Hiring a Financial Planner

[target2019]

I disagree. I've gotten great advice on the internet and it is up to me to filter it to what pertains to me. No one cares more about my financial well being than me, not even Charlie.

I think that once you establish an internet source, it can be reliable, and you are in good hands. On an initial search, though, you do have to filter a lot of noise and information.

By the way, they call him Chuck.
~~

 

[meleana]

Have you tried Charles Schwab? They are very structured. You will be assigned a general FA who can give you general financial advice. However, Charles Schwab also have specialists. For example, there is an expert on Social Security, an expert on taxes, an expert on estate planning, etc. If the general FA cannot answer a unique question, he or she will then call that expert into the office to help. Similar to a general doctor and a medical specialist at a medical center. Impossible for a FA and anyone on the internet to know everything.

They also have a propriatary computer program which they will plug in your specific information and your situation such as age, wealth, debts, risk tolerance, goals, etc and their computer program will provide your investment options based on the historical market returns versus your risk tolerance, you goals and your situation, etc This provide consistency and quality control of FA.

They will also request to manage your money for you and your fee is a percentage of your portfolio, but you can decline. If you do decline then they may charge you a fix hourly fee for advice.

Disclosure: My daughter works for Charles Schwab and she is a certified FA by the FTC. She makes most of her money managing money for high net worth clients who are willing to turn over their money to her. My daughter wines and dines the high net worth clients but ultimately the high net worth clients "trust" Charles Schwab as an institution.

Impossible to get financial advice on the internet since it is like getting medical advice on the internet. You really have to talk to someone who knows their business and know how to ask you the right questions before you can get your answers. Finally....Check out Yelp on Charles Schwab in your area to determine if their customers are satisfied or unsatisfied. You can't yelp financial advice on the Internet.

This is where one Financial Advisor wanted me to move all our money and put into different funds- NOT T Rowe price; NOT Vanguard; NOT Fidelity. , but HE would manage it and charge a percentage of assets. I really do not see why I should move my money which is already in low fee funds. It bothers me that some FA;s want me to liquidate everything and hand it to them to deal with. I mean, when you sell/transfer all those funds there can be market losses, etc. Crazy. Unless it is possible to transfer them in kind. But then-What's the point?



To use the Schwab advisor service I assume you have to put your money with them, even if they are not managing it.

 

[target2019]

This is where one Financial Advisor wanted me to move all our money and put into different funds- NOT T Rowe price; NOT Vanguard; NOT Fidelity. , but HE would manage it and charge a percentage of assets. I really do not see why I should move my money which is already in low fee funds. It bothers me that some FA;s want me to liquidate everything and hand it to them to deal with. I mean, when you sell/transfer all those funds there can be market losses, etc. Crazy. Unless it is possible to transfer them in kind. But then-What's the point?

To use the Schwab advisor service I assume you have to put your money with them, even if they are not managing it.

On this forum, I am pretty sure the names we hear most often are Vanguard, Fidelity, Schwab, and TRP. You can invest with any of these institutions as an individual. Or you can establish a relationship with a 3rd party financial advisor who will manage your funds in the institution. I think it is established, at least here, that that is the worst possible case.

Another option is to use/pay an advisor who is an employee of the institution.

It sounds like you are content with TRP, and may have located the 3rd party FP who will guide you further.

If you do meet an FA who wants 1% of your assets to manage at TRP, that does not reflect on TRP the institution. It is just some guy/gal taking advantage of folks.

FYI, we will eventually end up 50% at Vanguard, 50% at Schwab.

 

[meleana]

On this forum, I am pretty sure the names we hear most often are Vanguard, Fidelity, Schwab, and TRP. You can invest with any of these institutions as an individual. Or you can establish a relationship with a 3rd party financial advisor who will manage your funds in the institution. I think it is established, at least here, that that is the worst possible case.

Another option is to use/pay an advisor who is an employee of the institution.

It sounds like you are content with TRP, and may have located the 3rd party FP who will guide you further.

If you do meet an FA who wants 1% of your assets to manage at TRP, that does not reflect on TRP the institution. It is just some guy/gal taking advantage of folks.

FYI, we will eventually end up 50% at Vanguard, 50% at Schwab.

None of the FA's I spoke with want to manage the T Rowe Price funds. They want to liquidate them and put them in other funds within Schwab or TD Ameritrade and then manage them and charge us the %. Ummm.. no way.


That is why i liked the Garret Fee Only FP. First thing he said is we can just keep our money with T Rowe Price. He can look at what we have and give advice.



