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Old 02-04-2016, 05:46 AM   #1
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Financial advisors

Was wondering what most people think of financial advisors versus leaving my money in my company 401K. There's a few people at work that are taking their funds from there 401K and transferring them over to personal financial advisors. Not sure how to find a good one. Not sure if it's a good move.


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Old 02-04-2016, 06:16 AM   #2
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Vanguard.

Keep expenses low on mgmt and minimize risk of being tangled up in products that help advisors pocket books more than yours. Bogleheads forum which has similar people as this forum are very helpful in learning in this area.


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Old 02-04-2016, 07:48 AM   #3
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Don't do anything until you have explored this forum for about six months. You can easily figure out how to do a simple DIY portfolio of index funds at Vanguard, Fidelity or others. Financial advisors will just cost you a fortune and result in a total crap shoot of results.
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Old 02-04-2016, 07:55 AM   #4
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As you'll probably see, many here are DIY investors who don't use or recommend financial advisors, except maybe on an exception basis.

Financial advisors deserve to get paid, so they siphon off some of your portfolio returns, 1% per year is not unusual (I've seen from 0.35% to 2.5%). May not sound like much, but over 30 years that's roughly 30% of your portfolio, regardless of returns. Many academic studies have shown a very high percentage of financial advisors don't beat the returns (after fees) that a low expense ratio, indexed fund passive portfolio (Bogle, Bernstein, etc.) delivers. A DIY portfolio can invest and rebalance automatically, or be more elaborate with 3-10 funds.

It's easy to find a FA who beats the market for a few years, but finding one of the few FA's who can outperform a DIY investor long term isn't possible for most people. There's a saying, 'by the time you know enough to choose a great FA, you don't need one' - always rang true to me.

BUT some people don't have the time, aptitude, and/or stomach to DIY - they can be better off with a financial advisor. Just know that FA's come at a cost, that could very well reduce how much you have available in retirement, even substantially. Best of luck...
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Old 02-04-2016, 08:36 AM   #5
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Originally Posted by Andy Sr View Post
Was wondering what most people think of financial advisors versus leaving my money in my company 401K. There's a few people at work that are taking their funds from there 401K and transferring them over to personal financial advisors. Not sure how to find a good one. Not sure if it's a good move.
It's a good move for the financial advisors!

I never had the option of taking money out of a company 401(k) and rolling it over to a private account while I was still employed by the company. How are your investment options in the company plan? If they're decent (e.g. a large selection of Fidelity or Vanguard funds with low expense ratios) there may be no need to move them. Do you really need to pay someone 1% to change your allocation every once in awhile? Financial advisors can do a lot worse, too, depending on what they're pushing that day.

Disclosure: I do have a financial advisor on a brokerage account that has about 75% of our investments (the rest are in Fidelity), but I trust him and value his advice. I'm 63 and have been investing since I was 20, so I can smell the bozos and the salesmen a mile away.
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Old 02-04-2016, 08:36 AM   #6
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Simplistically there are two kinds of financial advisers.

One is paid a one time fee and sets you on a course that the average person can continue themselves as long as their mental faculties stay with them.

The second type siphons off 1% or more of your portfolio day in and day out, making investment calls for you, which may or may not be in your best interest. On a million dollar portfolio, that is $10,000 - a year.

Most of us here go with number one and many find that through reading books and forums, they can even avoid the one time fee. It turns out that if you are smart enough to build up a nice portfolio, it is not difficult to manage it in you own best interest.
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Old 02-04-2016, 08:58 AM   #7
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Andy if there is no time pressure to move the 401K, do some homework and discover how easy it is to manage your own funds as opposed to paying a FA. Once you feel comfortable you can roll your 401K into an IRA and manage it by yourself. One caveat is, it does take some discipline not to panic when the markets go south which they will do from time to time. Just my two cents and ymmv and welcome to the forum.
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Old 02-04-2016, 09:51 AM   #8
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Hi Andy -

I would suggest some simple reading to help explain how you can be your own financial advisor using low cost index funds. Remember, no one cares about YOUR money as much as YOU do. But managing your money is easier than you probably think. The hardest part is at the beginning when you are figuring out your asset allocation to match your risk tolerance. After that - it's about 1-2 hours/year of work. Seriously.

For that initial part - it may make sense to hire a fee-only financial advisor to explore an appropriate asset allocation and make sure you've considered your options. Or you can read some books.

A book that explores the ease of DIY investing. The Millionaire Teacher.

Another source about lazy portfolio's - the bogleheads wiki page.

A book that has a good overview of some of the financial considerations you should look at is The Wealthy Barber.

Finally - an article by the Department of Labor that looks at the impact of fees on your nest egg, over time. It is titled about 401k fees - but applies just as well to financial advisor AUM (assets under management) fees. If your financial advisor is taking 1% - you can have a big impact on your final retirement number.
A Look At 401(k) Plan Fees

Give these a read before you roll out to a financial advisor. If you decide to roll out to a low expense ratio mutual fund company - the folks at Vanguard, Fidelity, Schwab, etc will be glad to hold your hand through the process.... for free.
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Old 02-04-2016, 10:13 AM   #9
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What Rodi said, times a million.
The time spent understanding your current investments, and what you really want to accomplish with regard to your investments (the so-called Investment Policy Statement) will serve you well, regardless of what you finally decide to do with the funds.
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Old 02-04-2016, 10:31 AM   #10
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You can do your own investing. I would not trust a financial advisor. On this forum and Bogleheads you will get unbiased advice from people who are not trying to make commissions and fees from you.Congratulations
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Old 02-04-2016, 10:35 AM   #11
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we discussed leaving $$ in k plan or rolling it over in another thread - pros and cons to both
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Old 02-04-2016, 10:38 AM   #12
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I think when someone wants to speak or trust a FA...they need to look at other resources as well.

