How many totally manage their own nest egg?

[dirtbiker]

I conceded the point where one is actively trading... but I suggest that few people trade so actively that they would get a benefit.

Maybe. I have no idea how the number of people who actively trade vs buy and hold stack up.

But let's consider the example of someone who starts out with $100,000, 10% interest compounded annually with no contributions for 30 years, to keep numbers simple. If they and pay taxes on their 10% gain just once in their first year and have to pay 15% taxes (middle of the long term gains tax rate), after 30 years and then hold onto it, they will have $1.81 million. The same person if they were in a tax deferred account and makes only that one sale, but doesn't have to pay taxes on it would have 1.98 million in 30 years. That's a difference of nearly $200k for paying taxes one year on a long term gain at only 15%. Imagine if you did that every year or every couple of years, or even worse, more often than annually and paying short term gains taxes on it. Since I don't know of a calculator that will do that math for me, it's too much work to crunch the numbers for more than just the first year. However, I really think you're underestimating how much of a difference tax deferment makes on compound interest, even for someone that doesn't sell their investments often.

 

[pb4uski]

...That's a difference of nearly $200k for paying taxes one year on a long term gain at only 15%. ...

^^^ Your numbers are wrong.

Tax-deferred account..... $100,000*(1+10%)^30 = $1,744,940

Taxable account with one sale at end of 1st year:
$100,000*(1+10%)^1 =$110,000
$10,000 gain * 15% tax rate = $1,500
$108,500*(1+10%)^(30-1) = $1,721,146

Difference is only $23,794 or $1,500*(1+10%)^(30-1)... NOT nearly $200k!

 

[Gumby]

Yes, there are some valuable nuggets of wisdom in allstock's post, but it took a big turn south when he advocated whole life insurance. I worked in financial management for one of the large mutuals (not MML but one of their mutual competitors) for 12 years and later had many as clients. Whole life is a great product for people and situations where there is a permanent need for life insurance like some family farms and small businesses, estate and succession planning, etc. ... but most families' need for life insurance is only for 20 to 30 years, and for them BTID (buy term and invest the difference) is better in those situations.

That said, the whole life policy that I naively was sold when I was a 21 year old fresh faced college grad hasn't done all that bad... a 5% return ignoring the value of the life insurance coverage and a 7% after-tax .... in both cases based on the IRR of premiums in relation to CSV and the tax-free death benefit, respectively.

I have a paid up whole life policy to make up for the fact that when I go away, my social security goes away. Due to the GPO, my young wife (who will most probably survive me) will not receive a survivor benefit and is not eligible for her own social security. And it has also proven to be a satisfactory investment.

 

[pb4uski]

I have a paid up whole life policy to make up for the fact that when I go away, my social security goes away. Due to the GPO, my young wife (who will most probably survive me) will not receive a survivor benefit and is not eligible for her own social security. And it has also proven to be a satisfactory investment.

Yet another good example where there is a legitimate need for permanent life insurance... though admittedly the amount that you need to fund replacement income will likely decline as well as you age.

 

[jazz4cash]

I've been paying for Motley Fool Stock Advisor on and off for almost 20 years. Otherwise just me. Help manage various ex's money and retirement also.

Oh my. I need to fess up. I’ve been a subscriber to Bob Brinker’s Moneytimer monthly news letter off and on for many years. I no longer subscribe. It’s the most inappropriately named newsletter ever. At $185/yr its pretty low on an AUM scale. I can’t recall any price increases ever.

 

[Offgrid Organic Farmer]

I wish my grandparents ever had enough to understand such things, much less be concerned about what I might do.

My grandparents were subsistence farmers before the Depression.

When the banks locked their doors and froze all bank accounts, my grandparents learned to hate bankers.

When their farms were foreclosed on, my grandparents learned to hate lawyers.

Fifty years later, my father was around a bunch of people talking about the stock market. He decided that it could not be as bad as his parents warned him. So my father withdrew all of my 'college fund' and he invested it in stocks when I was 17.

