financial planner....how to choose one

[noone]

So, financial planners control the markets, I never knew that!

Noone knew it.

 

[wolf]

So, financial planners control the markets, I never knew that! Tell you what, I'll hire you to manage my personal assets, and I want YOU to guarantee I will make money, ok?

Sorta figured my last statement might cause disagreement.

Put simply: If your car breaks down, you pay a dealer to fix it. If your Furnace breaks down, you pay HVAC person to make the repair. Drain problem, you pay a plumber to correct the problem. Roof leaks, pay a roofer to find the leak.
Broken arm, call the doctor to fix. Income taxes, hire a CPA., ..etc.....

If any of the above professionals fail to perform. Do we still pay them?
I do not. Most of us will complain. (usually there is a contract, ie, warranty, guarantee, fiduciary).

Why do we let professional financial planners get off the hook so easily.
We are asking them for their advice and putting at risk our life savings.
If they make a mistake, Do we just walk.......

Again, just my 2 cents.

 

[FinanceDude]

Put simply: If your car breaks down, you pay a dealer to fix it. If your Furnace breaks down, you pay HVAC person to make the repair. Drain problem, you pay a plumber to correct the problem. Roof leaks, pay a roofer to find the leak.
Broken arm, call the doctor to fix. Income taxes, hire a CPA., ..etc.....

If any of the above professionals fail to perform. Do we still pay them?
I do not. Most of us will complain. (usually there is a contract, ie, warranty, guarantee, fiduciary).

Why do we let professional financial planners get off the hook so easily.
We are asking them for their advice and putting at risk our life savings.
If they make a mistake, Do we just walk.......

Again, just my 2 cents.

NONE of those professionals can GUARANTEE the things they fix won't break down. Your doctor can't guarantee you'll never get sick, etc. Hey, do what you want, but the all the guys I know who guaranteed market returns are in jail.........

Just because one gets advice does not mean one should take it, or use it. Is there a guarantee when a CPA does your taxes that the IRS won't audit you? Uh, I don't think so.........

 

[73ss454]

Just because one gets advice does not mean one should take it, or use it. ........

Or have to pay for it.

 

[wolf]

NONE of those professionals can GUARANTEE the things they fix won't break down. Your doctor can't guarantee you'll never get sick, etc. Hey, do what you want, but the all the guys I know who guaranteed market returns are in jail.........

Just because one gets advice does not mean one should take it, or use it. Is there a guarantee when a CPA does your taxes that the IRS won't audit you? Uh, I don't think so.........

Would appreciate other's input. When you hire someone, don't you expect satisfaction?

 

[nun]

So, the advice from Vanguard is better than a fee only CFP because it's free? Interesting...........

Vanguard advice will be no better than a fee only CFP, so I'd go with the least expensive. However, IMHO, an evening's reading of the Boglehead wiki will get you all the knowledge you need to run your own financial affairs. When people use advisors they are mostly paying to be able to blame someone other than themselves when their returns suck.

 

[LOL!]

So other than cost and how they are paid, how would one pick a vendor to give one financial advice? The industry certainly has major image problems.

 

[FinanceDude]

Vanguard advice will be no better than a fee only CFP, so I'd go with the least expensive.

Can you prove that? Most CFPs I know have knowledge far beyond all but the most astute investors. Why not go with the least expensive in everything....least expensive estate attorney, least expensive CPA, least expensive surgeon, least expensive dentist, least expensive LASIK doctor.........etc.......

VG has excellent funds at low cost, with above average customer service, but that's about it...........anyone who thinks that VG's salaried CFPs are better because they are "free" is misguided........ CFP's that know their stuff don't make $40,000 a year.......

 

[Bestwifeever]

DH has a small inheritance that he left with the existing financial advisor. DH has no interest in investments. The advisor laid out for him in very brief terms with a pretty chart just where the money is, how the investments are rated, and how much the yield has been for ytd, one, five, and ten years, and that was good enough for him.

A lot of people on e-r.org wouldn't be happy with that (me included ); we'd be doing so much research on the investments that we would be just as well off investing them ourselves.

If someone can't see the difference between a financial investor and a surgeon, oh, well.

FinanceDude, you know the industry. What are your suggestions to the OP as to how to choose a good advisor?

