Financial Advisor Questions/Advice

[conway19145]

As other's have said, for tax issues you need a tax professional, not an FA.

I'm confused about 'my finances are complex'? If this is due to a business, that's separate from investments. I fail to see how a business would change what you invest in outside that business?

Yes, I agree. I guess my issue with my previous/current situation was/is, is that my FA and CPA wouldn't communicate. It drove me nuts. I just want a clear-cut strategy that will work. Instead, I was a constant middleman conveying info. No matter how many times I made this clear, nothing changed. I guess, for me, when I offer a business service to my clients, I take care of everything so they have little to worry about. I also charge a lot for my services but people who don't want to worry about things, don't mind paying. I'd like to find someone with this mentality, but they seem to be few and far between.

When I say complex, I own a few corporations. Sure, they're self sufficient but I do occasionally make investments with a focus on growth. I have various retirement plans (Some of which have had to be rolled over or moved - which is where a CPA comes into play). I also have many sources of income. In addition to that, I own a few million square feet of real estate which are all structured differently. My annual tax return is grossly complicated because of this.

For me, saving 1% management fees comes nowhere close to saving .5% at work. That is where I spend most of my time and energy.

My girlfriend constantly yells at me for working a lot. But the difference between her and I is, she shows up to work, collects a paycheck and comes home. I on the other hand, have to no only worry about my best interests at home, but I have to worry about 1,000 others and their families. I have to worry about turning as much of a profit so I can fully maximize my exit strategy.

Well, an anchor came with the engagement ring, so you are half-way there! <j/k>

Welcome to the forum, and a Happy 4th to you to!

-ERD50

Haha!!! This made me laugh out loud. Thank you!!

I will take a look at the book that Helen mentioned.

Thank you all!!

 

[ERD50]

Yes, I agree. I guess my issue with my previous/current situation was/is, is that my FA and CPA wouldn't communicate. It drove me nuts. I just want a clear-cut strategy that will work. Instead, I was a constant middleman conveying info. No matter how many times I made this clear, nothing changed. ...

Maybe because there wasn't really anything the FA could do?

... I guess, for me, when I offer a business service to my clients, I take care of everything so they have little to worry about. I also charge a lot for my services but people who don't want to worry about things, don't mind paying. I'd like to find someone with this mentality, but they seem to be few and far between. ...

... For me, saving 1% management fees comes nowhere close to saving .5% at work. That is where I spend most of my time and energy. ...

Likely because you offer experience, and/or have tools or time to do what your clients cannot do, or at least you do it better than they can.

But that doesn't apply in most cases to an FA. The studies show that that there aren't stock picking tools or experience that works reliably - they can't predict the future. So you do better on average with the "Couch Potato" approach (but & hold a few simple broad-based index funds). It is so simple/easy, it doesn't take any special knowledge or time and anyone can do it. It's not about trading money for a service in return, it's about giving someone money, and getting essentially nothing for it.

I know it seems like a pro should do it better, like in most professions, but FA just isn't one of them (at least for the basic investment part of it).

-ERD50

 

[conway19145]

Maybe because there wasn't really anything the FA could do?


Likely because you offer experience, and/or have tools or time to do what your clients cannot do, or at least you do it better than they can.

But that doesn't apply in most cases to an FA. The studies show that that there aren't stock picking tools or experience that works reliably - they can't predict the future. So you do better on average with the "Couch Potato" approach (but & hold a few simple broad-based index funds). It is so simple/easy, it doesn't take any special knowledge or time and anyone can do it. It's not about trading money for a service in return, it's about giving someone money, and getting essentially nothing for it.

I know it seems like a pro should do it better, like in most professions, but FA just isn't one of them (at least for the basic investment part of it).

-ERD50

I had to take annual disbursements out of my account with Morgan Stanley and my accountant called to notify them, but then my FA would call me to ask a questions, and this was the whole go around. My FA also made decisions that they shouldn't have (And more importantly, I shouldn't have followed their advice - totally my fault). So, in my opinion, there was a lot my FA could have done that didn't involve picking investments. Oh well. It was an expensive mistake, which I call, tuition. Live and learn!

