Seeking advice on picking a new broker

[DWPC]

Our long time broker is retiring. Through buy-outs over 20+ years he ended up at Wells Fargo Advisors, not company we'd choose. We've stuck out of habit. They want to ease us into a new account exec but we're not buying.

I'm going to check out the local Crowell Weedon office tomorrow and considering speaking with local CFPs who are affiliated with Raymond James and Edward Jones. I'm a bit leery of independents. And I won't sign on with a brokerage that is beholdin' to a megabank's interests.

We have one smallish IRA with Schwab but for our primary account, we want access to personalized guidance and support. I've downloaded several "Ten Questions to Ask..." sheets but would appreciate any input on making the selection, especially on the companies I've named. There's lots of advice on what to ask, but I'm also interested in what I should expect to be asked. Or not!

 

[73ss454]

I would ask Raymond James and Edward Jones what their ER's are. Once you find out that they are charging you about 2% or so then ask what makes them entitled to 1/2 of your retirement 4% SWR.

 

[Rambler]

I use Schwab. I'm pretty independent with my own investing. I do know a guy in So Cal who is a financial planner. I think with him, you would do your own buying and selling, but he could advise you. If you are interested, PM me.

Full disclosure: I don't know how he charges...never asked. He is my DD's soon to be father in law.

R

 

[travelover]

I would ask Raymond James and Edward Jones what their ER's are. Once you find out that they are charging you about 2% or so then ask what makes them entitled to 1/2 of your retirement 4% SWR.

+1

 

[samclem]

I would ask Raymond James and Edward Jones what their ER's are. Once you find out that they are charging you about 2% or so then ask what makes them entitled to 1/2 of your retirement 4% SWR.

It's that "personalized guidance and support."
"Where are the customer's yachts?"

 

[73ss454]

It's that "personalized guidance and support."
"Where are the customer's yachts?"

Next to their Brokers Yachts.

 

[DblDoc]

We have one smallish IRA with Schwab but for our primary account, we want access to personalized guidance and support.!

If you don't feel comfortable doing it yourself then you want to use a fee only advisor (Working with a Fee-Only Advisor - NAPFA - The National Association of Personal Financial Advisors) for this. It is much cheaper than using a commission compensated broker.

If you want to learn how to DIY there are plenty of books and resources listed here http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html and at Bogleheads Investment Books

DD

 

[travelover]

It's that "personalized guidance and support."
"Where are the customer's yachts?"

And birthday cards.

Don't forget the birthday cards.

 

[sheehs1]

And birthday cards.

Don't forget the birthday cards.

+1
Some years I even got Thanksgiving and/or Christmas cards.
Then there were the years I got a card that said "A donation has been made in your name". Like they think we don't know they got the tax deduction and are passing it off as a gift.. Well...I guess they did have to pay for the card and a stamp.

 

[haha]

There's lots of advice on what to ask, but I'm also interested in what I should expect to be asked. Or not!

"Boy, how much money you got?"

Ha

 

[chinaco]

You are in the midst of a bunch of DIYers.

Most of us do not use them... and what good is the advice of another person that is in your situation? What would they know?


Broker questions.... for you??


No offense... but since others have not said it "directly" yet, I guess I will...


All they are going to ask is how much money do you have! Why? Because they will be interested in commissions and fees. Plus, some will want to make sure you have enough money to bother with (low networth means low commissions and fees for them)!


Wise up and do yourself a favor... that could be good for your wealth! Read "Winning the Losers Game" by Charles Ellis or "The Investor's Maifesto" by William Berstein... they are recent publications. Or any of the many John Bogle books (for the last 20 years). Most of these books are not huge... couple hundred pages... and dumbed down for the average person (for the non-financial professional... you don't need an MBA). They will make reference to other books that get deeper if you want to learn!

 

[LOL!]

Is this the first time anyone has asked about recommending a full-service broker on the forum? Most folks ask about online discount brokers where one pays no fees and no commissions.

In strange twist of irony, it turns out that WellsFargo has one of the best online brokers with absolutely no fees. They are called WellsTrade, but they are only free if one has a WellsFargo PMA package going. "PMA package" is the key word. One can sign up for PMA in the WellsFargo bank, but not for the free WellsTrade stuff. Once you have PMA package, you sign up online for the WellsTrade brokerage account. See https://www.wellsfargo.com/investing/styles/wt/


The highly paid brokers/salesreps in a WellsFargo bank will act clueless about the free WellsTrade stuff, so don't expect anybody inside the bank to be helpful with telling you about the free WellsTrade.