Fortunately for me, I enlisted in the navy at 18.

When I was 25, I owned my first apartment complex, and that was when my father decided to give to me my 'college fund' that he had invested on the market. My father lost 50% of my college fund by day trading.

I have done pretty good with rental real estate. For one property I agreed to hire a manager, just while I was serving in a combat zone, that was a costly mistake. Regardless of how much money was lost, we lost our tax sheltering. Suddenly I was subject to paying income taxes on my salary income. I got rid on that property manager, and I will never hire one of those ever again.

Hiring anyone to manage my properties costs me the loss of my tax sheltering. So I can never have anyone manage my investments for me.

 

[dirtbiker]

^^^ Your numbers are wrong.

Tax-deferred account..... $100,000*(1+10%)^30 = $1,744,940

Taxable account with one sale at end of 1st year:
$100,000*(1+10%)^1 =$110,000
$10,000 gain * 15% tax rate = $1,500
$108,500*(1+10%)^(30-1) = $1,721,146

Difference is only $23,794 or $1,500*(1+10%)^(30-1)... NOT nearly $200k!

My mistake. Bad math. I missed something somewhere. But I still maintain that if stocks are bought and sold rather frequently, then this can be a big issue over many years of missing out on compounded interest. The plus side, however, is that at the end, very little of that money will need taxes paid on it.

 

[pb4uski]

My mistake. Bad math. I missed something somewhere. But I still maintain that if stocks are bought and sold rather frequently, then this can be a big issue over many years of missing out on compounded interest. The plus side, however, is that at the end, very little of that money will need taxes paid on it.

I conceded that point 10 posts ago, but you keep harping on it. Get over it dude.

 

[ychuck46]

I Rely On The Person I Can Trust the Most

Namely myself. Have always done all the investing myself, and have always done my own taxes. Tax software today has made the process extremely easy, and the latest tax changes even moreso with the high standard deduction for married couples.

 

[tenant13]

I let "my Chase guy" manage some of my cash and I already hate it

I've never needed FA and I just FIREd (ok, not that early, I'm 56 because I relied on myself when saving and investing. So the obvious thinking would be: "I got here on my own, why would I need anyone to help me spend money"? I had my stash divided into buckets, one of them being just cash in high yield saving accounts. I planned to live off it and use it to pay taxes on ROTH conversions.

But Chase keeps offering me bonuses for moving money to them and I like free money. Last year I gave them around 100k and since they don't offer decent savings accounts (Marcus was paying 2% at the time) I let them invest it. They bought bonds and a year later made me 3.5%. That was unmanaged so all I paid were transaction fees.

At the same time I started realizing that spending efficiently is a bit more complicated than accumulating so I started looking into financial planning: can I do it myself or do I need help? Lo and behold, "my guy" at Chase says he's a financial planner and that's exactly what he does: plans retirement finances! Great! Plus this year Chase offers a 2k bonus for becoming a Private Client. So I give them another 150k to play with (it would have stayed in Marcus otherwise at current 1.7% rate). Except that this time around "my guy" who is going to do all that planning and managing asks for 1%. So I'm thinking: if after his fees I get 1.7% (2k bonus is a bit of an insurance here) it's a wash and I'll learn how he operates and whether hiring someone like that long term makes sense. Plus Private Banking has its perks. It'll be a learning experience while I'm doing some reading, educating myself and figuring how to use financial planning software (I'm looking at IncomeStrategy, eMoney and RightCapital)

Right off the bat I realize he knows nothing about planning. He basically runs a quick simulation on his screen and tells me that I have close to 100% chances of success in achieving my goals. And when I go into structuring my income streams in a such way that I have my health insurance cost under control (currently on Medicaid - weird but I qualify) he gets lost and is clearly clueless. Not one meaningful comment about ROTH conversions and when I get into tax planning he recommends a CPA. So that's already a waste of time - no "planning" to speak of, just managing the investments - which I specifically told him I'm not interested in.

