Anyone use a Financial Advisor to confirm that you're FI?

[bearkeley]

We've been on this board long enough to know how most of you feel about Financial Advisors to manage your investments, but has anyone found the benefit of using one to help with the planning side?

We were pretty confident that we're 2 years to FIRE but now, we're not sure if it's maybe 4 more years. We have done our homework and are conservative in our estimates for reaching the 4% SWR and have added taxes, insurance etc, but we're still not sure it's right! Argh!!!!!

USAA offers planning for less than 1k (cheaper than others). I realize their funds aren't the best performing/high fees, etc. but we really just want someone's blessing to confirm our plan. Is it 1k well spent or a waste?

If you consulted a FA for the same reason, do you recommend using someone who specializes / at least knows enough about early retirement? Since a good chunk of our assets are real estate related, would it make a big difference to get someone who specializes in this area (if one exists?)

 

[REWahoo]

bearkley, back a few years ago when USAA was only charging $500 for their services, I had them do a plan for us just to be sure I wasn't totally nuts in thinking our investment plan made sense. That was before FIRECalc and this forum so there were few other places to seek input.

The planner told us we were on track and made a few recommendations, USAA funds, of course. None of his suggestions were were of any real significance and triggered no changes to our allocation. Had this forum been around I could have gotten the same information (better, actually) for free.

However, having a "professional" look at what we were doing did provide some peace of mind at the time. Whether or not that peace of mind would be worth $1k to you is another question entirely. Knowing what I know now, I would lay out my financial situation to this forum, ask for their input and keep my $.

 

[MooreBonds]

Disclaimer: I'm not a professional. I don't try to play one on tv. And I sure as hell wouldn't want to say I'm one.

I'm not 100% certain, since I've never cracked a financial I'll advise you with mediocre advice and sell you funds to help support my ever-increasing expenditure lifestyle planner, but I don't believe most would even think about early retirement, let alone have much experience in knowing what to plan for. If I had to guess, all they would do is look at your assets, tell you what they would assume for your portfolio growth (probably too high, IMO...in the neighborhood of 9%-10%/year), and, coincidentally enough, tell you that you could get those growth rates in these nice looking funds they just so happen to offer to their special clients like you.

Sure, a fee-only planner might be more in tune with things you might need to plan for (such as long-term care insurance, health insurance), but I would guess that the collective wisdom of this board is far superior to almost any financial planner out there (much less a randomly-selected FP from the yellow pages). You could always make a $1k donation to Dory36's the new guy's server fund, if it would make you feel better if money changed hands.

Is it just that another person saying "you can do it" in person would make you feel better, or is it the aspect that they're a "professional"? Realize that most financial planners would probably never even consider early retirement, much less have experience planning for it...so I don't know the value in paying one to give you a one-time portfolio look-over.

In the end, the FP can only give you advice - just like this board can give you advice. It's up to you to put into action any recommendation that we/the FP gives to you. It's up to you to make the final call to follow your original plan, or make any changes that are suggested by anyone.

 

[HelpMeRhonda]

Yes, we did and still do.

In my prof life I made BIG bucks doing what I was good at. It didn't make since for me to do anything other that what my job was (and coach little league ).

We found and independent FA 10+ yrs ago that we have had great success. He has helped us with numerous issues.

 

[LOL!]

http://early-retirement.org/forums/index.php?topic=8324.0
is a poll that asked a similar question. Also I guess you have read that quite a few folks here have gotten free "financial plans" from Vanguard. So a $1,000 (vs $0) seems a steep price to pay if you have significant assets at USAA and does not appear to be cheaper than others. But the main message I get from folks who got the Vanguard plan is "It was peace of mind for us."

 

[Coach]

Bearkeley, I spent some time with financial planning services about a year ago, mostly to see if I was on track. I don't think I got any great insights that I haven't gotten from this board and my own reading, but I did get a nice printed plan and some reassurance that I was on track.

