hiring an advisor

[pedorrero]

I have approached a FP once and was sent packing when they found out about my 'inherited' trust(s). I am a DIY'er (with money at least -- let's not talk about home improvement projects). My ego would have me believe I can do everything the best way. Experience shows this is not true. For people like me, perhaps the idea to see a fee only planner on a case by case basis would be good ... to have that 2nd opinion before major (and especially expensive or irrevocable) decisions.

 

[2B]

For people like me, perhaps the idea to see a fee only planner on a case by case basis would be good ... to have that 2nd opinion before major (and especially expensive or irrevocable) decisions.

The problem I see with this is that they don't charge "by the hour" for a specific issue like a lawyer or CPA. They want a flat fee of several thousand dollars to give you a computer generated printout. If you don't take too much of their time, they will chat about the specific issue you may have wanted input on above.

FWIW, I'd feel happier posting my question on this forum and seeing what input I'd get for free. There are a lot of very knowledgeable people here and few FAs that provide regular input.

 

[megacorp-firee]

Seems to me that there is a difference between a planner and an adviser. A planner may help with AA, insurance needs, estate/tax planning etc. An advisor tells you where (as in what stocks/MF/FI/) s/he thinks your money should go.

I might be willing to pay a planner but not an advisor.

You may make that distinction, but I am not sure any of the 'professionals' do. The one question I always ask is 'how do you make your money from this?' good luck in your quest

 

[megacorp-firee]

The problem I see with this is that they don't charge "by the hour" for a specific issue like a lawyer or CPA. They want a flat fee of several thousand dollars to give you a computer generated printout. If you don't take too much of their time, they will chat about the specific issue you may have wanted input on above.

FWIW, I'd feel happier posting my question on this forum and seeing what input I'd get for free. There are a lot of very knowledgeable people here and few FAs that provide regular input.

I agree with your comments. The only caveat is that you need to be able to separate the good advice from the bad. You will often find conflicting opinons and they will seem to have plausible logic behind each of them.

 

[Moemg]

and why don't they charge by the hour ? I think a lot more people would use them if they did .I was looking for a second opinion and called several they wanted a ridiculous amount to look at my portfolio .I ended up just taking a financial planning course for $82.00 and the professor answered all my questions .

 

[megacorp-firee]

and why don't they charge by the hour ? I think a lot more people would use them if they did .I was looking for a second opinion and called several they wanted a ridiculous amount to look at my portfolio .I ended up just taking a financial planning course for $82.00 and the professor answered all my questions .

I think it may be negotiable. If I had pressed it, I probably could have got an hourly rate. If I break it down, I have over the years averaged 3 meetings of 3 hours each. So that comes to $111.11 per hour. I'm ok with that. The price needs to be low enough where I think I am getting value and large enough where he thinks it is worth his while to help me. And he does do some pre-meeting work ... sooooo

 

[FinanceDude]

I think you're missing my point. He IS an Ameriprise associated FA. He is interesting in that he does not 'tout' Ameriprise recommended products (to me). He has the flexibility to get 'paid' in various ways. For all intents and purposes he ACTS like a fee-only advisor to me. He is even doing an analysis of ETFs vs. Vanguard MFs for me. He charges me a flat fee per year for consultation. So for ME, he is a fee-only advisor ... yes I agree, he does not 'belong to the club' and is not certified or whatever they have.
He never represented himself as a fee-only advisor. I think he thnks that he might lose me as a customer if he pushed his products, so we mutually agreed that we would go to this yearly fee. So a grand a year is enough for him to spend time helping me ... and I will continue to do this until I see no value. My goal is to pay attention to this LESS in retirement, not more. Others on this board do this as a hobby, which is great. I choose not to.

Ameriprise has THREE business models, the CFP's can charge a FLAT yearly fee for "consulting", they can run a fee-based/commission business, or they can run both. Most FA's I know try to run both. However, the gravy train of charging clients TWICE is under scrutiny and may go away..........

 

[FinanceDude]

and why don't they charge by the hour ? I think a lot more people would use them if they did .I was looking for a second opinion and called several they wanted a ridiculous amount to look at my portfolio .I ended up just taking a financial planning course for $82.00 and the professor answered all my questions .

Because most hourly planners have to supplement their income or they are out of business.........

Hourly CFP's can't charge fees like attorneys.......

 

[boutros]

I work at a fee only firm, as a portfolio manager not a planner. The planners can charge by the hour. I think the hourly rate is somewhere around $200 to $250 for planner's time and $40 or $50 for their assistants time. Usually they quote a firm number based on a project instead of an hourly rate. We really don't make any money on planning. Their fees really just cover the salary and expenses of the planners. The real money is in managing assets for a percentage based fee. The planners are good at servicing those clients and bringing in new clients.

 

[Sarah in SC]

What about Garrett Planning network folks? Aren't they hourly?

FD, don't call them CFPs unless they are!
You'll sully the rep of good folks like that!

....still waiting another three weeks for my results!
Sarah

 

[saluki9]

The problem I see with this is that they don't charge "by the hour" for a specific issue like a lawyer or CPA. They want a flat fee of several thousand dollars to give you a computer generated printout. If you don't take too much of their time, they will chat about the specific issue you may have wanted input on above.