Thanks for your help, ERD50!

 

[target2019]

Yes, but the secret the financial industry doesn't want you to know is that the "all" you have to learn really isn't much, nor is it difficult to learn.

Amen to that.
I'm trying to guide a young man as he recovers from a death, and opens his new business. He is very smart, but I can tell that he believes the sharks that circled his father really do have some secret sauce. He sends me 30-page MS slide shows. I try to begin with basic concepts, but he is having a difficult time understanding why simple is better. Another behaviour I see is that he just wants his "shiny things". The shiny things held by father are now a heavy weight on the estate. And the maintenance and carrying costs of these things were a factor in death at 55.

 

[RobbieB]

If your FA averaged 20% per year over the last 10 years he beat the market soundly.

 

[conway19145]

If your FA averaged 20% per year over the last 10 years he beat the market soundly.

But he has also made expensive (Careless) mistakes. I can't get an hour meeting for updates, planning or anything. It's incredibly frustrating. He performs but his service is terrible. I'm conflicted.

 

[target2019]

I had an accountant who made numerous mistakes so I just hired a new one, so we shall see. Right now, my fees at Morgan Stanley are 0.9% and I have been earning on average 20.8% for the past ten years. Making 20% and not having to research, make phone calls, follow the market in-depth and ultimately, buy, is quite nice. I have a small real estate holdings portfolio so that is where I put my time and energy.

Do you know whether the performance figure is based on XIRR or something like that. Different institutions have different calcs and name for the calc. It may be called personal performance, or something like that.

Since the 10 yr S&P 500 average return is a bit over 10%, getting 2X's that is fantastic.

 

[joeea]

Do you guys have any good questions to ask FA's? Anything that I should look out for?

First decide if you want a broker, a salesman, or a real Financial Adviser.

If the latter, start at: Financial Advisors & Planning Professionals | CFP - Let's Make a Plan

Here are some good questions: https://www.edelmanfinancial.com/education-center/articles/how-to-choose-a-financial-advisor Pick some that apply to your specific needs.

Look out for a Fee-Only Fiduciary Adviser. Talk to several before deciding on one.

 

[RobbieB]

I'd keep that guy doing my investments and hire another guy for advice. If the 20% includes his careless expensive mistakes he paid for those too.

 

[samclem]

Right now, my fees at Morgan Stanley are 0.9% and I have been earning on average 20.8% for the past ten years.

That is worth a very hard examination, relative to applicable indexes.

 

[flintnational]

......Are there any good excel sheets or calculators that you can recommend for calculating future value of money or retirement yields? Right now, I save about 30% of my paycheck and plan to do so for the rest of my life but I'd like to calculate A) What I will have and when so I know B) When I can make a boat purchase to sustain an upward trend in my portfolio. Unfortunately, my family history is not in my favor as most pass before the age of sixty. So, the sooner I can achieve my goal, the better. I'd like to at least enjoy a little bit of it

Thanks again, everyone!

Welcome to the forum. The forum was originally established as a support group for the Firecalc calculator. You can enter the variables you mention*, including a future large purchase, and it will provide answers to your questions and more. Make sure to read and understand what the Firecalc results are telling you. They are based on certain assumptions like all financial calculators and it is important to understand the strengths and weaknesses of the tool. Members here will be glad to answer questions regarding the use of Firecalc.

*Since you have several businesses and real estate, you may need to make some assumptions on investment returns within Firecalc instead of using the set assumptions. But, Firecalc will allow you to do this.

 

[ERD50]

Originally Posted by conway19145
Right now, my fees at Morgan Stanley are 0.9% and I have been earning on average 20.8% for the past ten years.

That is worth a very hard examination, relative to applicable indexes.

Wow, 20% per year compounded for 10 years is over 6x growth! SPY grew 1.6X the past 10 years. Amazing performance!

