Choosing an adviser

[seraphim]

DW is currently dealing with a PNC bank financial adviser reference inheriting her mothers portfolio. DW handled her moms assets for the past few years, but did not choose the adviser, nor does she understand how he is compensated. He is helping set up benefit accounts and bank accounts for the transfer of funds.

Being thrust into finance unexpectedly, and looking forward to setting up our own from tax deferred funds after retirement, I have just begun learning about fees and costs, etc. at this point, we're still waiting for IRAs to be transferred; equities must go through probate as they list no beneficiaries.

According to online information, the advisor has 14 years experience, is registered in quite a few states, has three FINRA disputes (?), and is fee and commissioned based.

I intend to interview him at the next meeting, but am curious about everyone's thoughts on choosing an adviser. DW seems to trust him, saying he has done a good job of maintains 5 to 6 percent income while her mom was in special care.

My recent reading spree makes me wonder...

Addendum: disclosure shows he administers 'wrap fee accounts', of which I have heard unpopular comments reference cost. Is an advisor employed by a bank even a good idea? Won't they be limited in funds they can employ? And paying a fee AND commission? Conflict of interest between commissions and recommending funds in the investors best interest?

 

[Sarah in SC]

When asked, the advisor should be able to explain exactly how he is compensated.
And should be able to provide you with a report of the actual dollars that have been paid in fees and commissions to him or his company.
It may be that he is a salesperson, not an actual financial advisor.
Ideally you are looking for someone who has a fiduciary responsibility.
My bias is clearly toward those with advanced designations, such as CFA, CFP, CPA with PFS, and the like.

 

[sengsational]

Consider reading the aarp retirement survival guide. Your public library probably has a copy. There are dozens of pages that tell you how to get good advice and avoid getting ripped off. I personally would not use anyone without fiducary responsibility to my interests.

 

[seraphim]

Thank you both. Fiduciary responsibility is a new term for me but I understand what you mean.

My concern becomes about beneficiary IRAs being set up at PNC. Once the money's transferred, are we locked in there ? Have to research it.

 

[panacea]

DW is currently dealing with a PNC bank financial adviser reference inheriting her mothers portfolio. DW handled her moms assets for the past few years, but did not choose the adviser, nor does she understand how he is compensated. He is helping set up benefit accounts and bank accounts for the transfer of funds.

Being thrust into finance unexpectedly, and looking forward to setting up our own from tax deferred funds after retirement, I have just begun learning about fees and costs, etc. at this point, we're still waiting for IRAs to be transferred; equities must go through probate as they list no beneficiaries.

According to online information, the advisor has 14 years experience, is registered in quite a few states, has three FINRA disputes (?), and is fee and commissioned based.

I intend to interview him at the next meeting, but am curious about everyone's thoughts on choosing an adviser. DW seems to trust him, saying he has done a good job of maintains 5 to 6 percent income while her mom was in special care.

My recent reading spree makes me wonder...

Addendum: disclosure shows he administers 'wrap fee accounts', of which I have heard unpopular comments reference cost. Is an advisor employed by a bank even a good idea? Won't they be limited in funds they can employ? And paying a fee AND commission? Conflict of interest between commissions and recommending funds in the investors best interest?

Typically (but not always) bankers have a broker dealer they work through so they qualify as the "sales person" versus a fiduciary. Big difference in that that they are only required to find something "suitable" for the client, which can mean a lot of things. It has few boundries when it comes to appropriateness and fees. As Sarah said, a fiduciary is generally a better choice because they must find an investment that is actually in the client's best interest. It's very different and IMO one of the most critical factors in selecting an advisor. With the fiduciary, you don't have to worry about the conflicts of interest you were referring to in the way you would with the salesperson. I think the biggest red flag at this point are the FINRA disputes. You should be able to obtain the detail on what the disputes are but that's not a very good sign. Personally, I'd steer clear and look for an advisor with a squeaky clean record.

 

[gerntz]

My concern becomes about beneficiary IRAs being set up at PNC. Once the money's transferred, are we locked in there ?

No. If you interview & find another advisor you prefer, the firm that new advisor uses to hold your accounts can provide forms to fill out & send to PNC to have the accounts transferred.

 

[seraphim]

Thank you both. You have eased my mind on several questions.

I am leaning towards indexing, which seems to give more stable results at a cheaper cost, if my studies are correct - indexed funds can't beat their benchmarks, but are more cost effective and less affected by manager style.

In short, when I retire in January we'll have about 690k in tax deferred and about 300k in beneficiary accounts: 2/3 of that fixed in IRAs and annuities, 1/3 in equities.

I'm trying to learn quickly lol, as the inheritance was not anticipated.

Any other thoughts would surely be appreciated.

Addendum: considering several companies dealing with indexed funds, such as Vanguard, Silverleaf, IFA...

 

[Finance Dave]

Thank you both. You have eased my mind on several questions.

