Asking For A Friend - Schwab

[DustyMom]

A dear friend of mine is nearing the end of the divorce process and will soon be in possession of a reasonably-sized cash settlement along with some property/business that will likely be sold in the not too distant future. She has no investment experience, nor do I believe she has the interest in learning more than the bare minimum. She has turned to me for advice as she knows I manage my own finances and have done well. She also has other friends advising her. At this point I am afraid she is on the verge of being sucked into a relationship with a Financial Advisor with an Investment/Insurance firm (recommended by a friend). I am trying to find a reasonable alternative for her, knowing that she just wants someone to tell her what to do.

I am looking at the Schwab website and see that they have various "Intelligent" services that might work for her. Because she will be looking for a new home for existing IRA/401(k) as well as a place for the new money, I am thinking she could consolidate all of her assets with Schwab, which would make the Intelligent Income product more useful. I don't really see the cash position or number of positions being much of an issue. Also the $300 one-time + $30/mo for unlimited access to a personal advisor sounds much more reasonable than the price she would pay for hand-holding from the aforementioned Financial Advisor.

I am not willing to get too deep into the weeds of her finances in advising her because I don't really feel qualified. My own financial success comes with a lot more margin to make mistakes than what she will have. I plan to call Schwab today and ask more questions so that I have a better understanding of how the portfolios work before I present my advice to her.

She is 65 and will probably end up with about $1M when all is said and done. I believe her SS will be relatively low and there are no pensions.

Thoughts on this as an alternative?

[braumeister]

For someone with absolutely no interest in managing their own account, Schwab Intelligent Portfolios is probably one of the best options.

[OldShooter]

Quote:

Originally Posted by braumeister For someone with absolutely no interest in managing their own account, Schwab Intelligent Portfolios is probably one of the best options.

+1

[Gotadimple]

Intelligent Advisors portfolios are robo-advisors. It uses a pre-determined allocation using many more holdings than many here with high figure do-it-yourself portfolios would use. In addition they hold a significant amount of cash. There is no hand-holding here. You put money in, the computer does its thing, you get whatever the results are.

With the value of her account, what could be transferred over, and a pending large financial transaction she would qualify for a face-to-face meeting with the Branch VP. At a minimum they can help her understand what she has and what services might be helpful to her. They do have a financial planning service that costs $300 for the plan. They don't recommend specific investment products.

Seriously, it is worthwhile given her situation to sit down with a certified financial planner who will not recommend investments but will help her make decisions about how to manage what she has, including what to take from retirement accounts, and when. Most services like this are available through Schwab, but cost more than $300. What she will get is a comprehensive plan and the time to talk seriously about her money.

If she needs to talk further she gets the free consulting from the Branch VP, but she does all the work. IF she isn't interested in doing the work, then she needs to consider other services offered by Schwab.

[GalaxyBoy]

I’m more of a Bogleheads three-fund portfolio person so I can’t comment on the merits of roboadvisors, but I will chime in to say that I’ve been with Schwab for over 30 years and have been satisfied with them. They don’t pay much interest on cash, though so she might consider one of the online banks for that portion of her assets. OTOH, I really like Schwab’s checking account with easy to use online billpay, check deposits via smartphone, and free ATM withdrawals at any other bank’s ATMs. I just transfer cash from my bank account at Ally as needed, which is also quick and easy.

[pb4uski]

Quote:

Originally Posted by DustyMom .... She is 65 and will probably end up with about $1M when all is said and done. I believe her SS will be relatively low and there are no pensions. Thoughts on this as an alternative?

I have accounts with Vanguard, Fidelity and Schwab and IME Schwab is the best of the three, but not by a wide margin. They are all pretty good. Since she doesn't care to get very involved she can probably do well with less than a handful of index ETFs or perhaps even some balanced or retirement date funds or ETFs.

Just note that if she waits until her FRA to claim, once her ex is collecting SS she will get the greater of SS based on her own work record or 50% of her ex's PIA.

https://blog.ssa.gov/ex-spouse-benef...ey-affect-you/

[DustyMom]

Thank you for the replies. I am relieved to see that (so far) no one believes Schwab would be the WRONG choice.

Given her need for some light- to medium-touch service and the relatively low cost, I will be sending her to Schwab.

[old medic]

After a bunch of research and asking we opened accounts with Schawb. Brought a check to the local branch, and was treated like it was a gazzion dollars... not the little bit it actually was.

