Retirees who trusted their broker

[saluki9]

There are no fee-based FAs who perform services for customers for an hourly rate without compensation from others??

Sure there are. They need to be registered advisor, and not a broker.

Many firms take no outside compensations from fund families, banks, etc.

 

[Achiever51]

An interesting article from MSN Money
8 things your financial planner won't tell you
Literally anyone can claim to be a financial adviser. Even those with top credentials may not divulge everything you should know. Here’s how to dig up the facts on the person you're paying for financial advice.


[url]http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/8ThingsYourFinancialPlannerWontTellYou.aspx
[/url]

 

[Tracker]

I really feel for these people.

My father never signed a check until my mother died. He was 60 years old at the time.

 

[Achiever51]

I really feel for these people.

My father never signed a check until my mother died. He was 60 years old at the time.

Ditto. But my dad was 74. Fortunately, he wasn't/isn't afraid to ask lots of questions before taking any action. Good thing, too. After my mom died, it was amazing how quickly the "experts" came calling -- e.g., on the afternoon of my mom's funeral, a realtor called to extend her condolences and to suggest he list his house for sale!

 

[FinanceDude]

There are no fee-based FAs who perform services for customers for an hourly rate without compensation from others??

The term "fee-based" is interpreted differently by different folks. I look at it this way:

1)CFP, only charges an HOURLY fee for services, and does NOT RECOMMEND investments through his/her office.

2)FEE-BASED advisor, who is compensated based on a negotiated fee of the assets he/she manages.

So, the difference is BILLABLE time/hours versus a negotiated fee for assets managed.

 

[haha]

The term "fee-based" is interpreted differently by different folks. I look at it this way:

1)CFP, only charges an HOURLY fee for services, and does NOT RECOMMEND investments through his/her office.

2)FEE-BASED advisor, who is compensated based on a negotiated fee of the assets he/she manages.

So, the difference is BILLABLE time/hours versus a negotiated fee for assets managed.

As a former sometime salesman with an ironical turn of mind, I am wondering if it isn't really hard to get paid upfront (i.e. by hours) for something which people think they can get for free. In my admittedly limited experience, and through my possibly warped way of looking at things it has always appeared to me that unless you have good pre-existing connections to wealthy people, you can only make money from the hoi polloi by getting compensated in ways that are not immediately obvious to the customer/client.

From your comments I take it that you belong in your category 1 above, CFP, and take no commissions or asset based or performance fees. Is this true?

If this is true, how do you compete with people who can advertise FREE!! ?

Ha

 

[FinanceDude]

As a former sometime salesman with an ironical turn of mind, I am wondering if it isn't really hard to get paid upfront (i.e. by hours) for something which people think they can get for free. In my admittedly limited experience, and through my possibly warped way of looking at things it has always appeared to me that unless you have good pre-existing connections to wealthy people, you can only make money from the hoi polloi by getting compensated in ways that are not immediately obvious to the customer/client.

From your comments I take it that you belong in your category 1 above, CFP, and take no commissions or asset based or performance fees. Is this true?

If this is true, how do you compete with people who can advertise FREE!! ?

Ha

Not warped at all. In fact, I worked for a firm that did "free financial planning". The basis was that if the client like your proposal, they would let you make money by managing the assets. Then, Amerrprise decided there was MORE money to make, so they charge for the PLAN ($500-$3000) and THEN get paid on the assets..............

Unfortunately, the folks getting whacked the worst are the CFP's that ONLY do planning on a billable rate basis. You need a TON of clients to make money doing $1000 plans. As a matter of fact, I know two CFP's with loads of experience that shut down their firms because they ran out of clients......... The ones that are surviving have hired money managers that implement their plans for a fee.

I am working toward a CFP, and will take the test in November. I am a fee-based RIA, and my fee is negotiable. I do financial planning for clients, but do not charge for it, nor will I even when I am a CFP..................

Commissions, 12b-1 fees, etc, are not as transparent as they should be. However, quarterly management fees are printed right on the statements, so clients see them right away..........

 

[Helen]

My Mother emailed me last week to tell her the bank called and wanted her to move her emergency fund laddered CDs into an annuity because they said she could make more money that way.

They were comparing the 1st year rate of return of 6.5% to her 4.x% CDs. Of course after the first year the rate dropped to 4% but they didn't talk about that. The money also would have been tied up for a minimum of seven years.

I told my Mother not to do it. I think I'll sit down with the nice lady when I return home in May and have her explain to me how that is a better deal.

 

[FinanceDude]

My Mother emailed me last week to tell her the bank called and wanted her to move her emergency fund laddered CDs into an annuity because they said she could make more money that way.

