Q about FA No Flame

[Jack_Pine]

Question:

I know the feeling of the prominent posters on the use of FA's. Get it.

Has anyone ever negotiated the rate with an FA firm? IE, I have a 3k portfolio and you want 1%, I will take .25 or leave........

1. Before you post, I know for some .25 is too much.
2. Like it or not, some folks want some contact with an FA so the DW can get advice when DH (who knows all) croaks.

Thoughts with out flaming?

 

[savory]

I have found they do not negotiate. They may have levels based upon amount invested.

 

[Jack_Pine]

I have found they do not negotiate. They may have levels based upon amount invested.

Interesting. One would think they would for the large balance accounts. There must be enough of the bottom feeder accounts to keep it going....

Btw, have you tried?

 

[Midpack]

Most posts I've read recommend against FAs for anyone who is interested and capable of managing their own portfolio/income (most people), not usually flames.

I have no idea if some/any FAs negotiate fees. Sorry.

The only FA I'd use (if DW has to handle things herself) charges 0.37% or less. But it's not my place to recommend to others.

 

[sengsational]

I heard that you might be able to find an advisor that charged by the hour. A little like doing your own taxes and just having them reviewed by a cpa. So I shopped around, starting with the list from that association of fee-only financial planners. I emailed a dozen or so, talked to three or four, and never got one that figured that the fee structure I proposed would work. The standard answer was "I think a guy like you should just do it yourself", and they were probably thinking, "this guy would be a PITA as a client...not worth it". But you might be able to find someone that would offer a flat fee price arrangement if you looked hard enough.

Along another line of thinking, I wonder if your local university has a program to get certified as a financial advisor? You might just be able to get a review for free or cheap. The student could confirm doubts with the prof and current reference materials. Yea, you'd have to be on guard with checking the quality of the advice, but I'd say thats true if you trust any advisor. Somehow I think that how much you pay might not be correlated closely with the quality of output in ths profession. For instance, a likable guy with mediocre skill would probably make more than a gruff guy with excellent skills.

 

[Jack_Pine]

You know, maybe that is the recommendation I was looking for.

Do it yourself, with all the tools referenced in this site.

Then, if DW is not engaged, have a relationship with a by the hour FA.

That sounds like a plan. I admit (rarely on this site) I use an FA. Mostly because of how DW would handle in my demise. (guilty)

Have to give it some thought?

 

[Ready]

There are many good financial planners who are "fee only" and charge hourly for their time. I see no issues at all with using on of these planners. The controversy around planners has to do with them wanting 1% or more of your entire base of assets each year to continually "manage" your assets.

When stocks were returning 10%+ per year and bonds weren't that far behind, nobody seemed to mind paying 1%. But with many bond funds having negative yields last year, and predicted yields being in the 2% range, paying 1% to an advisor would mean giving away 50% of your returns. That ridiculous. Advisors need to revise their formulas in light of the lower yields available today in fixed income markets. That is why hourly advisors are the only ones that make any sense.

If someone is not interested in working for you on an hourly basis, just move on to the next one. There are plenty of good ones who will.

 

[Jack_Pine]

Thanks Ready, that makes sense.

Guess the issue is finding the right per/$ guys. Much easier for the average Joe to find the mainstream ones that advertise, as it was for me. Get it.

Thought?.... For all you who are managing your own portfolios.... How do you plan to turn over the management of the nest egg to DW (I know sexist..or visa versa) ?

 

[Danmar]

My DW and I discuss every trade (infrequent recently). She is smart and interested. She will be equiped to run the show if (when) I check out. It might be cheaper, and better, to educate the spouse as opposed to paying a FA? I know this would not work for all. I am lucky in this regard.

 

[Jack_Pine]

My DW and I discuss every trade (infrequent recently). She is smart and interested. She will be equiped to run the show if (when) I check out. It might be cheaper, and better, to educate the spouse as opposed to paying a FA? I know this would not work for all.

Great for you, happy she is engaged.