I am leaning towards indexing, which seems to give more stable results at a cheaper cost, if my studies are correct - indexed funds can't beat their benchmarks, but are more cost effective and less affected by manager style.

In short, when I retire in January we'll have about 690k in tax deferred and about 300k in beneficiary accounts: 2/3 of that fixed in IRAs and annuities, 1/3 in equities.

I'm trying to learn quickly lol, as the inheritance was not anticipated.

Any other thoughts would surely be appreciated.

Addendum: considering several companies dealing with indexed funds, such as Vanguard, Silverleaf, IFA...

I'm not sure it's true that index funds can't beat their benchmarks...but their goal is to mimic them...so the performance should be very close if done correctly.

You may also want to consider, as you choose an advisor, the tools you would have at your disposal. I don't know if you consider your advisor as separate from the company at which you have your account...so it's a bit tricky to explain what I mean....but...

Vanguard has very low fees

Fidelity has an excellent website and better customer service than some according to some articles I've read in Kiplinger and Money magazine. I manage my Dad's retirement accounts, and they are in Fidelity. I manage my own (not yet retired), and they are in Vanguard. I prefer Fidelity's website, although I admit I'd be hard-pressed to provide specific details as to why...I just seem to be able to find what I need in Fidelity easier.

Fidelity has access to a VERY wide list of investments.

Just some thoughts to consider...you may not be only using an advisor, but also a website...and wanted you to know a bit about at least two of those options.

 

[samclem]

In short, when I retire in January we'll have about 690k in tax deferred and about 300k in beneficiary accounts: 2/3 of that fixed in IRAs and annuities, 1/3 in equities.

This isn't particularly clear to me. It might be worth a separate thread.

 

[Midpack]

It's been a while, but I thought this thread might interest the OP also http://www.early-retirement.org/forums/f28/certified-financial-planner-or-not-48748.html. And this one more recently http://www.early-retirement.org/forums/f28/financial-planner-how-to-choose-one-59591.html.

 

[seraphim]

Dave

Thank you. Some of my next questions involved working with online accounts. Do they provide 'adviser' service when setting up a portfolio, does adviser service entail additional fees, do they have fiduciary responsibility to the investor?

Much to learn.

 

[seraphim]

.This isn't particularly clear to me. It might be worth a separate thread.

Yes, but I'm not sure I know enough to ask the right questions. Of the two accounts, both offered via our pension fund, one is a "457", and the other is a deferred retirement option (DROP); the DROP invests my retirement check each month and accrues a 5% interest. It entices older employees to work longer so the initial rush of baby boomers doesn't deplete the pension. I must retire by 6-13 or lose that nest egg. It will roll over into other tax deferred account after I retire, which will be a good idea. Next month they're hooking the interest rate onto 10 year treasury bill. I can do much better, I think, once I retire and access those funds.

 

[seraphim]

Midpack. Thanks for the links. I'll check them out now.

 

[2B]

I suggest you go to the nearest mirror and say "hello" to your adviser. No one will care about your money as much as you will. You don't need to enrich anyone else by giving up investment return to them.

Please, get far away from anyone managing you assets as a "wrap account." You are paying way more than their services are worth and you can do it all yourself. If you really feel you need to have someone to help set up your asset plan, go to a fee-only planner. From what I've read, you should be able to get a good plan setting you up for indexing for under $1,000. You really shouldn't need any follow up.

You can find a "reading list" somewhere on this site. There is also a good list at the Bogelheads forum. You can also go to Scott Burns' easy to understand columns at asset builder.com but don't put your money there. There is a great book out I'll mention specifically -- William Bernsteins' Investors Manifesto. It's easy to understand and really drives home the benefits of indexing.

 

[shooter]

I don't think anyone can advise you about what to do. I personally have had a very very good financial adviser for several years, but it does cost me money every month for her to take care of my interests. If you want to explore a financial advisor I highly recommend a visit to an Edward Jones office for a sit down... it won't cost you one thin dime for some good advise, no sales pitch and it may open your financial world alot more than these folks expounding how they save money. We don't all want to spend time worrying.

 

[samclem]

If you want to explore a financial advisor I highly recommend a visit to an Edward Jones office for a sit down.

The technical term for this is "bad advice".

 

[seraphim]

The next step, I guess, is to contact him and verify exactly what his fees are. He did set up a beneficiary IRA account for DW and a small amount has been transferred over. Seems he's selling for a company called NFS. I also want to find out if there are withdrawal fees in case we want to move those funds. I also need to find out if any other transactions pending. Then check my options.

 

[Buckeye]

The next step, I guess, is to contact him and verify exactly what his fees are. He did set up a beneficiary IRA account for DW and a small amount has been transferred over. Seems he's selling for a company called NFS. I also want to find out if there are withdrawal fees in case we want to move those funds. I also need to find out if any other transactions pending. Then check my options.

