Poll: Do You Use A Financial Advisor? Definitions in post #1.

[Alan]

We are self directed. There is an article in the current AARP magazine by an financial advisor that is very interesting. Anyone else read it It seems that the way they are compensated is not always highly visible plus it can conflict with your best interests.

DW read it first then asked me about it. I told her that there had just been a discussion here on a similar story.

http://www.early-retirement.org/for...al-advisers-flunk-undercover-sting-60821.html

 

[FinanceDude]

You must know some great places to invest those quarters

Most of the local "known quantity" avoid me.......

 

[Bestwifeever]

Most of the local "known quantity" avoid me.......

Then you'll have to consult a financial advisor

 

[Finance Dave]

I consider myself a self-directed investor, though when I FIRE'd I did hire a fee-only advisor to go through my numbers with me.

To rephrase, I say I'm self-directed, but leave the door cracked open and never say never. Similar to taxes. I'm been a Turbotax user for years, but if my taxes get too complicated, I keep the option open to hiring a "professional."

Sounds like the category I'd be in. Have not used an advisor yet...but might pay an hourly fee for an "evaluation" when I get close to FIRE.

 

[SJ1_]

Self directed.

 

[youbet]

Lost money with advisers at a firm that I will prefer remain anonymous.

I have been able to loose a truck load of money all by myself, completely self-directed and with no help from an advisor whatsoever! Threre was nuttin' to it!

 

[Tre2012]

Advisor-Dependent/Self-Directed

I'm responsible for two portfolios:
- Our personal (DH and myself) is self-directed by me
- MIL, who lives with us, is advisor-dependent.

Since it doesn't seem like many here have really investigated the financial planning industry, here's what I learned from working (as a lowly paid back-office admin) in banking, insurance, and financial planning services.

a) ALL Certified Financial Planners (CFP) are financial advisors. But VERY FEW financial advisors are CFPs. The SEC is currently collecting financial industry titles. The count is up past 8,000 titles, most of which are worthless substitutions for "stockbroker" and "sales rep".

b) "Financial Planning" is an actual legal term. Only certified/registered advisors, a grand total of about 5 of those 8,000 titles, are legally allowed to do "financial planning". Confusingly, anyone can do a 'financial plan', or a 'retirement plan'. Those aren't protected terms. Personally, I wish they'd go back to the original term, "Estate Planning". It was a lot less bewildering for the average consumer.

So – why use a CFP? Because yes, even with certification there are bad CFPs, just as there are bad doctors and bad lawyers and...well, you get the idea.



We use an independent CFP firm for MIL because she has a high possibility of outliving us. If anything happens to us, successor trustees are honest but frankly ignorant about handling estates, dealing with complex tax and inheritance issues, and investing good-sized portfolios. We needed advisors who have fiduciary duty to her, not just following the legally worthless "suitability" standard (that's the difference between the 5 "real" advisor titles and the other 7,995 worthless titles).



We wanted an advisor with a twenty-year track record, of moderate size (big enough to stay in business, small enough for personal service), willing to provide multiple referrals from long-term (at least 5+ years) clients, of unimpeachable ethics and deep financial services knowledge. They need to be experienced in "hand-holding" a client through extremely stressful, critical decisions in ALL areas: financial, tax, and legal. They will be part of the trio of pros needed in those areas, and must excel at communicating so that any possible issues can be pro-actively managed by the successor trustees.



I have access to two independent CFPs whom I respect highly and have learned a lot from. They are generous with their time, love to educate and help people, and can count a high percentage of multi-generational family clients.



I handle our own portfolio because I enjoy doing so. I also do our very comprehensive financial planning because I learned how to evaluate risk unemotionally and analyze the most cost-effective risk mitigation for us. We never made a lot of money and have definite health negatives genetically. For us to successfully take early retirement meant a solid, well-tested financial plan was absolutely essential. I retired in 2006 and my DH retired as planned in 2010. The market chaos had no effect on us, despite the fact we are rampant consumers and have never done a formal budget in the four decades we've been together.



This is because a financial plan has very little to do with investing ROI, budgeting and other financial basics. What I learned from long experience in filling out paperwork was to never mistake fundamentals for risk analysis. Most people handle risk by ignoring it. If you're lucky everything will work out. Of course, the media seems to be full of stories these days of Boomers and WWII seniors for whom ignoring risk eventually came back to bite them. We personally see this problem a lot among our friends and family as well.