Mine, not so much. That is their choice, either way. I am fine with it as I am sure you are.

 

[sengsational]

DW is not the least bit interested in it, and she will never be, no matter if I'm around or not. I'm not worried since her dad is still around and sharp as a tack. I might need to start thimking harder about it once she doesn't have a trustworthy go-to person.

 

[brewer12345]

Thanks Ready, that makes sense.

Guess the issue is finding the right per/$ guys. Much easier for the average Joe to find the mainstream ones that advertise, as it was for me. Get it.

Thought?.... For all you who are managing your own portfolios.... How do you plan to turn over the management of the nest egg to DW (I know sexist..or visa versa) ?

I have all the qualifications, background and experience to act as a per hour FA and I have no doubt that I would be able to do a much better job than the bulk of the advisors out there. In a few days I will be semi-retired at the age of 40 and open to the idea of a part time business opportunity. While it might seem like a no-brainer to hang out a shingle as a FA, I am leery. Aside from liability issues, how do I acquire clients? I have zero interest in competing with the biggest liars to try to convince people that I can do for them what nobody can (beat the market, make up for too little in assets via returns, etc.), so how would I distinguish myself? I dunno, but the problem you face is mirrored on the other side of the table.

My DW is totally uninvolved in the money side of things. Should I get hit by a beer truck, I have a letter entitled "In case of my demise" that tells DW where all the assets are and what to do with them. It also includes some brief instructions on how to find a fee-only planner if she needs one.

 

[LOL!]

The portfolio maintenance should be so simple now that one can go to Vanguard and say, "Here's my money, please manage it for me." And then set up a monthly or annual withdrawal. It really is that easy.

All the assets will get a stepped up basis, so selling to move everything to Vanguard would not cost any new taxes as well.

My spouse was in 2 investment clubs and knows what to do, but I would guess she would not mind if things were simplified. OTOH, I don't see how anyone could mess things up.

It really wouldn't matter if the portfolio was left untouched except for annual withdrawals. The dividends would still go into the checking account and it really wouldn't matter if the asset allocation got lopsided because of no rebalancing. There are already RMDs for inherited IRAs, so spouse knows all about that.

So think about it: What is really necessary except collecting the money and spending it?

 

[REWahoo]

It really wouldn't matter if the portfolio was left untouched except for annual withdrawals. The dividends would still go into the checking account and it really wouldn't matter if the asset allocation got lopsided because of no rebalancing.

That would be a non-issue if the portfolio was invested in balanced funds.

 

[youbet]

All the assets will get a stepped up basis,

Is that true? You have a jointly held brokerage account with DW, you croak, and DW get's a stepped up basis? I don't think so but since I haven't croaked yet I can't tell you from experience.

 

[MRG]

Many get their fees based on the class of fund they sell you. Typically the 12b1 fee is used. So with these folks you really can't negotiate.

Other's will do it for a sliding rate based on assets invested with them. You might be able to get a reduction from that type of setup.

MRG

 

[Rambler]

Personally if I felt the need, I would use an hourly FA to get things in order, then manage myself. Since I'm pretty knowledgeable about such things (after quite a bit of study and reading, and a little practice) I don't use one. However, I understand the question well as my DW has zero interest in how to make the money she wants to spend. As long as green crosses her palm when she wants something, she is right as rain. I do expect, however, that my demise will be before hers, given longevity in her family and in her overall gene pool (she's Japanese). Therefore, at some point, I would be wise to take on an hourly adviser just to have the contact, so she knows where to go in the case of an early demise for me. On the other hand, if I can train my DSIL and DD well enough and early enough to help her out without giving away too much about our assets, then I would prefer for her to have them to lean on. If that does not appear to be possible, I will at some point buy an SPIA to make sure DW can survive, and prepare to have an FP/FA help with manage the rest when I'm gone. I also have a son. Love him to death, but at 26 (same age as DSIL) he still does not even show the beginnings of the mental/intellectual capacity to cope with helping his mom manage large sums of money. He would either flub it really big and really fast, or take undue advantage.

