Financial Advisor Or ???

[Bryan Barnfellow]

We do not know what financial instruments or capital assets are in the inheritance. Unravelling them may be complicated.

+1000

You likely can make some big mistakes without some specific expert advice in this particular aspect of receiving the inheritance.

-BB

 

[RoadRunner7]

Thank you all for your insight and advice. I look forward to gaining insight from your experience and knowledge in the days ahead

 

[Cayman]

Vanguard. Big no to a FA. You've found an excellent resource in this board and can expect sound advice here. Congrats.

 

[hesperus]

I went through a similar event about 5-6 years ago, when I inherited a mid seven figure portfolio. Many questions and emotions, and the forum here was a great place to get feedback. Here's the thread:

http://www.early-retirement.org/for...-investment-advisor-is-a-good-idea-73532.html

In summary, I moved the portfolio from high commission wells fargo advisors to fidelity, used their private client group (no cost if above $1M) to help get the allocation to an appropriate place for our age and risk tolerance. We then benefitted from an extraordinary bull market the last 6 years which has pushed it to eight figures. At first, it may take the help of an advisor if it's a complicated collection of assets like ours was, but once you get it there, you can typically manage it yourself. I'm sorry for your loss, good luck.

 

[kcowan]

The good news is that you have time. I would start by asking the attorney for names he might recommend.

We talked to the Lawyer in charge of the estate and he told me to get a Financial Advisor. He said no rush as it will take about a year to get everything settled...

I think these this fact indicates that you will need help. Just avoid AUM advisers.

We have one eight of our stash in the hands of an AUM adviser so that DW has a goto person when I am gone. It is a form of insurance. Plus I carry a $500k policy to help cover the extra costs and loss of company pension.

Congratulations on your pending windfall and regrets for the cause.

 

[FreeBear]

Sorry about your loss, an inheritance is a mixed blessing. It was a bit helpful to us, but under unexpected and painful circumstances.

Suggest getting a better idea of exactly what types of assets you are receiving, eg. Life insurance, ira's, after tax account, real estate, car, etc. We can better comment if we know asset type; anyone you hire would need this info too. Suggest learning something about what you'll get, even if you hire someone, to improve your comfort level and ask better questions.

Our situation was fairly simple but we are glad to check with an accountant regarding impact on taxes. For example, life insurance was free and clear but an IRA had to be rolled over to prevent 10% penalty on top of the taxes at a high marginal rate. Again, we don't know what you'll get, but it's good you are thinking ahead.

 

[iloveyoga]

I would avoid using a FA. If you insist on having one, do a background check as a minimum through FINRA.

I agree, no FA and use this time to learn as much as you can about investing. Vanguard is a great start!

 

[JonB]

Sorry to hear of your loss. Hope the inheritance helps support your goals and dreams including accelerating your reitirement! Having recently retired myself, I think there can be a place for using a financial advisor depending on the complexity of your situation, your personal understanding of the drivers of your investment decisions, and potentially the support/hand holding you may need to stick with “The Plan” in the face of changes, especially market downturns.

If you think one will help, especially during the initial transition, I would suggest to look at one who is a CFP (https://en.m.wikipedia.org/wiki/Certified_Financial_Planner). These have a fiduciary responsibility to do what’s in your best interest. Also, going with one which is “Fee Only” helps insure there aren’t any hidden conflicts of interest (avoid Fee Based services). I also think ones which do not keep your funds in their own company’s accounts, but use an independent 3rd party custodian like TD Ameritrade, Fidelity or Schwab helps keep everything clean and transparent.

I would encourage to talk to a number to assess how well they could meet your needs and you feel you could have a good chemistry to work with. Many may provide a free financial plan incorporating your needs/wants on the spending side, the cash flows from various sources, and simulations of potential portfolio returns. Of course you can do much of this on your own using spreadsheets and some online tools, but there may be choices/questions which you may not even be aware of. As others suggested, read as much as you can here and from other resources.

