Should we stay

[NBS54]

Hi all,

I'm new posting although I've been reading for almost a year.

I've got a question. I'm retired and my husband retired at age 63 six months ago. We love retirement and life has been good. About five years ago we put all our money with a financial advisor with whom we have been very happy with.

When we retired our net worth was about 1.4 million dollars not counting our home. 400,000 of that was in my husband's 401K. When he retired he realized he had made more more in the 401K than the retirement account with the advisor the last year so decided to keep the money there for the next year and see what did the best. Also, the fees for the 401K are very very low but you cannot make withdrawals, it's all or nothing when you leave.

Well, six months into retirement we got a call for a meeting with our financial advisor. We like him and felt we have gotten good advice but we knew when we got a call four months earlier than usual that he would want to know why we haven't rolled the 401K over to our account with him. The meeting went as usual for the first 15 minutes and then he told us if we didn't put my husband's 401K into an account with his company he would no longer be our financial advisor. We could stay with the company which in Wealth Enhancement Group which is based out of Minneapolis but we would have to have another advisor whom I believe he assumes is not of his caliber.

I believe this is financial blackmail and my first instinct is to leave but we have really liked the ease of someone looking over our finances and doing a decent job of it. We like him and have felt comfortable dealing with him.

Are we just lazy and should we take care of things ourselves? The money we are getting from our investments is now our main source of income. My husband has a small pension but the advisor has given us a 97% chance of success in retirement and that is if we live to be really old.

Any opinions would be welcome.

 

[2017ish]

They have a nice website. But, I agree with you--it is financial blackmail. Did he give any reason for the demand?

What (and how) do you pay them? What do they have your money in now? Do you have an overall asset allocation model? How does the 401k fit into that?

Most everyone vocal on this site (me included) is in the "do it yourself" camp. It isn't that difficult if you are willing to put a few (well, maybe more than few?) hours in to learn--and are capable of mostly ignoring the ups and downs in the market.

PS--I see that they embrace a fiduciary standard, which is good.

 

[Walt34]

I would bail out and take my money with me. Yes, he's being greedy and wants the income from the 401k.

Read a few books on investing and create a "couch potato portfolio" at Vanguard and be done with those jerks. And although it likely will do better, the Vanguard portfolio won't even have to do as well as the FA you're with now because you won't have the drag of fees and commissions your FA charges.

 

[REWahoo]

I believe this is financial blackmail and my first instinct is to leave but we have really liked the ease of someone looking over our finances and doing a decent job of it. We like him and have felt comfortable dealing with him.

Why do you like someone who you believe is trying to take advantage of you? Run, don't walk to the exit. He's far more interested in his financial well being than in yours.

Are we just lazy and should we take care of things ourselves?

I don't know about being lazy, but you should definitely consider moving everything to Vanguard or Fidelity and allow them to assist you in self-managing your portfolio.

My husband has a small pension but the advisor has given us a 97% chance of success in retirement and that is if we live to be really old.

Are you comfortable believing what he says given the fact he's trying to coerce you into moving more funds to him? He doesn't sound trustworthy to me.

 

[prudent_one]

Is the advisor doing anything for you besides managing investments? Did he give a reason to justify the ultimatum?

 

[RE2Boys]

Remember that most folks that call themselves financial advisors are first and foremost salesman......very adept at putting clients at-ease and confident that they made a wise choice in dealing with them.

Possibly your man only takes accounts with assets over a certain dollar amount and he accepted your account figuring that you would be over the threshold once you moved the 401k to his company. Otherwise your assigned to a pool of advisors.

 

[pb4uski]

So let me get this straight. This guy is managing $1 million for you and is demanding that you let him manage the other $400k.

Your first instinct to leave is spot on.

I would send him a certified letter ordering him to suspend all trading in your account until further notice. I would then meet with the leadership of the firm, explain to them your adviser's ultimatum and ask if it reflects the firm's position. I would also file complaints with any professional associations that the adviser is associated with and any relevant regulators. I would do everything in my power to make his/her life a living hell while at the same time moving my money to Vanguard. After all, I'm retired and have plenty of time to be a total PITA to this jerk.

No way I would stay with a firm that treated me like that.

 

[ShortInSeattle]

I don't understand why your financial advisor would make such a demand. It's up to you if you want to self-manage your portfolio or look for an advisor but I'd certainly leave.

You might also check up on what fees your current FA will charge you to roll your funds to another broker. Hopefully nothing onerous, but his behavior is not a credit to him so far.

