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Using a planner to help, well, plan?
Old 04-11-2008, 03:43 PM   #1
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Using a planner to help, well, plan?

So, DH and I are happily tooling along on our ER plan, but each year our financial picture gets a little more complex (add kids, add jobs, subtract jobs but keep the old job's deferred comp plans, etc). I'm beginning to feel a little scattered, and I'm also wondering if we're making the most of the opportunities available to us for maximizing savings, minimizing risk and meeting our goals. We've got a written plan that we review and tweak at least once a year; we use index funds and are working on our diversification; we're not emotional investors, we keep learning.

What I'm wondering, specifically, is if using a CFP to help us coalesce and vet our plan would be useful. Has anyone on the board used a planner for just this purpose -- checking your plan for holes, making recommendations to get some synergy out of your accounts, and for another opinion? I'm not a fan of turning my money over to someone else to manage, but I'm wondering if we've got all the bases covered.

Experiences? Suggestions?
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Old 04-11-2008, 03:49 PM   #2
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I've got some complicated tax issues, so I am currently interviewing several fee-based financial planners. There are several in my area that come with good recommendations.

I was using my CPA for business and personal taxes, and when it came to asking him some investment questions, I found him lacking. He also encouraged me to use the services of a broker who rents space in their lovely office building. Not going there.

My investments are relatively simple, but I want to have a better handle on the tax implications, both now, and planning for retirement of the SEP-IRA/ IRA/ Roths and other investments.
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Old 04-11-2008, 05:26 PM   #3
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Originally Posted by Urchina View Post
but I'm wondering if we've got all the bases covered.

Experiences? Suggestions?
Professionals are good for issues such as estate planning and taxes. But for general "do I have all the bases covered" questions, I'd rely on reading, reading and then a little more reading. Several years ago, my company paid $3k for a planning firm to do a plan for DW and I. Interviews..... questionaires..... PowerPoint presentations..... all ending in a 200+ page color, glossy, professionally bound report for us. Looking back at it today, it seems pretty worthless and definitely no substitute for making yourself as informed as you possibly can be, including participating in forums like this one.
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Old 04-11-2008, 11:34 PM   #4
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IMO, the more you know, the better off you are. Given that, you sometimes don't know what you don't know...
Contrary to many on this board who are very knowledgeable and have the inclination to read books written by the top pros in the field, I don't want to get into the nitty gritty and be an expert on everything financial. So I have used a FA to help do a review of what I was doing, gain an understanding my goals and then giving me suggestions on how I can accomplish those goals. He has found my plans to be fairly solid and that I have a good understanding of financial vehicles and alternatives. I currently am scheduled to have him do twice a year reviews. I have agreed to pay him a flat fee of $1000 a year (the 2007/8 payment to be made in Sept).
Is (was) it worth it? It has given me a confidence level that I was on the right track. I will continue to use his services until I find no value.

IMO, you have to know yourself and how you want to approach this.
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Old 04-12-2008, 02:14 AM   #5
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I agree that you have to take responsibility for the "big picture" of where you want your financial life to go. Financial advisors and other experts are only good for answering the specific questions you will have.

For example, you have to learn what your basic alternatives are for diversifying your investments. A financial advisor will review (to provide constructive feedback) and then implement your decisions in terms of being an asset manager (i.e., buying and selling specific assets in such a way to satisfy your objectives). (My financial advisor happens to be a stock broker at a major Wall Street brokerage firm, but I've done enough research of my own to be able to tell that I'm getting good advice when we discuss my financial situation and plans [otherwise, I would have dumped this person a long time ago].)

Many years ago, I put my cashflow budget into spreadsheet format that goes out several decades. By doing so, I was able to see how investing an additional $100 a month now, for example, was going to improve my retirement possibilities a decade or two or three into the future. This feedback in terms of knowing the futurity of current decisions provided the motivation I needed to make that additional monthly investment in the here and now. This spreadsheet also allowed me to see how my budget would hold up in the future under various scenarios (e.g., inflation rates of 3% versus 4% versus 5%, or market returns of 5% versus 7% versus 10% a year).

Putting together such a spreadsheet also forces you to learn about such things such as required minimum distributions from retirement accounts (for example), along with many other arcane aspects of financial planning. Your goal here is not to become an expert in such matters, but to become knowledgeable enough to be able to ask experts intelligent questions and to know that you have all of your bases covered.
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Old 04-12-2008, 06:00 AM   #6
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Quote:
Originally Posted by megacorp-firee View Post
I currently am scheduled to have him do twice a year reviews. I have agreed to pay him a flat fee of $1000 a year (the 2007/8 payment to be made in Sept).
Is (was) it worth it? It has given me a confidence level that I was on the right track. I will continue to use his services until I find no value.