Good CFP’s can help you with developing and sticking to a wholistic plan including not just investment choices, but other decisions which affect your financial life like managing/leveraging debt, multi-year tax strategies to take advantage of capital gains rates vs normal income, managing one-off decisions like inherited IRA distribution choices or what to do with inherited Savings Bonds, etc.

If you get to the point that you feel confident to manage it yourself, great! If you need some help to get started that can be well worth the fees I think.

 

[OldShooter]

... I would suggest to look at one who is a CFP (https://en.m.wikipedia.org/wiki/Certified_Financial_Planner). These have a fiduciary responsibility to do what’s in your best interest. Also, going with one which is “Fee Only” helps insure there aren’t any hidden conflicts of interest (avoid Fee Based services). ...

Just a clarification or two: The CFP designation is a good thing but it is simply a designation sold by an independent company and has no legal status. A CFP designation does NOT denote or confer fiduciary status despite a lot of misinformation out there. Their "CFP Rules of Conduct" do not include the Duty of Loyalty (to the client), which is critical for a fiduciary. I think this is because if they had this duty, then they could not sell their certificates to Series 7 licensed "registered representatives" where the loyalty as representative is clearly to the employer. The Rules also conclude with this: "… the Rules are not designed to be a basis for legal liability to any third party." In other words: "We really aren't very serious about this."

Re fee only, AFIK it is not possible to be a fiduciary and receive commission-based compensation. This is why the DOL fiduciary rule is so upsetting to the industry and why you see even Eddie Jones moving to AUM fees.

To ensure fiduciary status, look for "Registered Investment Advisor" or "Investment Advisor Representative." These designations have legal teeth. Those with Series 65 or Series 66 licenses are best. https://brokercheck.finra.org/ is your friend on this.

 

[gerntz]

We have one eight of our stash in the hands of an AUM adviser so that DW has a goto person when I am gone. It is a form of insurance. Plus I carry a $500k policy to help cover the extra costs and loss of company pension.

Interesting approach. Keep cost of AUM advisor down by letting him/her manage a small portion of your total & then mirror his recos on your own. Good deal.

 

[Luck_Club]

I went through a similar event about 5-6 years ago, when I inherited a mid seven figure portfolio. Many questions and emotions, and the forum here was a great place to get feedback. Here's the thread:

http://www.early-retirement.org/for...-investment-advisor-is-a-good-idea-73532.html

In summary, I moved the portfolio from high commission wells fargo advisors to fidelity, used their private client group (no cost if above $1M) to help get the allocation to an appropriate place for our age and risk tolerance. We then benefitted from an extraordinary bull market the last 6 years which has pushed it to eight figures. At first, it may take the help of an advisor if it's a complicated collection of assets like ours was, but once you get it there, you can typically manage it yourself. I'm sorry for your loss, good luck.

Just spoke with one of them recently, so my experience is limited. He took some time to explain the services, and showed us where some of the fee for service offers had benefit. IE tax loss harvesting. He assured us he was there for us whether we wanted to do it ourselves or if we wanted the "managed money". This was reassuring, because the marketable security piece is new to me.

In general they have some nice bene's if you can hit the 1M number like a yearly meeting with the estate planning attorney etc. However, I didn't get the impression he was going to pick and manage our investments, just guide us through the decision making process with regard to risk.

 

[hesperus]

However, I didn't get the impression he was going to pick and manage our investments, just guide us through the decision making process with regard to risk.

Exactly. They will not execute trades for you. If you come into it with a goal (ie: asset allocation), they can be helpful in steering you towards it. One has to still be careful of their tendency to steer you towards their own products. But it wasn't heavy handed at all.

 

[Luck_Club]

Exactly. They will not execute trades for you. If you come into it with a goal (ie: asset allocation), they can be helpful in steering you towards it. One has to still be careful of their tendency to steer you towards their own products. But it wasn't heavy handed at all.

Did you utilize any of their separately managed accounts? I thought the fees were fairly reasonable for running the money. 0.4% for a tax managed fixed income and equity strategies. They also had a dividend income strategy, which ran 0.58%, which is getting up their in my opinion.