Vanguard and Fidelity are both good options to consider for your next step.

Sorry you have to deal with this. Unnecessary stress when you're trying to enjoy the fruits of your labor.

SIS

 

[rodi]

First - Kudo's for recognizing what is going on. Now comes the emotionally hard part (but actually easy). Transferring your money and managing it yourself. Emotionally hard (at least for non-confrontational types like me) because you need to have that awkward conversation to say "I'm moving my money". Your FA will suddenly try to talk you out of it and butter you up.

I'm as lazy as they come. I have a couch potato portfolio. I figured out that for me (you may be different) I wanted a 60% equities/40% bonds&cash ratio. I rebalance every quarter or less - I only rebalance mid-year when it's out of wack by more than 5%. That's a couple of button clicks on a website. I use Schwab, but others here use Vanguard and Fidelity. The key is to go to a financial institution that has low cost index funds.

Your financial advisor is probably getting 1% (or more) of your assets under management. That means he's getting about $10k/year (on top of any expense ratios if he has you in high fee/load funds). All for clicking a few buttons periodically to rebalance for you.

I'm cheap - I wouldn't want to pay the $10k/year.

If you want a good primer - "The Millionaire Teacher" is an easy read that shows how easy it really is. Check it out from your local library (my preference) or order it from Amazon.... (Did I mention, I'm cheap).

Part of your reluctance to move your money might be because the conversation is awkward. Is it worth $10k/year to avoid hurting his feelings? He had no problem risking hurting your feelings to increase his pocket by $4k/year when he insisted on that 401k money.

Move your money. Set up a simple portfolio. Can be as simple as 2 funds: Total Stock Market and Total Bond. Or if you want a low cost active management fund where the rebalancing is done for you - consider Vanguard Wellington or Wellsely.

 

[frayne]

He's just trying to make a living (off of you). Ask him what kind of returns he can guarantee versus a simple index fund. As stated earlier in this thread the majority of FAs are nothing more than salesmen that have no fiduciary responsibility to you.

 

[Sarah in SC]

I don't like the sound of that at all.
There is nothing that would make me more uneasy than that sort of conversation. You have legitimate reasons for wanting to keep the 401k where it is, and that should be sufficient. The value of that isn't enough to bump you up into some giant leap in management fees or whatever, so it just seems arbitrary.

As a CFP (Certified Financial Planner) myself, I cannot imagine working with someone who has done what you've described. If he is a real fiduciary and not a salesperson, then all the more reason.

You may wish to consult with an advisor through NAPFA (the national association of fee only planners) for an evaluation of your asset allocation and withdrawal plans, if that would improve your comfort level as you move toward DIY.

 

[athena53]

That's crazy. My advisor knows I have about $400k in an account I manage myself. While he lets me know every once in awhile that he'd be happy to have it under his firm's umbrella, he doesn't pester me. He knows better.

Leaving is easy once you select another firm. They give you forms to complete, you complete them, and they deal with getting the money from your current firm. You'll never have to talk with your advisor again. I do like the idea of filing complaints against him- his behavior was greedy and unprofessional.

 

[travelover]

I would definitely move my money to Vanguard or Fidelity. The hard part will unwinding the investments in taxable accounts. In addition to any pound of flesh they take out of you for closing accounts, you want to avoid incurring capital gains by selling holdings. A rep at Vanguard or Fidelity can tell you which investments can be transferred in kind.

Both companies have funds that automatically rebalance themselves, so all you basically have to do is withdraw a set amount on a monthly or yearly basis.

Once you start looking closely at how much you have been charged for "advice" and "management", you may be surprised.

 

[MRG]

Good advice, run away. DIY or Vanguard does it for .30-.35.

My Fidelity rep actually told me not to roll my 401k to them before I checked out pre 59.5 withdrawals. He acted in my interest not his or Fidelty.

 

[Texas Proud]

I would run away....

A friend of my DW is getting a divorce... her husband is a 'financial adviser'.... well, she showed me their 'assets' and I said she was screwed... they had nothing... he was in huge debt with very little in savings... he had already been through two divorces and decided to spend as much as he could during this marriage...

I said she will be lucky if the judge does not give her any of the debt he ran up while they were married....


BTW, he really is a insurance salesman.... seems like a very likeable guy, but when it comes to really investing he is much worse than the avg person....

 

[athena53]

DS had to settle a claim for a customer whose Escalade had been totaled and who reminded DS several times that he was a Certified Financial Planner. He was furious that they offered him less than the $75k he owed on it. DS' wonderful down-to-earth observation to me was that he'd never hire a financial advisor who was upside-down on a loan for an Escalade.

