61 y/o in Atlanta, mostly retired

[Route246]

Folks, I should probably never have mentioned I used an AUM percentage fee-based advisor. It appears to have become a distraction from the question I was attempting to ask.

Forget about any previous advisors I might have mentioned and their fees I might have paid and the returns I might have forgone because of it. What I wanted to do in my first post on this forum was, in addition to introducing myself, ask if anyone had experience with an hourly fee-based advisor. It sounds like the vast majority on this forum absolutely hate the idea of someone assisting them with their finances. It seems coming here to ask about financial advisors is about as popular as coming to an automobile enthusiast forum to ask about mechanics. I don't repair my own car, or mow my own lawn, and so forth. Rather, I'm willing to pay someone (or maybe a robo-someone) what I deem a fair price for the job. The issue with my present advisor whom I should never have mentioned is that I don't believe I'm getting good value. They're doing an absolutely bog-standard job, and that's fine, because I'm risk-averse and content to invest in exactly whatever way conventional wisdom suggests I should, but I don't need to pay them a percentage quarterly for them to do nothing most quarters. I'd rather hire someone on an as-needed basis.

If I have specific questions in the future, I'll post them in the appropriate sub-forum, but I will be sure not to mention anything about financial advisors.

I think depending on how much you have Vanguard offers financial assessments if you reach out and ask. They are frequently asking me if I would like to schedule time with an advisor but I politely decline. Merrill Edge offers the same services, at least they do for me.

That said, the reason you get the eye rolls here is because many here have been there and done that or they know someone who has been there and done that. If someone starts criticizing or taking shots directly then just consider it trolling and ignore them.

I have a good friend who is a fee-only, no commission financial advisor who caters to high net worth clients. First thing he asks is about your objectives and helps if you don't know what your objectives are. He assesses your current situation and then presents sample scenarios/portfolios as examples of how to approach your method based on risk tolerance and income requirements, etc. This is what I would be looking for with a financial advisor. The first question I would ask is if he/she has any piece of your action, that is any incentive to initiate any action for you. If he/she is straight with you he will disclose any possible conflict of interest such as a referral bonus, etc. If there is any commission structure or activity-based incentive then I would get up and run as fast as you can for the exits.

I would also listen for keywords like diversification, expense ratios and fees. A lot can be given away just by how those keywords are used. If he/she is steering you towards Vanguard/Schwab/Fidelity then this is probably a good thing. If you hear an insurance company or annuity mentioned you need to do your own homework and assess if there are alterior motives in play. I can tell you with some amount of certainty if you are recommended to choose one of the following (VG,Sch,FID) then it is a pretty good indicator of positive mojo.

In the end, it is your assets, not anyone else's. Take care of your assets and you will do well.

 

[Lorenzo]

I think depending on how much you have Vanguard offers financial assessments if you reach out and ask. They are frequently asking me if I would like to schedule time with an advisor but I politely decline. Merrill Edge offers the same services, at least they do for me.

Doesn't Schwab offer the same thing? As I explained, I already have my accounts at Schwab, and I'm sure I meet their minimum balance threshold. It's just that my major account is managed by an independent advisor using Schwab as custodian of the account. If I ditch my independent advisor, I suppose a Schwab advisor would be glad to talk to me.

I have a good friend who is a fee-only, no commission financial advisor who caters to high net worth clients. First thing he asks is about your objectives and helps if you don't know what your objectives are. He assesses your current situation and then presents sample scenarios/portfolios as examples of how to approach your method based on risk tolerance and income requirements, etc. This is what I would be looking for with a financial advisor. The first question I would ask is if he/she has any piece of your action, that is any incentive to initiate any action for you. If he/she is straight with you he will disclose any possible conflict of interest such as a referral bonus, etc. If there is any commission structure or activity-based incentive then I would get up and run as fast as you can for the exits.

You're describing the advisor relationship I have right now. He works on a fee-only basis, with no commissions or incentives or other "piece of the action," and does not try to "sell" me any product. He's a fiduciary--conflicts of interest would be a violation of his fiduciary duty. But his fee is based on a percentage of assets-under-management (AUM), and that is the part that increasingly doesn't make sense to me, given the tools available to us nowadays. Fee-only is better than commission-based, as you pointed out, but fee-only on an hourly rate basis would be better. I can do the legwork, but I'd essentially like to have someone I can turn to, paid by the hour, to provide a general roadmap going forward from my present point and to answer questions and check my work if and when I feel I need that. I have come across threads here in which people asked other forum members to check their work--and I'm sure there are people here who are very savvy and happy to help others--but I would be willing to pay a pro to do it for a reasonable hourly fee. Oh, I'll ask you guys, too. But it seems fee-only advisors willing to charge hourly are not easy to find.

