Should I Fire my Financial Advisor

[crispus]

I called Vanguard and they said that if I transfered the covered call stocks to them they would charge me $30 per trade. I was advised that I should liquidate with my FA and move the money to Vanguard money market. I am worried that this process will not be so easy or fast. The covered calls take time to expire. What should I do in the interim. While I am looking foward to calling my FA, the main question is how long all of this will take.

[cute fuzzy bunny]

Are you transferring considerable assets, as in a million or more? They might waive that $30 per trade fee if so.

[clifp]

Quote:

Originally Posted by crispus You know FA's daughter is being Bat Mitzvah's in October and they wanted an upscale booklet to hand out at the party. I am a print salesman, so FA called me for a meeting to discus project at his home. I gave him the price and he said that looked great and he would get me the info in August. He called me a week later, very apologetically, to tell me he was not going to do the booklet. I guess his wife found a cheaper way to do it.

This is perfect. You should call him back and apologize but explain that your wife found a cheaper way to manage your investments, especially since he has the dubious honor of underperforming in both up and down markets.

On a somewhat serious note. What are his qualifications? Unfortunately, virtually anybody can call himself a financial planner advisor. A fair number of the fancy letters they can put after their names can be obtain with a couple hours of study a few hundred dollar. IMO, as someone is who is slowly in the process of obtaining my CFP (Certified Financial Planner), having the fancy letter doesn't mean you are good advisor. But not having the right ones means there is a good chance your financial advisor doesn't know squat except for what makes him and his company the most commission.

In my opinion, CPA who does financial planning is probably worth paying for money especially on the subject of taxes. (of course purchasing a VA for a IRA pretty much eliminates the possibility that your FA is certified public accountant (CPA).
A CFP is a fairly thorough program with tough certification test at the end. You can still be a shyster but odds are you are knowledgable. MBA aren't all that useful for financial planning but at least you have some confidence that the guy has a master degree in related field.

The important thing to understand is that you should not be paying more in fees to any financial advisor on hourly basis than you would for a CPA or lawyer, because it is much harder to become lawyer and CPA.

More importantly there isn't a great deal of evidence (and I am being kind) that a financial advisor will save you money where as in many case a lawyer or a CPA can save you a small fortune.

So if for some reason you want to continue to work with this guy, tell him you want to work with him only on fee only/hourly basis, and the price better not exceed what you pay the tax guy!

[Salaryman]

The truth of the matter is that most FA's are salesfolks first.
Got to ask the question is my FA smarter than Investment professionals managing 100's of millions of assets (most of the mutual fund managers are well experienced and usually armed with MBA's, CFA's and other useful designations).
Or better yet, very few managers beat the index consistently.
Just remember, covered call strategy may cover your downside...but it'll limit your upside potential as well.
G'luck.

[FinanceDude]

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Originally Posted by lsbcal Maybe FinanceDude can tell us why anyone should mix socializing or church with money matters. Seems to me they are distinctly and inheritantly different activities. Mixing socializing/friendship/religion with money is a BAD idea in my opinion. Would like to hear a counter argument though , , .

It happens, some of my best clients have become friends over the years. However, I have politely declined almost all of their invitations to "go to the club","bring the kids out to the lake home", etc. I just feel I could lose my objectivity and make things uncomfortable on either end if I got too wrapped up with them.

I try to keep business and socializing as distinct as possible. I know it has "cost me" some opportunities, but I;m not about to do things differently.........

[FinanceDude]

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Originally Posted by Salaryman The truth of the matter is that most FA's are salesfolks first.

Most folks in ANY business are salespeople, including bsuiness owners, CPAs, attorneys, etc..........

Quote:

Got to ask the question is my FA smarter than Investment professionals managing 100's of millions of assets (most of the mutual fund managers are well experienced and usually armed with MBA's, CFA's and other useful designations). Or better yet, very few managers beat the index consistently.

The DIY's don't understand this, but most of the FA's who last in the business NEVER sell performance.

[Just remember, covered call strategy may cover your downside...but it'll limit your upside potential as well.
G'luck.[/quote]

I have never used covered calls except as a way to make extra income on a long stock position...........

[cute fuzzy bunny]

Quote:

Originally Posted by FinanceDude Most folks in ANY business are salespeople, including bsuiness owners, CPAs, attorneys, etc..........

I have it on good authority from another thread that your company's business has nothing to do with what it makes most of its money on, but rather on the minority tools it uses to generate 99% of its revenue.

So you therefore are a spreadsheet guy, not a sales person, financial advisor, investment guy or anything else like that. Your core business isnt relevant. You make spreadsheet results.