If anything happens to me, DH doesn't enjoy investing as I do. He will sell the house (no mortgage) and transfer the proceeds and the portfolio to the CFP firm who handles MIL's portfolio. These are non-discretionary managed accounts with all funds bought at NAV. Quarterly reports (and personal meetings any time we want) always detail in full what funds are being used and the proportion of the portfolio assigned to that market sector.



More importantly, DH will have the firm as his first-line resource for any questions on any subject concerning whatever affects his or MIL's financial situation. All good advisors develop a wealth of knowledge and numerous professional contacts. They will be there for those times when DH needs a referral beyond the legal/tax advisors we already use.



You use a fiduciary advisor as a collaborative effort. A good one will say "no" to you if they think you're taking on too much risk. They are not there to give you above average returns on the latest "hot" market sector. They are there to help you get good returns with the lowest possible risk. We do not grudge them their fees, any more than we grudge what we pay to our excellent mechanic, or our skilled orthopedic surgeon.



A trustworthy certified advisor will save you time, money, and energy. A bad one, which is most of them, should be avoided at all times.

 

[justplainbll]

I've been retired for 17 years, have a current income that is about 2X my final annual salary, and doubt I would be any better off if I'd relied on the advice of a CFA .

 

[Tre2012]

You may have missed my point

Many people have never seen the difference using a CFP (not CFA, BTW) makes, for some people. I have, and I assure you, the difference a good advisor can make is substantial.

Think of basic examples: many people change the oil in their cars. CAN everyone do it? Yes! SHOULD everyone do it? Maybe. I can't see my 84-yr old MIL doing it, can you? MUST everyone do it? Nope, and many don't do it either themselves nor go to a pro to have it done, they just drive as long as they can on gunked-up engines. And sometimes they break down on freeways and are put to a lot of trouble and $$$, but they want to risk it. Their choice.

You can write your own will. There's lot of books on the subject, free advice on the Web, legal forms available from many reputable vendors. CAN you? Certainly, and doing something is better than nothing, as I can tell from having settled an estate. SHOULD you? Again - maybe, and maybe not. The money we spent on a probate attorney was well spent, in our opinion. She raised issues we had never thought of. That's her job, and that's what we received - invaluable, as I'm sure you would agree.

I have no problem doing both the investing and the financial planning for us. But they are two different things, requiring different skills and different knowledge base.

We have seen from personal experience that most people are very poor at financial planning, because they have no idea of the right questions to ask of themselves, and they are afraid of objectively analyzing the amount of risk they have allowed to accumulate in their lives.

A fiduciary advisor is a trusted professional resource when you encounter life-changing events (these are defined in financial planning as birth, death, marriage, divorce). How many people have you known who forget to do something as simple as change the beneficiary on their accounts when they get married or divorced?

In my MIL's case, she has dementia and cannot even add/subtract accurately. As fiduciaries for her trust, it would be negligent of us to not make certain that her finances will be professionally handled so that the successor trustee has an easier time.

I've been there, when my sister died at age 38. You do not want to be searching for sound financial and legal advice when you are grieving with the other family members, while trying to understand all the issues around settling an estate, most of which you are totally unfamiliar with and many that carry substantial legal/financial penalties for making an error.

A good advisor helps clients stay organized. If you don't need that, more power to you, that's great! But many people DO need it, and do not want to be involved in day-to-day investing. And like our estate attorney, a good fiduciary advisor makes sure 'all the bases are covered.'

 

[Midpack]

We may be in heated agreement...

A trustworthy certified advisor will save you time, money, and energy. A bad one, which is most of them, should be avoided at all times. A certified advisor may or may not save you money. At 1% of assets (not uncommon for an FA) - $10,000/yr per $1MM assets! Someone retiring with $1MM might hope to generate $40,000/yr in income using 4% SWR just for example - another $10,000/yr for an FA is relatively costly, and will have a considerable effect on retirement income over the long run. That's a pretty big incentive to DIY if you can. And your latter point is yet another reason to DIY, unfortunately "bad ones" prey on those who most need their services all the time.

Many people have never seen the difference using a CFP (not CFA, BTW) makes, for some people. I have, and I assure you, the difference a good advisor can make is substantial. For some people no doubt, my MIL couldn't DIY invest. This is a community of people who have consciously chosen to learn to DIY, so the poll and POV here isn't going to match the mainstream view - any more than preaching Hummers & Corvettes on a Prius forum.