 

[upupandaway]

The 401k is with Voya through my employer. I suppose that once I separate from that employer--at present, I continue to do some amount of work and they continue to treat me as a full-time employee--I should roll over the 401k either into the same tIRA at Schwab or something else, but Voya is not the place for it to remain, am I right?

No one tackled this yet so I will chime in. Voya's fund offerings and fees will vary with each companies plans. Some may have a horrible selection of high fee options and some may be very reasonable. In my experience Voya was not very transparent about total fees charged and had limited options. Do your best to determine the fees for your plan and simply compare them to buying outright from that provider which in my case was vanguard. There used to be an argument that large companies might have access in their 401k to institutional class investments that would be more favorable then what one could buy on the market. I don't think this is very relevant now with options like Vanguards Admiral shares fee structures being so low.

Flexibility and options are another key incentive to roll over to tira. The world opens up once you go to a tira and you have almost limitless options and strategies to employ as opposed to the limited selection your previous employer has chosen for their program.

I hope this helps.

 

[Lorenzo]

No one tackled this yet so I will chime in. Voya's fund offerings and fees will vary with each companies plans. Some may have a horrible selection of high fee options and some may be very reasonable. In my experience Voya was not very transparent about total fees charged and had limited options. Do your best to determine the fees for your plan and simply compare them to buying outright from that provider which in my case was vanguard. There used to be an argument that large companies might have access in their 401k to institutional class investments that would be more favorable then what one could buy on the market. I don't think this is very relevant now with options like Vanguards Admiral shares fee structures being so low.

Flexibility and options are another key incentive to roll over to tira. The world opens up once you go to a tira and you have almost limitless options and strategies to employ as opposed to the limited selection your previous employer has chosen for their program.

I hope this helps.

Thanks. This was sort of a side question, but I'm glad someone replied. I think it's a no-brainer to roll over that Voya 401k into my existing rollover tIRA at Schwab when I stop working. And this ties into the main issue: rolling over my 401k into the existing tIRA will about double its balance, and so will double that one percent fee I'm paying the advisor on the tIRA.

 

[meleana]

We are always making marginal improvements now that most of the big ones are (mostly) done. You can always improve your return by tweaking. I'd look at simplicity as a start, say VTI or VOO and some say mixing in a little bond fund and a small cap value fund. It could be this simple.

I'm looking at moving an old HSA this week, personally. Optum only pays .01% on balances and adds in fees as you get to lower balances (not to mention investment fees for the funds offered) whereas FIDO pays 4.96% on balances & no future fees... Again small improvements that cuts out an additional account for simplifying.

Lots of good advice here if you want to share more details.

You can move an old HSA you had with an employer to another company? I didn't know that!


We have Optum also and the money is just in a cash account with no interest to speak of. I don't want to put the money in a stock or bond mutual fund but would like a savings account with decent interest. We only have about $14,000 in there and use it to pay medicare part B mostly.

 

[pc95]

Welcome to your "eye opening" nirvana. You have found your fees.

Now, be sure not to look and see how big your portfolio would have been if you hadn't paid that "just 1%" for 40 years. That is a tearful eye opener.

Instead of $1 million you might have 2.5 or 3 million.

Fees, the silent killer. Silent but deadly. But "just 1% or 1.5%".

A 25% haircut is tough to swallow. Most here and at Bogleheads.org manage their money themselves with just a few index funds with super low expense ratios.

Personally, I spent ~2 years at Edward Jones and saw the proverbial light quite quickly with the hidden and not hidden fees. The loads and 12b-1 fees and high expense ratios.

Painful. So much wealth is consumed and transferred to "wealth management" companies. It should be against the law. Just 1% don't cha know. Or just 2% or more.

At this point, all you can do is move to a Vanguard or Fidelity, cut your expenses to .05% to .09% ish and try to maximize your strategy.

Welcome and good luck on your journey of discovery.