 

[Happyras]

Did you utilize any of their separately managed accounts? I thought the fees were fairly reasonable for running the money. 0.4% for a tax managed fixed income and equity strategies. They also had a dividend income strategy, which ran 0.58%, which is getting up their in my opinion.

Just a heads up. From my experience they will put you in MF that have expenses, that include such things as marketing kick backs to the selling agent among other bogus fees. That .40% AUM fee is only a small portion of what the bank gets on your investment. Also, they will likely put you in worthless Market Neutral funds, which have fees with no returns just to maintain a cash position while making a kick back fee.

 

[OldShooter]

Re Fido etc. IMO it is still a good idea to run a brokercheck on any rep you're talking to. With reputable companies like Fido, Schwab, etc. you are not likely to find any nasty customer disputes, but the check will also show you what licenses the FA holds, how long he has been in the business, and what his employment history is. For myself, I want to see someone who has been in the business at least 12, better 18 years, so they have seen the tech bubble, the housing bubble, and importantly: have seen a more normal interest rate environment than we have seen in the last 10 years.

YMMV, of course.

 

[joel2125]

Inheritance

I am new to the forum but I am liking what I hear already. I have been investing in my 401k for 25 years, I am 58 yo and also looking to hang it up. I have made spectacular mistakes but through it all I have still managed to beat the market by 2% points of 25 years so at the very least I am lucky.

The common refrain here is to beware of fees. The forum members are absolutely correct. Jack Bogle is a very smart man and I remember an article I read from him many years ago that was so amazing I had to run the math myself. He said that if you have two investors who get the market return over 40 years, one of which pays a 2% fee and the other pays the low fee of an index fund, the difference in the balance of their portfolio is a staggering 60%! So fees are a killer for sure.


You have already been investing in your 401k in low cost funds so you are on the right track. Presumably this money would be outside the 401k. My recommendation is to manage it yourself. Assign a time horizon to the new money ie. how long before you actually need it. whatever portion is longer than 20 years, that should be 100% total market or 500 index. There is a zero percent chance by history that you will come up negative on that. Less than ten years I would likely dollar cost average into a total bond market fund. Yes, we are in an interest rate rising cycle and there will likely be a short term modest loss over three years. Read the fidelity bond site articles about that. The money between ten and 20 years I will defer to the forum, but probably 50%total market/50% bonds.

Warren Buffet recommends 10% bond fund, 90% total market/500 index IN RETIREMENT! I think it works well if you can live on the bonds for at least five years so you don't have to redeem your equity shares in a down market.

One last thing....read every day. "The Big Picture blog" c/o Barry Rhitholz is one of my favorites. I have read it every day for the past decade at least. Very informative. J

 

[Luck_Club]

Just a heads up. From my experience they will put you in MF that have expenses, that include such things as marketing kick backs to the selling agent among other bogus fees. That .40% AUM fee is only a small portion of what the bank gets on your investment. Also, they will likely put you in worthless Market Neutral funds, which have fees with no returns just to maintain a cash position while making a kick back fee.

They have 5 managed services:
1) Digital adviser -Mutual Funds, etfs etc
2) Portfolio Advisory service - Mutual funds
3) Personalized Portfolios - Funds etfs
4) Separately managed accounts - INDV Stocks & Bonds (this is the one I was referring to in prior post.)
5) Wealth Management advisory -(10 Milion + entry)

 

[kcowan]

Interesting approach. Keep cost of AUM advisor down by letting him/her manage a small portion of your total & then mirror his recos on your own. Good deal.

Yes. When he wanted to present his pie charts (comparing to benchmarks), I would show him the ROI in our hands from our spreadsheet...and also share how it was doing to our other components. (Usually a couple of % less but I also explained the insurance aspect.)