IMO, you have to know yourself and how you want to approach this.

I've used FPs in the past and will in the future, but I do the fee only type,
I put everything in a spreadsheet, I've done the m* x-ray, etc etc
So we don't waste time and get right to the heart of the matter.
I usually have specific questions/issues I need to address.

Unless your financial situation changes, why bother going back to have
the FP tell you the same thing they told you the last time. And if they
don't tell you the same thing, what change? I totally agree it depends
on how complex you situation is and how comfortable (educated) you
are with financial issues.
TJ
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Old 04-12-2008, 09:39 AM   #7
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Originally Posted by megacorp-firee View Post
IMO, the more you know, the better off you are. Given that, you sometimes don't know what you don't know...
Contrary to many on this board who are very knowledgeable and have the inclination to read books written by the top pros in the field, I don't want to get into the nitty gritty and be an expert on everything financial. So I have used a FA to help do a review of what I was doing, gain an understanding my goals and then giving me suggestions on how I can accomplish those goals. He has found my plans to be fairly solid and that I have a good understanding of financial vehicles and alternatives.
I did something similar several years ago, just before I found this board. I wrote my own plan and then hired a fee based FA to review the plan and make recommendations. She felt we were in good shape, understood our needs and risk, etc. She recommended some tweaks in the asset allocation. Talking things through with her helped me assure myself that my estimations were not way off. In my opinion, this Board is a better resource by far. The most difficult thing is figuring out what FAs will be worth talking to. I suspect there are some very good ones out there but finding them is a crap shoot. You can just ask friends who use them but, if they need an FA they are probably not sufficiently knowledgeable to advise you whether the FA is any good
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Old 04-12-2008, 09:39 AM   #8
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I've interacted with a few planners. None (yes, NONE) of them have convinced me that they were worth paying them money for advice. If you are capable enough to post on this forum, you will likely do a better job for yourself than any planner would.

We have paid an estate attorney for wills, bypass trusts, POA, etc.
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Old 04-12-2008, 12:33 PM   #9
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You can just ask friends who use them but, if they need an FA they are probably not sufficiently knowledgeable to advise you whether the FA is any good
And that's the truth! Like most life-skills, once you know enough to interview and pick a professional to do a job, you probably know enough to just do it yourself.

Even in this thread, the folks who advocate using a planner say they're pretty well informed, are doing planning spreadsheets, etc., and just use the planner for consensual validation (confidence building) or convenience.

I think the key point is that whether you use a planner or not, you need to be relatively well informed about your personal financial status and the available tools, strategies and rules of the game going forward.

Having a $/hour planner review your situation and strategy and give advise for your consideration, fine. Having a commission based or $/hour planner do everything for you so you need to know little/nothing, big mistake.
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Old 04-12-2008, 12:51 PM   #10
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Speaking of planning spreadsheets, does anyone have a link to a spreadsheet that one could use as a guide for planning. Thanks.
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Old 04-12-2008, 08:36 PM   #11
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Speaking of planning spreadsheets, does anyone have a link to a spreadsheet that one could use as a guide for planning. Thanks.
try here: CCH Financial Planning Toolkit | Table of Contents
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Old 04-12-2008, 09:12 PM   #12
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Originally Posted by Urchina View Post
So, DH and I are happily tooling along on our ER plan, but each year our financial picture gets a little more complex (add kids, add jobs, subtract jobs but keep the old job's deferred comp plans, etc). I'm beginning to feel a little scattered, and I'm also wondering if we're making the most of the opportunities available to us for maximizing savings, minimizing risk and meeting our goals. We've got a written plan that we review and tweak at least once a year; we use index funds and are working on our diversification; we're not emotional investors, we keep learning.

What I'm wondering, specifically, is if using a CFP to help us coalesce and vet our plan would be useful. Has anyone on the board used a planner for just this purpose -- checking your plan for holes, making recommendations to get some synergy out of your accounts, and for another opinion? I'm not a fan of turning my money over to someone else to manage, but I'm wondering if we've got all the bases covered.