I am speaking with a T Rowe Price Advisor as well on Friday, but the Garret guy would supplement what advice I get from the T Rowe Price guy, because that will not be as comprehensive as what we will get from the Garret guy.


In order to have the more advanced advisory service with T Rowe Price you need 5 million dollars and we have no where near that! Wish we did because things would be a lot easier!

 

[njhowie]

None of the FA's I spoke with want to manage the T Rowe Price funds. They want to liquidate them and put them in other funds within Schwab or TD Ameritrade and then manage them and charge us the %. Ummm.. no way.

If an advisor wants you to move your funds, then that should be the end of the discussion - keep looking. Their objective in getting you to move your funds is to have them as their assets under management and charge you fees up front and ongoing. Any advisor worth his/her salt should be able to provide unbiased advice keeping your funds in place, simply reallocating/rebalancing with the funds T. Rowe Price has to offer.

Any advisor you end out choosing, you want to be a fiduciary. You should not be willing to work with any advisor who is not a fiduciary. Not being a fiduciary, the advisor may as well hang a sign around his/her neck stating "I will take your money and guide you to whatever makes me the most money regardless of how appropriate/suitable the investment is for you".

An old colleague of mine just put up these short YouTube videos explaining fiduciaries. It's a promotional video for his firm, however, ignore that it's labeled for his firm (which I do not endorse and have no affiliation with), and understand that the fiduciary puts the clients best interests ahead of his/her own. Pay particular attention to the second video and the questions to ask. (moderators, feel free to remove links if not acceptable)

If your advisor is not a Registered Investment Advisor who is on file with the SEC or registered with your state, then ask him/her directly and immediately if they are a fiduciary. If the answer is no, then walk/run away. If they say that they are a fiduciary, get them to put it in writing - before you have any discussion about anything regarding your finances. The reason that you need to have documentation that the advisor is a fiduciary, especially for one you plan to have managing your money over an extended period, is that if a situation arises and you end out going to arbitration against the advisor, you're going to need proof that the advisor claimed to be a fiduciary and did not act in your best interests.

I would personally never work with any advisor. If there is something I do not understand, I would go and learn about it. Nobody, even a fiduciary is going to care about my money or protect it as much as I do.

 

[ERD50]

None of the FA's I spoke with want to manage the T Rowe Price funds. They want to liquidate them and put them in other funds within Schwab or TD Ameritrade and then manage them and charge us the %. Ummm.. no way. ...

What was their reason for selling T Rowe Price funds? Did they calculate the tax hit (or are these tax deferred?)?

...
That is why i liked the Garret Fee Only FP. First thing he said is we can just keep our money with T Rowe Price. He can look at what we have and give advice.
...

And what reasons did he give for keeping them? Did he look at performance, fees, allocations, etc?


-ERD50

 

[OldShooter]

@meleana, I think you are having so much fun here that you are getting a little confused. Let's talk first bout moving assets:

First, unless you have been hanging out with dangerous characters like Eddie Jones, it is near-certain that all your investments can be transferred in-kind without tax implications. Rowe-Price will be able to tell you for sure. Transferring is easy. You just fill out a form at the receiving house and the transfer happens. I just moved a small test portfolio from an FA back to its home at Schwab. Filled out the form on a Thursday IIRC and on Tuesday the deed was done, completely hands-off.

So the task of transferring assets should not be a consideration in your decision making.

OK, now lets talk about these advisors. Start by putting them into two buckets.

Bucket One is advisors who are brokerage house employees. In general these will be investment advisors (narrower scope) rather than financial advisors. They will have access to software and expert resources, but even if they are acting as the broader financial advisor role they will iMO never have the personal relationship with you that a really good independent FA will. You will, however, probably benefit from a certain amount of employee quality control. Question #1 is to ask how the person is paid. Sometimes the brokerage house employee will be comissioned on sales. Avoid these. We have enough assets at Schwab that my guy is paid simply to support the relationship. He answers questions, chases information, expedites problems, etc. and is very helpful overall. But he is not, strictly speaking, a fiduciary. Ask about that, too. But ... brokerage house employees are expected to bring in assets. So, for example, my guy gets a small bonus when he brings in some money. Most houses seem to have dollar threshold in the low six figures for assigning a no-cost individual rep to a customer. If you find an advisor from bucket #1 that you like, he/she will not work with you unless you move the assets to them -- even if you are not paying an AUM fee.

Bucket #2 is independent financial advisors. (I prefer small shops.) Many of these have referral affiliations like the ones you have found. They probably pay a fee to be recommended, so there is moral hazard there. Ask. Quality control on these folks is much more up to you. Remember you are not hiring a friend. Think of it more like hiring a house cleaner or a lawn service and evaluate based on qualifications and experience.

