By Dr. Jim Dahle, WCI FounderMost of the people who religiously follow The White Coat Investor are Do-It-Yourself (DIY) investors. They cannot imagine actually PAYING someone else to do their financial planning and investment management. They love this stuff. They know that, given the frequency of bad advice and the price of good advice, functioning as their own financial advisor is the best-paying hobby they will ever have.
DIY Investors
Most of them are right. DIY investors may make a mistake every now and then due to not getting professional advice, but as long as they have enough interest in this stuff, that mistake is likely to cost less than the sum total of years of advice and service. Besides, advisors make mistakes every now and then, too, and most who call themselves advisors aren't actually real advisors anyway (and they're making mistakes every single day).
My best guess is that 20% of doctors are DIYers. They're interested enough that they develop the knowledge and discipline they need to be successful relatively early in their careers. I say more power to these folks. We produce all kinds of content to help them. This includes our numerous free resources:
- This blog
- Email newsletters
- Two podcasts
- A videocast
- Social media feeds
- Four online communities
- Webinars and other presentations
We also have a few resources that cost money:
If you are a DIY investor, congratulations! Welcome to The White Coat Investor community. We expect you'll be a multi-millionaire in 10, 20, or perhaps 30 years. There are no guarantees in life, but if you do what most in this community do, you'll almost surely accomplish that.
Delegators
However, not everybody reads every post we publish. Not everybody has gone back and listened to all the podcasts from the beginning. And read a financial book? No way. This money stuff is complicated and no fun. I'd rather spend my time curing cancer, fixing broken bones, fighting off infectious diseases, or stamping out suicidality. And what limited time I have left after that is going to my family and my own sanity. My accountant doesn't try to take out his own appendix, so why should I try to manage my own portfolio?
The financial services industry has a name for people who feel this way. They are called “delegators.” This is not an insult. It's just a description. Katie and I pay someone to clean our house. When we bring our houseboat back to the marina, we pay someone to park it, fuel it, clean it, and pump the poop out of it. When our car has an issue, it goes to the shop, and we gladly pass over the credit card when we pick it up that afternoon. We have better things to do. It's money well spent.
It's OK if you're a delegator. The most important thing about delegators is not whether you are one or you aren't one. It's that you recognize what you are. A DIYer who thinks they're a delegator will be very unhappy eventually, especially once they realize what they are paying. A delegator who thinks they are a DIYER is also a tragedy waiting to happen. Neither person is going to have the outcome they want.
My best guess is that about 30% of doctors are delegators. Congratulations! There is an entire industry set up to serve you. Some of them even charge a fair price. In case you're not aware, that price is $7,500-$15,000 per year for comprehensive financial planning and asset management. If someone wants to charge you much more than that, you need to shop around a bit more. A bigger problem for delegators is that they don't know enough to recognize what good advice looks like. The biggest service The White Coat Investor has done for you is to put together this page of WCI-vetted financial advisors.
The benefit of that page is that it lists a whole bunch of real financial advisors who would LOVE to serve you as a delegator. Yes, they all pay us to list them there because they want to meet you so badly. Yes, they are all charging a fair price. Note that while they are all “fee-only” advisors (meaning they don't charge commissions), some charge hourly fees, some charge annual or quarterly subscription fees, and some charge Asset Under Management (AUM) fees.
AUM fees have a particularly bad reputation among DIY investors. If you choose an advisor who charges AUM fees, that just means you personally have one extra task to do every year. You have to calculate your fees and make sure the total is still a fair price. This is a very simple calculation. You simply multiply your assets by the AUM fee. If you have $500,000 and you're paying 0.9%, your fee is $4,500. That's quite a fair fee. No reason to make any change at all. But if you have $10 million and you're paying 0.8%, that's $80,000 a year in fees. That's way too much. You need to either negotiate that way down or fire your advisor and move on to another one. Even if you're paying $40,000 a year, you better be getting some very specialized services from that advisor. Heck, at a typical WCIer level of wealth I'd probably expect that sort of an advisor to also be washing my car, mowing my lawn, cleaning my house, and walking my dog every afternoon for that. But that might be because I'm a DIY investor.