For instance, my work has 6 employees that said they are paid by our co and happy to discuss financial topics and coach free of charge...just ring them. These are people with financial working backgrounds...who knows how their own personal portfolio's are doing.

I think before you talk to an FA (that likely charges a FEE) you should be able to answer the question "How much did I pay in investment fee's last year including trade fee's, and mutual fund fee's" I know for a fact this year my expense ratio is
0.09% I know what that equates to in $ and I know I made 2 $7.99 trades...likely to make 2 more.

Likely once you have the answer to that question, along the journey you will discover all sorts of good financial wisdom.

I ask my friends how much their fees are and a lot say "i don't know"...granted I am still early 30s
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Old 02-04-2016, 10:53 AM   #13
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Andy Sr, our experience has been the small fee's to our FA and CPA, are well worth it.
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Old 02-04-2016, 11:27 AM   #14
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Many FA's know how to sell investments not how to invest. I researched the training a typical Jones rep got. They spend approximately 3 times longer learning how to manipulate you then on the securities industry!

Rolling your 401k over you should understand the liability protection your giving up. Depending on the balance you should consider looking into an umbrella insurance policy. Some of the protection can be different by state so check into your state details.

To learn more about why people are afraid of FA'S look at threads here:
Hi! Ameriprise client needing advice...

There's many others on this site. Google "FA Name rip-off or sucks etc" you will find many folks who get taken. There's a funny parody on utube regarding E.D. Jones and how they treat their clients. You have to find it through utube as Jones' bots attempt to clean up their searchs.
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Old 02-04-2016, 11:34 AM   #15
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Before retirement, our biggest expense was federal taxes. Looking into expected expenses at retirement, I realized that a financial adviser charging x% of invested portfolio was likely to be the biggest single yearly expense. My DW and I interviewed a few, didn't take long to realize that following a simple DIY investment plan made more sense and saved significant cost. The only FA services we use now are occasional calls (free) to our Vanguard representative to confirm our understanding on specific questions of interest to us.

If I had no confidence in managing our money, I would consider using the Vanguard service. They charge a 0.3% fee to fully manage a portfolio. The other FA's we talked to wanted anywhere from 0.75% to 1.6% and didn't offer anything magic that any moderately competent person with an interest in managing their own money couldn't do.
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Old 02-04-2016, 11:43 AM   #16
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I am a financial advisor. Some people are perfectly capable of handling their own investments without the help of a financial advisor, some are not. The thing that makes managing your own investments difficult is that it isn't just money. Its your life savings, its your security and its the difference between working longer or retiring, and also living comfortably in retirement or not. It's a very emotional thing and it is hard for some people to make rational decisions about their money when the stakes regarding failure are so high. If you are not sure if you can stick with your plan if your portfolio declines in value by 25, 40 or 50%, you may want to hire some help. If you can stand the volatility, you will certainly get off cheaper doing it yourself. Financial Advisors, (like Doctors, Lawyers, Accountants, Engineers etc all have to earn a living)

Financial Advisors are accustomed to being "interviewed" by prospective clients. He/she should explain all of your options and all of the fees, and explain what you expect to get in return for your fees. Referrals are a great idea- one of the best indicators of a good financial advisor is when they advise you of something that is clearly not in their best interest- its in yours. Ask your friends which of their advisors have told them NOT to sell in a down market, have discouraged them from buying "hot stocks" they heard about on the golf course, and have steered them away from expensive products they don't need.

Y'all are a very self-sufficient bunch. Anyone who has the self-discipline to accumulate the assets you have requires intelligence and good decision-making skills. Recommending to EVERYONE that they invest on their own assumes that they have the same er, intestinal fortitude that you do- could be a mistake. Tons of investors sold out during 08-09 and will never recover from that loss. Don't tell everyone they can do it alone- everyone can't!
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Old 02-04-2016, 11:50 AM   #17
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I wouldn't hire a FA unless he/she had a CFP at a minimum, preferably a CFA and also signed a fiduciary pledge. Also, it would have to be a fixed-fee arrangement.


http://bucks.blogs.nytimes.com/2010/...iduciary/?_r=0
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Old 02-04-2016, 11:52 AM   #18
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....... Don't tell everyone they can do it alone- everyone can't!
Someone has to counteract the steady drum beat of misinformation and fear mongering from the financial advising industry. People asking here are adults and can take our advice or not. I'm still sick over the churning of my late MIL's portfolio by her "trusted" adviser.
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Old 02-04-2016, 11:53 AM   #19
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Y'all are a very self-sufficient bunch. Anyone who has the self-discipline to accumulate the assets you have requires intelligence and good decision-making skills. Recommending to EVERYONE that they invest on their own assumes that they have the same er, intestinal fortitude that you do- could be a mistake.....
Andy - ugeaugirl makes a good point. I'm quite confident with money management, my DW much less so. When I decided to go the DIY way, one of the considerations was what to do if I passed away and my DW was left holding the bag. I am actually working to educate her on the DIY way so she has a choice....but also have included in our yearly update to our Retirement Plan the Vangaurd contact to consider using if she's uncomfortable managing her finances alone.
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Old 02-04-2016, 11:56 AM   #20
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Someone has to counteract the steady drum beat of misinformation and fear mongering from the financial advising industry. People asking here are adults and can take our advice or not. I'm still sick over the churning of my late MIL's portfolio by her "trusted" adviser.
Agreed.

The great Ben Hogan said that the average person can break 80 by disciplined practice and following a few simple rules. Investing is no different.
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