 

[frank]

I came into some money in 1992. I didn't know anything about investing, so I thought why not hire a financial planner. I made an appointment with one that was referred to me by my cpa. I went to see him and he told me he was going to diversify my funds in a certain way and he would charge me .075 for handling my account. I was with him for two years and I was getting no return. I thought I could invest my own money and make nothing and wouldn't have to pay the fee, that's what I did. I think the only one who has your best interests at heart is yourself, so study up and pay attention.

 

[frank]

[/Can you prove that? Most CFPs I know have knowledge far beyond all but the most astute investors. QUOTE]

but if you don't have a ton of money to invest how much time will they spend on your account?

 

[donheff]

How is a hourly fee CFP charging thousands of dollars? Most CFPs I know will look over everything but the most compelx situations for less than $1000. It is always easy to make broad assumptions when you don't have to defend them........

For an investor who is unsure of himself this is probably a reasonable approach. I did it so it must be reasonable. The year before I retired I paid a one time fee to a local advisor to look over my investments and plans. She validated my basic approach and suggested some tweaks that made sense. But, although I think this approach was worth the investment (for the reassurance it provided), the advice was still biased by conflict of interest (IMHO). The advisor validated my AA, budget and withdrawal plan. But she noted that she did not believe I could do as well with index funds as I could with a carefully designed portfolio of managed funds under the continuing guidance of her or another advisor. She was probably honest in that assessment but I doubt she had any empirical support for it.

Note: in my email engagement message I explained that I wanted a one time analysis of my plan and would specifically not hire the advisor who did that analysis for long term management. I hoped those conditions would lead to a relatively unbiased analysis.

Edit: this post got me thinking about my situation at the time I engaged the fee only advisor and I have to say, she was even better than I remember. At the time, DW and I still had a substantial part of our portfolio in load funds with a commission broker. The fee advisor went into some detail about how we could do much better with low fee, no load funds and noted that "As you know, I feel very strongly that people such as yourself benefit greatly from professional advice." She went on to note that since I had the time for research and was starting to do it, I should take a number of steps including a carefully phased exit from my current managed load funds. Based on what she could see of our history to date, she was right that DW and I were people who needed some professional help. I got it here but many similarly situated people won't. The only area I would disagree with her is on the issue of index funds.

 

[Midpack]

Would appreciate other's input. When you hire someone, don't you expect satisfaction?

Sorry I'm entirely with F Dude on this one, see post #10. With all due respect, the questions you suggested posing to an FP in post #9 were a waste of time at best. They don't serve any useful purpose, but I assume you weren't really suggesting anyone ask them, IOW rhetorical questions. If you don't need an FP, that's fine, not everyone does.

 

[jIMOh]

My husband and I are a few months away from his retirement. We have decided to consult with a financial planner to make sure we have all our ducks in a row. We have limited financial planning knowledge and have a short window to accept or decline my husbands early retirement offer. We chose this planner on recommendation from a retired couple that have been working with and are pleased with him. This first meeting is at no charge to us. My questions for this forum are: what should we ask him to help us decide if he is the planner that will do a good job? What credentials should he have? What fees should we expect for his advice and potentially management of our assets? How do we know if he has our best interests at mind? Anything else that we need to find out?

thanks for any insight, advice

Are you on linked in? If so, go through all contacts and see who is connected to a planner. Interview 2-3 and see what happens.

Ask the following questions

1) What is total compensation advisor will receive for the recomendations made?

I would phrase like above because many products have hidden fees not disclosed, so ask about total compensation, not what the planning fee is, or what the commission is on initial sale.

2) What does advisor see as biggest risks to your situation?

3) What are 3 possible courses of action based on the retirement package, and will advisor draw up a financial scenario for each option? This makes sure you see 3 clear paths to choose from (examples might be cash out pension, annuitize pension or delay pension and work part time). Always look for 3 choices for any given amount of data. If advisor cannot give 3 choices, it might be because they have a limited product line. For each choice, ask "what is total compensation advisor will receive for that recommendation".

4) Mutual funds are sold by prospectus. Ask advisor for prospectus, and take it home. Look up fees which include 12b1 fees and sales charges. If the mutual fund has a 12b1 fee and advisor did NOT disclose that in "total compensation advisor will receive" response, look elsewhere.