Experiences? Suggestions?
I was trucking along with our ER plan and reading up on things etc etc when a very good friend of ours dropped dead 2 days before his ER day and his wife suddenly had to pick up the pieces and start trying to figure out all his finances. This was when DW decided she needed to know just what I was doing and why. Lots of questions etc, then she heard about evening classes at the local university so we took ourselves off there and it was excellent. Lots of good information, suggestions, ideas, all of which were available in books which I could have read, but it generated a lot of food for thought. 6 x 2hr classes at a cost of $75 for both of us - great value.

You might have a look to see if your local college offers such things, and if they do, ask around to see if they are genuine and not really just trolling exercises by FP's looking for business.
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Old 04-12-2008, 10:22 PM   #13
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... but I'm wondering if we've got all the bases covered.
Experiences? Suggestions?
What LOL said.

First you have to avoid the "fee-based" guys who get money from you but who also get a lot more money from financial institutions through commissions and other compensation. Then after you finally wade across the cesspool to the "fee only" guys at the shallow end you still have to make sure that they're not getting any type of compensation or reimbursement from other firms that would make them captive shills. I'm not sure how to do that.

A financial advisor has to be an expert on a number of different situations. You only have to be an expert on one-- you. You're far more motivated to do the research and the calculations and to put in the extra hours to verify the results. Between your efforts and this board's advice you'll have it covered better than a professional's cookie-cutter printouts.

I went through an advisor search in the late 1990s. It was a heckuva challenge to find a planner who could even entertain the idea of ER, let alone promise a plan for five or six decades' worth. The few who could get through those wickets choked on the asset-allocation concepts of military pensions and cheap healthcare. The advisor with the best software (from AXA) had a great data package but during the first interview he admitted that their simulation software was going through an upgrade to a new version that'd be available in six months. Just the exercise of filling out their data package, though, persuaded me that we'd thought of everything.

About the time I was tiring of fending off annuity salesmen and filling out data packages, I came across FinancialEngines.com. Between there and the T. Rowe Price retirement software we had the confidence that no stone was left unturned, and we confirmed that with FIRECalc a few months later. If you're still concerned after using those calculators then you can also spend the comparatively minor sum on ESPlanner, whose the data-entry details will surely convince you that you've thought of everything.

My favorite financial advisor was the guy who said "Well, it sounds like you're retiring early. If you can limit your annual spending to 3% of your portfolio and consider part-time work then you don't need me..."
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Old 04-13-2008, 05:58 AM   #14
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My accountant does a good job of making tax / business recommendations. But now I don't consider him a financial planner. Based on his advice, he put together a "retirement plan" for me and DH 4 years ago. It has 5 sections. 1 is basically a Firecalc printout, but not as good. Sections 2-5 each have 7 pages of canned "portfolio snapshot disclosure statement" followed by graphs/ printouts of past 401k / IRA activity and that of the annuity which I bought from him. No real "planning" in the report.

Most financial planning can be done yourself with the proper research / education.
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Old 04-13-2008, 11:40 AM   #15
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What LOL said.


About the time I was tiring of fending off annuity salesmen and filling out data packages, I came across FinancialEngines.com. Between there and the T. Rowe Price retirement software we had the confidence that no stone was left unturned, and we confirmed that with FIRECalc a few months later. If you're still concerned after using those calculators then you can also spend the comparatively minor sum on ESPlanner, whose the data-entry details will surely convince you that you've thought of everything.

"
Speaking of Financial Engines, and maybe I should start a new thread on this, we've used them, FireCalc and Vanguard to track the likelihood of ER success. The odd thing I've found is that we come out very well in both FE and FireCalc (95%) but much lower (83%) or so with Vanguard. Has anyone else found a large discrepancy when using Vanguard?

I've asked Vanguard about it, esp. and Financial Engines is now available through them, and they haven't had a definitive answer: just that they've changed their tracking period to go back to 1900 I think, and extended life expectancy to 95. But I always wonder which to believe. Obviously we'd feel a lot more comfortable about ER if FE and FireCalc are not being overly optimistic. It just puzzles, and bothers, me that Vanguard is so much different.
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Old 04-14-2008, 10:59 AM   #16
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Thanks for the advice, everyone. Most of it confirms my gut feeling (which so far has never been wrong and which I've learned through trial and error to trust). I do feel that I can do this, and do it well. I also know that if we did have a planner help us with our money, we'd drive him/her crazy with micromanagement, which means I should just do it myself.

Some of my reservations come from the fact that I'm still relatively low on the learning curve, and I know that mistakes (like interest) can have significant impacts if allowed to compound over time. The tools available here will help assuage that doubt, once I get up the umph to use them.

Again, thanks for your thoughts and advice. I appreciate it!
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