Think of basic examples: many people change the oil in their cars. CAN everyone do it? Yes! SHOULD everyone do it? Maybe. I can't see my 84-yr old MIL doing it, can you? MUST everyone do it? Nope, and many don't do it either themselves nor go to a pro to have it done, they just drive as long as they can on gunked-up engines. And sometimes they break down on freeways and are put to a lot of trouble and $$$, but they want to risk it. Their choice. Paying $50-100 for someone to change my oil doesn't compare to $10's of thousands a year for a financial advisor.

You can write your own will. There's lot of books on the subject, free advice on the Web, legal forms available from many reputable vendors. CAN you? Certainly, and doing something is better than nothing, as I can tell from having settled an estate. SHOULD you? Again - maybe, and maybe not. Again, paying a (few) thousand for a complete will & other docs several times during retirement doesn't really compare to $10's of thousands per year for an FA.

 

[ERD50]

A good advisor helps clients stay organized. If you don't need that, more power to you, that's great! But many people DO need it, and do not want to be involved in day-to-day investing. And like our estate attorney, a good fiduciary advisor makes sure 'all the bases are covered.'

In addition to what Midpack said, we often point out here, how does someone know if they found a 'good advisor'?

Seems you need to know enough to tell good from bad, and we mostly say that once you know that much, you know enough to pick some index funds, rebalance once a year, and be done with it.

Another way to look at that 1% versus 4% withdraw - to get the same $40,000 annual, you need a $1,333,333 instead of $1,000,000. Even if you find a 'good advisor', it will cost you $333,333! That means many more years of working and saving for most people, it takes time to add another 1/3rd to your nest egg.

-ERD50

 

[truenorth418]

I decided a long time ago to educate myself and manage my own financial decisions. I'll never know whether I could have done better with an advisor. I have talked with several over the years and even signed on with one early on. She went ballistic when I tapped the stock account she had sold me so that I could afford a down payment on a house.

What has really turned me off is that few if any ever began the conversation by asking me what my financial objectives were. This showed me that they really did not have my best interests at heart. Or were even willing to bother to pretend.

 

[jeeper]

I started investing in 401k when they were first offered at MegaCorp, around 1985. People I respected there were doing it, so why not I?
Fast forward 15 years when retirement conversations starting flowing, I realized that a lot more financial knowledge would be required. Recommended books, peer advice, and perseverance educated me enough to understand that paying for a professional advisor was not necessary.
Self-directed and loving it!

 

[Tre2012]

>>how does someone know if they found a 'good advisor'? Seems you need to know enough to tell good from bad, and we mostly say that once you know that much, you know enough to pick some index funds, rebalance once a year, and be done with it.>>

So basically the poll is useless then? EVERYBODY here is self-directed/self-taught/DIY, so why even ask the question about using advisors if no one on the forum does it?

I guess my post was wasted, since the point I was trying to make was that investing fundamentals, no matter how skillfully executed, is NOT true financial planning. And for some people - actually, I'd say many people - having a financial plan increases one's chance of successful retirement.

There are many factors that go into achieving one's goals. Truenorth418 showed good instincts in rejecting advisors who are not interested in helping you define your objectives.

I'll repeat this one last time, and then I'm going to go away so I won't bother anyone any longer.

WHAT YOU DON'T KNOW CAN HURT YOU. The questions you forget to ask, the risks you prefer to ignore, can mess up your senior years. That's what an advisor is for - a true fiduciary, not a 'suitability' advisor.

I wish all of you good fortune and health in the years ahead.

 

[Bestwifeever]

>>how does someone know if they found a 'good advisor'? Seems you need to know enough to tell good from bad, and we mostly say that once you know that much, you know enough to pick some index funds, rebalance once a year, and be done with it.>>

So basically the poll is useless then? EVERYBODY here is self-directed/self-taught/DIY, so why even ask the question about using advisors if no one on the forum does it?

I guess my post was wasted, since the point I was trying to make was that investing fundamentals, no matter how skillfully executed, is NOT true financial planning. And for some people - actually, I'd say many people - having a financial plan increases one's chance of successful retirement.

There are many factors that go into achieving one's goals. Truenorth418 showed good instincts in rejecting advisors who are not interested in helping you define your objectives.

I'll repeat this one last time, and then I'm going to go away so I won't bother anyone any longer.