Found out about 10 years ago my mother at Wells Fargo (WFC) had an "advisor", Jacob, who was personable and she liked, but found WFC would charge her a ridiculous fee for selling her own stocks. I nipped that as fast as possible, but still Ma was out $500. Since, moved her to Schwab, and I have figured out that she wants assistance - but better a family member give it with no outlandish charges - or even better youself.

Yes sorry to say for OP 1% was too large by about 3x, but seems innocuous enough at first thought. That is passed now, so hopefully they did a magnificent job.

I manage our own singles and funds. It helps hugely that I like doing it.

 

[TheWizard]

Part of the "advisor pothole" that Lorenzo stumbled into, I think may be due to the fact that some of us have never paid for a true Financial Advisor of any type.
That's been the case for me since starting to invest in 1973.

Now my employer's 403(b) plan with TIAA had an agent that we could make appointments to see (no charge), to facilitate certain things that required paper forms. But I figured out what investments to use myself.

Over the past quarter century, it has become increasingly easy, for those of us who are inclined, to learn everything we need to know about investing, and especially to dispell the idea that financial advisors have any sort of secret sauce that adds value.

Nonetheless, there are some folks who will want some level of handholding or second opinion on their plan...

 

[Al18]

You should be able to get financial advice from a FA that's linked to your 401K plan. It won't cost you anything extra, because it's part of the 401K fee your employer and you are currrently paying. For large companies, the fee is about 0.5% per year.

 

[engineernerd]

I am considering the possibility of taking a more hands-on approach. Could I hire an advisor/planner on an hourly fee basis to plan how to turn my savings into a cash income stream and otherwise make sure my ducks are in a row for, say, the next year, and then repeat the process annually (or at whatever interval I want)? I have contacted a few advisors whose names I got from acquaintances, but so far, none of them work on an hourly fee basis--everyone seems to prefer the AUM fee model. Thoughts?

You can manage your own investments with very little effort if you put your money in index funds. We have never paid a financial advisor in any way (neither AUM nor flat fee), nor have we spent more than a VERY minimal amount of time choosing investments, ever. Yet our investment accounts have done quite well. The key is broadly-based index funds. Vanguard is the traditional leader in providing these but Fidelity has its own stable of funds also, and I’m sure there are others too. There are bond index funds (and ETFs) as well as stock index funds and ETFs. I personally prefer ETFs over traditional mutual funds because you can place limit orders to keep from being harmed by a “flash crash” if one should ever happen again. Mutual fund shares trade at the end-of-day price, which you can't know what it will be when you place your buy or sell order.

In retirement accounts such as 401(K)s and rollover IRAs you can buy and sell investments without triggering tax issues. So if your financial planner left you a portfolio full of things you don’t understand, you can sell those without incurring capital-gains taxes, and buy things like VTI, VB, and BND. I recommend going to Vanguard's website and looking at their offerings, also checking out Fidelity's stock and bond index ETFs.

Have you used the FIRECalc tool here yet? I recommend it highly. Obviously the future has not signed a contract requiring it to resemble the past, but knowing how your portfolio would have done in past periods is a valuable decision-making tool. Note that if the calculator shows your optimal allocation is heavily weighted towards stocks this means you need to reach for high returns, but if it is more weighted towards fixed income options this means you have plenty of money saved up.

Be careful about life expectancy. If you just go with average life expectancy for your age, you will have a 50% chance of living longer and outliving your nest egg. Maybe you're OK with that but I'm guessing probably not.

None of the above addresses withdrawal strategies. For the time being you could just sell a bit of everything whenever you need money.

 

[upupandaway]

Thanks. This was sort of a side question, but I'm glad someone replied. I think it's a no-brainer to roll over that Voya 401k into my existing rollover tIRA at Schwab when I stop working. And this ties into the main issue: rolling over my 401k into the existing tIRA will about double its balance, and so will double that one percent fee I'm paying the advisor on the tIRA.

It is totally up to you but you certainly could roll over this 401k to a new IRA at another brokerage like vanguard. It would give you separation if there were ever an IT/cyber related incident at one of the brokerages and give you an easy out for the management fee until you figure out your long term plan with that situation. Perhaps once you got comfortable with self management of these funds it would be the catalyst to start managing the others. Either way I'm sure you will make a good decision. Best of luck to you.