As for how to train the kids, I intend to start a brokerage acct for each of them, donate a starting position, and help them decide how to manage it. Then, if the next 4-5 years or so are good one for the markets, I will begin making matching donations to each of their accts, up to the tax free gift limit. I will instruct the kids that this is their money, but that they cannot use it for anything except up to maybe half, but only for funding the down payment on their first home, and for their own eventual retirements. Using it for anything other than that would cause a halt to future matches. Upon my demise, there would be no restrictions, but by then I would hope that they had learned to be skillful with managing their money. DD and DSIL are already showing promise. DS and DDIL are not.

FWIW...

R

 

[Jack_Pine]

Rambler....like your post.

Unfortunately for me we have no kids. DW will probably outlive me so it's her or nobody (FA)

 

[Rustward]

All the assets will get a stepped up basis, so selling to move everything to Vanguard would not cost any new taxes as well.

Has anybody ever heard of this?

Is that true? You have a jointly held brokerage account with DW, you croak, and DW get's a stepped up basis? I don't think so but since I haven't croaked yet I can't tell you from experience.

Not if it is community property that is jointly held. No step up in basis.

Possibly if it has been separate property that is inherited by the surviving spouse, but who does this? Possibly, but I have never heard of this, and am not going to attempt to find out.

 

[ronin]

Depends of the titling of the assets. Joint tenancy receives a step-up in basis on the decedent's share, while community property with rights of survivorship receives a step-up on the entire account (assuming one lives in a community property state).

bogleheads wiki/Step-up_in_basis

jlfwealth.com/tips/estate_planning/titling_property

 

[SVHoper]

Hi,

I feel I get value from my FA found through yelp. Spouse has negative interest in financial stuff and I feel I need a sounding board and injection of expert ideas from someone who has a full financial/goal/life picture.

I pay $500 per year plus 1% assets under management but they manage ~3% of net worth (slowly increasing this, rest is low cost mutual funds and real estate) - I treat them kind of like an active mutual fund. I meet with them once every 6-8 weeks and topics range across the whole portfolio: include real estate purchases, kid's jobs, wills, individual stocks, asset allocation, expectations on oil, burma etc etc. Last year they performed a bit better than S&P500; so not the best and not the worst of my asset allocations.

bogleheads.org has quite a few strong, low cost FA recommendations.

I hope to have my kids fully educated/inculcated to low cost indexing before I am unable to manage portfolio, but if something sudden happened I think our FA plus some written direction (which I should write) would be better than nothing.

 

[clifp]

Regarding trying to negotiate with them. My attitude is it never hurts to ask. In general, I don't think you'l be successful with somebody who is part of a larger organization Edward Jones etc. It is possible with an FA who is independent. When was looking for FA when I first retired, I got the impression that it was possible to negotiate fees. However, my demands for proof of their past performance were non-starters.

 

[Rustward]

Depends of the titling of the assets. Joint tenancy receives a step-up in basis on the decedent's share, while community property with rights of survivorship receives a step-up on the entire account (assuming one lives in a community property state).

bogleheads wiki/Step-up_in_basis

jlfwealth.com/tips/estate_planning/titling_property

I stand corrected. Thanks for the links.

 

[youbet]

Thanks to eveyone who commented on the step-up basis issue.

I think I need to go see a pro and make sure I'm doing this correctly in Illinois. A large percentage of our non-deferred portfolio is capital gains. Having the basis stepped up would be a good thing for the survivor.

 

[Jack_Pine]

Regarding trying to negotiate with them. My attitude is it never hurts to ask. In general, I don't think you'l be successful with somebody who is part of a larger organization Edward Jones etc. It is possible with an FA who is independent. When was looking for FA when I first retired, I got the impression that it was possible to negotiate fees. However, my demands for proof of their past performance were non-starters.

Thanks for the comment, good thoughts to the original post.

The others, related to the step-up stuff ....maybe should be a new thread for y'all. Just say'in.