Do you have a financial planner?

[travelover]

.......
Unless you have lost most of your senses, it should be pretty easy to spot churning and commission generating transactions before they happen. As usual, it will pay to understand how things work, and know what questions to ask, and when you should terminate a relationship with a broker, advisor, of planner.

.........

When my MIL was in her 80's her "advisor" would call her regularly to get "her permission" to make trades. She had no idea what he was doing and just always said "if you think I should, go ahead". It was clearly churning, but she was unsophisticated and getting a little senile.

 

[obgyn65]

I have been thinking about this and would like to give it a try. Where can I find a trustworthy fee only advisor ?

And this is exactly the sort of portfolio that perhaps you might want a professional to assess. NOT ONE WHO IS SELLING ANYTHING, a Fee only advisor.
?

 

[obgyn65]

I have not shared this information. When I joined this website I was advised to 1) not give my exact location 2) avoid providing absolute numbers about my portfolio 3) not give my actual professional title (take your pick among MD, DO, PA or NP as all four titles allow you to provide obgyn services). I have tried to stick with these rules. However, I can confirm my CD and muni portfolio is far below 15 M

We don't know how much Obgyn has in CDs and munis, do we?

 

[teejayevans]

I have been thinking about this and would like to give it a try. Where can I find a trustworthy fee only advisor ?

There is plenty of fee-only advisors who charge a percentage of your portfolio (usually ~1%), then there is advisors who charge by the hour (~$250/hr), but they are rare.
If you have 1M, the fee only will pocket 10K/yr, not bad. There are nationwide advisors (Ric Edelman, Bob Brinker, Ray Lucia is probably the most well known), and then if you live in a city, local ones, you kind of need to hear about them via word of mouth.
TJ

 

[SumDay]

I have been thinking about this and would like to give it a try. Where can I find a trustworthy fee only advisor ?

The kind folks on this board advised me to find one either through Garrett Network or NAPFA: Fee-Only Financial Advisors Home - NAPFA - The National Association of Personal Financial Advisors

Google is your friend.

 

[brewer12345]

The kind folks on this board advised me to find one either through Garrett Network or NAPFA: Fee-Only Financial Advisors Home - NAPFA - The National Association of Personal Financial Advisors

Google is your friend.

I would second the suggestion for NAPFA. Find a few advisors in your area and interview them. Pick one you can work with and seems competent and try them out.

 

[Sarah in SC]

I would second the suggestion for NAPFA. Find a few advisors in your area and interview them. Pick one you can work with and seems competent and try them out.

+3 on this.

 

[REWahoo]

William Bernstein has some interesting advice when it comes to selecting a FA:

Interview one and say, "Look, this is my portfolio now," and you show him or her a simple, cheap index-fund portfolio.

And if he says, "You know, this is really good, you've got the right idea, I think we can diversify you a little more by using some more cheap index funds," that's the answer you want to hear. You've probably found an honest adviser. And someone who adheres to an index-fund portfolio will probably be more likely to adhere to the policy because you've got someone who has some humility and realizes he doesn't know how to time the market.

The worst retirement investing mistake - Sep. 4, 2012

 

[FinanceDude]

William Bernstein has some interesting advice when it comes to selecting a FA:

The worst retirement investing mistake - Sep. 4, 2012

Easy for him to say, he doesn't believe in advisors anyways.

 

[urn2bfree]

There is plenty of fee-only advisors who charge a percentage of your portfolio (usually ~1%), then there is advisors who charge by the hour (~$250/hr), but they are rare.
If you have 1M, the fee only will pocket 10K/yr, not bad. There are nationwide advisors (Ric Edelman, Bob Brinker, Ray Lucia is probably the most well known), and then if you live in a city, local ones, you kind of need to hear about them via word of mouth.
TJ

As suggested, in the era of google you do not have to rely on word of mouth. NAPFA is a great place to start. There are many who will,advise-as they should-on a per hour NOT a percent of assets basis. As others have suggested you want someone who understands and believes in a passive not active investment strategy. Such a strategy is entirely time dependent not asset dependent. It takes no more effort to advise on a portfolio of $5million than it does $1million. So anyone charging you more as in by % of assets instead by time - is really somewhat taking you. Do not pay by percent of assets under management unless it is for active investing like picking out individual investment vehicles, not index funds. Better yet do not try to do active investment- it works,for very few and not consistently for the same few over the long run.
There is some good advice for free on the Evanson Asset Management site. www.evansonasset.com

 

[FinanceDude]

There are many who will,advise-as they should-on a per hour NOT a percent of assets basis.