 

[engineernerd]

Folks, I should probably never have mentioned I used an AUM percentage fee-based advisor. It appears to have become a distraction from the question I was attempting to ask.

Forget about any previous advisors I might have mentioned and their fees I might have paid and the returns I might have forgone because of it. What I wanted to do in my first post on this forum was, in addition to introducing myself, ask if anyone had experience with an hourly fee-based advisor. It sounds like the vast majority on this forum absolutely hate the idea of someone assisting them with their finances. It seems coming here to ask about financial advisors is about as popular as coming to an automobile enthusiast forum to ask about mechanics. I don't repair my own car, or mow my own lawn, and so forth. Rather, I'm willing to pay someone (or maybe a robo-someone) what I deem a fair price for the job. The issue with my present advisor whom I should never have mentioned is that I don't believe I'm getting good value. They're doing an absolutely bog-standard job, and that's fine, because I'm risk-averse and content to invest in exactly whatever way conventional wisdom suggests I should, but I don't need to pay them a percentage quarterly for them to do nothing most quarters. I'd rather hire someone on an as-needed basis.

If I have specific questions in the future, I'll post them in the appropriate sub-forum, but I will be sure not to mention anything about financial advisors.

[FONT=&quot]Ha, ha, you do sound frustrated. But I strongly recommend you LISTEN TO THE ADVICE HERE, not to pay a financial advisor at all. They are not worth one thin dime, IMHO, unless you are the excitable type who needs to be talked down from panicking and selling everything after a stock-market crash (selling low) or getting excited about the latest investing fad and throwing all your money at, say, crypto when it is heading for the sky (buying high).[/FONT]

[FONT=&quot]Possibly it could make sense to consult a financial advisor if you have a long list of financial goals, such as putting multiple kids through college, starting a capital-intensive business, buying an expensive boat or bizjet, things like that, in addition to having enough for your retirement.[/FONT]

[FONT=&quot]If you are the kind of person who hates spending time thinking about your investments and can trust that your boring well-diversified index fund portfolio will carry you through if you just leave it alone, and you don’t have a lot of complicated financial goals, then you don't need a financial advisor.[/FONT]

[FONT=&quot]What you can do with your newfound spare time instead is to explore FIRECalc’s capabilities. See what your odds of outliving your portfolio would be under various assumptions such as different percentages in stocks or different withdrawal rates or different ages to start Social Security.[/FONT]
[FONT=&quot]
[/FONT][FONT=&quot]Know also that if you do hire a financial advisor, you risk choosing a bad one, or simply one who doesn't fit your needs very well. A lot of people who hire them aren't especially well-qualified to judge how good their advice is, and may rave about one mostly because he or she is a likable person.
[/FONT]

 

[engineernerd]

One thing I didn't see anyone else mention here: it's a good idea to keep your IRA balance at any one brokerage below the $500k SIPC limit. Sure, it's hard to imagine one of the giants going bust, but you never know.

Another random piece of advice: if you have very big balances in non-Roth retirement accounts, you should educate yourself about Roth conversions. These forums are full of self-educated experts on the ins and outs of those (now including me! - thanks everyone!) - I would trust the advice here over the kind of generic ideas you are likely to get from a typical financial advisor.

 

[Lorenzo]

One thing I didn't see anyone else mention here: it's a good idea to keep your IRA balance at any one brokerage below the $500k SIPC limit. Sure, it's hard to imagine one of the giants going bust, but you never know.

Good advice, and someone mentioned it in a thread I started on the topic of whether it's okay to have all my eggs in one basket (brokerage): https://www.early-retirement.org/forums/f28/all-my-eggs-in-one-basket-brokerage-121358.html

Another random piece of advice: if you have very big balances in non-Roth retirement accounts, you should educate yourself about Roth conversions. These forums are full of self-educated experts on the ins and outs of those (now including me! - thanks everyone!) - I would trust the advice here over the kind of generic ideas you are likely to get from a typical financial advisor.

I see Roth conversions mentioned a lot in various threads. If I understand the logic, the goal is to do the conversions when you are in a lower tax bracket, and then you won't have to be as concerned about being in a higher bracket later due to things like RMDs. Do I have that right? My advisor mentioned the possibility of Roth conversions some time ago, when I first started musing to him about retirement, but hasn't brought it up again now that I am on the cusp of retirement.

