Hired a FA

[target2019]

Quote:

Originally Posted by Rustward So interesting: Would you like to get excruciatingly specific about these "horror stories" that you have heard? Can you provide these "horror stories" in razor sharp detail? Precisely what was bought, what was sold, in what type of accounts, and on what dates and for for how much?

I can.
For example, more than 10 years ago, in-laws asked for my help in getting rid of the Frick and Frack team that one daughter brought to the house. Yeah, there was churning. A state investigator later came to speak with in-laws, and as I recall, they were not an isolated case.
In addition, I posted a link above (I think) wherein you can search for specific firm and find out about any judgments about them. Specifically, I typed in the name of an FA we had met with, for purpose of hearing the shpiel and reporting back to AARP. I found out this week that his record had more than a few blemishes, with different fines and judgments paid out before year 2000. Has he cleaned up his act? I don't know, but I would guess so, since we met with him just a few years ago.
I am very sure there are many others with horror stories, and other ways to find specifics.

[Luck_Club]

Quote:

Originally Posted by stephenson So, given the new FA, what recommendation for investments has he made? This is where it gets interesting - I have heard horror stories about front end loaded funds, way out of whack portfolios, bond churning, etc ... and, of FAs reading their clients wrong and just sitting on CDs, or buying risky investments. So ....what specifically is this FA doing for you?

This truly is where the rubber meets the road. Post his initial buys and keep us informed of the trades.

Since August, I have trades that are down 6-8.19% this morning after 3 strong days. NONE OF THE ADVISERS TRADES ARE ABOVE WATER. At the bottom of the market correction a few weeks ago his trades were off nearly 7%.

I placed bets at the same time as the adviser. I'm 50/50 with my worst pick down 0.62% and a net positive. His best trade is down 0.34% and the second best holding 30% of the funds is down 1.33%. for a net negative.

Thomas partners is managing some other money, and their performance was much better then the advisers. However they are more of a position then an adviser.

[Jerry1]

Couple responses to the last few comments:

The FA I chose is a CFP I’m not sure about an RIA but I’ll check.

I don’t think I’ll be posting a comprehensive list of his build of my portfolio. That would be work that I’m not interested in and gets me to the point of thinking that I wouldn’t share something for free that I’ve had to pay for. However, I’ll be glad to share my experience. Once I get a clean starting point, I’ll start tracking his performance and share that. Of course, his performance is based on my risk tolerance and my plan so I don’t know how meaningful that will be.

As for trust and him trading on my behalf. Yes, it’s a bit risky but that’s what I’m paying him for. As others have discussed, we sat down and developed a plan. He understands mine and DW’s risk tolerance. He also understands my concern about his fee and the imbedded portfolio fees and he knows my expectation is to keep the portfolio fees in mind as he manages the portfolio.

Also, while I know this seems counterintuitive for someone using an FA, but DW was a fabulous bookkeeper in work and for us personally. I’m a CPA who performed audits and prepared year end financial statements even though that did not end up being my main occupation. I have no concern at all, at least at this point in our lives, that DW and I will have any trouble knowing exactly how any and all money is handled. Someone already said it, trust but verify.

[pb4uski]

Quote:

Originally Posted by RobbieB If I wanted to be able to tell him his buy/sell instructions I wouldn't need to hire him in the first place.

But that is totally different from him getting your consent for trades over $x prior to executing them.

[EastWest Gal]

Quote:

Originally Posted by Rustward WTF? Are you serious? Your statement is absolutely inconsistent with the general sentiment in these forums.

It was sarcasm. Relax.

[EastWest Gal]

Don’t forget the fees are tax deductible. I have been with a FP since 1993. In 2015 we fired the original FP and switched to another group, founded by Rick Ferri, who posts on Bogleheads regularly and follows John Bogle. Yes, they charge by AUM, but their fee is 1/3 what I was paying.

[audreyh1]

Quote:

Originally Posted by EastWest Gal It was sarcasm. Relax.

I don’t think Midpack’s statement was sarcasm. I wasn’t so sure about Rustward’s.

[gerntz]

Quote:

Originally Posted by audreyh1 Some things like RMDs can already be automated.

How do you automate RMD's? Thanks.

[gerntz]

Quote:

Originally Posted by SnowBound Biggest problem with FA's: If my stock market account goes down 30%, I have no issue, will just ride it out. FA designed account goes down 15%, I'm going to have a panic attack and sell at the bottom.

Sounds like you have a FA phobia.

[audreyh1]

Quote:

Originally Posted by gerntz How do you automate RMD's? Thanks.

I haven’t done it as we aren’t at that age yet. But I looked into it a bit last year and it looked like Fidelity could configure that for you.

[gerntz]

Quote:

Originally Posted by Luck_Club This truly is where the rubber meets the road. Post his initial buys and keep us informed of the trades. Since August, I have trades that are down 6-8.19% this morning after 3 strong days. NONE OF THE ADVISERS TRADES ARE ABOVE WATER. At the bottom of the market correction a few weeks ago his trades were off nearly 7%. I placed bets at the same time as the adviser. I'm 50/50 with my worst pick down 0.62% and a net positive. His best trade is down 0.34% and the second best holding 30% of the funds is down 1.33%. for a net negative. Thomas partners is managing some other money, and their performance was much better then the advisers. However they are more of a position then an adviser.

You sound like a very into it active trader. Best to you.