Advisors who charge that much do it because they can. You only need to talk 50-100 investors into using you as their advisor to fill your practice. They don't have to convince everyone their fees are worth it; they just have to convince 60 people or so, and they're good for the rest of their career. It is possible that they can provide enough value to many people that the value is higher than the fees. But that still doesn't mean you should pay $80,000 if you could pay $15,000. Just like my hand surgeon only charged me a few thousand dollars for his services despite the fact that his surgery will provide me literally millions of dollars in value. You don't pay for value; you pay the going rate for the services. And the going rate for financial planning and asset management for nearly everyone reading these words is currently $7,500-$15,000 a year.
More information here:
What Is a Financial Advisor? How to Choose the Right Fit
Validators
So, what's the problem? The problem is the validators. If DIYers are 20% and delegators are 30%, what's everyone else? They're validators. Validators fall into several different categories.
The first category is cheapskates. They really don't like this stuff, but they found out that financial advisors charge thousands a year and they don't want to pay that—even if those thousands a year will result in millions later. Many of these people will come around to the fact that they're really delegators eventually and start using a full-service advisor like they should. However, some of them won't. That doesn't mean they'll become DIYers. It likely means they won't do anything.
Advisors see this all the time. They meet with someone they think is a validator, give them instructions, see them again 18 months later, and discover they haven't done anything they were supposed to do. Or they only did two out of the 10 things on their punch list. Hopefully, they'll still save enough but maybe not. They probably won't buy adequate insurance or have any sort of a reasonable portfolio. It's just going to be really bad eventually when the excrement hits the ventilatory system.
We all know people like this. They're in our family. They're friends. They're partners in our practice. It's just the way it is. What is WCI doing to help these people? We're pointing out what they are: cheapskates. It's OK; there are plenty of us who are just as cheap. We just happen to be a lot more interested in money than these folks. We really just need to convince them of the value of paying a fair price to get good advice. It's a pretty simple calculation, really. The difference between following a good financial plan and a bad one (or, more likely, no plan at all) is probably millions of dollars throughout a doctor's career. What's a few hundred thousand dollars in fees compared to that? Not that much, and it's well worth the price.
The second category is composed of people who are ignorant. It is often just a temporary ignorance. They're not hobbyists who love this stuff, but they are willing to learn what they have to know so they can do this stuff; they just want someone to teach them. The problem is that the vast majority of the financial services industry is not set up to serve them. Advisors are set up to serve delegators. It's way easier and, frankly, probably more rewarding for them, both personally and financially.
Advisors often start out wanting to serve these folks, but it becomes a more transactional model and requires a steady stream of new clients always coming in the door. That's expensive and stressful to maintain, if it can be done at all. People don't want to pay the price that these advisors must charge to stay in business with this model. So, they struggle, sometimes for years. Then, most of them end up serving delegators. Why not stick with 75 people who love you instead of trying to help 200 new ones who are skeptical about your fees every year? It's hard to blame them.
What is WCI doing to help these folks? We're finding the financial advisors out there who are successfully serving you, and we're helping to provide that steady stream of new clients the model requires. Many of these people will be DIYers in a year or two or three. Maybe they tried one of our online courses, and it wasn't quite enough. That's OK, we'll still help you get there by connecting you with some of the few pros successfully running this model.
The third category is the true “validator.” They mostly know what to do; they just want someone smart to run it by every now and then. They want someone to help them design their financial plan and maybe implement it initially. But then they'll take over the chores. Two or three years from now, they want to meet with their advisor again for a couple of hours, ask a few more questions, and just check in and make sure they're still on track. Again, this type of investor needs a special type of advisor that isn't just serving delegators. They're needing to charge some sort of flat rate, a low monthly subscription, or an hourly rate. This type of advisor might be able to serve 500-1,000 clients, though. That sort of management is challenging, and it still requires pretty constant marketing.