WHAT YOU DON'T KNOW CAN HURT YOU. The questions you forget to ask, the risks you prefer to ignore, can mess up your senior years. That's what an advisor is for - a true fiduciary, not a 'suitability' advisor.

I wish all of you good fortune and health in the years ahead.

You say in your first post on this thread that you do not use an advisor. Why not? I imagine most of the self-directed investors on this board share your reasons for not using one.

 

[REWahoo]

You say in your first post on this thread that you do not use an advisor. Why not? I imagine most of the self-directed investors on this board share your reasons for not using one.

Looks like you're too late. I think the doorknob may have hit him on the way out...

I'll repeat this one last time, and then I'm going to go away so I won't bother anyone any longer.

 

[Major Tom]

I'll repeat this one last time, and then I'm going to go away so I won't bother anyone any longer.

Wow. He came and went in 4 posts.

Who was that again?

 

[Nords]

So basically the poll is useless then? EVERYBODY here is self-directed/self-taught/DIY, so why even ask the question about using advisors if no one on the forum does it?
I guess my post was wasted, since the point I was trying to make was that investing fundamentals, no matter how skillfully executed, is NOT true financial planning. And for some people - actually, I'd say many people - having a financial plan increases one's chance of successful retirement.
I'll repeat this one last time, and then I'm going to go away so I won't bother anyone any longer.

This board's been around for nearly a decade.

During that time we've had quite a few well-informed new posters decide that the board lacks sufficient knowledge on a sub-topic of early retirement, and they proceed to deliver a sermon on the topic.

When the pushback begins, the new poster is offended that their credibility is questioned. They begin to document their experience and wisdom with other credibility tools like bold font and SENTENCES IN ALL CAPITAL LETTERS.

Eventually they decide that we're unlikely to respond to their wisdom, and they move on.

But most of the long-time posters are ignoring the behavior, or refilling their popcorn bowls while watching from the sidelines. A few other posters engage with enthusiasm & skepticism, and eventually the new poster "gives up" on our ignorance and flounces off.

In fact that whole cycle took place in the ~20 hours while I wasn't reading posts. I missed the whole performance!

The "circle of life" on a discussion board...

 

[ERD50]

The "circle of life" on a discussion board...

Good summary!

-ERD50

 

[Tree-dweller]

I hired a Fa when I was ready to pull the trigger just to get an independent confirmation that I wasn't nuts and I could pull this off. Other than that, no. Have been self-directed.

 

[harley]

This board's been around for nearly a decade.

During that time we've had quite a few well-informed new posters decide that the board lacks sufficient knowledge on a sub-topic of early retirement, and they proceed to deliver a sermon on the topic.

When the pushback begins, the new poster is offended that their credibility is questioned. They begin to document their experience and wisdom with other credibility tools like bold font and SENTENCES IN ALL CAPITAL LETTERS.

Eventually they decide that we're unlikely to respond to their wisdom, and they move on.

But most of the long-time posters are ignoring the behavior, or refilling their popcorn bowls while watching from the sidelines. A few other posters engage with enthusiasm & skepticism, and eventually the new poster "gives up" on our ignorance and flounces off.

In fact that whole cycle took place in the ~20 hours while I wasn't reading posts. I missed the whole performance!

The "circle of life" on a discussion board...

But at least this guy/gal was relatively polite. We didn't get called the lumpen proletariat this time. So s/he's welcome to come back if s/he wants.

 

[Nords]

But at least this guy/gal was relatively polite. We didn't get called the lumpen proletariat this time. So s/he's welcome to come back if s/he wants.

I appreciated their ability to scan 44,000+ threads and conclude:

Since it doesn't seem like many here have really investigated the financial planning industry, here's what I learned from working (as a lowly paid back-office admin) in banking, insurance, and financial planning services.

 

[Sarah in SC]

She did spell really well, though. And the info is accurate, more or less, but just not all that relevant to folks who by and large aren't in the same specific boat as her. Nice recap, Nords.

 

[travelover]

But at least this guy/gal was relatively polite. We didn't get called the lumpen proletariat this time. So s/he's welcome to come back if s/he wants.

I don't know - the drama is half of the entertainment value.

 

[MichaelB]

She did spell really well, though. And the info is accurate, more or less, but just not all that relevant to folks who by and large aren't in the same specific boat as her. Nice recap, Nords.

+1. And good punctuation helped, along with prudent use of the space bar.