Who has used a financial advisor?

[Nords]

Given time and resources the most productive research for money management should be done with an eye toward teaching us how to manage more consistently with personality styles.

They should just cut to the chase and recommend the appropriate asset allocation for a left-handed INTJ engineer...

 

[FinanceDude]

They should just cut to the chase and recommend the appropriate asset allocation for a left-handed INTJ engineer...

I'll start giving a Myers-Briggs test to all my new clients........

When I started in the business, the "old advisor" in my branch (40 years+) gave me this sage bit of advice: "There are four kinds of folks you DON'T want as clients, engineers, doctors, lawyers, and teachers"........

 

[caninelover]

Thanks everyone...I am kinda distrustful of FAs in general so I definitely wouldn't let one run the show. Its starting to seem like unless I just want a third party sanity check (which right now I don't, but may in the future as I get closer to FIRE-ing) it would be pretty much a waste of time and $ to consult with one.

Thanks again everyone!

 

[Finance Dave]

I don't use an advisor, but IMO an advisor's role is less about getting you good returns (they will get what the market gives them), and more about keeping you/us from making stupid mistakes.

Case in point? My MIL and husband had bought EE savings bonds all their lives as investments, they were afraid of the market. They were lower middle class, and did not accumulate much for retirement (they retired in about 1995 with about $90,000 of savings in EE bonds and a couple small pensions).

The husband died. MIL took all the savings bonds to the bank and cashed them all at once. Then she was shocked when she had the CPA do her taxes, only to find out she had inadvertently placed herself in a wealthy tax bracket for that one year, thus wiping out a large portion of her bond money.

IMO those are the types of things advisors are good for. Another example is that if you leave a job and want to roll over your 401k, they will tell you to not cash the check, safer to simply sign it over to the new 401k to avoid the penalties/fees. Many people are unaware of this.

Lots of similar examples.

 

[TooFrugal]

A dad we know through our kids' school functions is a financial advisor for one of the major brokerages. I talked to him a couple of times and he wanted me to turn our portfolio over to him (2% per year charge) and for that fee he would not actually manage our money but find someone (a golf buddy?) to manage it for us (another 1-2% charge!). I had a hard time believing he was really even serious or that he would actually have other clients. But he lives in an expensive home and we have a mutual friend who uses him as her financial advisor so I guess he really does get at least some clients. His portfolio manager would have to get returns of 3-4% over index funds in order to cover their fees, and have even higher annual returns to actually come out ahead of index fund returns.

I ended up talking to a few other people at the local brokerages, and most seemed more like sales people than actual financial advisers. I never went to a fee only financial planner. I ended up just buying several hundred dollars worth of books on taxes, small business structures, investments, etc. from Amazon and for me because I like to read and do my own research that was the right way to go.

We have also had a retirement plan done by Fidelity, but I think the one I did on my own was more accurate for us. Fidelity pushes what they make money on and not things like TIPS, which make sense for a lot of people. But it was still good to hear what the guy at Fidelity had to say and to compare the numbers I came up with on my own to his.

 

[clifp]

I'll start giving a Myers-Briggs test to all my new clients........

When I started in the business, the "old advisor" in my branch (40 years+) gave me this sage bit of advice: "There are four kinds of folks you DON'T want as clients, engineers, doctors, lawyers, and teachers"........

I think early retirees would be near the top of the list as undesirable clients.
I am sure poor people wouldn't be any good.

So other than stupid rich people, who are good clients for FAs?

I couldn't figure out the answer to the question so I stopped trying to become one.

 

[target2019]

Hi,

I have a question for everyone...I'm wondering how many people on here have used a financial advisor to help with retirement planning, either during the accumulation phase or prior to FIRE-ing to come up with their plan for how to draw on the money? Or have you done everything on your own?

I'm trying to get a handle on how useful their services/advice would be compared to what I can do on my own with calculators like Firecalc...

Thanks in advance, and Happy Monday to everyone!