Frankly, I don't think most advisors charge enough for this service. I want them to charge enough that they can provide it in a profitable, long-term way. It obviously has to be less than the $7,500-$15,000 a year that you can pay to have a “full-service” advisor, but you can't expect people to do this for $200 an hour for one hour every other year. Nobody can stay in business like that. You're probably paying a four-figure amount every couple of years for this sort of service. Here at WCI, we try to encourage advisors to operate as much as they can under this model and find ways to do it efficiently enough that it can be run as a long-term practice.
A Plea to WCIers
My first plea to you is to figure out what you are.
If you're a DIYer, great. Follow what we tell you to do, and this is going to work out great for you. Personalize your plan a little, it's fine. Maybe if we're lucky, you'll support one or two of our advertisers over the years or buy a course from us or come to the conference.
If you're a delegator, let's make sure you're getting good advice at a fair price and help you get to a place where you can enjoy the same standard of living during your working years and retirement.
If you're a validator, let's make sure you're a true validator and then get you in with someone who can help with that in an expert way.
My second plea is to recognize that not everyone is like you. If you're a hardcore DIYer, stop telling everybody you meet that they HAVE to do it just like you or they'll eat Alpo in retirement. Stop telling them that EVERY financial advisor is out there to rip them off or falsehoods like AUM-charging advisors aren't fee-only. Don't be surprised when your efforts to convert them to what has brought you so much success fail. No, they didn't read that book you lent them. Nope, they don't think index funds are interesting. No, they have zero desire to come to a conference and debate portfolio withdrawal methods with other attendees. Learn something about a few good advisors and how they work. Find someone who can work with validators. Find someone who can work with delegators. Stop referring people to famous advisors you've heard of who long ago filled their practice.
My favorite is to see people referring their friends to my friend, Rick Ferri. I think Rick is great. But he doesn't do financial planning or asset management. He only does portfolio reviews, a service appropriate only for a certain type of fairly independent validator. And he has a wait list that is literally months long. It might be over a year by the time you read this.
He certainly has no need to advertise with anyone. If you sent your delegator friend to Rick, you just did them a disservice. Heck, even if you sent your validator-without-a-financial-plan friend to Rick, you probably did them a disservice. They would have been better off starting a year earlier with a real financial plan from an actual financial planner. What if they became disabled without disability insurance while waiting for that appointment? Or all their money sat in cash or Nvidia or whatever for the nine months it took to get in to see him? How is that helpful? It's not.
More information here:
A New Way to Think About DIYing Your Financial Life
Real Financial Advisors
A real financial advisor gives the right advice. That doesn't mean they have a functional crystal ball. It means they make sure you have an appropriate insurance, spending, and estate plan. It means they teach you about your available retirement accounts and help you put a reasonable portfolio in place. It means they use index funds and talk about the importance of your behavior and keeping costs down and don't sell you loaded mutual funds, crummy annuities, and whole life insurance. Most people who call themselves financial advisors are product salespeople masquerading as advisors. If you're having trouble telling them apart, why not start with the people on our list? We're trying to run the people doing a crappy job and charging too much out of business, and we'd appreciate your help.
What do you think? Are you a DIYer, a validator, or a delegator? How can we help you best?
I recently completed a two part review with Ryan Kelly, after recommendation by WCI. It was a fabulous experience for me. I’m six years out of residency and have been following WCI since intern year and doing everything recommended, have 1.2 million saved for retirement, no debt outside of mortgage, all the insurances, etc. My husband is supportive but not very interested in finance and I felt like I needed someone else to lay eyes on my actual portfolio and offer a 30,000 foot perspective as well as granular feedback. He provided me a comprehensive written plan afterwards and helped me feel confident in my plan. He also helped me understand when I can expect to be FI, plan for helping my three kids in their early adulthood etc. The cost is a bit under 2K for the services I selected and I’m so glad I did it because I have more peace of mind and also feel more freedom to spend the money not earmarked for a purpose. Thank you WCI for a great recommendation and to Ryan Kelly for your kind and professional help!
