Friend asked for my financial advisor referral yesterday.
Don't have one.
Fired him two years ago after realizing I was paying 1.25% annually for advice I could get from a $20 book and portfolio performance I could beat with index funds.
Here's my exact system for managing money without paying advisor fees—and when you actually need professional help.
Why I Fired My Financial Advisor
The moment I realized I was getting ripped off:
2021: Portfolio returned 8.3% after fees Same period: S&P 500 returned 28.7% My fee: $12,500 annually (1.25% on $1M portfolio)
His explanation: "We're focused on risk-adjusted returns and downside protection."
My response: "You protected me from 20% upside while charging me $12K for the privilege."
The deeper problems I discovered:
Problem 1: Misaligned Incentives
What I wanted: Maximize long-term wealth building What he optimized for: Maximizing his fee income through complexity
His recommendations:
- Actively managed mutual funds (higher fees = higher commissions)
- Complex insurance products (high commissions)
- Frequent rebalancing (more transactions = more fees)
- "Sophisticated" strategies that required his ongoing management
Result: My portfolio had 47 different holdings across 12 different funds, all with expense ratios between 0.8% and 1.4%.
Translation: I was paying ~2.5% in total fees annually (advisor fee + fund fees) for a portfolio that underperformed the market.
Problem 2: Generic Advice Packaged as Personalized
The "comprehensive financial plan" I paid $5K for contained:
- Standard age-based asset allocation (60% stocks, 40% bonds at age 35)
- Generic risk tolerance questionnaire results
- Boilerplate tax strategies from his software
- Insurance recommendations that happened to be products he sold
Nothing in the plan was specific to my situation:
- Didn't consider my startup equity concentration
- Ignored my Canadian tax situation and cross-border complexity
- Missed obvious tax optimization opportunities (backdoor Roth, etc.)
- Didn't account for my irregular income patterns as entrepreneur
I was paying premium prices for generic advice.
Problem 3: The Complexity Trap
His strategy seemed sophisticated:
- Large cap growth fund
- Large cap value fund
- Mid cap blend fund
- Small cap international fund
- Emerging markets fund
- Real estate investment trust fund
- Commodities fund
- High yield bond fund
- International bond fund
- Alternative investments fund
The reality: All this complexity created a portfolio that tracked the total stock market index—but with higher fees and worse tax efficiency.
I could get the same diversification with 3 index funds at 0.05% expense ratios instead of 47 holdings at 1.2% average expense ratios.
My DIY Investment System
After firing my advisor, I built a simple system based on three principles:
- Keep costs low: Every fee point matters over decades
- Stay diversified: Don't try to pick winners
- Stay disciplined: Automate everything possible
The Core Portfolio (80% of investments)
Three-fund portfolio that covers entire global market:
Total Stock Market Index (VTI) - 70%
- Expense ratio: 0.03%
- Holdings: 4,000+ US companies of all sizes
- Why: Captures entire US market efficiently
International Stock Index (VTIAX) - 20%
- Expense ratio: 0.11%
- Holdings: 7,000+ international companies
- Why: Geographic diversification, currency diversification
Total Bond Market Index (BND) - 10%
- Expense ratio: 0.03%
- Holdings: 10,000+ US bonds
- Why: Stability, income, portfolio balance
Total annual fees on core portfolio: 0.05% Previous advisor portfolio fees: 2.5% Annual fee savings on $1M: $24,500
The Satellite Portfolio (20% of investments)
Higher conviction bets and specific exposures:
Individual Stocks - 10%
- Companies I understand well (mostly tech)
- Maximum 2% in any single stock
- Only buy what I'd hold for 10+ years
Real Estate (REIT Index) - 5%
- Real estate exposure without direct property ownership
- Inflation hedge, dividend income
- Vanguard Real Estate Index (VNQ)
Alternative Assets - 5%
- Cryptocurrency (Bitcoin, Ethereum)
- Precious metals (gold ETF)
- High-risk, high-reward bets with money I can afford to lose
Asset Allocation by Life Stage
Age 25-35: Growth Focus
- 90% stocks (70% US, 20% international)
- 5% bonds
- 5% alternatives
Age 35-45: Balanced Growth (My current allocation)
- 80% stocks (60% US, 20% international)
- 15% bonds
- 5% alternatives
Age 45-55: Moderate
- 70% stocks (50% US, 20% international)
- 25% bonds
- 5% alternatives
Age 55+: Conservative
- 60% stocks (40% US, 20% international)
- 35% bonds
- 5% alternatives
The rule: Subtract your age from 100, that's your stock percentage. Adjust based on risk tolerance and goals.