Almost without exception (Bernie Madoff was a exception) an independent FA will use a custodian to hold assets, do back office tasks, etc. Schwab and Fido are popular custodians. The FAs get support from the custodian, maybe even having their logo appear on your brokerage statements. So the reason the people in this bucket may want you to move your money will be strictly administrative. Bring them $10M or more and they will probably let you select your own custodian for the account, but for most of us we will be forced to use their standard custodian. If you aren't paying an AUM fee, though, I wouldn't think there would be any reason to move assets to an FA's custodian. IF you are paying, the FA will not want to just leave your assets as they stand -- what would be the point of that? He/she will want to move toinvestments using their normal portfolio model for people like you and to buy assets that they are familiar with. This should be done in a tax-conscious way of course.

If things get really stinky and you are forced to sue, you are probably more likely to recover from a Bucket 1 advisor just because the house has a reputation to protect and lots of assets.

 

[meleana]

If an advisor wants you to move your funds, then that should be the end of the discussion - keep looking. Their objective in getting you to move your funds is to have them as their assets under management and charge you fees up front and ongoing. Any advisor worth his/her salt should be able to provide unbiased advice keeping your funds in place, simply reallocating/rebalancing with the funds T. Rowe Price has to offer.

Any advisor you end out choosing, you want to be a fiduciary. You should not be willing to work with any advisor who is not a fiduciary. Not being a fiduciary, the advisor may as well hang a sign around his/her neck stating "I will take your money and guide you to whatever makes me the most money regardless of how appropriate/suitable the investment is for you".

An old colleague of mine just put up these short YouTube videos explaining fiduciaries. It's a promotional video for his firm, however, ignore that it's labeled for his firm (which I do not endorse and have no affiliation with), and understand that the fiduciary puts the clients best interests ahead of his/her own. Pay particular attention to the second video and the questions to ask. (moderators, feel free to remove links if not acceptable)

If your advisor is not a Registered Investment Advisor who is on file with the SEC or registered with your state, then ask him/her directly and immediately if they are a fiduciary. If the answer is no, then walk/run away. If they say that they are a fiduciary, get them to put it in writing - before you have any discussion about anything regarding your finances. The reason that you need to have documentation that the advisor is a fiduciary, especially for one you plan to have managing your money over an extended period, is that if a situation arises and you end out going to arbitration against the advisor, you're going to need proof that the advisor claimed to be a fiduciary and did not act in your best interests.

I would personally never work with any advisor. If there is something I do not understand, I would go and learn about it. Nobody, even a fiduciary is going to care about my money or protect it as much as I do.

Yes. I know. The one I intend to work with is a Fiduciary as he is part of the Garret Group which requires it. He is not going to manage our money at all. Just look at it and give suggestions. We are more interested in him helping us with our retirement life planning and putting everything together for us in a clear picture.

 

[njhowie]

Yes. I know. The one I intend to work with is a Fiduciary as he is part of the Garret Group which requires it. He is not going to manage our money at all. Just look at it and give suggestions. We are more interested in him helping us with our retirement life planning and putting everything together for us in a clear picture.

Great!

 

[Sunset]

OP - When a person looks at the plan for the next 30-40 years, it is complex and scary, and in your questions you didn't really talk about LTC, nursing homes, and death..

However, if you isolate many of the decisions then it becomes simpler, as not all decisions interact in a meaningful way.

There are a couple of website companies, where you pay approx $40-$50 and get to run software to figure out how to maximize SS , they have been reviewed in money magazine, and other financial magazines. There is that free site you probably used which is useful, and maybe it turns out the same answer.
Myself, I've run the free site a couple of times, but I'm going to pay for at least 1 of the pay sites, as I want a second opinion, and with the complexity of SS rules we already know the SS employees sometimes give out wrong answers (and shouldn't they always be correct ? ).

I am really, really surprised you claim your house has not gone up in value in decades ?? I don't know of any place like that. Our place is in an ok neighborhood, but in IL , and it is worth almost what we paid for it a decade ago.
Did you look it up on Zillow ?

 

[2177V]

Here is some free advice to FIRE wannabes: Search "50 / 50 portfolio" on the internet. According to the following link:

https://www.vanguard.com/us/insights/saving-investing/model-portfolio-allocations

the average historical return is 8.4%. Jack Bogle and Warren Buffet both suggested a 50 /50 portfolio as a relatively safe investment. However, if your 50 / 50 portfolio is in a 401K or IRA, you can then play the following riskier game without any tax consequences....

