely looking to address being more transparent. I also started experimenting with Motif, another startup that does thematic portfolios. I dabbled, placing little bits of money in various places, though I kept most of my money in my portfolio.
But it was when I started doing work for a financial services firm that I really realized how opaque the system is. When I get a report from my advisor, it never says this is how much money your broker makes from your account. It just focuses on gains and losses in your portfolio and things like a 10-year view of performance. It’s an awful lot of distraction to keep me happy. Any ability to look into the funds further, I’m completely on my own.
In fact, at about that time, I became more interested in understanding the companies I’ve invested in. I started dissecting my regular portfolio and really digging underneath each of the funds. A lot of that started because of things I care about, like gun violence. Every couple of weeks there’s some shooting. I wanted to do something with my investments. I built a Google Doc to keep track of everything.
We switched funds around, but we had to initiate it. It’s much easier for advisors to keep you in standard platforms they do for everybody. It’s a lot less work.
My advisor has something he calls a “living balance sheet” with all my financial information. But I’ve grown uncomfortable providing all that information. I started to suspect it was a tool to figure out how to get more assets from me. At the same time, I think a lot of financial advisors have highly customizable tools that make you feel more supported. And the intent in some cases might be good, that is, empowering the advisor to give the client better advice.
Ultimately, dealing with financial advisors, the big problem is, unless you’re growing fast enough, you’re just not that interesting to them. As you mature, you have more funds and that changes things a bit. So I’d say my first advisor was less attentive than my second one for that reason. Still, I think there isn’t much interest in working with anyone unless you’re truly high net worth.
Now I’m wondering about taking everything and going into things like Robinhood. But I’m concerned I don’t know enough to do that. It could end up being dangerous.