Over the last six months I have listened to a dozen FA's. I have no intention of turning over my decisions, but use these opportunities to get a free dinner, and test my assumptions.

I feel that your best advisors are on this board, and also over at Morningstar and Bogleheads.

I look at this as life-long educational opportunity, with significant payout. It is in our best interest to keep looking for good advice, and remain skeptical.

 

[saluki9]

I think early retirees would be near the top of the list as undesirable clients.

Not so at all. Our firm works with a bunch of them. Most are great clients, easy to work with, and don't expect us to wear ties

 

[FinanceDude]

I think early retirees would be near the top of the list as undesirable clients.

Most of mine are early retirees, a lot of them from GE.

I am sure poor people wouldn't be any good.

They could be over time, but rarely listen anyways.......

So other than stupid rich people, who are good clients for FAs?

So, only stupid rich people use FA's? You need to get out more......

 

[FinanceDude]

Over the last six months I have listened to a dozen FA's. I have no intention of turning over my decisions, but use these opportunities to get a free dinner, and test my assumptions.

So, you're a mooch..........

I feel that your best advisors are on this board, and also over at Morningstar and Bogleheads.

hey, its your money.......

I look at this as life-long educational opportunity, with significant payout. It is in our best interest to keep looking for good advice, and remain skeptical.

Remain skeptical no matter WHERE you get advice from. Pretty hard to sue an anonymous person on the Internet if their advice blows up your nest egg..........

 

[Kabekew]

After I sold my business last year, I looked around at various financial advisors and paid a fee-only one for what I hoped would be some advice, but nobody was willing to give any advice. They all just wanted to tell me about the various things I "could" do with the money but they all wanted me to ultimately decide what to do. They also wanted me to lay out my financial goals and plans in detail.

Okay, but I didn't have long term financial plans and specific goals and didn't want to have to come up with them NOW like they all insisted. Also I didn't know what I wanted to do so that's why I wanted to hire an advisor. So it was very frustrating that I couldn't get advice from them. Maybe it was just liability concerns on their part, but to me it wasn't worth the time and money, and some of the newer financial products I did learn about from them I could have found with a little research online.

I wonder if their profession has been "dumbed down" maybe because the vast majority of their customers don't understand even simple mathematics, statistics, and concepts like interest and inflation, so these "personal financial advisors" have their hands full just getting people to do the very basics like understanding they can't spend more than they have, staying within a budget, and putting money toward retirement. All of their standard presentations seemed to focus on that, and for me anyway spent way too much time trying to teach me the "powers of compounded interest" and what inflation was even though I politely told them I knew those things already (engineering and economics background, corporate finance, etc).

Maybe I just picked bad FA's though, who knows. I just don't see what value they add if you already know the basics and know how to research things yourself.

 

[FinanceDude]

After I sold my business last year, I looked around at various financial advisors and paid a fee-only one for what I hoped would be some advice, but nobody was willing to give any advice. They all just wanted to tell me about the various things I "could" do with the money but they all wanted me to ultimately decide what to do. They also wanted me to lay out my financial goals and plans in detail.

Okay, but I didn't have long term financial plans and specific goals and didn't want to have to come up with them NOW like they all insisted. Also I didn't know what I wanted to do so that's why I wanted to hire an advisor. So it was very frustrating that I couldn't get advice from them. Maybe it was just liability concerns on their part, but to me it wasn't worth the time and money, and some of the newer financial products I did learn about from them I could have found with a little research online.

I wonder if their profession has been "dumbed down" maybe because the vast majority of their customers don't understand even simple mathematics, statistics, and concepts like interest and inflation, so these "personal financial advisors" have their hands full just getting people to do the very basics like understanding they can't spend more than they have, staying within a budget, and putting money toward retirement. All of their standard presentations seemed to focus on that, and for me anyway spent way too much time trying to teach me the "powers of compounded interest" and what inflation was even though I politely told them I knew those things already (engineering and economics background, corporate finance, etc).