Then I look at his investments and I really don't like what I see: tons of trades (I have yet to see a statement so no clue what the commissions are), including funds when I specifically told him to stay away from them, dividends re-invested when I made very clear I wanted them pushed to checking account (I can't set it up myself since it's a managed account)... I have no control over these accounts and I have to call/email him with every question. I get a response 3 days later and it's usually something to the tune of "let the experts do what they do best" or " I thought we decided on something completely different".

The proof is in the pudding and if I can stomach dealing with him for a year and he'll actually make me money I may give him a better review. For now I went on Morningstar and set up two test portfolios with $250k each. Let's see which one performs the best.

 

[pb4uski]

^^^ It might be fun to let him know that he is on a short leash and the benchmarks that he needs to exceed, after fees, to retain your money.

 

[tenant13]

^^^ It might be fun to let him know that he is on a short leash and the benchmarks that he needs to exceed, after fees, to retain your money.

I doubt he's retaining anything - I don't enjoy this relationship and see no point in continuing it beyond what it needs to accomplish: give me an insight into how a financial advisor operates.

 

[OldShooter]

... Then I look at his investments and I really don't like what I see: tons of trades (I have yet to see a statement so no clue what the commissions are), including funds when I specifically told him to stay away from them, dividends re-invested when I made very clear I wanted them pushed to checking account (I can't set it up myself since it's a managed account)... I have no control over these accounts and I have to call/email him with every question. I get a response 3 days later and it's usually something to the tune of "let the experts do what they do best" or " I thought we decided on something completely different". ...

The brutal truth here is that you have given him trivial money, which at a place like Chase is going to get you trivial attention. Your guy's sales manager is almost certainly asking why Chase even has the account. Your guy's answer is probably "Well he has more money and my plan is to capture it."

More, your guy is probably not even making those trades. Chase will have a few "standard" portfolios and whichever of those buckets you fall into, that's what will happen in your account -- all done by a computer. It cannot be otherwise; customizing trading in a pipsqueek account is a guaranteed money loser for Chase. And your FA is busy, out prospecting for customers who have portfolios large enough to be worthwhile for him. (Which yours is not.)

Chase, Morgan Stanley, JP Morgan, RBC etc. are IMO not places suitable for retail investors. They are best suited for customers with serious seven figures who believe that leaving their money with "experts" is the safe path and who never try to benchmark the results that the experts are giving them. I have a friend whose husband died, leaving her with a very profitable Dairy Queen. She has sold it and given the money to some kind of advisor and is adamant that she has no interest in keeping track of what is going on. That's how Morgan Stanley built a "wealth management" business that delivers 25%+ profits to the bottom line.

If you want an FA to pay attention, go with a million bucks and start interviewing small shops/independent advisors. I am partial to DFA; I think they have a good story. Their web site may be a good place to hunt for candidate advisors. https://www.dimensional.com/ Also https://www.napfa.org/ and https://www.xyplanningnetwork.com/. I have heard good things about both but have never actually used either one.

 

[4legsgood]

I manage my own, but try to never or only very slightly recommend that approach to others with an FA. When my cousin was worrying about her FA's horses on his ranch in CA
during wildfires, I think I did murmur something about her paying for them...oops.

 

[target2019]

Just checked 2 portfolios I set up on M*, so that I could track an actual portfolio set up by friend's FA. At the time (June 2018) I recommended 3 Vanguard funds that came very close to emulating the 9 fund approach of FA (Oppenheimer funds with > 1% e/r).

At 16 months, the INDEX is $8K ahead of the FA, then add the 1% FA fee. Someone could be $14K further along...

 

[OldShooter]

Just checked 2 portfolios I set up on M*, so that I could track an actual portfolio set up by friend's FA. At the time (June 2018) I recommended 3 Vanguard funds that came very close to emulating the 9 fund approach of FA (Oppenheimer funds with > 1% e/r).