 

[DWPC]

If you don't feel comfortable doing it yourself then you want to use a fee only advisor (Working with a Fee-Only Advisor - NAPFA - The National Association of Personal Financial Advisors) for this. It is much cheaper than using a commission compensated broker.

DD

Thanks. I posted hoping to get some insight from folks who've been through the selection process before and have some experience they might relate. A fee-only advisor sounds attractive, but a list of local names from an association website and advisor websites full of platitudes isn't much to go on to pick a winner.

 

[PaddyMac]

Another vote (with LOL!) for moving to a self-directed account at Wells Fargo with a PMA account. You get 100 free trades per account per year, along with free checking. Then hire a no-fee financial advisor who doesn't charge a percentage of your portfolio.

 

[DWPC]

... Then hire a no-fee financial advisor who doesn't charge a percentage of your portfolio.

No-fee? Are you suggesting someone who works on a fixed fee or hourly rate? I've seen a listing for a local CFA that works that way. I'm a little at odds with the idea of the meter being turned on when ever I'd call. The fee schedule indicated fairly high event cost and lawyer-like hourly rates; it would pretty costly for moderate activity, especially the first year or so. I also prefer that the adviser has some skin in the game.

I've interviewed a fee-only adviser firm who works for 1% of account value, and I was impressed by their thoroughness, their relatively low number of clients, and their individual resumes as analysts and in mutual fund management rather than as acct execs at big brokerages or insurance. I'm not adverse to paying 1% if some one will consistently earn me more than I could on my own (not hard) or a commission brokerage would.

 

[LOL!]

Here is a good site to look up what brokers and Registered Reps are thinking when they meet clients:
Registered Rep Forums |

 

[DblDoc]

No-fee? Are you suggesting someone who works on a fixed fee or hourly rate? I've seen a listing for a local CFA that works that way. I'm a little at odds with the idea of the meter being turned on when ever I'd call. The fee schedule indicated fairly high event cost and lawyer-like hourly rates; it would pretty costly for moderate activity, especially the first year or so. I also prefer that the adviser has some skin in the game.

I've interviewed a fee-only adviser firm who works for 1% of account value, and I was impressed by their thoroughness, their relatively low number of clients, and their individual resumes as analysts and in mutual fund management rather than as acct execs at big brokerages or insurance. I'm not adverse to paying 1% if some one will consistently earn me more than I could on my own (not hard) or a commission brokerage would.

I would not consider a 1% of assets a "fee only" advisor. Fee only is a flat fee for performing a specific function or hourly rate (and if you think that rate is high calculate what 1% per annum of your portfolio is!). To put that 1% in perspective the SWR (http://www.bogleheads.org/wiki/Safe_Withdrawal_Rates) is ~ 4% annually. So you are giving the advisor 1/4 (25%!!!) of your SWR. Of course they will tell you they will earn back that amount for you with their superior knowledge and skill. This IS NOT true. NO academic study (ie not paid for by the industry) has shown that they beat the market by enough to make up for their costs, let alone provide more money for you.

I would suggest reading from the recommended list here: http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html or here: Investment Books.

It is NOT hard to do this yourself - the industry wants you to think it is and that they have special knowledge. This reading would be worthwhile even if you decide you still need some help/handholding in creating and managing your portfolio.

DD

 

[haha]

Here is a good site to look up what brokers and Registered Reps are thinking when they meet clients:
Registered Rep Forums |

Those are really funny. Only surprising to someone who has never had to sell something to put food on the table.

Ha

 

[yakers]

I have some experience with Crowell-Weedon and I think they are OK, they 'advice' on investments for a fraternal group I am a member of. I also think Osher Van de Voorde (Pasadena) are OK, they 'manage' my MIL's portfolio and I (and the rest of the family) keep an eye on them. I could manage the portfolio myself but don't want the official responsibility inside the family. I have DW's IRA in Vanguard funds (Wellesley & Star) and mine are 60% in index funds and 40% I manage in a Wells Fargo account, also have a small trading account with them. Don't know how long it will last but the WF PMA is hard to beat, 100 free trades per account and a lot of choices and a decent trading interface.
By the way, with all these investment choices my wife's funds in VG Wellesley/Star have done the best.

