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What's the best question you asked your CFP / Investment Advisor
Old 11-28-2015, 06:54 PM   #1
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What's the best question you asked your CFP / Investment Advisor

Hi... Relatively new to the forums. Wife and I have hit "our number" and going to go into retirement early next year, me at 55 and wife at 53. I've managed to build our investments but never really sure if I've done better or worse than the "experts". We will have 7 figures available so I'm looking to interview a couple of CFP's to see if they have useful advice to get a good income stream developed. Which brings me to my question, what was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them? Thanks
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Old 11-28-2015, 07:04 PM   #2
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Welcome to the forum.

After you spend some time here you'll find the majority of those of us on the forum are DIY types who eschew paying fees to CFPs and/or Advisors. In short, they bring far more cost than value to anyone who is willing to spend a little time and effort educating themselves on how to manage their investments.
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Old 11-28-2015, 07:08 PM   #3
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Ask how they are compensated. Ask to see a fee schedule for all of the services that can be provided. They should also disclose if they refer you to another professional (i.e. accountant or attorney) what if any is the business arrangement they have with that professional. If any CFP or advisor refuses to disclose anything about how they are compensated do not utilize them at all.
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Old 11-28-2015, 07:10 PM   #4
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Originally Posted by bobandsherry View Post
... I've managed to build our investments but never really sure if I've done better or worse than the "experts".
Well, if you study the research, you'll see that the 'experts' are not able to consistently outperform a simple portfolio of index funds. So if you just do that, you likely are doing better than the 'experts'.

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... I'm looking to interview a couple of CFP's to see if they have useful advice to get a good income stream developed. Which brings me to my question, what was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them? Thanks
Based on the above - it doesn't seem like any question is a good question. All you do is give them a chance to sell their services, which you can easily do yourself.

Unless you have some complicated situation, but even then, I'm not sure the cost of a non-optimal DIY solution would be any worse than an optimal solution after fees. And how would you ever know?

-ERD50
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Old 11-28-2015, 07:15 PM   #5
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Ask how they are compensated. ...
Why bother? What good will come of it?

If you use a CFP who meets the 'fiduciary standard', they are working for you, so they should not have a conflict between selling products and doing best by you. They need to be paid for their time and expertise, and if they don't meet the fiduciary standard, then run away.

The question is, "Will paying them result in more money in my pocket?". Numerous studies say "no". So why bother?

-ERD50
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Old 11-28-2015, 07:18 PM   #6
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Welcome to the forum.

After you spend some time here you'll find the majority of those of us on the forum are DIY types who eschew paying fees to CFPs and/or Advisors. In short, they bring far more cost than value to anyone who is willing to spend a little time and effort educating themselves on how to manage their investments.
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Old 11-28-2015, 07:22 PM   #7
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Ask to see audited results of how well clients perform against benchmark(s). A pin drops. The BS motor starts.
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Old 11-28-2015, 07:57 PM   #8
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After receiving an inheritance many years ago, I interviewed several financial advisors. I asked them what the Sharpe ratios of their recommended investments were. When they asked me what the Sharpe ratio was, I crossed them off the list.
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Old 11-29-2015, 06:46 AM   #9
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Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.
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Old 11-29-2015, 06:59 AM   #10
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Your best option may be to consult with a fee-only financial planner. That could be the most cost-effective way to get advice on how to structure your investments to minimize taxes and set up a withdrawal plan for income. See https://www.napfa.org/

Once you get set up, you can manage your own investments through Vanguard or Fidelity and save the 1% or greater annual fee an Advisor will charge to (mis)manage your portfolio.
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Old 11-29-2015, 07:14 AM   #11
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Originally Posted by bobandsherry View Post
Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.
Maybe you need a CPA instead. You've apparently done well to get where you are without a CFP, but now your concern seems more tax-related.
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Old 11-29-2015, 07:18 AM   #12
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You've got "7 figures available", so you'd qualify for free Flagship Services at Vanguard. Info at this link: https://investor.vanguard.com/what-w...elect-services
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Old 11-29-2015, 08:22 AM   #13
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I'd ask, "where are the customers' yachts?"
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Old 11-29-2015, 08:24 AM   #14
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Here are some of my questions:

- Do you suggest stocks, active funds, or index funds? How do you select them?

- How often do you make trades on the accounts you manage? (More trades indicates several things - if it's a taxable account you have tax issues. More trades equals more trading fees/expenses, etc.)

- How are you compensated? Is it percentage of Assets Under Management (AUM)? How do you guarantee that your returns are higher than the market by that percentage? Do you get sales fees based compensation (loads) from the funds you invest in?

- Do you have a fiduciary responsibility?

Personally - I have big issues with paying fees for funds that often don't perform as well as index funds. I keep things simple with total stock and total bond index funds and a simple 60/40 asset allocation. With Vanguard and with Schwab you get a free financial consultant who can run through their tools and give you pretty reports and suggestions. I took advantage of this at Schwab just to double check my retirement readiness. She asked some questions that triggered some additional thought for me. But I am in charge of my own money.
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Old 11-29-2015, 08:30 AM   #15
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Here are some of my questions:

- Do you suggest stocks, active funds, or index funds? How do you select them?

- How often do you make trades on the accounts you manage? (More trades indicates several things - if it's a taxable account you have tax issues. More trades equals more trading fees/expenses, etc.)

- How are you compensated? Is it percentage of Assets Under Management (AUM)? How do you guarantee that your returns are higher than the market by that percentage? Do you get sales fees based compensation (loads) from the funds you invest in?

- Do you have a fiduciary responsibility?

Personally - I have big issues with paying fees for funds that often don't perform as well as index funds. I keep things simple with total stock and total bond index funds and a simple 60/40 asset allocation. With Vanguard and with Schwab you get a free financial consultant who can run through their tools and give you pretty reports and suggestions. I took advantage of this at Schwab just to double check my retirement readiness. She asked some questions that triggered some additional thought for me. But I am in charge of my own money.
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Old 11-29-2015, 08:48 AM   #16
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Old 11-29-2015, 09:55 AM   #17
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I would approach it like any other hire. They are working for you. First ask your friends and acquaintances who they use and whether they are happy. Then approach one or two of them and ask them questions that satisfy you that they are a good choice. Be careful not to be sucked in by their "story". It is results that count.

(How they get paid should not be an issue. Of course, you will need to know any fees you are expected to pay.)
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Old 11-29-2015, 10:16 AM   #18
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How much for the snake oil ?
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Old 11-29-2015, 10:45 AM   #19
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How much for the snake oil ?
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You lookin' to buy some snake oil to rub on your small snake?
(This sounded innocent at first, now maybe not so much).
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Old 11-29-2015, 11:00 AM   #20
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What was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them?

I asked each one for their general philosophy on how they'd manage my money. Got quite different answers from the 4 I talked to and eventually got free financial retirement plans from. I learned from those discussions and plans that the costs associated with having them manage my assets was exorbitant for the value provided. I have taken the route of many on this board and chosen to manage our assets ourselves and generally use simple index funds. My "management" takes a couple hours each quarter and really little to no effort. That's good because I really don't enjoy financial stuff that much. We keep it simple. Even teaching my wife what we are doing is fairly easy.
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