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What is a Portfolio?

With Vanguard, low cost index funds, life cycle funds, good personal fiance/investment books and the open source permanent portfolio and Ivy portfolio, what are some legitimate use cases for old fashioned financial advisers? What are some legitimate providers?

  • To further clarify my question: let's distinguish between small (retail) investors and wealthy clients or so called accredited investors. The situation in any country might be interesting but please state your country in your answer. Thank you. References: 1 - http://www.napfa.org/UserFiles/File/PursuitofaFinancialAdvisorFieldGuidev14.pdf 2 - Buffett's best tip for personal finance 3 - http://joshkaufman.net/permanent-portfolio/ 4 - http://www.amazon.com/The-Ivy-Portfolio-Endowments-Markets/dp/1118008855

  • Answer:

    Great question! For most of us, an optimized portfolio of Vanguard index funds is sufficient for long-term prosperity and financial security. Web based investment advisors like Betterment.com and Wealthfront.com do an excellent job of maintaining low-fee, optimized portfolios for those with limited investment knowledge. Those who have built disproportionate wealth have usually done so by taking disproportionate risks. For example, founders of start-ups have the potential for tremendous financial reward by concentrating their risk into a single entity. Similarly, those who have built significant wealth may have large, concentrated positions of restricted stock or some combination of non-qualified and qualified stock options. They may also have private stock positions, hedge fund exposure, and GP interest in venture capital and private equity funds. Complexity arises when trying to unwind these concentrated positions/risks. Liquidity events may leave founders with large tax bills if not executed properly. Exceptional investment advisors are able to look at a complex balance sheet and adjust the risk to meet the ambitions and obligations of the client. Often, advisors act as a point of contact for other professional service providers like CPAs, Private Bankers, Trust and Estate Lawyers, etc. Investment advisors definitely aren't for everyone. If you can manage your own money with confidence, great. Betterment and Wealthfront are great options if you want to put your investments on autopilot. There are also perfectly good reasons for choosing to work with a wealth advisor especially if you have an impending liquidity event or your wealth is going to drastically increase.

John Karakelle at Quora Visit the source

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There are a number of investments than an individual can not purchase on their own without a Series 7 securities licence and an insurance license. For example there are non traded REIT's and Business Development Companies (BDC's) which cannot be purchased with out the proper licence's. There are also a number of Institutional Money Managers that have outstanding track records may not be available without a licenced professional. Believe it or not, in many cases you can purchase mutual funds inside of a Variable Annuity cheapee than you could outside of a VA. Plus, VA's offer a number of other advantages not available to mutual funds.

Paul Carnahan

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