5) Where does advisor get information for portfolio construction?

 

[jIMOh]

Also, be sensitive to the distinction between "fee only" and fee-based" financial planners. Fee only means, as you put it, fee for service. Fee based means that s/he charges you a fee AND can make some money off any financial products you buy from him/her.

CORRECT.

Always as the question

"what is TOTAL COMPENSATION advisor will receive based on advice given". Fee Based planners will need to disclose commissions, trailers, and products more thoroughly if you phrase question correct.

If you change the question, its possible you might not receive all the relevant information on the products.

There is a difference between "expenses you pay" as client, and "compensation advisor receives". If you focus on compensation, you will be able to "follow the money" back to the fees you pay.

 

[Rustward]

...We have limited financial planning knowledge and have a short window to accept or decline my husbands early retirement offer. ...

Here we go again, folks. In case nobody has noticed, the OP seems to have disappeared the day after the original post. He/she came here for some information and assistance and just got a lot of noise. See the words short window in the original post. Congratulations.

Lots of bickering about fees and almost nothing about helping the OP with their decision.

I live in a neighborhood of lots that are just under one acre in size. Most homeowners here hire professional landscapers. I am in the minority of homeowners here who does his own yard. But you won't find me knocking on the doors of those who use professionals telling them they are stupid for paying for a service they could do themselves.

This discussion is not productive and should be closed.

Infoseeker, if you are still around, please start another thread.

Edit to add: I do acknowledge that there actually are some posts that are appropriate and on topic. But we could do without all the arguing over planner vs. DIY.

 

[FinanceDude]

DH has a small inheritance that he left with the existing financial advisor. DH has no interest in investments. The advisor laid out for him in very brief terms with a pretty chart just where the money is, how the investments are rated, and how much the yield has been for ytd, one, five, and ten years, and that was good enough for him.

A lot of people on e-r.org wouldn't be happy with that (me included ); we'd be doing so much research on the investments that we would be just as well off investing them ourselves.

If someone can't see the difference between a financial investor and a surgeon, oh, well.

FinanceDude, you know the industry. What are your suggestions to the OP as to how to choose a good advisor?

1)CPAs and estate planning attorneys typically know the top advisors in a given area. Ask them whom they recommend.

2)You can easily look up an advisor on the FINRA website to see to do a background check. All you need are their first and last names. You don't even need to tell them you're doing it, and can do it before you even agree to meet.

3)if you do decide to meet, don't play games, just tell them your situation. Ask them how they are compensated, and is it spelled out clearly. Ask them if they use ISPs (investment policy statements). If they don't use them, I would be very leery.......

That's a start. With my referral sources, I provided them with a dossier on me, my background, etc,. Some call it a personal brochure. Potential clients like to see that before they commit to anything.........

 

[Midpack]

Here we go again, folks. In case nobody has noticed, the OP seems to have disappeared the day after the original post. He/she came here for some information and assistance and just got a lot of noise. See the words short window in the original post. Congratulations.

Lots of bickering about fees and almost nothing about helping the OP with their decision.

I live in a neighborhood of lots that are just under one acre in size. Most homeowners here hire professional landscapers. I am in the minority of homeowners here who does his own yard. But you won't find me knocking on the doors of those who use professionals telling them they are stupid for paying for a service they could do themselves.

This discussion is not productive and should be closed.

Infoseeker, if you are still around, please start another thread.

Edit to add: I do acknowledge that there actually are some posts that are appropriate and on topic. But we could do without all the arguing over planner vs. DIY.

Between the wide variety of responses and several thread hijacks, I agree the OP got some good info buried in a lot of "noise." I sometimes wonder what members responsibilities are when this happens; ignore, refute, PM, report/wait for a Mod to act, other? I've almost posted something like this several times, but I doubt it would be taken in good spirit very often if ever, and so I haven't.

 

[LOL!]

Sorry FinanceDude, but your suggestions to find a CFP/advisor are practically useless.

Attorneys knowing "top advisors"? What's a "top advisor"? By whose definition? Most assets under management? Biggest stable of Mercedes? Just because big guns are using an advisor means little (I'm sure you are thinking of Madoff, here).