The numbers are shrinking all the time. There are probably half the number there were 10 years ago........

It takes no more effort to advise on a portfolio of $5million than it does $1million.

Really? How many portfolios of that size do you manage?

 

[urn2bfree]

The numbers are shrinking all the time. There are probably half the number there were 10 years ago........

Really? How many portfolios of that size do you manage?

Sorry I guess I should have put quotes on the statement as I heard it from someone who manages over $2 Billion in people's portfolios. If you are doing asset allocation and indexing, the amount of money is irrelevant in these ranges. Furthermore the costs of calculating these things is getting cheaper and cheaper with technology advances, but a percent of assets fee structure only gets more and more expensive or it should get more expensive or your assets are not growing. In short I stand by the statement that it costs no more to advise someone with $1 million or $5 million. WHY would it?

 

[FinanceDude]

Sorry I guess I should have put quotes on the statement as I heard it from someone who manages over $2 Billion in people's portfolios. If you are doing asset allocation and indexing, the amount of money is irrelevant in these ranges. Furthermore the costs of calculating these things is getting cheaper and cheaper with technology advances, but a percent of assets fee structure only gets more and more expensive or it should get more expensive or your assets are not growing. In short I stand by the statement that it costs no more to advise someone with $1 million or $5 million. WHY would it?

A person who manages over $2 billion IS charging a fee on those assets. While there are economies of scale when you manage large amounts of assets, there is also a cost structure of staff and technology to handle it. Do your eally think the guys who manage $2 billion or more are using Vanguard funds and not charging a fee? They would not be in business long if they were. Most of those firms of that size run MLPs and for a yearly fee and have CPAs, estate attorneys, and CFPs on staff.

 

[haha]

Like many here I have never used a financial planner. Here is what Bill Gross says about giving away 100 basis points or today's scanty yields.

BILL GROSS: If I Were An Individual Investor, This Is What I Would Do - Business Insider

 

[btbw2380]

I never could understand how someone could pay a fee based on a percentage of assets under management. I know the con artists "sell" it by explaining that it provides incentive for them to grow your portfolio - what a joke and a total rip off. If one needs some advice, paying for someone's time is the only way to go.

 

[urn2bfree]

A person who manages over $2 billion IS charging a fee on those assets. While there are economies of scale when you manage large amounts of assets, there is also a cost structure of staff and technology to handle it. Do your eally think the guys who manage $2 billion or more are using Vanguard funds and not charging a fee? They would not be in business long if they were. Most of those firms of that size run MLPs and for a yearly fee and have CPAs, estate attorneys, and CFPs on staff.

The point was not that NO FEE was being charged. It is of course being charged but at a flat hourly rate for time spent-not as a percent. The point was that charging people by a % of assets is bogus.

 

[braumeister]

charging people by a % of assets is bogus.

Agreed, but there are a lot of hedge funds charging "two and twenty" and people are still lining up to invest in them.

 

[MBAustin]

We engaged an advisor/planner several years ago for a fixed fee. The long-term plan he created was a major confidence builder to confirm that we were FI. I like his market perspective and general philosophy, so we put a small part of our investments under his management. For this he gets less in fees than we would pay for an annual consultation with a planner, and we get the opportunity to discuss things with a very smart and knowledgeable professional once or twice a year. And should something untimely happen to me, he has agreed to advise DH on an hourly fee basis to handle the bulk of our portfolio.

FWIW, he is seriously considering giving up his advisory business to become a fee-only planner due to the increasing regulatory burden.

Even being 95% DIY, I like having someone to talk things over with. For most of my life, it was my father. Since he passed in 2006, it's now our advisor. YMMV.

 

[brett]

I think one of the first steps is to understand exactly what you are paying in fees. And by that I mean any MERS, front end, back end loads, and/or a percentage or flat fee to your adviser.

We were not happy with our advisor-one of the bank specialists. It was fees plus MERS etc. Spent six months looking for the right advisor for us-pure fee for service based on percentage, and have been very happy with the move. And I believe that we are paying less and getting much better service.

If you don't know what you are paying, or don't thing that you are paying anything...then look very closely. There is a very good reason why some organizations like to mask the fees....its called a client who wants value for his/her money and wants to compare those costs.

 

[jerome len]

Is it possible to have enough "excess" CDs and muni bonds to overcome the long term risk?

For example, would $15,000,000 in CDs and munis cover an inflation adjusted distribution of, say, $100,000/year over 35 or 40 years? This is kind of extreme, so pick your own numbers.