The Automation System
The key to DIY investing: Remove emotions and timing decisions through automation.
Monthly Investment Flow
1st of every month (automated):
- $8,000 automatically transferred from business account to investment account
- $6,000 goes to core three-fund portfolio (70/20/10 split)
- $2,000 goes to satellite investments based on current allocations
Quarterly rebalancing (automated):
- If any asset class is >5% away from target, rebalance
- Sell high performers, buy underperformers
- Use new contributions to rebalance when possible (tax efficient)
Tax Optimization
Account prioritization:
- 401k: Max contribution ($23,000 in 2024) in low-cost index funds
- Backdoor Roth IRA: Max contribution ($7,000) for tax-free growth
- Taxable account: Remaining investments in tax-efficient index funds
Tax-loss harvesting:
- Sell losing positions to offset gains (automated through Wealthfront for taxable account)
- Estimated annual tax savings: $2,000-5,000
Asset location optimization:
- Bonds in tax-advantaged accounts (avoid taxable interest)
- Growth stocks in Roth IRA (tax-free growth)
- Index funds in taxable account (tax-efficient)
Risk Management Without an Advisor
Emergency Fund Strategy
6 months expenses in high-yield savings (currently 4.5% APY)
- Amount: $45,000 (covers personal + business expenses)
- Account: Marcus by Goldman Sachs
- Why: Immediate liquidity for emergencies, market downturns, or opportunities
Insurance Portfolio
Term Life Insurance:
- $2M, 20-year term policy
- Cost: $120/month
- Why: Income replacement if something happens to me
Disability Insurance:
- Covers 60% of income if unable to work
- Cost: $200/month
- Why: Protect against loss of earning capacity
Umbrella Liability:
- $2M coverage beyond auto/home insurance
- Cost: $300/year
- Why: Asset protection against lawsuits
Health Insurance:
- High-deductible plan with HSA maximization
- HSA contribution: $4,300/year (triple tax advantage)
- Why: Lower premiums, tax-advantaged savings
What I don't have:
- Whole life insurance (investment disguised as insurance)
- Annuities (high fees, complexity)
- Complex insurance products advisors love to sell
Concentration Risk Management
The startup equity problem: Most of my net worth is tied to business equity. This violates diversification principles but comes with entrepreneur territory.
My approach:
- Diversify liquid assets aggressively (hence the global index fund approach)
- Take money off the table when business generates cash (pay myself salary + distributions)
- Don't invest business cash in risky assets (6-month operating expenses in high-yield savings)
- Consider partial exits if business value becomes >80% of net worth
When You DO Need a Financial Advisor
Despite my DIY approach, there are situations where professional help makes sense:
Complex Tax Situations
You need help if:
- Multi-state tax obligations
- International tax compliance (FBAR, FATCA)
- Business ownership with complex structure (partnerships, trusts)
- Estate planning needs (>$12M net worth)
My solution: I use a CPA for taxes ($3K annually) instead of financial advisor for everything
Behavioral Issues
You need help if:
- Panic sell during market downturns
- Can't resist timing the market
- Constantly change investment strategy
- Lack discipline for long-term investing
The test: If you sold stocks in March 2020 or chased crypto in 2021, you need behavioral coaching
Lack of Time or Interest
You need help if:
- Don't want to spend time learning about investing
- Would rather pay someone than manage it yourself
- Find financial decisions overwhelming or stressful
- Have other priorities worth more than fee savings
Important: If this is you, use a fee-only fiduciary advisor, not commission-based advisor
Very High Net Worth
You need help if:
- Net worth >$10M (estate planning complexity)
- Complex business structures requiring sophisticated planning
- Multi-generational wealth transfer needs
- Charitable giving strategies
At this level, advisor fees become smaller percentage of value created
The Results: 2 Years Post-Advisor
Portfolio performance comparison:
With advisor (2019-2021):
- Average annual return: 6.8% after fees
- Total fees paid: $37,500
- Portfolio complexity: 47 holdings across 12 funds
DIY system (2022-2024):
- Average annual return: 11.2% after fees
- Total fees paid: $1,200 (0.05% expense ratios)
- Portfolio complexity: 8 holdings total
Financial impact:
- Fee savings: $36,300 over 2 years
- Performance improvement: 4.4% annually
- Total benefit: ~$125,000 over 2 years on $1M portfolio
Time investment:
- Initial setup: 40 hours of reading and research
- Ongoing management: 2 hours quarterly for rebalancing review
- Annual review: 4 hours to assess allocation and goals
Stress level:
- Lower (simpler portfolio, better performance, lower costs)
- More control and understanding of investments
- Confidence in long-term strategy
The Investment Reading List
The books that replaced my financial advisor:
Foundation:
- "The Bogleheads' Guide to Investing" by Taylor Larimore
- "A Random Walk Down Wall Street" by Burton Malkiel
- "The Intelligent Investor" by Benjamin Graham
Advanced:
- "Your Money or Your Life" by Vicki Robin
- "The White Coat Investor" by James Dahle (applies to high earners generally)
- "Tax-Free Wealth" by Tom Wheelwright
Total cost: $120 for books vs $12,500 annual advisor fee
Knowledge gained: Understanding of investment principles instead of dependence on advisor
Common Mistakes to Avoid
Mistake 1: Over-Diversification
What I used to do: 47 different holdings trying to optimize every market segment
What I do now: 8 holdings covering entire global market efficiently
Lesson: More complexity ≠ better returns. Usually means higher fees.