Sounds like a steal for what you got. I hope Ryan can stay in business for a long, long time.
We also worked with Ryan Kelly this year and it was a great experience. The process is very comprehensive and efficient and Ryan is very kind. I’m the financial advisor in our family. My husband agrees with our goals but doesn’t like to think about it or deal with the moving parts. Ryan was super helpful with validating our plan, prioritizing our goals and thinking through questions like pay down the mortgage vs. invest, UTMA or invest more in our brokerage, how much for college savings, hassle with moving a tIRA or just forego the backdoor Roth IRA such that we no longer second guess our plans. He even went so far as to draft emails and checklists for us to deal with accounts that needed shifting. He saved us nearly $6000 in estate planning by providing us reasonable estimates for what we needed done which avoided us paying way too much for a simple trust and will. I appreciated that Ryan really worked with our preferences and priorities rather than forcing a one-size-fits-all plan or fiddling in the weeds with minutiae.
I’m on the DIY end of the spectrum, and I’m guilty of encouraging the delegators in my family to read a finance book, even though I stand by the recommendation as a good choice for novices (I Will Teach You To Be Rich by Ramit Sethi). But I accept your feedback more generally.
With that said, I can’t shake the instinct that even delegators need to understand some basics. I’m talking about understanding the difference between a Roth retirement account and a traditional retirement account, or how index funds are superior to picking individual stocks–I’m definitely *not* talking about retirement withdrawal strategies or tax loss harvesting. Is it reasonable for me as a DIY-adjacent hobbyist to push the delegators in my life to establish some fundamental financial literacy? They do already meet with formal financial advisors, but I don’t know how collaborative or educational those meetings are.
Sure, push them and see what happens. At a minimum help them ensure they’re paying a fair price and getting good advice. It takes a certain amount of knowledge just to do that. I see education as a primary role for an advisor anyway. Some people will take that education and become validators or even DIYers. But some won’t. Different strokes for different folks.
There is a Kitces article (https://www.kitces.com/blog/regulation-of-financial-planning-subscription-and-retainer-fee-for-service/) that talks about another issue for advisors who want to work with validators, which is that many state regulators don’t allow them to charge a comparable fee to other models if they’re offering hourly financial advice. It’s older (2017), but my understanding is that that situation hasn’t changed much.
I appreciate the classification system you created and how it’s helped me think about getting financial advice. For years, I was DIY, and that worked very well, but after a while, I decided I didn’t want to do it anymore (my spouse is completely uninterested). After a couple of decades of accumulation, we hired a financial advisor, but as suggested here, we looked only at the total annual cost without getting hung up on how different firms calculated it (which for the firms we considered included project fees, AUM, percentage of net worth, and retainer).
I’m a very frugal DIYer I think. Trying to decide if I need a check in validator or the few $1000s it ought to cost for that would be better spent on meals and trips with family (thank you for the realistic price check, and the list of candidates). I know we’ll be alright, maybe they could help us be a tiny bit smarter… But I think it would just be more tweaking at my spreadsheets.
However the points about trying to get others to care and guiding them are very important for me to hear. My kids, and my spouse, are not me and I do need to do my best by spouse to ensure he is squared away if I go first or lose capacity. We’re making progress with spouse but I want it on autopilot in the next decade plus.
My kids?!? One pretty keen- just got her into a local CU with better rates with one text about it, and she might be ready to manage our affairs when we can’t. However the other one hasn’t even written her will though I think she can get it for free thru work. Just this week I threatened that the BIL she isn’t sure about will probably get custody of her kids if she and SIL are lost on an upcoming trip. (We both know I’m no longer a candidate for the task.) I’ve been urging the importance of wills for parents for years now. At least my SIL has gotten out of crypto at her urging. And she understands the concept of emergency fund, but charmingly pointed out “Right now Mom YOU are our emergency fund.”
