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Family and CFP
Old 04-20-2008, 01:23 PM   #1
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Family and CFP

My brother-in-law is a CFP for a major brokerage firm and currently handles my wife's Roth IRA. I know that many on this forum don't care for Financial Planners due to the high fees and poor performance compared to low cost DIY funds through places like Vanguard. I tend to agree with that perspective, but in this case I think he will look out for our best interests.

He waives the fees for her and will do the same for me as a family member. Obviously there is the issue of mixing family and money, but other than that, are there any advantages or disadvantages to investing through him versus Vanguard? Thanks.
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Old 04-20-2008, 01:39 PM   #2
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I would have him put you in index funds with vanguard via his brokerage. See how happy he'd be with that idea.
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Old 04-20-2008, 01:39 PM   #3
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He's waiving what? Not charging you a fee for a financial plan? Not charging you sales load? He's certainly NOT waiving the internal expenses of the funds and you should still compare expenses vs Vanguard funds. Advantage: your investments probably still count towards some quota he's trying to meet. Disadvantage: If this goes badly you are probably going to have a hard time extracting yourself without family issues.
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Old 04-20-2008, 02:10 PM   #4
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He waives the fees for her and will do the same for me as a family member. Obviously there is the issue of mixing family and money, but other than that...
I don't think you can dismiss the potential perils of this mix quite so easily. I cannot imagine any upside from what your BIL can do vs. what you can do on your own that would outweigh the risk of serious family discord down the road.

We all assume some level of risk with our investments. Why take on the additional risk of family problems if you don't have to? Not worth it.
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Old 04-20-2008, 03:21 PM   #5
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Obviously there is the issue of mixing family and money, but other than that, .............
You already gave enough reasons that makes it a bad idea. Why ask us to overkill?
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Old 04-20-2008, 07:18 PM   #6
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Obviously there is the issue of mixing family and money, but other than that...
Whitebread Americans tend to shy away from family linkage. But some of the most successful familes and subcultures would hardly deal with anyone who isn't family.

So to me at least, this is not an automatic no. Depending on the guy, your family culture, and other factors, it could be a great idea.

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Old 04-20-2008, 07:28 PM   #7
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. . . are there any advantages or disadvantages to investing through him versus Vanguard? Thanks.
No advantages. Scores of disadvantages.
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Old 04-20-2008, 07:35 PM   #8
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Gosh, I love this crowd. No, I'm sure this guy knows nothing about investments that can't be learned from a bunch of strangers on the internet

I manage money for most of my family members. I can assure you that I look after those accounts very closely.

If you trust him, and he treats you well as a client I don't see what the problem is? My only caveat is that I tend to shy away from people who want to waive all of their fees for me. The fact is that he is running a business and you want this account to be important to him.
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Old 04-20-2008, 07:55 PM   #9
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I manage money for most of my family members. I can assure you that I look after those accounts very closely.
I'm sure you do (not being facetious or sarcastic here) and there is no reason to believe the OP's BIL wouldn't be equally as conscientious. But that's not the point.

My thumbs down vote was based on what happens if sis ends up unhappy with the results of BIL's efforts? It could be very, very sticky to tell him "Thanks, but I no longer want you to manage my money." Conversations like that generally don't foster good family relationships.

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I'm sure this guy knows nothing about investments that can't be learned from a bunch of strangers on the internet
Hey, not only are we good, we're cheap too!
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Old 04-20-2008, 08:32 PM   #10
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I think he will likely look out for your best interests, but why don't you have a pleasant conversation now about your exit strategy if your situation changes in the future and you want to get out. Then you've got a plan in place if you get uncomfortable later.

I'd love to have someone like Saluki in our family! I'm sure your family is delighted by having someone with your credentials and current knowledge to advise them.

I give some very general advice on mutual funds, tax stuff, questions about mortgages, etc. But I'd not want to give anyone the idea in my family that I would actually "manage" their money.
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Old 04-20-2008, 08:53 PM   #11
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He's waiving what? Not charging you a fee for a financial plan? Not charging you sales load? He's certainly NOT waiving the internal expenses of the funds and you should still compare expenses vs Vanguard funds. Advantage: your investments probably still count towards some quota he's trying to meet.
You guys know so little sometimes it's scary..........
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Old 04-20-2008, 08:54 PM   #12
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I would have him put you in index funds with vanguard via his brokerage. See how happy he'd be with that idea.
How happy were you all the times over the years when folks turned down your financing through the dealer and didn't buy warranties, credit life, or disability?? Just wondering..........
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Old 04-20-2008, 10:13 PM   #13
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How happy were you all the times over the years when folks turned down your financing through the dealer and didn't buy warranties, credit life, or disability?? Just wondering..........

FD, all part of doing business, you take the good with the bad when your on commission.