This was through TIAA-CREF, and free because I have enough invested with them. In retrospect I think it would have been worth $1000 to me.

Your question about real estate seems like an important one, but I have no answer for it.

Coach

 

[Jake46]

I havee had some really bad experiences with financial advisors/brokers in the past and decided about five years ago that I could do at least as well. But two years ago, I qualified for free financial advice through my Fidelity Private Access account. I have used the advisor to bounce ideas off of but mainly to confirm what I have planned. It's good to have a sounding board once in a while.
Jake46

 

[FinanceDude]

My take?

Most "planners" aren't planners at all, they just "play one on TV". Truth be told, NOONE is a "financial planner" unless they hold the CFP certificate, and that's a MINIMUM requirement.

An hourly fee CFP with a lot of experience is probably the most unbiased person to hire.

I can't tell you HOW MANY "planners" I have met that aren't even REGISTERED, or only have a Series 6...............

 

[grumpy]

bearkeley,

Two years prior to my planned retirement date, I was trying to convince DW that we were on track. I had run all the Firecalc numbers but she didn't understand them and didn't really believe me. She played tennis with a guy who was a financial planner. I got her to agree that we would go see Artie and give him all of the data. If he said we were good to go, she would accept it. He charged us $500 but it was well worth it. He concluded that, not only were we on track, but that DW could switch to half-time teaching for her last two years without hurting the situation. This gave her a more gradual transition to FIRE and worked out great. We've been retired 3 years and its wonderful!


Grumpy

 

[Sarah in SC]

My take?
Most "planners" aren't planners at all, they just "play one on TV". Truth be told, NOONE is a "financial planner" unless they hold the CFP certificate, and that's a MINIMUM requirement.
An hourly fee CFP with a lot of experience is probably the most unbiased person to hire.
I can't tell you HOW MANY "planners" I have met that aren't even REGISTERED, or only have a Series 6...............

Ditto. The stuff we see out there...would gag a goat!
Truthfully, in my own experience, my older CFP boss says that DH and I need A LOT more money to retire comfortably than my own data shows--he's a big proponent of working forever (he's 71 this year and still hard at it). I just take it as his own experiences getting in the way of giving good advice to me. My younger (38) boss knows and cheers our FIRE goals, and gives good, relatively unbiased advice. I took this job to learn more about handling my own finances (including getting the CFP) and I'm glad to be interact/learn from high net worth folks. I would be hard pressed to pay for so-called professional advice, unless it was from an hourly planner with some clue about FIRE.
Sarah

 

[SecondCor521]

I wouldn't, but then again, I'm not you.

Personally my calculation is really easy:

1. Let A = my FIRE stash (essentially net worth - home equity - NPV of kids' college expenses).
2. Let B = my last six months expenses according to Quicken.
3. Is A more than 50 times B? If yes, FIRE.

I think the real estate aspect would present a challenge to the average FA and USAA as well. If I were in your shoes I would probably present my plan (especially how you plan to handle the real estate) here and get feedback.

2Cor521

 

[youbet]

Several years ago, Megacorp offered employees a benefit that could be used for tuition, estate planning, retirement planning and several other things of that nature. The amount was based on grade and seniority and I fell into the $5,000 category.

Hmmmmm....What to do with the money? I decided to go for retirement planning and picked a $3,500 package from a local firm. DW and I filled out forms detailing what we had, what we were making, what we wanted in terms of retirement, etc. We sat through interviews, both with individuals and teams over a six week period. At the end, they provided:

1. A detailed evaluation of our current situation and suggested plans going forward emphasizing the relationship between my investment style and our RE vision. Lots and lots of quantative data, pretty charts and graphs, etc. NO selling. Investment recommendations were based on me doing it myself primarily in a no-load, low-cost fund environment.

2. A follow-up more generalized presentation, focused primarily at DW, where I sat quietly while they explained in a very straightforward manner that we were in good shape to RE and why. This included some really clever explanations of market return variability and risks, such as RE into a bear market, etc.