 

[AShyOne]

Investment Coach

Any thoughts about using an investment "coach" who charges a pretty high commission, but only on gains in excess of 5%? As a thought for someone who knows naught about investing and whose savings is just sitting there right now.

 

[samclem]

Any thoughts about using an investment "coach" who charges a pretty high commission, but only on gains in excess of 5%? As a thought for someone who knows naught about investing and whose savings is just sitting there right now.

I'm a fan of indexing, picking an asset allocation, and rebalancing--ala Bogle, Bernstein, etc. Regarding the compensation scheme you've mentioned--what type of behavior would it reward in the coach? A high-risk, all-or-nothing investment style. He loses nothing if you lose your entire portfolio, but he gets a huge reward if the lottery number hits and his guess is right.
For simplicity, imagine the "coach" gets 25% of the gains of any return over 5% PA in an investor's account. Further, imagine the market is made up of 10 asset classes (or individual stocks, if you prefer) , they all have high volatility, equal historical returns, and performance entirely independent of each other. Say history shows that in a typical year 4 of them double in value and the rest decrease in value so that the overall market (all the asset classes held equally) returns 5% per year. In such circumstances, most investors would probably spread their money among the investments and be content with 5% return.

Case A: The "coach" advises each of his 10 clients to spread their money equally among the investment classes. All of them get 5% returns each year, and he makes zero.

Case B: The "coach" tells each client about his excellent analytical skills, and advises each to invest in a just a single focused asset category ("hey, he's the coach, and makes nothing if I don't make money") At the end of the year, six clients lost money, maybe a lot of it. Four clients doubled their money--well, at least before his huge commission. He would take home a commission of 9.5% of all the assets of all the clients.

This compensation scheme rewards high-volatility investing that may not be appropriate for retirement accounts. Of course, some people may believe their "coach" can produce returns much higher than average--so why is he messing around with individual investors when such skill would be worth many millions to institutional investors?

 

[AShyOne]

Thank you for that insightful reply. I feel silly that I didn't consider that perspective before. He gets to gamble with my money with no downside. I am seeking a financial advisor for the first time and do not trust that anyone will truly be able to help me grow my small savings. I was thinking if the coach/advisor only made money off a gain, that would at least be a step in the right direction. I don't know how anyone figures out where to start in getting their money to work for them! I'm new to this forum and hoping I can learn a thing or two!!

 

[Surewhitey]

I would look into someone who can beat a particular index without using high-beta investments. For example, S&P500 index, but pick sub 1.0 beta stocks and still outperform...

I'm trying this on my own money and buying on the way down (recently), but not afraid to sell while on the upswing. I'll beat the index just from buying on the way down and lock in some profits on big upswings.

I'm up around 1.6% this year while the S&P is now down like 4+%...

I also trade in and out of the same investments. On a big swing up in a short time period, I sell expecting a pull back. If they fall 5-10% from my last sell, I get back in.

 

[samclem]

He gets to gamble with my money with no downside.

Exactly-much better than I said it.

I am seeking a financial advisor for the first time and do not trust that anyone will truly be able to help me grow my small savings. . . . I'm new to this forum and hoping I can learn a thing or two!!

Nobody will care more about your more than you do. The bad news is that this investing thing isn't something that can be reliably "hired out," because it takes some research to know if the "expert" is a snake-oil salesman or really working for your best interests. By the time you learn that stuff, you can do the job yourself and save the fees. The good news: It's not hard to do it yourself. You've come to the right spot, this forum is a super place to learn, get opinions on your ideas, etc. Look through the excellent ER FAQs and dive in. Read a couple of the recommended books from the FAQs, visit the Bogleheads forum, build an asset allocation you can live with, rebalance occasionally, and you'll have more real knowledge and better results than 80% of investors. And, if you want, you can manage everything in just a few hours per year after you get things set up. Best of all, you'll understand how it works an be immune to hucksters.
Welcome to the board!

 

[clifp]

My advice is to do what Warren Buffett did, while interviewing candidates for a chief investment office for Berkshire Hathaway, he asked to the statements for there personal investment accounts. You can a learn a lot about how somebody will manage your money by seeing how they manager their own.

If the person had most of their money invested in the stock market in 2009, 2010 and managed to shift heavily into cash in summer of this year before the latest correction, than I'd be inclined to let him invest my money.

You may have difficult convincing people to let you look at the personal investments, since you probably don't have Buffett's billions but keep trying.