It may not be optimal, but I might take that deal if I was worth $15,000,000.

We don't know how much Obgyn has in CDs and munis, do we?

15m would probably earn you between 250k and 400k depending on how it was invested. You could easily take over $100,000, investing the remainder in more muni bonds and increase your distribution keeping up with inflation. To me a slightly better and very safe approach would be to replace the CDs with about 25% invested in REITS and dividend mutual funds......I use Vanguard low cost funds for both. It's safe, dividends and rents increase over the years and I believe I'll safely increase my distributions at least as much as inflation every year.

 

[SVHoper]

Hi,

Although I am primarily a fairly aggressive DIYer (bolgeheads, index funds, heavy small tilt, Bernstein, no bonds) my DH is not interested in $. So a couple of years ago, I yelped for a financial planner.

(1) His primary value to me is that he understands all the nuances of our situation and provides me a different financially educated perspective, a sounding board, a check of anything that is going on in our lives: for the other 97% of assets, house purchase, kid internship, wills, insurance, macroeconomic musings.

(2) Secondarily, he has less than 3% or our net worth under management and I treat him like an aggressive mutual fund [including silver, apple.... and fb :-(].

I feel that a single correction/improvement of for example, one house purchase decision would pay for many, many years of his fees. Overall he is doing OK on his assets under management... during a fairly difficult time: not the best mutual fund (REIT, Small Cap), but not the worst (EWX, DGS).

He costs a lot more than a book or bogleheads, but I am satisfied with the value so far.

 

[FinanceDude]

The point was not that NO FEE was being charged. It is of course being charged but at a flat hourly rate for time spent-not as a percent. The point was that charging people by a % of assets is bogus.

That business model doesn't work at even $250 an hour. Sorry, I don't buy it. Even a CFP with 25 years experience is not getting $250 an hour in the large metro area I live in. Maybe they are doing private placements or non-traded REITS or hedge funds, and then they say they don't charge "fees". A person like that probably has an average client of around $25 million or so. So let's say he has 80 clients like that, and he consults with them for 5 hours a year, at $200 an hour, that's $1000 X80 or $80,000 a year. He can't even pay his expenses out of that..............

 

[kumquat]

That business model doesn't work at even $250 an hour. Sorry, I don't buy it. Even a CFP with 25 years experience is not getting $250 an hour in the large metro area I live in. Maybe they are doing private placements or non-traded REITS or hedge funds, and then they say they don't charge "fees". A person like that probably has an average client of around $25 million or so. So let's say he has 80 clients like that, and he consults with them for 5 hours a year, at $200 an hour, that's $1000 X80 or $80,000 a year. He can't even pay his expenses out of that..............

Maybe the guy in your example is retired. After all he only works 400 hours a year. At 40 hours/week, that's darn near 3 months. Slave drivers.

WADR, what has a client's net worth got to do with how much a fee-for-service advisor charges. Would (s)he make the same if the average client had a negative net worth?

On a 1% of assetts model, 80 clients with $25M comes to, let's see, 80 X $25M X .01 = $2M. Yep, he certainly deserves that for 400 hour/yr. I bet (s)he would cover expenses if (s)he worked a typical 2,000 hour/yr.

 

[FinanceDude]

Maybe the guy in your example is retired. After all he only works 400 hours a year. At 40 hours/week, that's darn near 3 months. Slave drivers.

WADR, what has a client's net worth got to do with how much a fee-for-service advisor charges. Would (s)he make the same if the average client had a negative net worth?

On a 1% of assetts model, 80 clients with $25M comes to, let's see, 80 X $25M X .01 = $2M. Yep, he certainly deserves that for 400 hour/yr. I bet (s)he would cover expenses if (s)he worked a typical 2,000 hour/yr.

I'm going off OP's original anonymous person, and the information provided, not sure who he is speaking of. Those FAs managing a couple billion dollars are not doing it for free is my point. A lot of folks think that hourly fee CFPs grow on trees, but they don't. The guy managing $2 billion may be doing it for 30-50 bp, but is not doing it at $1000 a year. Maybe OP can idenitfy the person or his firm and I can research it a little.

Someone with $500K generally has a less complex situation than the person with $25 million. Most people with $500K are not looking into multi-generational wealth transfer, ILIT trusts, MLP's, etc.

 

[kumquat]

A lot of folks think that hourly fee CFPs grow on trees, but they don't.

That's the reason most of use here are DIY. When we hire professionals to help us (think doctors, lawyers or even plumbers) we expect to pay them based on what they do, not what we have.