We really got two things out of it. I felt more confident I was on the right track. I still refer back to some of the material even after several years. DW, who struggles to be interested in our finances, developed a new attitude towards FIRE and a greater appreciation for the saving and investing we had done over the years. Her confidence that we could stop working increased many times over and has stayed that way. I guess she just needed those three folks in their conservative suits, the fancy meeting room, the dozens of PP slides and their convincing words to backup what I had been telling her.

Conclusion: It helped us as described above, but I would have never in a zillion years paid for this myself. I only did it because the benefit was provided by Megacorp and the time to use the money was about to expire. Still, in retrospect, I'm glad we did it.

 

[saluki9]

Disclaimer: I'm not a professional. I don't try to play one on tv. And I sure as hell wouldn't want to say I'm one.

I'm not 100% certain, since I've never cracked a financial I'll advise you with mediocre advice and sell you funds to help support my ever-increasing expenditure lifestyle planner, but I don't believe most would even think about early retirement, let alone have much experience in knowing what to plan for. If I had to guess, all they would do is look at your assets, tell you what they would assume for your portfolio growth (probably too high, IMO...in the neighborhood of 9%-10%/year), and, coincidentally enough, tell you that you could get those growth rates in these nice looking funds they just so happen to offer to their special clients like you.

Sure, a fee-only planner might be more in tune with things you might need to plan for (such as long-term care insurance, health insurance), but I would guess that the collective wisdom of this board is far superior to almost any financial planner out there (much less a randomly-selected FP from the yellow pages). You could always make a $1k donation to Dory36's the new guy's server fund, if it would make you feel better if money changed hands.

Is it just that another person saying "you can do it" in person would make you feel better, or is it the aspect that they're a "professional"? Realize that most financial planners would probably never even consider early retirement, much less have experience planning for it...so I don't know the value in paying one to give you a one-time portfolio look-over.

In the end, the FP can only give you advice - just like this board can give you advice. It's up to you to put into action any recommendation that we/the FP gives to you. It's up to you to make the final call to follow your original plan, or make any changes that are suggested by anyone.

I disagree with you 100%. Despite what you think, there are some great planners out there. The CFP designation is a start, but not the only requirement. I know it is hard to fathom but, not everything you need to know about financial planning is available on a website.

I continue to be amazed when I see some of the issues real planners come up with. I realize there are a lot of people here who don't want to pay for advice, but a good planner can really make a huge difference.

 

[LOL!]

We are about to have the annual 401(k) meeting for employees. Our plan is run by a big fee name full-service brokerage and they are sending a suit to answer questions. Employees can get a free private consult by appointment if they like. I wonder if I ask I them which books I should read to help me understand investing and retirement planning if they would tell me about anything written by Bernstein or Bogle?

Has anyone's advisor given them suggested reading? If so, what was it?

 

[CCdaCE]

I disagree with you 100%. Despite what you think, there are some great planners out there. The CFP designation is a start, but not the only requirement. I know it is hard to fathom but, not everything you need to know about financial planning is available on a website.

I continue to be amazed when I see some of the issues real planners come up with. I realize there are a lot of people here who don't want to pay for advice, but a good planner can really make a huge difference.

I'm on the fence, not disagreeing with you. What would be an example of some minute detail that a planner has caught, which would've been catastrophic. Or, whatever... I need some example.

To me, it's a question of what estimates they use, how "deep" they go into different scenarios, etc. I could've done most of what my "planner" came up with (basically to sell more of his products to me).

-CC

 

[CCdaCE]

<snip>

Has anyone's advisor given them suggested reading? If so, what was it?

Your Complete Guide to Money Happiness. After I ran across a part about market timing, I put this book on the shelf. For instance, Chapter 30 is titled "Three Prudent Investment Tools: Mutual Funds, Variable Annuities, and Variable Life". Not my cup o' tea, as far as the last two topics.

It's got a few good general tips, though. Stuff like "make a will, buy life insurance", blah blah. Mostly common sense - some of it isn't so common, though, I guess.