When the stock market is relatively low, reallocate to 75% stock / 25% bond. When the stock market is relatively high, consider 25% stock / 75% bonds. You may end up getting an extra 1% or up to 9.4% average return if you play this game right. I use the "50 days exponential moving average" as a guide in determining relatively highs and lows of the stock market.

Second game: Diversify your 50 / 50 portfolio into many different asset classes: large caps, small caps, health sector, energy sectors, treasury bonds, corp bonds, tax free municipal bonds, etc. When you are withdrawing, pick the asset class that is relatively high compared to the other asset class. Avoid balanced or target mutual funds because they co-mingle assets and therefore you can't play this game of "selling high".

Both games are based on "buy low, sell high" strategy. There are other games to play but it involves higher risk and higher experience.

Good Luck from a seasoned investor.

 

[OldShooter]

... Both games are based on "buy low, sell high" strategy. ...

What a brilliant strategy! I wonder why no one has thought of it before.

 

[njhowie]

What a brilliant strategy! I wonder why no one has thought of it before.

I'm wondering why it's on this thread?

 

[2177V]

I put my "buy low sell high" strategy for people to read and learn. I also put my Charles Schwab comment for people to understand a little bit on how a FA work. My opinion: If your portfolio is small, you probably do not need a FA if you are smart enough to know the basics.

However, if your portfolio grows to $1M plus, then a FA is recommended simply because a minor mistake in a $1M portfolio can be costly. High net worth clients understand this point. The other point is that the smarter you are, then you can ask the right questions to a FA.

Here is another strategy: Most people rely on the 4% rule. However, there is an alternative to the 4% rule: Divide your retirements into buckets. 1st bucket covers emergencies. 2nd bucket covers withdrawals between age 65 to 70, 3rd bucket covers withdrawals age 70 to 75, etc. Life expectancy is about 85 but you can adjust this life expectancy based on your current health. The long term buckets can have an aggressive investment portfolio since withdrawals may be 20 years away. The emergency and short term buckets should be conservative. You then live within your means while withdrawing from that specific bucket. People lives from "paycheck to paycheck" while working. Retirement will be living from "bucket to bucket".

The advantage: Your retirement is fully funded up to the maximum age and living within the bucket provides financial discipline. What happens when you used up your last bucket and you are lucky to live beyond your life expectancy?

Congrats! You then turn around and get a reverse mortgage because you can't take your house with you. A reverse mortgage pays a high monthly payment at age 85. A reverse mortgage pays relatively little at age 65. Once you understand the alternatives to the 4% rule and review the pros and cons then you can make better decisions.

 

[Jerry1]

I had a friend who had this strategy. He had pockets instead of buckets. Seems to conflict with the framework that money is fungible. Add up all your buckets and you’re probably at an asset allocation of between 40/60 to 60/40.

 

[VanWinkle]

A minor mistake in a 1M portfolio can be costly. 1..25%AUM plus .75 fund expense fees will take your 4% of portfolio down to 2%. So your FA just helped himself to 1/2 of your income. I tend to agree with you that it is more costly to make that mistake with 1M portfolio.

 

[VanWinkle]

Yes. I know. The one I intend to work with is a Fiduciary as he is part of the Garret Group which requires it. He is not going to manage our money at all. Just look at it and give suggestions. We are more interested in him helping us with our retirement life planning and putting everything together for us in a clear picture.

Great choice meleana!!! And I'm not just saying that because I recommended them

 

[Caskem]

You will get as many suggestions as posters, however, one thing to watch: we paid our CFP over $10K in 2018. We LOST 5.8% on the account. That was a surprise.

 

[NgineER]

I have a phone meeting with another CFP on Monday- a Dave Ramsey recommendation.

Dave Ramsey's network of CFPs are paying him to be part of his network.
Dave Ramsey is a proponent of needing investment help so you don't buy high and sell low in a panic. Fund commissions are 3-6% on average, but that is nothing to worry about since you are prevented from selling low and are getting professional help.

I would stay away from Dave Ramsey planners if I could. I interviewed some in the past and they were both AUM and had front-end load funds for you to invest in.

 

[meleana]

What was their reason for selling T Rowe Price funds? Did they calculate the tax hit (or are these tax deferred?)?



And what reasons did he give for keeping them? Did he look at performance, fees, allocations, etc?


-ERD50

No to both. EXACTLY!

 

[meleana]

Great choice meleana!!! And I'm not just saying that because I recommended them

Yes- thanks so much!


Ok So one thing- today I also spoke with another FA via phone.



(My goal was to speak with three, so this was the third).


I liked him also. He is a recommended advisor through the Dave Ramsey Smart Investor program also, and is located about an hour from our home near where my husband works and where I grew up.