 

[Lorenzo]

... Possibly it could make sense to consult a financial advisor if you have a long list of financial goals, such as putting multiple kids through college, starting a capital-intensive business, buying an expensive boat or bizjet, things like that, in addition to having enough for your retirement.

My thinking was that I might hire an advisor on an as-needed basis for just such things. Well, not quite buying a jet, but I do need to plan how to pay for a new car to replace my 21 year-old vehicle and soon enough thereafter to replace my wife's 15 year-old vehicle. That kind of frugality is how we saved enough money to consider retiring a few years early, but now we're facing the costs on the back end. We also recently sold our residence and moved into what had been a rental property of ours, and now we're renovating that--big expenses. These are one-time bumps in the road, but I would feel better having a plan for how to juggle my resources to best navigate those bumps. Once I'm past all that, I would not feel a need to consult an advisor. But I really would like help making a roadmap right now. And that's why I said in my initial post that I was considering finding an advisor who I could pay only for their time, only when needed.

What you can do with your newfound spare time instead is to explore FIRECalc’s capabilities. See what your odds of outliving your portfolio would be under various assumptions such as different percentages in stocks or different withdrawal rates or different ages to start Social Security.

I am going to play more with FIRECalc, but the little bit I did on my first day on this forum, using my current allocations and a 4% withdrawal rate gave me a 95% "success rate," so that's encouraging.

 

[engineernerd]

I see Roth conversions mentioned a lot in various threads. If I understand the logic, the goal is to do the conversions when you are in a lower tax bracket, and then you won't have to be as concerned about being in a higher bracket later due to things like RMDs. Do I have that right?

Yes. Also due to likely tax hikes in the future, IMHO. Current tax brackets are at all-time lows while budget deficits and the national debt are at all-time highs. I think this country is on an unsustainable trajectory and something will have to give.

 

[engineernerd]

My thinking was that I might hire an advisor on an as-needed basis for just such things. Well, not quite buying a jet

Your expenses all sound fairly immediate, so a slightly conservative but reasonably accurate way to model them is to reduce your starting portfolio by those amounts.

And that's why I said in my initial post that I was considering finding an advisor who I could pay only for their time, only when needed.

Such advisors do exist, but I think there aren't many. Someone I knew did that for a while but didn't stick with it. He said it was hard to make enough money.

It's a conundrum: the people who most need a financial advisor rarely seem to consult one. That's because an advisor's most valuable job is to stick a proverbial pin in math-challenged people's bubbles. Make them face reality: no, you cannot buy all that stuff you want AND retire in comfort.

I am going to play more with FIRECalc, but the little bit I did on my first day on this forum, using my current allocations and a 4% withdrawal rate gave me a 95% "success rate," so that's encouraging.

FIRECalc has many neat options. One is to show how your odds of success would be affected by changing your stock allocation (it shows you a graph).

One thing it doesn't do is figure in taxes. You need to include taxes in your withdrawal amounts.

 

[Surewhitey]

You can move an old HSA you had with an employer to another company? I didn't know that!

Yeah, it's easy to open. Then you can download a pdf statement and send it to Fidelity and they will do the legwork. It takes a few weeks as they do some snail mail stuff, but so far, pretty easy. Just opened it a couple weeks ago.

 

[Lorenzo]

Your expenses all sound fairly immediate, so a slightly conservative but reasonably accurate way to model them is to reduce your starting portfolio by those amounts.

Good suggestion.

Such advisors do exist, but I think there aren't many. Someone I knew did that for a while but didn't stick with it. He said it was hard to make enough money.

It's a conundrum: the people who most need a financial advisor rarely seem to consult one. That's because an advisor's most valuable job is to stick a proverbial pin in math-challenged people's bubbles. Make them face reality: no, you cannot buy all that stuff you want AND retire in comfort.

I was once an enginerd, too, so I'm definitely not math-challenged. With all the tools available to us today, it's not like decades ago when I first hired my advisor and it was all opaque and required dealing with brokers by snail mail. I've been putting this off for too long.

 

[pacergal]

I was with VOYA through my previous employer. They had financial advisers I met with for free.
A few years prior to retirement, we hired a fee only FA to review everything and make us a plan. We met with that person every year to review, only paid if we sold something.

Currently, we have her as AUM FA. Yes, it cost more, but for personal reasons, we went in that direction at this time.

OP--do what is comfortable to you. there are many books out there to read also.