True validator. As the spouse charged with maintaining our financial health and growth, I just need occasional confirmation that I am not screwing this up.
Great post! I love the ongoing effort to help our community self-organize into one of these three categories. It is so valuable to know which one we are, prove to ourselves we really belong in that category, acknowledge not everyone else has to share that category with us, and be aware that changing categories over time is ok and even normal as our interests or situations evolve.
Two thoughts stood out to me as I was reading this:
Thought #1
I just want to highlight and emphasize that – Financial planning and Investment management are two fundamentally different services.
I think most readers of this blog understand that but if you go ask a random peer in the hospital cafeteria to articulate the difference between comprehensive financial planning and full service asset/investment management it will become clear pretty quickly that most people conflate these ideas in a way that is hugely problematic.
For reasons the article describes well, the financial services industry is almost exclusively designed to help delegators BUT….I am routinely shocked and disappointed how often the service actually being provided to the delegators is really only investment management.
This is understandable from a capitalism perspective – Investment management is relatively easy AND it pays better. Financial planning is quite hard and pays much worse. So what would most people do in that situation? If there is a procedure that takes 40 minutes and pays $5000 versus a procedure that takes 4 hours and pays $1000, which procedure would you be inclined to do if given the choice?
Of course if you ask the financial services industry “Do you provide financial planning along with your investment management?”. They all say, “yes, absolutely”.
You then ask them, “Given these two services are totally different, I’m curious how much you charge for the investment management piece and how much you charge for the financial planning piece. Can I see an itemized bill for how each service was priced and charged this year?”
After they pause and stumble for a bit they will often say something like, “We charge our fees based on assets under management (i.e charging for investment management) and we include the financial plan for free.”
If they charge their fees based on assets and include the planning for free, which of the two services do you think they are most focused on attracting and providing?
We tend to get what we pay for in this world and if the “planning is free” you can imagine the quality of that plan in most cases. In other words, I fear that most delegators out there are not just paying AUM fees that are too high but they aren’t even getting the financial planning service they need and deserve for that price.
As Jim said above about how much is reasonable for delegators to pay, “In case you’re not aware, that price is $7,500-$15,000 per year for comprehensive financial planning ***and*** asset management.” My plea is for people to understand that these services are different, to understand which services you are getting or not getting, and to understand the price you are paying for each service.
Thought #2
I generally agree with the $7,500 – $15,000 cost for delegators. I think that price applies to most WCIers. However, at some level of wealth (maybe ~$10 million and more) it is reasonable for that price to go up. I agree that it is not 10x harder to support someone with $10,000,000 that it is to support someone with $1,000,000 BUT…at those higher levels of wealth at least two things are different:
a) The risks are higher. Errors, omissions, mistakes, miscommunications, etc for those with $10, 15, 25 million are way more impactful than the same errors with $80,000. That risk needs to be priced into the fee in some reasonable way.
b) The human beings attached to the $10, 15, 25 million have different expectations about how, when, where, etc they are served. They don’t always ask for a meeting, they tell you when the meeting is happening. They don’t want an email about their estate plan they want you on the call with their estate planning attorney at 5:00 AM your time whether you are on vacation or not. I am not saying these people are rude or unreasonable, just that their lives often have reached a level of complexity and logistical gridlock that things need to happen on their timeline or they won’t happen at all. These are reasonable requests for these folks and they are often willing to pay a higher fee to have these needs met. It is likewise reasonable for the planner to adjust the pricing for these folks accordingly.
I am looking for a financial planner for my sister who is a delegator and about to retire. I was looking through the list of recommended planners in the link above.
Has anyone used any of the planners listed? I’ve tried googling reviews for several of the companies and cannot find any reviews.