He is also a Fiduciary and he did say that I could leave my money at T Rowe Price, as it is safe where it is and so forth and as his advise could be taken anywhere. But he did comment that there could be good reasons to change. So I got the impression that- yes- he does manage money but you do not have to have him do it.



He charges $1800 for a comprehensive financial plan, so he is $300 more than the Garret Group man.



He does this in a series of 3 meetings- the first being a complimentary one with my husband and myself, and if we decide to proceed from there, the fee does not have to be paid until after the third meeting. It also includes one year of support AFTER the meetings.



So my husband and I are thinking we should at least meet with him before we make our decision.


I am pretty much ruling out the Edelman Financial Engines guy, (he charged $800 for a plan, but then wanted to put our assets under management) and he is in another state far from here anyway.

 

[meleana]

Dave Ramsey's network of CFPs are paying him to be part of his network.
Dave Ramsey is a proponent of needing investment help so you don't buy high and sell low in a panic. Fund commissions are 3-6% on average, but that is nothing to worry about since you are prevented from selling low and are getting professional help.

I would stay away from Dave Ramsey planners if I could. I interviewed some in the past and they were both AUM and had front-end load funds for you to invest in.

What is AUM? I don't know all these abbreviations! LOL!

 

[meleana]

OP - When a person looks at the plan for the next 30-40 years, it is complex and scary, and in your questions you didn't really talk about LTC, nursing homes, and death..

However, if you isolate many of the decisions then it becomes simpler, as not all decisions interact in a meaningful way.

There are a couple of website companies, where you pay approx $40-$50 and get to run software to figure out how to maximize SS , they have been reviewed in money magazine, and other financial magazines. There is that free site you probably used which is useful, and maybe it turns out the same answer.
Myself, I've run the free site a couple of times, but I'm going to pay for at least 1 of the pay sites, as I want a second opinion, and with the complexity of SS rules we already know the SS employees sometimes give out wrong answers (and shouldn't they always be correct ? ).

I am really, really surprised you claim your house has not gone up in value in decades ?? I don't know of any place like that. Our place is in an ok neighborhood, but in IL , and it is worth almost what we paid for it a decade ago.
Did you look it up on Zillow ?

Well- as for death- well- I have funds set aside for funerals/cremation. For Long term Care- well- I have considered moving to a CCRC- but, again, I am not sure that we could afford one. That is where a financial planner could be useful.



I worked in home health care most of my life in management, and I am not as much a proponent of home care as one would think due to the unreliability of it. I also do not like Long Term Care insurance for many various reasons, not to mention the cost.



Not that I am a fan of assisted living or nursing homes either. Scary places with scary personnel.



My husband does make his own bullets.


I have gone on some sites regarding SS but not sure which to trust which is again why I would like an objective human eye on the matter and not just through a computer.


In terms of our house- well- welcome to the twilight zone! That is where we live! I know it is hard to believe but this is what we are dealing with. I do get updates from Zillow and they are usually all over the place. Zillow has given us over $300,000 down to $250,000 depending when they send the email. Problem is also we will be competing with new homes that run in that range- some bigger than our home and with the fancy open floor plans and cathedral ceilings.



Then again, in real estate anything can change. We will know soon enough as the house will most likely go up for sale next year or the year after at the latest.



I really want to see if we can buy something to move into instead of having to wait until the house does sell and scramble. We are getting older and it would be too much for us trying to pack everything ourselves and find a place to live in another state while in the process on closing on our home within a 2 month time frame. Just crazy.


Sure- we could maybe rent- but who the heck wants to move twice at our ages? It is so much easier to already have a place to live before our home sells. Maybe even move there and leave our home empty for the realtor to show it. But, of course, we need to be able to afford that and the expenses of running two homes. Then- what if our home does not sell?!!


My head hurts.

 

[2177V]

On the subject on when to take SS...It should depend on your health. If you are healthy and likely will live up to or even beyond your life expectancy, then take SS at 70. If you are not healthy, take SS at 62. There are web pages that will help you predict your life expectancy based on your weight, health conditions and life style.

The other factor is your financial situation since some people collect at 62 because they need the money at 62.

There is no perfect answer because life expectancy and health are difficult to access. For me, I started collecting at age 66 which is right down the middle.

My rationale: In the worst case... I will be only 50% wrong and not 100% wrong. This is part of my personality when I am confronted with two extreme options, I tend to take the middle one.

 

[Jerry1]

What is AUM? I don't know all these abbreviations! LOL!

Assets Under Management

The basis from which a percentage financial advisor charges their fee.