Maybe I just picked bad FA's though, who knows. I just don't see what value they add if you already know the basics and know how to research things yourself.

Most folks in your situation DON'T WANT to invest themselves, you are different.

If I talk to a prospective client, I find out their background, so I don't look like an idiot. Someone with a finance background, I have an entirely different conversation than another prospect that knows nothing about investing and money.

Two of my best clients both have an MBA from the University of Chicago and are CFOs for major companies. Having a conversation with them about compound interest would have a bad effect.........

 

[LOL!]

I shudder to think what a "best client" means to a FA. Goose that lays golden eggs and lets you have them?

 

[Sarah in SC]

Our good clients are those that understand that investing is long-term, stay actively involved in their investments and tax planning, and keep their estate plans up to date. Smart people are who we want as clients. It helps if they are reasonable and nice, and are good savers.

I can't speak for the other FAs, but our clients are pretty good folks--no geese that I've seen so far, LOL.

 

[FinanceDude]

I shudder to think what a "best client" means to a FA. Goose that lays golden eggs and lets you have them?

Most rich people are smarter than they get credit for, and are good savers and conservative folks besides. A large number of millionaires and mult-imillionaires use financial advisors......

 

[ziggy29]

I shudder to think what a "best client" means to a FA. Goose that lays golden eggs and lets you have them?

Ouch. Cynicism meter jumping off the charts here....

 

[LOL!]

I was curious if y'all could speculate why financial journalists have financial advisors? For instance, Paul Sullivan of the NYTimes writes obliquely about switching advisors in this article: http://www.nytimes.com/2009/07/10/your-money/asset-allocation/10wealth.html
and Ron Lieber of the NYTimes is known to have used an advisor who was indicted for fraud: http://www.nytimes.com/2009/06/11/your-money/financial-planners/11money.html

 

[saluki9]

I shudder to think what a "best client" means to a FA. Goose that lays golden eggs and lets you have them?

People who know what goals they are trying to reach, or the challenges they face and who will listen to advice. It also doesn't hurt if they are nice respectful people either.

 

[Nords]

So other than stupid rich people...
I couldn't figure out the answer to the question so I stopped trying to become one.

Well, one out of two isn't so bad!

I think many of a FA's customers start as "Holy crap, I just realized that 90% of my net worth is in my employer's restricted stock and unvested options. I'm already working 80 hours a week to avoid the upcoming layoffs, my wife wants to remodel the house, my six kids want to go to college, and I don't have time to deal with all of this. What can you do for me?!?"

 

[saluki9]

Well, one out of two isn't so bad!

I think many of a FA's customers start as "Holy crap, I just realized that 90% of my net worth is in my employer's restricted stock and unvested options. I'm already working 80 hours a week to avoid the upcoming layoffs, my wife wants to remodel the house, my six kids want to go to college, and I don't have time to deal with all of this. What can you do for me?!?"

Hey, wasn't that one of my comments in a previous thread?

Yes, that is fairly common, but not always the case.

 

[FinanceDude]

I think many of a FA's customers start as "Holy crap, I just realized that 90% of my net worth is in my employer's restricted stock and unvested options. I'm already working 80 hours a week to avoid the upcoming layoffs, my wife wants to remodel the house, my six kids want to go to college, and I don't have time to deal with all of this. What can you do for me?!?"

That happens MORE than one would like to think. As for the so-called "financial journalists" of the NYT, well it is amazing to me that those folks still have jobs......almost ANYONE on this forum could submit better articles........

 

[Kabekew]

Most folks in your situation DON'T WANT to invest themselves, you are different.

No, I didn't want to have to do everything myself -- I would love to just pay someone to manage everything for me and create maybe a few choices of realistic financial goals for me to pick from. But at least everyone I checked with wanted me to make all the decisions and they would just carry it out.

