What's the best question you asked your CFP / Investment Advisor

[bobandsherry]

Hi... Relatively new to the forums. Wife and I have hit "our number" and going to go into retirement early next year, me at 55 and wife at 53. I've managed to build our investments but never really sure if I've done better or worse than the "experts". We will have 7 figures available so I'm looking to interview a couple of CFP's to see if they have useful advice to get a good income stream developed. Which brings me to my question, what was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them? Thanks

 

[REWahoo]

Welcome to the forum.

After you spend some time here you'll find the majority of those of us on the forum are DIY types who eschew paying fees to CFPs and/or Advisors. In short, they bring far more cost than value to anyone who is willing to spend a little time and effort educating themselves on how to manage their investments.

 

[pjm-7]

Ask how they are compensated. Ask to see a fee schedule for all of the services that can be provided. They should also disclose if they refer you to another professional (i.e. accountant or attorney) what if any is the business arrangement they have with that professional. If any CFP or advisor refuses to disclose anything about how they are compensated do not utilize them at all.

 

[ERD50]

... I've managed to build our investments but never really sure if I've done better or worse than the "experts".

Well, if you study the research, you'll see that the 'experts' are not able to consistently outperform a simple portfolio of index funds. So if you just do that, you likely are doing better than the 'experts'.

... I'm looking to interview a couple of CFP's to see if they have useful advice to get a good income stream developed. Which brings me to my question, what was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them? Thanks

Based on the above - it doesn't seem like any question is a good question. All you do is give them a chance to sell their services, which you can easily do yourself.

Unless you have some complicated situation, but even then, I'm not sure the cost of a non-optimal DIY solution would be any worse than an optimal solution after fees. And how would you ever know?

-ERD50

 

[ERD50]

Ask how they are compensated. ...

Why bother? What good will come of it?

If you use a CFP who meets the 'fiduciary standard', they are working for you, so they should not have a conflict between selling products and doing best by you. They need to be paid for their time and expertise, and if they don't meet the fiduciary standard, then run away.

The question is, "Will paying them result in more money in my pocket?". Numerous studies say "no". So why bother?

-ERD50

 

[wolf]

Welcome to the forum.

After you spend some time here you'll find the majority of those of us on the forum are DIY types who eschew paying fees to CFPs and/or Advisors. In short, they bring far more cost than value to anyone who is willing to spend a little time and effort educating themselves on how to manage their investments.

+1

 

[target2019]

Ask to see audited results of how well clients perform against benchmark(s). A pin drops. The BS motor starts.

 

[Meadbh]

After receiving an inheritance many years ago, I interviewed several financial advisors. I asked them what the Sharpe ratios of their recommended investments were. When they asked me what the Sharpe ratio was, I crossed them off the list.

 

[bobandsherry]

Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.

 

[REWahoo]

Your best option may be to consult with a fee-only financial planner. That could be the most cost-effective way to get advice on how to structure your investments to minimize taxes and set up a withdrawal plan for income. See https://www.napfa.org/

Once you get set up, you can manage your own investments through Vanguard or Fidelity and save the 1% or greater annual fee an Advisor will charge to (mis)manage your portfolio.

 

[mystang52]

Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.

Maybe you need a CPA instead. You've apparently done well to get where you are without a CFP, but now your concern seems more tax-related.

 

[racy]

You've got "7 figures available", so you'd qualify for free Flagship Services at Vanguard. Info at this link: https://investor.vanguard.com/what-we-offer/personal-services/flagship-and-flagship-select-services

 

[travelover]

I'd ask, "where are the customers' yachts?"

 

[rodi]

Here are some of my questions:

- Do you suggest stocks, active funds, or index funds? How do you select them?

- How often do you make trades on the accounts you manage? (More trades indicates several things - if it's a taxable account you have tax issues. More trades equals more trading fees/expenses, etc.)

- How are you compensated? Is it percentage of Assets Under Management (AUM)? How do you guarantee that your returns are higher than the market by that percentage? Do you get sales fees based compensation (loads) from the funds you invest in?

- Do you have a fiduciary responsibility?

Personally - I have big issues with paying fees for funds that often don't perform as well as index funds. I keep things simple with total stock and total bond index funds and a simple 60/40 asset allocation. With Vanguard and with Schwab you get a free financial consultant who can run through their tools and give you pretty reports and suggestions. I took advantage of this at Schwab just to double check my retirement readiness. She asked some questions that triggered some additional thought for me. But I am in charge of my own money.

 

[Closet_Gamer]

Here are some of my questions:

- Do you suggest stocks, active funds, or index funds? How do you select them?

- How often do you make trades on the accounts you manage? (More trades indicates several things - if it's a taxable account you have tax issues. More trades equals more trading fees/expenses, etc.)

- How are you compensated? Is it percentage of Assets Under Management (AUM)? How do you guarantee that your returns are higher than the market by that percentage? Do you get sales fees based compensation (loads) from the funds you invest in?

- Do you have a fiduciary responsibility?

Personally - I have big issues with paying fees for funds that often don't perform as well as index funds. I keep things simple with total stock and total bond index funds and a simple 60/40 asset allocation. With Vanguard and with Schwab you get a free financial consultant who can run through their tools and give you pretty reports and suggestions. I took advantage of this at Schwab just to double check my retirement readiness. She asked some questions that triggered some additional thought for me. But I am in charge of my own money.