At 16 months, the INDEX is $8K ahead of the FA, then add the 1% FA fee. Someone could be $14K further along...

Yeah. Some of these FA portfolios are pretty bad. Here is some actual cumulative return data from a nonprofit I am involved with. The "couch potato" portfolio is $100K of real money, started out 1/1/2015 at 65% total US market and 35% total international, dividends reinvested and no rebalancing. The "Morgan Stanley" portfolio is the equity portion of a total portfolio created by a particularly inept pair of reps.

​

 

[tenant13]

The brutal truth here is that you have given him trivial money, which at a place like Chase is going to get you trivial attention. Your guy's sales manager is almost certainly asking why Chase even has the account. Your guy's answer is probably "Well he has more money and my plan is to capture it."

LOL, yes - that was all obvious to me because he tried many times (and failed) to have me move my serious accounts from Schwab. So he's bidding his time waiting for me to be seriously impressed but what he's doing

 

[OldShooter]

LOL, yes - that was all obvious to me because he tried many times (and failed) to have me move my serious accounts from Schwab. So he's bidding his time waiting for me to be seriously impressed but what he's doing

Yeah, no surprise. But the rest of the story is that you are not going to learn much about FAs by hanging with some bozo at Chase, Morgan Stanley, RBC, etc.

BTW, have you run a brokercheck on this guy? (https://brokercheck.finra.org/) It will probably be clean; most are. But I did look up one guy who had 22 customer disputes, many settled for six figures. And another who had lost his licenses for forging customer signatures on forms. Running brokerchecks is very cheap insurance.

 

[tenant13]

Yeah, no surprise. But the rest of the story is that you are not going to learn much about FAs by hanging with some bozo at Chase, Morgan Stanley, RBC, etc.

BTW, have you run a brokercheck on this guy? (https://brokercheck.finra.org/) It will probably be clean; most are. But I did look up one guy who had 22 customer disputes, many settled for six figures. And another who had lost his licenses for forging customer signatures on forms. Running brokerchecks is very cheap insurance.

Clean and sparse record. He has limited experience and only rudimentary exams passed - not a word about being a CFP which is what I would be interested about. So no, I'm not going to learn much - it's ok, I doubt he'll do much damage to my 250k. I'll take a look at links you included. Thank you!

 

[OldShooter]

... not a word about being a CFP which is what I would be interested about. ...

An FA having a CFP is, IMO, a good thing but it is (again IMO) seriously oversold.

The CFP is a designation that can be purchased from a private company after meeting their experience and training requirements. College degree? Yes. Mortuary Science? Just fine. 2 years experience. Receptionist an an FA firm? Fine. Then some exams. The guy that runs the CFP Board makes over $1M/year and his income depends on the number of CFPs they sell. So ... moral hazard.

Also importantly, a CFP is not legally a fiduciary. Until this year their code of conduct did not even mention the fiduciary duty of "loyalty" to clients. The revised version, out this fall, is better but in the end the CFP code has no teeth other than revoking a CFP certificate. Also, they say: “ … the Rules are not designed to be a basis for legal liability to any third party.“ Specifically their rules for CFPs are not designed to protect clients. So ... what's the point?

 

[tenant13]

An FA having a CFP is, IMO, a good thing but it is (again IMO) seriously oversold.

The CFP is a designation that can be purchased from a private company after meeting their experience and training requirements. College degree? Yes. Mortuary Science? Just fine. 2 years experience. Receptionist an an FA firm? Fine. Then some exams. The guy that runs the CFP Board makes over $1M/year and his income depends on the number of CFPs they sell. So ... moral hazard.