[gerntz]

Quote:

Originally Posted by EastWest Gal Don’t forget the fees are tax deductible. .

As of 2018, I don't think so.

[gerntz]

Quote:

Originally Posted by audreyh1 I haven’t done it as we aren’t at that age yet. But I looked into it a bit last year and it looked like Fidelity could configure that for you.

OK. I think Fidelity or whomever can calculate the RMD, but wouldn't you still need to say when via phone call or electronic means? Also, need to set any deductions - we pay our income taxes from IRA withdrawals not quarterly payments.

[GravitySucks]

18 pages in 2 days.
I'd say you hit a nerve here Jerry1 !

[ERD50]

Quote:

Originally Posted by Jerry1 .... I don’t think I’ll be posting a comprehensive list of his build of my portfolio. That would be work that I’m not interested in and gets me to the point of thinking that I wouldn’t share something for free that I’ve had to pay for. However, I’ll be glad to share my experience. Once I get a clean starting point, I’ll start tracking his performance and share that. Of course, his performance is based on my risk tolerance and my plan so I don’t know how meaningful that will be. ... I have no concern at all, at least at this point in our lives, that DW and I will have any trouble knowing exactly how any and all money is handled. Someone already said it, trust but verify.

I hope this doesn't come across as 'flogging', but I'm having trouble understanding this. The bolded part, how are you accounting for your risk tolerance? Mostly, we do that with an AA. If your discussion with your FA boiled down to an AA, then you can measure against a benchmark of broad-based index funds of that AA. But if it was just a general 'feeling', I'm not sure how you will do that.

And if you are going to this level of 'trust but verify', are you saving yourself any work? It sounds like it makes work to me. I don't need to check my performance, I'm confident that my VTI/BND mix will be very close to market performance, minus the small fees, and some very small random tracking error.

It seems like you expect the FA to beat the market? Good luck. If so, what is this based on?

It seems to me that an experienced FA could show you their past performance for clients in your risk tolerance range, so you could see how they have done. I would think they would maintain a pro-forma account for various risk levels, they could share that with prospective clients. Have you ever asked for this? Why should you need to put your money, time and effort on the line to get this info? It's easy for me to compare broad based index funds to 'the market', and they all track very closely.

From your OP:

Quote:

.... (This FA) ... came highly recommend to me by two previous bosses of mine who are also retired and using this FA. One of the oddest things regarding the recommendation is that these are two very frugal people. I've never known either of them to waste money. Money they both have plenty of. However, they both feel it's worth it. ...

It is interesting that they 'feel it is worth it', but do they have any hard evidence of this? Have they compared to benchmarks? There have been many reports of people who are 'happy with their FA', but that was based on feelings, rather than data. Some of those were not so happy after learning how to verify those numbers.

-ERD50

[ERD50]

Quote:

Originally Posted by gerntz How do you automate RMD's? Thanks.

Quote:

Originally Posted by audreyh1 I haven’t done it as we aren’t at that age yet. But I looked into it a bit last year and it looked like Fidelity could configure that for you.

Quote:

Originally Posted by gerntz OK. I think Fidelity or whomever can calculate the RMD, but wouldn't you still need to say when via phone call or electronic means? Also, need to set any deductions - we pay our income taxes from IRA withdrawals not quarterly payments.

I have set up RMDs for my MIL's account at Fidelity. Easy-Peasy.

First, they calculate the RMD for you, shows right up on the screen, and pre-filled in on the distribution page. Her entire IRA is at Fidelity, so it's the full amount. You accept this amount as the default, or change it if required, and set the distribution date.

Better yet, you can specify the amount to withhold for Fed and State taxes. For MIL, the RMD covers her expected taxes plus a little, so we do not need to send in quarterly tax estimate payments. Withholding like this is treated as being paid across the entire year.

This is literally a couple minutes 'work' if you are slow, and nothing to calculate, it's all done for you. A few clicks. Far easier then setting up Fed and State payments, or mailing 8 checks a year.

I'll be doing this for myself when the time comes.

-ERD50

[pb4uski]

Quote:

Originally Posted by gerntz How do you automate RMD's? Thanks.

My Mom's tIRA is centralized at Vanguard. I set it up so RMDs are done automatically on her birthday and the net proceeds go into her taxable account. Vanguard does the calculation.
Easy peasy.

[pb4uski]

Quote:

Originally Posted by GravitySucks 18 pages in 2 days. I'd say you hit a nerve here Jerry1 !

In the thread display options you can set the number of posts per page... I have mine set to 20 and thus only have 9 pages. If I set it to 100 I would only have 2 pages.

[happy2bretired]

Quote:

Originally Posted by EastWest Gal Don’t forget the fees are tax deductible. I have been with a FP since 1993. In 2015 we fired the original FP and switched to another group, founded by Rick Ferri, who posts on Bogleheads regularly and follows John Bogle. Yes, they charge by AUM, but their fee is 1/3 what I was paying.

Are the fees still tax deductible? I was under the impression that I will no longer be able to deduct my investment expenses due to the new tax law passed this year.

[pb4uski]

^^^^ You are correct.

Quote:

The Tax Cuts and Jobs Act eliminated the deduction for investment expenses, starting in 2018. Fees for investment costs were deductible as a miscellaneous itemized deduction, to the extent they and other costs exceeded 2 percent of your adjusted gross income.