Mistake 2: Timing the Market
What I used to try: Wait for "good times" to invest larger amounts
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What I do now: Invest same amount every month regardless of market conditions
Lesson: Time in market > timing the market
Mistake 3: Chasing Performance
What I used to do: Buy last year's best-performing funds
What I do now: Buy broad market indexes and hold long-term
Lesson: Past performance doesn't predict future results
Mistake 4: Emotional Decision Making
What I used to do: Panic during market downturns, get excited during bull runs
What I do now: Automate investments and rebalancing to remove emotions
Lesson: Your worst enemy in investing is yourself
Mistake 5: Paying High Fees for "Sophistication"
What I used to believe: Complex strategies and active management justify higher fees
What I know now: Higher fees almost never lead to better long-term performance
Lesson: Every fee point matters over decades due to compounding
The DIY Investment Decision Framework
Ask yourself these questions:
Question 1: Time and Interest
- Do you have 10-20 hours to learn investment basics?
- Are you interested in understanding your investments?
- Can you spend 2 hours quarterly reviewing your portfolio?
If no: Consider low-cost robo-advisor or fee-only fiduciary advisor
Question 2: Emotional Discipline
- Did you panic during 2020 market crash?
- Do you check investment accounts daily during volatile periods?
- Are you tempted to time the market or chase hot stocks?
If yes: You might benefit from advisor behavioral coaching or automated investing
Question 3: Complexity of Situation
- Do you have simple tax situation (W-2 or straightforward business income)?
- Is your net worth under $5M?
- Do you have standard investment goals (retirement, general wealth building)?
If yes: DIY approach likely works well
Question 4: Cost-Benefit Analysis
- Are you paying >1% annually in advisor fees?
- Could you earn more through business/career focus than investment optimization?
- Are advisor fees significant compared to your income/net worth?
If advisor fees are high relative to value provided: Consider DIY approach
My Current Investment Rules
Rule 1: Automate Everything
- Monthly investments happen automatically
- Rebalancing happens on schedule, not based on market feelings
- Contribution increases happen with income increases
Rule 2: Keep It Simple
- Core portfolio is 3 index funds
- Satellite investments are small and high-conviction
- No more than 10 total holdings
Rule 3: Minimize Fees
- Never pay >0.25% expense ratio without compelling reason
- Avoid actively managed funds
- Use tax-loss harvesting and tax-efficient funds
Rule 4: Stay the Course
- Don't change strategy based on short-term market movements
- Annual reviews only, no constant tinkering
- Focus on long-term goals, ignore short-term volatility
Rule 5: Continuous Learning
- Read 2-3 investment books annually
- Stay informed about tax law changes
- Understand what I'm invested in and why
The Future Evolution
As my situation changes, my approach will adapt:
If net worth reaches $5M+:
- Consider fee-only fiduciary advisor for estate planning
- More sophisticated tax planning strategies
- Possible alternative investment allocations
If business sells for significant amount:
- Major diversification event requiring careful planning
- Tax-optimal strategies for large liquidity event
- Possible geographic diversification for tax reasons
If I have children:
- 529 education planning
- Life insurance needs review
- Estate planning becomes more important
As I approach retirement:
- Shift allocation toward more conservative investments
- Focus on income-generating assets
- Healthcare cost planning becomes critical
The principle: DIY approach works for straightforward situations. As complexity increases, professional help becomes more valuable.
The Bottom Line
Financial advisors serve a purpose for some people in some situations.
But most people overpay for generic advice they could implement themselves.
My system:
- Lower fees: 0.05% vs 2.5% = $24,500 annual savings on $1M
- Better performance: 11.2% vs 6.8% annual returns
- Greater control: I understand every investment and decision
- Simpler approach: 8 holdings vs 47, easier to manage
The key insight: Investment success comes from discipline and low fees, not sophistication and active management.**