Love to see how that was done.

edit/add: So maybe this was the Dave Ramsey version of "average returns", where a minus 40% and a plus 80% give you a 20% "average return", but does worse than the S&P?

       1.00
0.6    0.60
1.8    1.08
0.6    0.65
1.8    1.17
0.6    0.70
1.8    1.26
0.6    0.76
1.8    1.36
0.6    0.82
1.8    1.47
1.2     < Average

I'd keep that guy doing my investments and hire another guy for advice. If the 20% includes his careless expensive mistakes he paid for those too.

No, I'd dump the guy/gal. If he/she really did that well, I'd expect reversion to the mean. Get out while the gettin's good!

-ERD50

 

[kcowan]

What kind of errors and what type of investments? Both are pushing credibility without details!

 

[braumeister]

No, I'd dump the guy/gal. If he/she really did that well, I'd expect reversion to the mean. Get out while the gettin's good!

But you would have said the same in each of the previous years, so you would have missed out on a lot of gains. (Assuming they were relatively level).

 

[ERD50]

But you would have said the same in each of the previous years, so you would have missed out on a lot of gains. (Assuming they were relatively level).

Of course. But w/o a crystal ball, that is still the reasonable approach.

It's like saying buying lottery tickets is smart - after you won.

It's also assuming the claims are true. And if they are Dave Ramsey style 'average returns', the S&P did better anyhow!

-ERD50

 

[Another Reader]

Your situation is far more complex than that of most in this group. Based on what you stated, I would in your shoes need a top flight tax attorney and a very experienced CPA that is knowledgeable about the type of business you are in.

Retail financial advisers are of little to no use for you. Decision making with your business and complicated asset picture is beyond their limited skill set. As for the achieved rate of return, I would divide the value of the investments today by the value when you gave them the money to manage and convert the ratio to an annualized compound rate of return.

 

[brett]

We have a fee for service financial adviser. Had the same one for the past six years. Each year we look at results vs costs. The results, net of fees, have been very good so we happy campers.

We have also experience poor fee for service advisory service from our bank. So we knew what we wanted from a FA and spent six months finding the right one for us with the right fee schedule for us.

 

[SumDay]

Thanks, all! So, common theme is to learn it all and do it myself. As nerdy as I am with business/finance, I am a bit concerned! Maybe I'll set aside 10% and 'play' with it until I get more comfortable.

I had an accountant who made numerous mistakes so I just hired a new one, so we shall see. Right now, my fees at Morgan Stanley are 0.9% and I have been earning on average 20.8% for the past ten years. Making 20% and not having to research, make phone calls, follow the market in-depth and ultimately, buy, is quite nice. I have a small real estate holdings portfolio so that is where I put my time and energy.

My main concern is retirement. I was a poor kid growing up and I NEVER want to be back in that position, and more importantly, I don't want my family to be either.

As I originally mentioned, the only thing that I want is a boat (Which is a very lofty goal). Are there any good excel sheets or calculators that you can recommend for calculating future value of money or retirement yields? Right now, I save about 30% of my paycheck and plan to do so for the rest of my life but I'd like to calculate A) What I will have and when so I know B) When I can make a boat purchase to sustain an upward trend in my portfolio. Unfortunately, my family history is not in my favor as most pass before the age of sixty. So, the sooner I can achieve my goal, the better. I'd like to at least enjoy a little bit of it

Thanks again, everyone!

I'll add another side of the story. I truly wanted a FA, but refused to give them a % of my hard earned $. I found ours here: https://www.napfa.org/

Our first visit cost us about the same as the average nice car payment, and when we go back, every other year or so, it costs us what a pretty decent hotel room would run you.

We started seeing her in 2012 when DH was offered a lump sum after early retirement, and I just wasn't comfortable making that decision, nor figuring out how to invest it.

You've got to do what makes you comfortable. I like a little hand holding now & then, but am pretty much a DIY person after I get advice.

She's Ms. Vanguard, recommends funds, reviewed our budget & made suggestions, and we are both retiring on August 31. So, I feel like it was the right decision for us.

Good luck in whatever you decide.