I had a consultation/meeting with Bradley Clark, who is listed with WCI. I’m still in the accumulation phase and am mostly DIY but will work with him when I get closer to retirement. He specializes in retirement and I think has a very sound approach. I would take a look at his profile with WCI and confirm that your sister is within his target group. His website is very informative and has videos about his approach.
Some of the regulations/compliance issues make it challenging to use testimonials to advertise. I guess there could still be Google reviews but I’m not sure they would be much more useful than those for doctors, which are not particularly useful.
There is another category and that is the DIY who wants to plan for the future. I’m personally pretty comfortable with the DIY approach but my wife is not. This is no big deal now, but as we get older I worry that either I will develop dementia or will die before my wife (statistically likely as I’m a male). As I’ve watched relatives age I’ve seen them have more difficulties with their finances, and some even fall prey to scammers. Do you have any advice on what someone in my situation should do? Do some people at a certain age just decide to go ahead and be delegators even when they’ve been DIY for decades?
Exactly what you’re thinking about, get a back-up plan in place.
20% DIY seems sadly low, but you obviously know whether it’s realistic. If I hire someone to clean my house I’m not giving up 25% of my income to do it. If you have an advisor that charges 1%, and 4% is a safe withdrawal rate, that’s what you are doing.
I guess some people like working, but financial literacy seems like the highest value use of your time, particularly since 50-100 hours are sufficient to learn.
Bill Bernstein thinks that number is 1%, not 20%. I mean, 20% might be trying but only 1% doing it successfully he thinks.
I agree that managing your own money is definitely the best (financial) use of most people’s time. The bang for the buck is pretty darn high.
50-100 hours:
There was a thread on Bogleheads where it was asserted that some people don’t have the time to learn how to invest.
A user replied, if you only have thirty seconds, this is it:
Max out your 401k.
Put it in Vanguard Target Retirement.
I agree “investing” is not particularly hard. I would assert that “planning” is often more complicated than people realize.
Maxing out a 401k and putting 100% of it in a target date fund is pretty universally good advice. It just represents 1/200th of a comprehensive financial plan.
My point – It worries me how many people conflate the ideas of DIYing their investing and DIYing their financial planning. These are very very different tasks.
But but but what if my 401(k) doesn’t have Vanguard Target Retirement? And how much can I put in my 401(k) anyway? And how in the world would I ever save enough money to do that?
You are a hard case. You definitely need the three minute version.
My wife and I discovered White Coat Investor just as we were retiring. We would be classified as DIY – we learned it the hard way on our own over many years. Our accountants were very useless as far as financial advice. We did discover Vanguard early on and filled up our 401-Ks. We did the single stock approach before moving on to low-cost index funds with after tax money. We entered retirement and began increasing TIPs in our IRAs. We saw a couple financial advisors who wanted us to sell our after-tax stocks ignoring the tax implications and put the cash into Dimensional Funds or their own version of the S&P 500 all for a mere 0.8-1.2 AUM fee. We decided that we need an outside expert for a second opinion. Rick Ferri was the man! We got our appointment, filled out all the forms, and had a valuable consultation. We’ve implemented his suggestions and look forward to meeting him (and you) in-person at the Boglehead Conference this October in San Antonio.
Should be a fun conference. I just finished the line-up for Bogleheads University the first day so don’t show up late.
Have you done a post on a checklist of what a DIY should be doing to not miss anything a delegator is having done? I feel like some people pay fees because of thinking they will miss something. Your site in many locations has the collective content of what to do. And it varies by individual. But an wondering if is summarized in one post so I can see if anything else I should be doing
Well…there’s an online course (Fire Your Financial Advisor) designed to help you write your plan and it has a 100% no questions asked money back guarantee. But I’ll consider trying to somehow stuff it all into one check list for a blog post. Might be tough to be comprehensive.
Mostly DIY here but looking for prn validation as I near retirement. How much are people here paying for validator financial advice?
Depends on how much or how little you need. It can range from hundreds to thousands.