FWIW, I'd feel happier posting my question on this forum and seeing what input I'd get for free. There are a lot of very knowledgeable people here and few FAs that provide regular input.

1. Your first comment simply isn't true. I don't know a single firm that isn't going to sit down with you for an hourly fee. Ours does it all the time. Expect to pay $175 - 300/hr and depending on your issues it should take 1-3 hours. 99.9% of firms aren't hourly fee only because the economics simply aren't there to make it work.

2. Free advice is nice, but it's true that you get what you pay for. I wouldn't flatter yourself by indicating that posting some questions on an internet forum is the same as working with a professional.

 

[FinanceDude]

1. Your first comment simply isn't true. I don't know a single firm that isn't going to sit down with you for an hourly fee. Ours does it all the time. Expect to pay $175 - 300/hr and depending on your issues it should take 1-3 hours. 99.9% of firms aren't hourly fee only because the economics simply aren't there to make it work.

2. Free advice is nice, but it's true that you get what you pay for. I wouldn't flatter yourself by indicating that posting some questions on an internet forum is the same as working with a professional.

 

[2B]

1. Your first comment simply isn't true. I don't know a single firm that isn't going to sit down with you for an hourly fee. Ours does it all the time. Expect to pay $175 - 300/hr and depending on your issues it should take 1-3 hours. 99.9% of firms aren't hourly fee only because the economics simply aren't there to make it work.

2. Free advice is nice, but it's true that you get what you pay for. I wouldn't flatter yourself by indicating that posting some questions on an internet forum is the same as working with a professional.

You say my first point isn't true by saying every firm including your firm will do it but then say 99.9% of the firms won't. Something isn't consistent however I'll be happy if I'm always 99.9% right.

I've found that there is great wisdom in the "free advice" on this forum. It gives me something to reflect on and to challenge my original opinion. Some I discount quickly and some takes a little longer. There have been numerous situations where a new idea was considered better and that's the way I went. I don't think I would be any different if I paid some FA a $1000 to tell me his opinion. Ultimately, I'd have to evaluate it and decide for myself on the path forward.

 

[ERD50]

2. Free advice is nice, but it's true that you get what you pay for. I wouldn't flatter yourself by indicating that posting some questions on an internet forum is the same as working with a professional.

Not always true. Not at all.

I could make a long list of things I needed advice on, and I got far better advice free from the internet than I got from the 'pros'.

Some things require a professional, and it is penny-wise-pound-foolish to try to avoid it. But not for everything, and IMO, far too many people who use an FA would be better off doing it themselves. It ain't rocket surgery for most people, and in many cases the fees they pay just get them in poor investments.

There are exceptions, but as I alluded to earlier, the same people who choose an FA because they feel they don't know enough to DIY also do not know enough to judge the competency of the FA.

Either way, I think you need to educate yourself, or rely on luck.

-ERD50

 

[saluki9]

You say my first point isn't true by saying every firm including your firm will do it but then say 99.9% of the firms won't. Something isn't consistent however I'll be happy if I'm always 99.9% right.

Please read my post again. I said that 99.9% of firms aren't HOURLY FEE ONLY.

 

[dk1047]

Hiring an Adviser

The MOST important factor when selecting an adviser is to use a fee only adviser. IE One that makes all of his money off you from his direct fees and not sales commissions.

Most "Financial Planners" are just fancy salespeople trying to sell you the "Investment" vehicle that will get them the highest commission/long term return.

You need a fee only adviser so that are free of conflict of interest and can look only to your best interests.

The same goes for Brokers. Don't use them. Just buy Vanguard Index funds and beat 90% of all broker's, stock pickers all the time.

 

[FinanceDude]

The same goes for Brokers. Don't use them. Just buy Vanguard Index funds and beat 90% of all broker's, stock pickers all the time.

 

[FinanceDude]

FWIW, I'd feel happier posting my question on this forum and seeing what input I'd get for free. There are a lot of very knowledgeable people here and few FAs that provide regular input.

Read the disclaimer on my signature.........

 

[WoodRipper]

Reality about Advisors

I used to be an advisor myself and I have hired one. Why? Not because I can't create an excellent portfolio and rebalance it annually. Not because I can't keep up on all the major, relevant, asset classes. The reason is simply this: when you manage your own money the propensity to due irrational things is very high. There are studies by Fidelity and Lord Abbot which show that the average investor in their large cap mutual funds realize only a small fraction of the funds long term return. Why? Because the average investor buys high and sells low. Emotion runs their investment activity.

This behavior has nothing to do with the type of investment, it is about people. I suspect the averages for index investors who are DIY are not much different.

Being aware of these pitfalls I think I could escape them - I'm pretty disciplined. But even so, I've chosen an advisory relationship to prevent me from the "idiot factor". If the advisor saves me from 1 or 2 stupid moves every 10 years than he will have earned his fee right there.

How confident are you that you will beat your own emotions consistently for 20 or 30 years? Most people will not, and would be well served by a quality advisor. Finding one however is another question...