Even if you studiously avoid real estate reality shows it’s hard to get away from the genre’s power couple, Chip and Joanna Gaines.
The Waco, Texas entrepreneurs and parents of five are best known for their recently ended home repair show “Fixer Uppers.”
The premise was simple: They are assigned a couple who are home shopping, find a suitable but inexpensive home in need of attention, then use the balance of the purchase budget to fix it up.
The key moment in the show is the reveal, when the Gaines’s lead the owners toward a huge screen emblazoned with an image of their previously unrenovated house, then roll it back to show off spectacular changes.
If you walk into the home of anyone who has redecorated in the last few years and found the walls slabbed in antiqued wood, farmhouse flooring and country-ish metal wall hangings — that’s Joanna’s look. People actually travel to Waco just to drive by homes she and Chip have rescued and reimagined.
Now, buying a fixer-upper is not that hard. There are plenty of websites dedicated to listing foreclosures and low-priced homes. A little research and a whole lot of sweat equity and you too can get into a nice house for less than buying, say, new.
The problem, as any fan of the show will attest, is that older houses can have major problems that escape the untrained eye. Cracked foundations, dangerous wiring, shaky support beams — true deal killers.
The design work by Joanna sells the house, but it’s the dusty, difficult grunt work by Chip that saves the home from becoming a liability to the new owners.
Yard-sale portfolio
I often find the equivalent of a “fixer upper” home in the investment portfolios of new clients. People come to us asking why their investments don’t perform as well as the overall stock market. In just a few minutes I spot the worst problems.
Many folks who have been saving for decades have what I call a “yard-sale” portfolio. Mismatched investments, outdated approaches, white elephant funds.
The fee structures built in to their investments are almost always unnecessarily heavy. Money is taken from their accounts like clockwork with little explanation. That’s like a house with a small but persistent water leak; hardly noticeable but ultimately a lot of money lost.
If you ask for an explanation of fees often you get back platitudes that are frankly nonsense. “Our fees are the industry standard” or “Your funds are the best in breed,” or our favorite: “There are no fees.”
That’s garbage. Any legitimate financial adviser will explain their fees in specific detail, what they charge and what the investment funds charge you, plus any ancillary costs to run your portfolio.
If you don’t know the exact amount of “all-in” dollars you pay each year — fund fees, advisory fees, and commissions — it’s likely that you are being taken for a very expensive ride. You can ask for these numbers, and you should.
Joanna is great at making the home fit the client — understanding their lifestyle, how they use a home and where they spend the most time. A portfolio should be constructed the same way. Some money is for long-term needs, some is set aside for emergencies.
Adding value
For me, the Joanna Gaines value-add is not just fixing what’s wrong with your investments but understanding where you are going in your financial and personal life.
It isn’t enough to lower costs and rationalize a portfolio (though that’s important). A real financial adviser will seek a personal, one-on-one relationship in order to properly adjust a portfolio over time and in the context of your entire money life.
With most advisers you won’t get planning help. You won’t get your adviser on the phone when you want. Don’t expect a phone call from him, either, except around your birthday or when he’s got a “hot” fund to sell you because he needs to meet a monthly sales goal.
Real planning help along with investment advice is crucial. One without the other doesn’t make for much of a reveal. The screen rolls back and maybe the house looks great, but there’s a foot of water in the basement. Or perhaps the house is perfectly sound but so outdated you cringe walking in the front door.
Getting all of it — the right investments with the right plan and the right advice — is what matters.
The author is the managing director and chief investment officer of a financial advisory firm.