I can remember many threads on this forum where everyone was beating up on car dealers and anybody else that's on commission. I remember Saluki laughing about how he beat a dealer down to no profit and then made the dealer take his credit card so it would cost the dealer more $. So what, who cares if that's what makes him happy.

When on commission, sometimes you bite the bear and sometimes the bear bites you.

My statement was after the BIL stated he was not charging any fees. Well, if that's the case he shouldn't have any problem putting all the money into index funds with Vanguard, no
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Old 04-20-2008, 10:19 PM   #14
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FD, all part of doing business, you take the good with the bad when your on commission.
When you work on commission, you got to sell if you want to keep your wife and kids.

So you do, and the more stuff with the highest mark-ups you can sell the better you like it.

So what? What does the customer expect? Unlike roughly 1/3 of the population you are not being supported by tax receipts.

ha
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Old 04-20-2008, 10:24 PM   #15
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Yup, no doubt about it, I lived on commissions for 35 years.

But when you tell a relative that your not charging any fees or profit then you should do the right thing for them. So I would think he shouldn't have a problem putting him in Vanguard and managing his port.
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Old 04-20-2008, 11:02 PM   #16
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But when you tell a relative that your not charging any fees or profit then you should do the right thing for them.
Oh, I agree completely. Family is a separate issue. After all, these are the people who you want to be able to rely on if the going gets rough in any way.

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Old 04-20-2008, 11:07 PM   #17
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Hey, not only are we good, we're cheap too!
Well, cheap anyway...
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Old 04-20-2008, 11:53 PM   #18
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I am also one that is surprised on how some people dis family members..

I give advice to almost all of my family members... for free... but I only give it when asked...

And usually, I give them options so they can make the final decision...

Most have gone into Vanguard, but some are in a few others they like, but they are good investments...

And I have also given advice to some co-workers when asked... they would come by and just start talking... and then ask... 'what should I do?'...

I have usually told people that don't listen to me on individual stock... I am bad at picking them.... but pretty good at portfolios....

BUT, do be careful with a BIL or someone else who does recommend some high cost funds... I was talking to my company's outside adviser on some of the very high cost funds.... and why do we offer them... and he said that Fidelity was recommending them for our size plan... and 'if they make more than someone else they pay for the extra fees'... it is this kind of thinking that you want to avoid.... just my thoughts..
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Old 04-21-2008, 12:02 AM   #19
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He waives the fees for her and will do the same for me as a family member. Obviously there is the issue of mixing family and money, but other than that, are there any advantages or disadvantages to investing through him versus Vanguard? Thanks.
I think that disadvantages are primarily from his perspective. Will I put my wife in an awkward situation with her brother if I suggest investments that don't work out.

In general there are three issues with using a financial adviser
  • Is he competent
  • Is he trustworthy
  • Does his fees justify what I can do on my own.
I think having a family member who is both knowledgeable and willing to help you with investments is terrific benefit. The same way that having a doctor, lawyer, CPA, or Vet in the family is great for if nothing else getting a second opinion.

Of all the silly letters that go behind financial advisers names the only two that should impress an individual investor, are CPA, and CFP in that order. The programs are rigorous and the pass rates for either credential are lower than the bar exam. I have an MBA, 25+ years of successful investing, and I can tell you that would take a full year of study for me to have a chance at passing a CFP. I have yet to meet somebody who has passed the CFP on their first try.

So while a CFP is no guarantee that guy is competent is an indication. Trustworthiness is an issue you will have to judge for yourself.

The final issue is fees, if he waives there is at least a reasonable chance he could make you more money than sticking your money in a couple Vanguard funds.

So my advice is unless your think your sister married, and stupid liar, you should at least listen to his advice. Now I don't think this gets you off the hook about learning about investing, because it is after all your money and your future. But to me 90% of successful investing is A. Saving more than you earn. and B. not doing anything stupid.
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Old 04-21-2008, 08:35 AM   #20
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Of all the silly letters that go behind financial advisers names the only two that should impress an individual investor, are CPA, and CFP in that order. The programs are rigorous and the pass rates for either credential are lower than the bar exam. I have an MBA, 25+ years of successful investing, and I can tell you that would take a full year of study for me to have a chance at passing a CFP. I have yet to meet somebody who has passed the CFP on their first try.
Ah, I'd argue there is one more designation that one might value, and getting it makes getting a CFP look like a walk in the park. Just sayin'...

To OP:

Given that your BIL is treating you as a family member and he is bound by the ethical standards that go with a CFP, I would be willing to trust him were I in your shoes. It is up to you to judge his competency. More importantly, you should make sure they you see eye to eye with him. Make sure he understands your goals, risk tolerance, etc. and doesn't color outside the lines with your portfolio.

I manage accounts for my parents and my wife's parents, and I manage them A) very carefully and B) with varying risk profiles (all of which are different from my own). It can work out just fine to let a family member help you.
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