I think you should also ask how much money he made from the account in previous years. My guess is there is compensation received in addition to the explicit fees. For example, might he get "kickbacks" (or whatever it is called) for having your mom invested in specific things that have higher than desireable fees?

 

[seraphim]

Looking at the NFS website, a list of funds described as not having a transaction fee have an ER of 1.5. (NOT .15). Haven't checked all of them. Tomorrow DW is going to pull out old statements and we're going to look for fees. Monday I intend to have a word with the adviser. There's another 190k due to transfer to the BeneficiRy IRA account: I need to find some options before that transfer occurs, if it's not too late to change it. If he's getting a fee from this transfer, every 1% equates to $1900 in his pocket.

 

[brewer12345]

By now I have heard enough to believe that you should be out shopping for a new advisor if you want one, or picking out a brokerage firm (Vanguard, Fidelity or Schwab - can't go wrong with any of them). If you still want an advisor, I would suggest that you set up brokerage accounts to handle the assets and just pay the advisor for their advice. Don't let them sell you. That way if you decide to take over and dispense with the advisor as you learn more it is really easy to cut them out of the loop.

 

[Nords]

... but it does cost me money every month for her to take care of my interests.

I'll bet it does, but that sounds more like "worry insurance" than "investment education".

If you want to explore a financial advisor I highly recommend a visit to an Edward Jones office for a sit down... it won't cost you one thin dime for some good advise, no sales pitch and it may open your financial world alot more than these folks expounding how they save money.

Your EJ experience has been shared by very few other posters on this board.

In fact, the advice you get from this board is probably worth [-]what's paid for it[/-] at least as much as the advice gleaned from a guy who's working for his commissions...

 

[ERD50]

I don't think anyone can advise you about what to do. I personally have had a very very good financial adviser for several years, but it does cost me money every month for her to take care of my interests. If you want to explore a financial advisor I highly recommend a visit to an Edward Jones office for a sit down... it won't cost you one thin dime for some good advise, no sales pitch and it may open your financial world alot more than these folks expounding how they save money. We don't all want to spend time worrying.

The technical term for this is "bad advice".

+1 samclem

shooter, I am a bit confused. A few excerpts from your earlier posts:

When I ascribed to this forum I told them I use an FA and they almost all said to get rid of "her/him". I STRONGLY DISAGREE! .... I pay less than .75% annually on my total portfolio and I don't have to worry about watching the damn market, she reallocates my investments based on my risk factors, growth factors, and is always available to talk to me.

The market finally reacted to Congress and Prez regarding the deficit! I say YEH!!! Going in with guns blazing for some bargains, how 'bout ya'll? The water is fine, but it may get a lil warmer before it cools!

I thought you didn't watch the market. Your gal did all this for you?

Seems odd that 3 of your 4 posts are pro FA, and 2 out of 4 posts mention the company name specifically. Or maybe that is not odd?

One more question: How do you know you have a 'very very good financial adviser'? Seems to me that can only be determined by measuring against some benchmark with an AA appropriate for your situation. Many of us have found that once you do that, and see that the benchmark can be purchased for far less than .75%, and only takes an annual re-balance to keep on track, that the decision is in favor of just managing the benchmark yourself. Have you measured against a benchmark?

-ERD50

 

[seraphim]

By now I have heard enough to believe that you should be out shopping for a new advisor if you want one, or picking out a brokerage firm (Vanguard, Fidelity or Schwab - can't go wrong with any of them). If you still want an advisor, I would suggest that you set up brokerage accounts to handle the assets and just pay the advisor for their advice

I am agreeing with you. Technically, though, the accounts we are dealing with now are DWs, and I can only suggest to her. She's been happy with the results as she was helping her mother during Alzheimers, but admits she was unaware of how the adviser was reimbursed. The decision will ultimately be hers. Reportedly he kept her mom's accounts earning 5 to 6 percent, but doesn't know if that return was before or after fees were removed. We did open a joint account (the 'brokerage' is PNC bank, BTW) in addition to her beneficiary IRA (currently in a money market until the inheritance is settled) but have put no funds in that joint account yet. I don't think we will.

When I retire in 2013, though, I have a very good idea how I will handle my retirement funds. Probably not an adviser, but if I do choose one it will be a fee only RIA with fiduciary responsibility in a passive account of low ER index funds.

Nice to know an old dog can still learn new tricks. Thanks for all the help, everyone.

 

[seraphim]

Update: After speaking with the PNC FI on the phone, I learned he charges a 1% fee for equity acoounts he actively manages. He stated he receives no commissions. Fee is paid quarterly. We will accrue no charges on money being transferred into retirement accounts. We'll meet again when the majority of the estate settles to decide if we want to cash out equities, or continue holding the stock accounts as they are. I'll have time to learn more before then.

Thanks again for all the information.

 

[seraphim]

. I'll bet it does, but that sounds more like "worry insurance" than "investment education".

I understand your point. For the next few months the " worry insurance" is acceptable - for now *grin*