Also importantly, a CFP is not legally a fiduciary. Until this year their code of conduct did not even mention the fiduciary duty of "loyalty" to clients. The revised version, out this fall, is better but in the end the CFP code has no teeth other than revoking a CFP certificate. Also, they say: “ … the Rules are not designed to be a basis for legal liability to any third party.“ Specifically their rules for CFPs are not designed to protect clients. So ... what's the point?

Thank you for all the info. I'm scheduled to meet with these guys: Mariner, Matthew DiQuollo - as per my free Schwab advisor who decided I need more comprehensive approach than what she can offer. It's an exploratory conversation but I already dread hearing all the pitches I'll go because I'm determined to keep an open mind.

 

[OldShooter]

Thank you for all the info. I'm scheduled to meet with these guys: Mariner, Matthew DiQuollo - as per my free Schwab advisor who decided I need more comprehensive approach than what she can offer. It's an exploratory conversation but I already dread hearing all the pitches I'll go because I'm determined to keep an open mind.

DiQuollo's their sales guy. Brokercheck is clean. I suggest zeroing in on where your assets would be compared to their average and median. What services do you get beyond investment advice? A true financial advisor is much broader than an investment advisor.

Also read the two "Form ADV" reports linked here: https://www.marinerwealthadvisors.com/legal For any firm, always read the ADV before the meeting.

The ADV indicates that they offer "private funds." Usually a bad idea because you may not be able to easily sell and take your money elsewhere. Ask.

When you zero in on a firm, be sure to interview a couple of candidate advisors who would become "your guy." Philosophical fit and personal chemistry are important. Write down notes on all promises, time and date, especially anything you get from the sales guy.

You will leave the meeting smarter than you were when you came in. So ... a guaranteed good investment.

 

[tenant13]

DiQuollo's their sales guy. Brokercheck is clean. I suggest zeroing in on where your assets would be compared to their average and median. What services do you get beyond investment advice? A true financial advisor is much broader than an investment advisor.

Also read the two "Form ADV" reports linked here: https://www.marinerwealthadvisors.com/legal For any firm, always read the ADV before the meeting.

The ADV indicates that they offer "private funds." Usually a bad idea because you may not be able to easily sell and take your money elsewhere. Ask.

When you zero in on a firm, be sure to interview a couple of candidate advisors who would become "your guy." Philosophical fit and personal chemistry are important. Write down notes on all promises, time and date, especially anything you get from the sales guy.

You will leave the meeting smarter than you were when you came in. So ... a guaranteed good investment.

I already have a long list of specific questions and am going through their website, page by page - I don't want to waste time for generalities. They offer a lot of interesting services that I'd be interested in. For example trusts in relation to tax planning... I also would like to know if they can manage self-directed IRAs since I was always interested in investing in foreign real estate. Perhaps they could set up a foreign banking and a brokerage account as well... I don't need someone to just purchase a bunch of index funds for me and call it a day.

 

[ncbill]

DiQuollo's their sales guy. Brokercheck is clean. I suggest zeroing in on where your assets would be compared to their average and median. What services do you get beyond investment advice? A true financial advisor is much broader than an investment advisor.

Also read the two "Form ADV" reports linked here: https://www.marinerwealthadvisors.com/legal For any firm, always read the ADV before the meeting.

The ADV indicates that they offer "private funds." Usually a bad idea because you may not be able to easily sell and take your money elsewhere. Ask.

When you zero in on a firm, be sure to interview a couple of candidate advisors who would become "your guy." Philosophical fit and personal chemistry are important. Write down notes on all promises, time and date, especially anything you get from the sales guy.

You will leave the meeting smarter than you were when you came in. So ... a guaranteed good investment.

Yeah, I got suckered into those a few years ago...still trying to get rid of them without taking a 35%+ haircut...

& the broker who sold them to me (collecting ~10% in commissions) has relinquished his license, so no chance of a FINRA claim, though he still operates his "advisory" firm...my advice is to stay far away.

 

[downrod]

I do now. 10 yrs with a financial advisor hurt my returns. Took me too long to wake up.
Big mistake