[crispus]

Thanks for all the great advice here. I opened up an account with Fidelity today. They will handle all the covered call stuff at the cheapest cost to me. As the call expire, I will invest in a range of mutual funds with a 60/40 stock to bond percentage.
Should I use managed mutual funds or index funds or a combination of both?

[cute fuzzy bunny]

I'd consider one of fidelities target retirement type funds that starts in the 60/40 allocation range and slowly shifts its allocation to become more conservative.

[2B]

Quote:

Originally Posted by crispus Thanks for all the great advice here. I opened up an account with Fidelity today. They will handle all the covered call stuff at the cheapest cost to me. As the call expire, I will invest in a range of mutual funds with a 60/40 stock to bond percentage. Should I use managed mutual funds or index funds or a combination of both?

I agree with the Target Retirement approach to get started but I personally have individual index funds for my own asset allocation plan. You can get about the same thing but you have to make a decision about how much you want in fixed income. The "target year" will impact the amount of fixed income so look at that. The amount of fixed will vary depending on the percentage of pensions or SS in your retirement income. If they are a low %, you should move to a higher fixed income. If they are more than 50% you can drop the fixed down. Typical fixed income % run around 40 to 50% for low pension/SS retirements. Of course, others may have different opinions. I also personally do not like bond mutual funds since I was once burnt badly on them. I buy laddered CDs for my fixed income.

BTW -- CONGRATULATIONS on taking charge of your own life and destiny.

[missionfinder]

If you want financial advice that is not tied to commissions, kick-backs, favors, etc. consider getting a certified fee-only advisor. Not a "fee based" planner because they disguise themselves as fee only but aren't.

In my case, I pay .4%, and that includes not only investment planning, but retirement planning, insurance analysis (I was shocked to find out how inadequate my umbrella policy was considering my net worth and the risk that exposed me to in a liability lawsuit), estate planning, budgeting, personal goal setting and planning, marital goal setting and planning, educational planning for the children, credit review and planning, and even lifestyle planning (health, exercise...). His firm has zero financial interest in any company, stocks or funds he recommends and I execute everything directly instead of through him.

So far I've been thoroughly impressed with his services and advice. Less than 1% of "financial planners" are certified as fee-only. That's because there isn't as much money to be made when you're not milking your clients.

And also, in my case the fee goes down after the initial planning stages because follow-up years review/change sub-plans rather than completely change our plan. Best part is the fee, as a percentage of our portfolio goes down as our portofolio value goes up. Be aware that your portfolio size may fall below the minimum amount most fee-only planners will manage (its a lot of work that they do) so they may charge a minimum fee the first year rather than a percentage.

Getting a fee-only planner was the best money decision I've made -- a far cry better than the run of the mill "advisor" who tells you to put your money in these buckets (because I make money when you do).

[Salaryman]

FinanceDude, my comments were not malicious or biased IMHO.

I thougth that the whole point of participating on this board was to help each other and to share information that can be used constructively.
Don't take it personally and don't have to defend an entire industry. SIA does that job fairly well, last time I checked.

Crispus, you are doing great by taking steps to secure your financial success. There isn't a single 'RIGHT' answer out there....just the best that you can do and feel good about afterwards.
I am sure that many successful investors have had to experience growing pains and make mistakes along the way.

There are a lot of good opinions, suggestions and information being offered for your benefit on this board. Use them to your advantage.

Best of luck.

[clifp]

Missionfinder I think that is good advice. I know there are networks of fee-only advisor, but I am curious how you went about finding yours, and .4% seems reasonable. Depending on your assets 2.5 million (a $1000 fee) reasonable 25 million (10K fee less so) and 250 million $100K not at all reasonable.

[FinanceDude]

Quote:

Originally Posted by clifp Missionfinder I think that is good advice. I know there are networks of fee-only advisor, but I am curious how you went about finding yours, and .4% seems reasonable. Depending on your assets 2.5 million (a $1000 fee) reasonable 25 million (10K fee less so) and 250 million $100K not at all reasonable.

Actually, .4% of $2.5 million is $10,000 a year.......

[FinanceDude]

Quote:

Originally Posted by Salaryman FinanceDude, my comments were not malicious or biased IMHO. I thougth that the whole point of participating on this board was to help each other and to share information that can be used constructively. Don't take it personally and don't have to defend an entire industry. SIA does that job fairly well, last time I checked.

SIA doesn't do anything of value for my industry...............

[2B]

Quote:

Originally Posted by missionfinder If you want financial advice that is not tied to commissions, kick-backs, favors, etc. consider getting a certified fee-only advisor. Getting a fee-only planner was the best money decision I've made -- a far cry better than the run of the mill "advisor" who tells you to put your money in these buckets (because I make money when you do).