+1

 

[dallas27]

"Where's the exit?"


Sent from my iPhone using Early Retirement Forum

 

[kcowan]

I would approach it like any other hire. They are working for you. First ask your friends and acquaintances who they use and whether they are happy. Then approach one or two of them and ask them questions that satisfy you that they are a good choice. Be careful not to be sucked in by their "story". It is results that count.

(How they get paid should not be an issue. Of course, you will need to know any fees you are expected to pay.)

 

[frayne]

How much for the snake oil ?

 

[redduck]

How much for the snake oil ?

_____________
Always carry a flagon of whiskey in case of snakebite and furthermore always carry a small snake. - W. C. Fields.


You lookin' to buy some snake oil to rub on your small snake?
(This sounded innocent at first, now maybe not so much).

 

[Whisper66]

What was one good question you asked your CFP or Advisor before you made decision to hire, or not hire, them?

I asked each one for their general philosophy on how they'd manage my money. Got quite different answers from the 4 I talked to and eventually got free financial retirement plans from. I learned from those discussions and plans that the costs associated with having them manage my assets was exorbitant for the value provided. I have taken the route of many on this board and chosen to manage our assets ourselves and generally use simple index funds. My "management" takes a couple hours each quarter and really little to no effort. That's good because I really don't enjoy financial stuff that much. We keep it simple. Even teaching my wife what we are doing is fairly easy.

 

[youbet]

Maybe you need a CPA instead. You've apparently done well to get where you are without a CFP, but now your concern seems more tax-related.

+1

The political, accounting and legal pro's have truly managed to make taxes complicated enough (in order to create jobs/work for themselves) that an amateur might spend enough time learning the stuff that paying the CPA looks like a good value.

I used to get pro help with taxes. Then, 20 yrs or so ago started doing them myself and became more entrenched with doing them myself with the advent of computerized tax packages. Recently, I've been looking at going back to a CPA. I really dislike doing taxes and I'm not sure how much true understanding of what's going on I continue to have as filling in the blanks in TurboTax is different than really understanding the tax code.

So, for me, CFA = no. CPA = starting to think about using one again.

 

[pb4uski]

Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right. ...

What you are looking to do is quite easy to DIY with a little research and thinking. This forum is a good sounding board for issues.

If your 401ks have a good stable value fund or some good investment alternatives that have low expense ratios then you may want to leave some money there. This link is a good primer on tax-efficient placement, but generally you want low efficiency assets like bonds in tax-deferred account and tax-efficient assets like equities in taxable accounts. RMDs don't apply until after you are 70 1/2 unless you have inherited the IRAs.

If you don't want to DIY it seems to me you just need to fee-based CFP or a CPA with a Personal Financial Services ("PFS") designation to help you set up a plan and get things properly positioned and then just work the plan from there and revisit every few years. If you have money at Vanguard, I used their financial planning service (which was free to me) and between that an the good resources here that was enough for me.

 

[target2019]

Thanks all. I've been hesitant to use anyone in past. But with pretty sizable 401k's and cash payout from pension I'm looking to get advice on how to best structure all the investments for taxes and income stream. From what I've researched I think I'm going to want to rollover the 401k's to IRA and then have RMD established. Setting up income from then before tax portfolio and then also tapping our other investments for after tax money (except any capital gains we may generate from sales). I want to do it smart as its only one time opportunity to get it right.

I'm trying to get as much DIY knowledge as possible to keep more money in my pocket. But also see benefit if paying someone keeps even more money in my pocket. After working so long to build this I'd hate to give too much to Uncle Sam or a CFP.

Before this thread hits a hundred posts, you will have enough good advice to stay with DIY. For example, having access to stable value fund is not something to give up unless you are forced to.

You need a good plan, but can get that without paying monthly fees to a salesman.

 

[samclem]

I would approach it like any other hire. They are working for you. First ask your friends and acquaintances who they use and whether they are happy. Then approach one or two of them and ask them questions that satisfy you that they are a good choice. Be careful not to be sucked in by their "story". It is results that count.

(How they get paid should not be an issue. Of course, you will need to know any fees you are expected to pay.)

I don't think this is practical. Of the people I know, none are qualified (or take the time) to know if they are getting good advice. They only know if they feel good about it, which is a terrible metric. As far as "results", it would take decades to know if a particular FA or stock-picker were getting results better than indexes (on a risk-adjusted basis), and if it were due to chance.

I think the CPA idea is probably a good one, if the person has the PFA designation that pb4uski mentioned.

As has been said often here--by the time you know enough to choose a good FA, you know enough to do the job yourself (and save a lot of money)

 

[AllDone]

We went looking for a financial advisor in February, 2009, but in Orange County the ones we contacted were all predicting imminent double digit inflation and suggesting gold (seriously! Not an exaggeration!) Since that left us with a pretty poor view of their economic prediction skills, we wound up using Vanguard Admiral shares and the free Vanguard service to help structure things for best tax advantage. We have quite a bit more money than we had then and still no double digit inflation in sight.