It's like ordering something at a restaurant, then the chef comes out and asks me what ingredients I want him to put in it, what suppliers to buy them from, what seasonings I want him to use, and how long I want him to cook it. I don't know! Surprise me! I'd like to pay for someone's expertise, experience and recommendations and not just a hired hand to carry out my detailed instructions. Do financial advisors like that exist, or did I just happen to pick bad ones?

 

[target2019]

So, you're a mooch..........

hey, its your money.......

Remain skeptical no matter WHERE you get advice from. Pretty hard to sue an anonymous person on the Internet if their advice blows up your nest egg..........

1 - By your definition, a mooch. However, I see it as similar to consumers being paid to discuss a company's new products. Let's not forget, the FA eats too, some or all of the cost is written off, or reimbursed by the parent company.
2 - My money, shared with the family and the taxing authorities.
3 - Always skeptical. Listening to FA sales pitches, reading books, conversing on the internet at M* and Bogleheads. Seems like a balanced approach, and the nest egg will make many omlettes in the future.

 

[youbet]

No, I didn't want to have to do everything myself -- I would love to just pay someone to manage everything for me and create maybe a few choices of realistic financial goals for me to pick from. But at least everyone I checked with wanted me to make all the decisions and they would just carry it out.

It's like ordering something at a restaurant, then the chef comes out and asks me what ingredients I want him to put in it, what suppliers to buy them from, what seasonings I want him to use, and how long I want him to cook it. I don't know! Surprise me! I'd like to pay for someone's expertise, experience and recommendations and not just a hired hand to carry out my detailed instructions. Do financial advisors like that exist, or did I just happen to pick bad ones?

Well, there was Bernie........ but he's in jail now. Still, there must be others willing to take your money, "manage" it with no/few inputs or oversight from you and collect fees and commissions.

I've never, ever used that kind of advisor-money manager so I'm just guessing but I'd say they have a concern that if their strategy leads to substantial losses, the client (you) would whine and probably sue. So, they want/need substantial proof that you are fully aware of and approve of what's happening.

 

[clifp]

I think this is going to end up being a pay off the mortgage never ending debate with no right answer.

The chef is an interesting analogy. I am a decent cook when I set my mind to it, but there is tons of chefs who make a better tasting meal, I suspect that vast majority of moms on this forum are far more efficient at preparing a decent meal than myself. Judging the quality, cost and efficiency of a chef is a easy, immediate and requires minimal knowledge.

Hiring a contractor/handyman/mechanic is a bit more difficult, since you may not have any knowledge of the subject. Books are somewhat helpful, but there is no substitute for getting your hands dirty (which involves breaking things in my case). Still it is relatively easy to tell after a few days/weeks/or rarely months if the guy is any good or not and price shopping isn't too difficult. On the other hand there is minimal certification and there are plenty of incompetent/crooked mechanics and handymen.

Judging the skill of doctor/dentist/lawyer is much more difficult. It is generally impossible for the lay person to have the knowledge of their skill without going to medical/law school. The results aren't typically evident in periods shorter than a year and can take decades to really know. (e.g. a will,contract, cancer treatment). It is also very difficult to separate the skill of the professional from the situation. Did the patient die/lose the case, because the doctor/lawyer was incompetent or cause the person was really sick/case really weak. So people often judge the quality of a professional on the basis of their interpersonal skills. Fortunately, the bar association and AMA have implemented a certification process which sets a pretty high bar so that most of the truly incompetents are weeded out.

The problem with FA as profession is that they combine the worse of lawyers (it generally takes years to judge results, highly situational dependent) with the lack of certification that you get with auto mechanics, handyman etc. I know we've seen a lot more complaints about financial planners this last 6 months than we saw 3 years ago. I also think that for people with decent math/money skills you can learn the basics of financial planning by reading 3 or 4 books from among the boards reading list. All in all I find by that the time you've acquired the knowledge to properly evaluate an FA skills, you've also got the knowledge to do it yourself.