 

[pb4uski]

I think that many of those financial planner dudes and dudettes often start to believe their own hype because they hear it so much.

Excluding Sarah in SC of course.

 

[Sarah in SC]

Why thank you, lol.
I hate salespeople as much as anyone does, and it galls me that they call themselves "advisors".
I can't count the number of times we do "revenue reducing recommendations" at our firm, from telling people to take money out of investments to pay off their houses (if it makes sense), to draw down from managed accounts instead of self directed ones, and on and on. That's what you do, fer chrissakes! The right thing. It isn't so hard, really.

 

[pb4uski]

You sleep better at night, preserve relationships and those preserved relationships result in higher revenue from existing clients and referrals... it seems to me that it is just smart business in the long run and I'm constantly flabbergasted that so many people in business can't look past this month/quarter/year and see that.

 

[chemist]

Fire the advisor, move everything to Vanguard and put it in a Target Retirement or Life Strategy fund for 0.1% AUM. Or if you absolutely need hand holding, use Vanguard's PAS (Personal Advisory Services) for 0.3% AUM.

Stop paying 1% AUM which represents 1% of your asset base but 25% of your retirement income available to spend from your portfolio.

 

[utrecht]

Moving funds to another place is a royal pain...but once its done you can manage your own money so easily it will boggle your mind. You dont have to have any knowledge at all. You dont need to be constantly monitoring your money. "Managing your money" will consist of putting it into 3-4 funds and looking at it once a year.

You hire a pro when you cant do something yourself. I hire a plumber when I have a foundation leak because I dont know how and dont have the tools to fix it.

Anyone can manage their own money. Its amazingly easy with virtually no knowledge or tools.

 

[hnzw_rui]

Moving funds to another place is a royal pain...but once its done you can manage your own money so easily it will boggle your mind. You dont have to have any knowledge at all. You dont need to be constantly monitoring your money. "Managing your money" will consist of putting it into 3-4 funds and looking at it once a year.

Anyone can manage their own money. Its amazingly easy with virtually no knowledge or tools.

For beginners or someone who doesn't want to learn, you can even skip the whole managing your money thing by using a balanced fund (Vanguard Balanced, Wellesley, Wellington, LifeStrategy, Target Retirement, Managed Payout).

The only issue with moving a large amount in a taxable account is possible tax consequences.

 

[NBS54]

Thank you all for your responses. I've read enough on this forum to know most would recommend handling our investments ourselves. I'll admit up until this ultimatum we had been very happy with how our finances have been handled. He was very helpful when my husband decided to retire early. I know 63 isn't early to many of you but he had planned to work to full retirement age until the 60 hour weeks and no time to take vacations started to wear on him and me too. Retiring a few years earlier was a good decision and we've loved the first six months.

I really don't know where this came from. I was up front with what we had when we talked the first time. He always has business cards and wanted us to recommend him to people we knew. He never said "just your rich friends". We never did but if someone would have asked for a recommendation for a financial advisor I would have given them his name. While we aren't rich I think a 1.4 million dollar portfolio is still substansial and will do us well. We are not big spenders. We like to garden and our idea of a great vacation is to attend major league baseball games. And we eat before we go and take our own water, no $9.00 a can beer for us.

Fortunately we didn't get mad and leave the office in a huff. As a matter of fact I think he believes we will transfer our 401K to him. I think this is good as he is now taking care of most of our life savings and I don't want an angry man doing this. I also have trust in the company he is affiliated with.

My next move is going to be to contact the main office and let them know what happened and see what their reaction to this treatment is. We will leave this advisor but we want to make a good decision and not do anything rash. I really believe taking our time will lead to the best decision. At this point we may go out on our own although we've used others for many years to help us and we've done well. I didn't realize Vanguard has advisors for a lower fee and that may be a good option for us.

I guess I knew what I would hear when I posted but it makes me feel good to know that I'm not over reacting and this really was an outrageous thing for a professional to do. I will let you know what I hear back from the Wealth Enhancement Group. I may hear nothing which will be all the more reason to get out quick.

Thanks again for all the responses.

 

[travelover]

...... I also have trust in the company he is affiliated with.........

How much are you paying a year to have them manage your money?

 

[RonBoyd]

Two really good articles (book reviews) on this subject:


Book Review - DIY Financial Advisor: A Simple Solution To Build And Protect Your Wealth | Seeking Alpha


Book Review: DIY Financial Advisor | Seeking Alpha