There isn't a perfect answer for everyone. I personally think that with some self study and reflection most everyone that is smart enough to find this forum can do a reasonable job evaluating everything you mentioned.

One thing this forum teaches is to watch the fees. The thought of writing a check for 0.4% of my portfolio would make my hands shake. Living through 10% market corrections is a necessary part of the game but high fees are not.

I would probably be much more interested in the services of a FA if they were available like lawyers or CPAs -- paid by the hour for the services provided. I would think that their service would be valued at $100 to $200 per hour. When I see what people pay the "full service/full fee" FAs, I can only shake my head.

[FinanceDude]

Quote:

Originally Posted by 2B There isn't a perfect answer for everyone. I personally think that with some self study and reflection most everyone that is smart enough to find this forum can do a reasonable job evaluating everything you mentioned.

True, and I have stated that many times. However, the folks that actually TAKE ACTION and are willing to DO the work necessary are a small percentage......

Quote:

One thing this forum teaches is to watch the fees. The thought of writing a check for 0.4% of my portfolio would make my hands shake. Living through 10% market corrections is a necessary part of the game but high fees are not.

It depends on what he's getting for that .4%. I know private banking guys that charge 1% a year on Family Limited Partnerships for folks at $30 million and up, but for that fee they literally do EVERYTHING..........

Quote:

I would probably be much more interested in the services of a FA if they were available like lawyers or CPAs -- paid by the hour for the services provided. I would think that their service would be valued at $100 to $200 per hour. When I see what people pay the "full service/full fee" FAs, I can only shake my head.

Unfortunately that business model is dead. Unless the fee-only CFP's find another avenue to make revenue, they can't pay the bills. Like I said, two well known local hourly CFP's that have been doing it for over 20 years closed up shop due to lack of money..........

We've had this discussion on here numerous times. I see VERY FEW folks on here willing to pay $200 a hour for an FA, regardless of background and experience...............

[saluki9]

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Originally Posted by Nords Because that's where all the suckers customers are. How many times have we read a financial disaster article that started with "Mr. Edward Jones was an upstanding financial advisor and a pillar of the community's local church, where he..." ?

Well, you can be the smartest planner, CPA, attorney, etc but if you don't have any clients it is pretty hard to make a living.

The fact is that social interaction is how most people meet their FAs. But that is also true of other professionals. There are some really specialized people that get 100% of their business from referrals, but even to do that you need to get out and be among the people.

[saluki9]

Quote:

Originally Posted by FinanceDude Unfortunately that business model is dead. Unless the fee-only CFP's find another avenue to make revenue, they can't pay the bills. Like I said, two well known local hourly CFP's that have been doing it for over 20 years closed up shop due to lack of money.......... We've had this discussion on here numerous times. I see VERY FEW folks on here willing to pay $200 a hour for an FA, regardless of background and experience...............

Yeah, it's nice in theory to have a CFP who works only by the hour, but you have to be at a very high end shop to make that work. The only time I have seen it successful is where they have in house planners at an accounting firm. There is one in Philly I have worked with where they take a $10K retainer up front and $300 and hour after that for planning.

Our firm is getting more and more requests for it. I just spent the last 4 hours doing a suitability writeup for a trustee who doesn't trust the existing portfolio manager. We charge $250/hr for me to do that, but it can save the clients many times that. That being said, it's never going to be a core business, the demand just isn't there.

[2B]

Quote:

Originally Posted by saluki9 Our firm is getting more and more requests for it. I just spent the last 4 hours doing a suitability writeup for a trustee who doesn't trust the existing portfolio manager. We charge $250/hr for me to do that, but it can save the clients many times that. That being said, it's never going to be a core business, the demand just isn't there.

That amazes me. The typical rube I run across is paying 1.5% in fees just for the FA and then they are put into high fee mutual funds that charge another nominal 1.5%. For a $1MM portfolio that works out to $30,000 per year. Yet these people that need the help won't pay $1,000 once or twice per year to have someone look over their portfolio allocations, insurance coverage, etc?

I can't help but think that if your assets are under about $5MM you fall into the cookie cutter approach. There would be slight shifts based on size of expected pensions, inheritances, business, real property holdings but overall the adjustments are pretty obvious and minor.

I guess that business model doesn't work because so much money can be made from the clueless. Once they realize they aren't getting much value for their $30,000, they realize they can usually do it themselves.

I will agree that when the amount of money becomes substantial -- $20MM+ or so -- the complexity grows when other family members, commitments and goal are factored in. If I ever find myself in that area, I'll let you know.