 

[SumDay]

I came to this forum several years back, after DH was offered a lump sum from his megacorp pension. A "financial advisor" was selling us hard on an annuity, and luckily this site set me straight. Someone suggested we look here: https://www.napfa.org/ We found one who charges a flat fee. She went through everything (how much we pay for cable, groceries, phone, home insurance, etc). I'm pretty organized but she made me feel like a slug. Anyway, her first time fee was less than we'd spend on a plane ticket, and follow-up visits (which we do every few years) are less than we spend on eating out a month. Now she just reviews our asset allocation, suggests tweaks, which we make at Vanguard, and we're done.


DH has NO interest in any of this, and for me it's well worth the price to have someone to bounce ideas off and ask questions when I get stumped. I need it and it helps me sleep. Well worth it, to me anyway.


Good luck to you and congrats on your new found wealth. And sorry for your loss.

 

[medved]

As the posts on this thread demonstrate, I am in a very small minority on this Board who use a financial advisor. (But, of course, many people in the world use financial advisors -- otherwise, the profession would have ceased to exist). So, this Board is not a representative sample -- it is very heavily weighted in the DIY direction.

I negotiated the rate scale so that I pay around 50 bps. It is a sliding scale, but that is, more or less, what it works out to.

I find that I get good value. The fee, even at 50 bps, is not cheap. But they have helped me do planning, given me the benefit of a couple of generations of perspective and insight into what has -- and has not -- worked well for comparably situated people, done projections that I find useful and that have given me confidence about my retirement plans, done a bunch of mechanical work that I don't have time for, given me tax advice that has saved me money, helped me think through asset allocation issues and withdrawal strategies, kept the portfolio reasonably well balanced, done some tax loss harvesting, and helped me avoid mistakes that could have been costly. So, I am fully satisfied and I think it has been money well spent.

I am a big fan of expertise, generally. I get medical advice from doctors (even though I am capable of doing medical research and making medical decisions on my own), i let mechanics repair by car rather than DIY, hire plumbers and electricians, painters, etc. They know how to do their trades better than I do. The same is true with my FA.

Sometimes, one reads on this Board comments about dishonest FAs who put their own interests above their clients' interests, or even steal money or whatever. And I am certain that dishonest FAs exist. I am also certain that dishonest ministers, and doctors, and accountants, and lawyers, and electricians, and undertakers exist. So it is important, if you use an FA, to get references and do appropriate diligence.

I am NOT saying that you should use an FA. It is perfectly fine to invest on your own and manage your own money. Whatever you want. Many people have done that very well. Some have done it very badly. Just like those who fix their own cars.

But I did not want you to think that EVERYONE believes that FAs are a dumb idea. Because that is not the case.

 

[Rustward]

As the posts on this thread demonstrate, I am in a very small minority on this Board who use a financial advisor. (But, of course, many people in the world use financial advisors -- otherwise, the profession would have ceased to exist). So, this Board is not a representative sample -- it is very heavily weighted in the DIY direction.

I negotiated the rate scale so that I pay around 50 bps. It is a sliding scale, but that is, more or less, what it works out to.

I find that I get good value. The fee, even at 50 bps, is not cheap. But they have helped me do planning, given me the benefit of a couple of generations of perspective and insight into what has -- and has not -- worked well for comparably situated people, done projections that I find useful and that have given me confidence about my retirement plans, done a bunch of mechanical work that I don't have time for, given me tax advice that has saved me money, helped me think through asset allocation issues and withdrawal strategies, kept the portfolio reasonably well balanced, done some tax loss harvesting, and helped me avoid mistakes that could have been costly. So, I am fully satisfied and I think it has been money well spent.

I am a big fan of expertise, generally. I get medical advice from doctors (even though I am capable of doing medical research and making medical decisions on my own), i let mechanics repair by car rather than DIY, hire plumbers and electricians, painters, etc. They know how to do their trades better than I do. The same is true with my FA.

Sometimes, one reads on this Board comments about dishonest FAs who put their own interests above their clients' interests, or even steal money or whatever. And I am certain that dishonest FAs exist. I am also certain that dishonest ministers, and doctors, and accountants, and lawyers, and electricians, and undertakers exist. So it is important, if you use an FA, to get references and do appropriate diligence.

