The Bogleheads' Guide to the Three-Fund Portfolio

CHAPTER FOUR Twenty Benefits of Total Market Index Funds (in no particular order)

Benefit 1: No Advisor Risk

The Three-Fund Portfolio is remarkably easy to maintain. For this reason, most three-fund investors can avoid the additional cost and risks of using a broker or a financial advisor.

The search by the elite for superior investment advice has caused it, in aggregate, to waste more than $100 billion over the past decade.

—Warren Buffett in his 2017 Annual Letter to Berkshire Shareholders

There are two primary risks when using an advisor: “incompetence” and “conflict of interest.”

Incompetence: In most states, the minimum level of education needed to become a broker or a financial advisor is lower than that needed to become a hairdresser or an electrician. Most states do not require even a high school diploma to become a broker or a financial advisor. Financial advisors are required to take a state licensing exam that tests basic product knowledge and awareness of the applicable state and federal laws. However, none are required to have any substantive or formal education in financial planning itself.

Conflict of interest: You want the lowest cost subtracted from your returns. Your advisor wants the largest income for himself and his family. You can guess who is likely to win.

You must understand that whatever the advisor is paid comes out of the return on your investment. The cumulative impact of advisor and broker fees over an investment lifetime can be huge, as the ...