I got this from an insurance salesman.

-CC

 

[Sarah in SC]

Well, one example a planner might help you with, is setting up your assets for estate tax efficiency. That is not a DIY topic to be sure. Needs of minor children, use of bypass trusts, etc are all areas that a good planner would review, but not if the so-called planner is just some stock jockey shilling investments. A comprehensive plan can uncover/explain some gaping holes in your insurance coverage (like own-occ disability), wills/trusts/beneficiary designations, and tax efficiency.

Sarah

 

[Meadbh]

I've had financial reviews through professional associations. In recent years I have had a very comprehensive review through private client services at my bank (part of the package). I got a very comprehensive plan with Monte Carlo forecasting which actually made me realize that I was FI. The plan is to review the analysis every two years. I think the benefits of having a professional involved (with a decent software package) include consideration of taxation, estate, insurance and sensitivity analysis. And no pressure.

 

[CCdaCE]

Well, one example a planner might help you with, is setting up your assets for estate tax efficiency. That is not a DIY topic to be sure. Needs of minor children, use of bypass trusts, etc are all areas that a good planner would review, but not if the so-called planner is just some stock jockey shilling investments. A comprehensive plan can uncover/explain some gaping holes in your insurance coverage (like own-occ disability), wills/trusts/beneficiary designations, and tax efficiency.

Sarah

Excellent points. I'm biased since I'm only familiar with the sales-oriented planner. I agree that a hourly fee-based one would hopefully have more to offer.

-CC

 

[Martha]

Despite what you think, there are some great planners out there. The CFP designation is a start, but not the only requirement. I know it is hard to fathom but, not everything you need to know about financial planning is available on a website.

I continue to be amazed when I see some of the issues real planners come up with. I realize there are a lot of people here who don't want to pay for advice, but a good planner can really make a huge difference.

A good financial planner should be very helpful with a wide range of issues. Here are topics they are tested on:

http://www.cfp.net/downloads/Financial Planning Topics 2006.pdf

I question though how often financial planners consider more than a few of these issues when working with a person. I talked to a financial planner/accountant once and he drew up a fancy spreadsheet to show how we could retire. He never once asked about expenses, specifically the big expense of health insurance. Not very helpful.

 

[CCdaCE]

Thanks Martha, that link is especially insightful.

OTOH, I have passed the P.E. (Professional Engineer) exam. That doesn't make me an expert on every topic which you're tested on.

We're all human, I guess. It's good to know what they're (CFPs) are supposed to be familiar with, though.

-CC

 

[LOL!]

Well, one example a planner might help you with, is setting up your assets for estate tax efficiency. That is not a DIY topic to be sure. Needs of minor children, use of bypass trusts, etc ....

I went to an estate lawyer to help with this stuff and not a financial advisor.

 

[FinanceDude]

I'm on the fence, not disagreeing with you. What would be an example of some minute detail that a planner has caught, which would've been catastrophic. Or, whatever... I need some example.

To me, it's a question of what estimates they use, how "deep" they go into different scenarios, etc. I could've done most of what my "planner" came up with (basically to sell more of his products to me).

-CC

Bottom line, most CFP"s or whomever aren't going to find the "magic bean" for you. One interesting fact I read a number of years ago was something like 85% of folks that have over $10 million in net worth use an advisor.

And that number is more likely due to complex issues requiring FLP's and things like that................

 

[Martha]

I went to an estate lawyer to help with this stuff and not a financial advisor.

My firm's estate planning department employed a CFP for a while to work with clients. The lawyers did most of the tax planning or at least would review the planner's recommendations.

 

[Sarah in SC]

Oh gawd, let me say that the CFP's job (according to the CFP Board of Standards) is to play quarterback for the planning "team", which can be composed of a CPA, estate lawyer, etc and SHOULD NOT be practicing law without a license.
....um yeah, that is on the bone-crushing CFP exam I'm studying for....along with an inexhaustible supply of ethics rules.

Sarah