FINRA? C'mon. For example, I just looked you up. I like that amusing little bit about your fraternity friends. There is nothing in this report about the quality of advice that the person gives nor the fees, so as a screening tool, I think it has little value.

And there is a difference between a financial planner and financial advisor. I think advisors are mostly in the business of selling investments and annuities, while planners are perhaps giving advice on wills, estates, insurance, investments, retirement, social security, etc.

 

[jIMOh]

Sorry FinanceDude, but your suggestions to find a CFP/advisor are practically useless.

Attorneys knowing "top advisors"? What's a "top advisor"? By whose definition? Most assets under management? Biggest stable of Mercedes? Just because big guns are using an advisor means little (I'm sure you are thinking of Madoff, here).

FINRA? C'mon. For example, I just looked you up. I like that amusing little bit about your fraternity friends. There is nothing in this report about the quality of advice that the person gives nor the fees, so as a screening tool, I think it has little value.

And there is a difference between a financial planner and financial advisor. I think advisors are mostly in the business of selling investments and annuities, while planners are perhaps giving advice on wills, estates, insurance, investments, retirement, social security, etc.

Referrals from friends will be better than referrals from professionals, IMO.

 

[nun]

Between the wide variety of responses and several thread hijacks, I agree the OP got some good info buried in a lot of "noise." I sometimes wonder what members responsibilities are when this happens; ignore, refute, PM, report/wait for a Mod to act, other? I've almost posted something like this several times, but I doubt it would be taken in good spirit very often if ever, and so I haven't.

IMHO the OP is missing a great opportunity to ask questions here. They haven't come back with any information about the retirement benefits or current investments. I think we would all agree that a fee only planner is the way to go and armed with the answers from this forum the OP could ask the same questions to prospective advisors and see if the answers came close to agreeing.

 

[LOL!]

Indeed. I think it is really a pain-in-the-you-know-what to try to find a competent worthy CFP. It turns out to be quite a lot of work to find ones to interview, to interview them, to decide if they are competent, and to figure out what they charge and how, doesn't it?

And in the end, you are never really sure that you made a good choice, are you? There really is no such thing as a money-back guarantee, is there?

 

[Nords]

Indeed. I think it is really a pain-in-the-you-know-what to try to find a competent worthy CFP. It turns out to be quite a lot of work to find ones to interview, to interview them, to decide if they are competent, and to figure out what they charge and how, doesn't it?
And in the end, you are never really sure that you made a good choice, are you? There really is no such thing as a money-back guarantee, is there?

And then you'll be wondering whether they're still competent.

At some point you'll have learned enough about screening the skills of prospective CFPs to maybe even figure out how to handle your own money!

 

[easysurfer]

And then you'll be wondering whether they're still competent.

At some point you'll have learned enough about screening the skills of prospective CFPs to maybe even figure out how to handle your own money!

Agree. Looking for a compentent, trustworthy CFP may be just one more layer added on. In many ways, it's just easier to DIY and have no one but yourself to blame or take the credit for your own finances.

 

[Helen]

I think we would all agree that a fee only planner is the way to go and armed with the answers from this forum the OP could ask the same questions to prospective advisors and see if the answers came close to agreeing.

I think asking on message boards is a better way to go. You get a lot of discussion from a lot of people and if someone has a fact wrong there will be many eyes to catch it. If there isn't clarity in a response more questions can be asked. It is a great way to see different approaches to solving a problem or creating a plan.

I went to a fee only financial planner last year. This woman was an attorney and had passed the CFP exam on the first try. It was a fair amount of work to pull documents and fax them to her. We then met with her and provided information and talked for about an hour. Then we met again and received a financial report.

The report was lame at best in terms of depth. It was also filled with a lot of errors; our SS at age 62 was off by $10K and worse was that she had given us an estimate for what our SS would be if we worked until age 56 but didn't collect until 66.5 - even though she didn't have the information to compute that estimate, my pension amount was wrong, her projection of earnings was linear and incredibly elementary relative to firecalc, some of the numbers in her spreadsheet were on a pre-tax basis while others were on a post tax basis, and on and on. After two letters I received a full refund of $2,300. If someone didn't know much about finance and retirement planning they would have believed her numbers.

I can see why the answers to the OP were varied and why discussion took off. There really is no nice and neat answer to the question of how to find a good FP.