[still_working]

We have multiple Schwab accounts and are very satisfied with them overall. I decided to try one of their robo-adviser models on a small piece of our portfolio and didn't care for it.

While I appreciate that it tailored our model based on answers to approachable questions meant to assess risk, it didn't have a way to adjust that model based on other accounts in our portfolio at Schwab and elsewhere. For example (and as mentioned by others), it holds a certain amount of the overall account in cash. In our case, our robo-advised account has also under-performed relative to the major indices and market overall.

I do think that her future business warrants a face-to-face introduction with a local branch VP and they would do a good job helping her get set up to be successful, but it may not be in a robo-advised product depending on what her goals are.

[OldShooter]

Quote:

Originally Posted by Gotadimple Intelligent Advisors portfolios are robo-advisors. It uses a pre-determined allocation using many more holdings than many here with high figure do-it-yourself portfolios would use. In addition they hold a significant amount of cash. There is no hand-holding here. You put money in, the computer does its thing, you get whatever the results are. ...

Your info is out of date. There is optional handholding and there has been for some time.

Quote:

Originally Posted by Gotadimple With the value of her account, what could be transferred over, and a pending large financial transaction she would qualify for a face-to-face meeting with the Branch VP. ...

The service is tiered based on the assets at Schwab. The first tier is at a $1M and is called "Pinnacle." With any asset transfer she will get assistance. At the Pinnacle level she will get a permanent rep assigned. There is no "branch VP", most of the reps are VPs, as is the branch manager. The branch manager will assign one of his troops, again depending on asset level. As a start, I have PM'd the OP with the contact info for our rep, who is indeed a VP. Knowing that I made the referral he will go the extra mile to help her help her friend.

Quote:

Originally Posted by Gotadimple Seriously, it is worthwhile given her situation to sit down with a certified financial planner who will not recommend investments but will help her make decisions about how to manage what she has, including what to take from retirement accounts, and when. Most services like this are available through Schwab, but cost more than $300. What she will get is a comprehensive plan and the time to talk seriously about her money. ...

Good recommendation, but I'd suggest finding an FA who charges by the task or some kind of flat rate. The FAs you get at brokerage houses are really IAs/investment advisors and do not address the full range of a client's financial life. Garrett Planning Network seems to be well thought of as a referral source. www.xyplanningnetwork.com and napfa.org seem to be well thought of too. IMO the CFP is a minimum credential, not a big deal, but worth watching for.

[still_working]

Quote:

Originally Posted by OldShooter As a start, I have PM'd the OP with the contact info for our rep, who is indeed a VP. Knowing that I made the referral he will go the extra mile to help her help her friend.

That's an incredibly kind gesture for a complete stranger. Glad we have folks like you on this forum.

[DustyMom]

OldShooter, I did look for some local fee-based planners and gave her a couple of numbers which she said she called and they either didn't return her call or she felt they talked down to her and now she is holding a folder of information from an Investment Advisor and being encouraged by another friend who has used him for many years (but knows very little about her own accounts) so I have to quickly find another alternative.

[38Chevy454]

I agree that Scwab can do fine for your friend. I do think some in-person mtgs with an overall financial planner would help her to understand the big picture currently and for going forward. A fee-only advisor is what would be best. Then with that guidance, some free investment advice from Schwab would enable your friend to get things prepared for now and into the future. Whether the robo-advisor service is utilized, or just some DIY (with Schwab's advisor guidance) diversified funds is really up to your friend.


For sure steer your friend away from a AUM type financial advisor. Your friend should consider that a little amount paid now for self-education and financial knowledge will be far more valuable than the mostly head in the sand "My advisor makes all the decisions" type yearly fee.

[braumeister]

Quote:

Originally Posted by DustyMom now she is holding a folder of information from an Investment Advisor

And I would bet money that the actual cost of that Advisor is either stated obliquely in that folder or else in such a way as to make it look like a good deal.

Which it is, of course, but only for the advisor.

[DustyMom]

Braumeister, actually, the info very clearly states some disturbing facts about conflict of interest and how the advisor is held to minimum sales thresholds, may be encouraged to sell products that compensate them more, etc. etc. I wonder how many people actually read through that stuff. LOL.