I am NOT saying that you should use an FA. It is perfectly fine to invest on your own and manage your own money. Whatever you want. Many people have done that very well. Some have done it very badly. Just like those who fix their own cars.

But I did not want you to think that EVERYONE believes that FAs are a dumb idea. Because that is not the case.

I echo every point that you made. Your post is such a breath of fresh air in this forum.

It seems that the general population here believes that 1% AUM is the minimum management fee charged in managed accounts, which is very incorrect -- in some cases by a lot. Of course there is the self-fulfilling prophecy in which, for example, one might pay 3% or 4% management fees which would be a losing proposition in the long run -- just don't do that. Just about anything can be messed up, and if someone voluntarily pays a high management fee then they have messed up and it is probably their fault. We also hear about 12b-1 fees (that really aren't that high) and those 12b-1 fees are usually waived in managed accounts. I would suggest that most DIY'ers here do not fully understand how managed accounts work. We even had one poster who insisted that wrap fees for a 401K or IRA were required to be paid from separate after-tax money, which is totally false -- those wrap fees are paid from the 401K or IRA account and are not treated as a retirement fund distribution for tax purposes. Nobody (except me) stepped up to correct this person's very incorrect post. This says something about the group -- the forum. Wrap accounts generally use institutional class funds for which there is no front-end load and lower expense ratios than retail fund classes - facts that are frequently glossed over by most of the DIY posters here.

To be objective, there is a lot of really good information in this forum, and there is also a lot of misinformation.

So please be objective with your posts and comments, and do your research before posting.

 

[VanWinkle]

As the posts on this thread demonstrate, I am in a very small minority on this Board who use a financial advisor. (But, of course, many people in the world use financial advisors -- otherwise, the profession would have ceased to exist). So, this Board is not a representative sample -- it is very heavily weighted in the DIY direction.

I negotiated the rate scale so that I pay around 50 bps. It is a sliding scale, but that is, more or less, what it works out to.

I find that I get good value. The fee, even at 50 bps, is not cheap. But they have helped me do planning, given me the benefit of a couple of generations of perspective and insight into what has -- and has not -- worked well for comparably situated people, done projections that I find useful and that have given me confidence about my retirement plans, done a bunch of mechanical work that I don't have time for, given me tax advice that has saved me money, helped me think through asset allocation issues and withdrawal strategies, kept the portfolio reasonably well balanced, done some tax loss harvesting, and helped me avoid mistakes that could have been costly. So, I am fully satisfied and I think it has been money well spent.

I am a big fan of expertise, generally. I get medical advice from doctors (even though I am capable of doing medical research and making medical decisions on my own), i let mechanics repair by car rather than DIY, hire plumbers and electricians, painters, etc. They know how to do their trades better than I do. The same is true with my FA.

Sometimes, one reads on this Board comments about dishonest FAs who put their own interests above their clients' interests, or even steal money or whatever. And I am certain that dishonest FAs exist. I am also certain that dishonest ministers, and doctors, and accountants, and lawyers, and electricians, and undertakers exist. So it is important, if you use an FA, to get references and do appropriate diligence.

I am NOT saying that you should use an FA. It is perfectly fine to invest on your own and manage your own money. Whatever you want. Many people have done that very well. Some have done it very badly. Just like those who fix their own cars.

But I did not want you to think that EVERYONE believes that FAs are a dumb idea. Because that is not the case.

As a DIY type, I agree with your statement 100% Not everyone has the time or inclination to educate themselves on all the required information to make decisions on their future income. Even if they do learn everything, they lack the experience of some FAs that have been there before.

Great post!!

 

[kcowan]

Also a good financial plan can help making life decisions. That has little to do with portfolio selection.

 

[OldShooter]

Also a good financial plan can help making life decisions. That has little to do with portfolio selection.

Yes, as has been mentioned, many discussions around here conflate "investment advisor" with "financial planner." Few, if any, of the rants, cheap shots, or impassioned arguments around here pertain to actual financial planners. You don't find real financial planners at investment companies, whether Vanguard or Morgan Stanley. What those guys do is a subset of what financial planning encompasses.