[Chuckanut]

As much as I like Vanguard, Schwab has one advantage over Vanguard that I think is useful to people such as your friend. That is the fact that Schwab has physical offices with people in them that she can consult with face to face. Small short consultations are 'free', though if she wants a more thorough plan Schwab may charge her.

I went with a friend to a 'free' Schwab consultation and the advisor did recommend Schwab's robo account. In my friend's case he had two IRA accounts with comparable amounts in each. He invested the Roth IRA into the lazy portfolio - USA total stock market, USA total bond market, International total market (percentages 50,40,10). He will re-balance it each year. He invested the regular IRA into the robo advisor after answering the questions. In a few more years he will take a look at both and see what he thinks.

FWIW, the robo advisor had him somewhat higher in total stocks at 66%, and with about 12% in cash, the rest is in bonds. This was at the end of last year. The total number of funds varies from 8 to 12 as far as I can tell.

FWIW2, I have been a satisfied custom of both Vanguard and Schwab for three decades. I still like controlling my own investments, but I am wondering if starting to switch some assets to the Robo Advisor is a good idea. If I wait until I am too addle-brained, well.. that would be too late. I saw my father hang on to control of his assets past the point when he had the ability to make reasonable decisions. While he did not get taken to the cleaners by a greedy FA, he did leave tens, probably hundreds of thousands of dollars on the table by hanging on to certain stocks and funds which rarely if ever even matched the total market indexes.

[Dash man]

Schwab does have the option to use independent financial advisors they work with. We’re considering working with one to update our financial plan with an emphasis on tax planning.

[braumeister]

Quote:

Originally Posted by Chuckanut I still like controlling my own investments, but I am wondering if starting to switch some assets to the Robo Advisor is a good idea. If I wait until I am too addle-brained, well.. that would be too late.

A perennial concern for many of us.

One possible feature that might help:
I don't know about Vanguard, but both Fidelity and Schwab let you designate a trusted contact:

Fidelity:

Quote:

Why should I provide a trusted contact? A trusted contact is someone we can get in touch with in the event we're concerned about your: Health, Well-being, or Welfare (due to exploitation, endangerment, or neglect)

Schwab:

Quote:

What is a Trusted Contact Person? A Trusted Contact Person ("Trusted Contact")* is a resource Schwab, and your advisor (if you have one), may contact on your behalf, if necessary, to attempt to address concerns regarding potential financial exploitation, or in communicating with you regarding issues related to your account(s).

[target2019]

Quote:

Originally Posted by DustyMom Thank you for the replies. I am relieved to see that (so far) no one believes Schwab would be the WRONG choice. Given her need for some light- to medium-touch service and the relatively low cost, I will be sending her to Schwab.

Others have mentioned the advantages of Schwab. In most threads you'll get recommendations like Vanguard, Fidelity, or Schwab.

Let your friend know there is no such thing as a free lunch. She may need the local offices provided by Fidelity or Schwab. OTH, many are fine with Vanguard. The cusotmer service experience with these three can vary.

Whenan institution provides a low-fee robot or similar, it is a product. For example, there is a fee for Intelligent Portfolio, but in addition pay close attention to what you must be invested in (the fund selections). And of great importance is the drag of un-invested cash in Intelligent Portfolio.

You can also find many critical threads on Bogleheads about these institutions.

I am happy with Schwab, and also with Vanguard. Each has pros and cons. To agree with you, yes, Schwab is not the WRONG choice. However, Vanguard and Fidelity are not wrong either.

If it were my friend I'd make sure to attend any meetings and listen to any phone calls. The conversation can get very deep at times, and people often don't recall the specifics.

Good luck with your search.

[OldShooter]

Quote:

Originally Posted by DustyMom Braumeister, actually, the info very clearly states some disturbing facts about conflict of interest and how the advisor is held to minimum sales thresholds, may be encouraged to sell products that compensate them more, etc. etc. I wonder how many people actually read through that stuff. LOL.

Ack!! This is not a fiduciary financial advisor. This is an insurance salesman. Run a broker check (https://brokercheck.finra.org/) and check licenses and customer complaints. Probably this "FA" has only a Series 7 plus an insurance license and there may be customer complaints.

Explain to your friend that an FA relationship must be a fiduciary relationship or she will be fleeced.. The reasons are obvious. https://www.nerdwallet.com/article/investing/fiduciary and https://www.investopedia.com/terms/f/fiduciary.asp