They were comparing the 1st year rate of return of 6.5% to her 4.x% CDs. Of course after the first year the rate dropped to 4% but they didn't talk about that. The money also would have been tied up for a minimum of seven years.

I told my Mother not to do it. I think I'll sit down with the nice lady when I return home in May and have her explain to me how that is a better deal.

Sorry to hear that.................... I'm sure the conversation went something like this:

You know, Mrs. XXX, we did a review of your account, and noticed you keep a large amount of cash in there which you never use. And since we're only paying 2% on that money, we FEEL BAD because you're not getting your fair share of the higher interest rates available today...........

What if we could show you how to get 6.5% on your money, which is more like 9% in your tax bracket, and, HERE'S THE GOOD PART, you don't PAY ANY TAXES AND< although it's not FDIC-insured like our bank accounts are, Southwestern Auto Reserve Life has NEVER not paid a claim in their 3 years as a going concern.........

Besides, if you REALLY need some money out of it, we can take 10% a year out............

 

[haha]

Unfortunately, the folks getting whacked the worst are the CFP's that ONLY do planning on a billable rate basis. You need a TON of clients to make money doing $1000 plans. As a matter of fact, I know two CFP's with loads of experience that shut down their firms because they ran out of clients......... The ones that are surviving have hired money managers that implement their plans for a fee.

Thanks F-Dude. This is pretty much what I would have expected to be the case.

Ha

 

[saluki9]

Thanks F-Dude. This is pretty much what I would have expected to be the case.

Ha

Ha, what FD said is really true. The only people I know making it as hourly or project planners are guys working in a really high end shop. They charge $15-25K up front and $350/hour after that for financial plans. All the planners there are JD, CPA, CFPs and they are the exception.

For your average CFP, it's just too hard to charge $400-$1K for a plan that takes hours of fact gathering, number crunching, etc when you can get somebody to drop $50K into a variable annuity from an hour or two meeting and walk away with $3-4K in commission.

 

[haha]

For your average CFP, it's just too hard to charge $400-$1K for a plan that takes hours of fact gathering, number crunching, etc when you can get somebody to drop $50K into a variable annuity from an hour or two meeting and walk away with $3-4K in commission.

Saluki I understand what you are saying, and I can't really fault them for doing what works. Buyer beware.

There are clearly better choices available, such as what your group or F-Dude offer, but it takes a more discriminating client to understand what he/she is getting.

Ha

 

[FinanceDude]

Saluki I understand what you are saying, and I can't really fault them for doing what works. Buyer beware.

There are clearly better choices available, such as what your group or F-Dude offer, but it takes a more discriminating client to understand what he/she is getting.

Ha

Saluki's "shop" is high end money management. His firm's clientele is probably $5 million and up, or even higher.

My average client has $400K or so with me. Interesting thing that happened when I switched to being a fee advisor........I became the PRIMARY advisor for a lot of my clients. Within 18 months, my average client account will be $500K. I feel the only way I can continue to learn and help is to become a CFP. I also am looking into getting the CIMA designation.

One of my buddies just got his CFA.......... Talk about a tough set of tests!!

One of the main reasons I am on this forum is the demographic. My clients are NOT UNLIKE most on this forum, LBYM folks who are great savers..............

 

[kcowan]

...Within 18 months, my average client account will be $500K. I feel the only way I can continue to learn and help is to become a CFP. I also am looking into getting the CIMA designation...

Is that growth coming from new clients that are just a little bigger or the odd big fish? How many clients and how much growth?

 

[FinanceDude]

Is that growth coming from new clients that are just a little bigger or the odd big fish? How many clients and how much growth?

Clients that are bigger clients. I am in the middle of a 6 year business plan, and the plan is to have 75 clients at an average of $1 million each, or $75 million in a fee-based
practice.

Actually, the way I am running things, the "odd big fish" wouldn't fit too well. For instance, someone with $20 million or so has needs my firm/I am not equipped to handle, and would be better suited to a place like saluki's...........

 

[Sarah in SC]

Ditto on the CFA, FD! My boss is getting ready for the 2nd test, for the second time. The last time he took it, he'd just had a baby. Not great timing. There was some talk about me going after the CFA when I started here, but I told them I was way too much of a crackhead to pass even the first one!

There are a couple of Garrett planners (hourly) here, and I think they might be starving, unfortunately. Most others do some money management. We don't really have local clients, so I can't say how much business there is for fee only planners.

I'm taking the live review course in Denver in June for the summer CFP exam. Hope it "takes".

Sarah

 

[saluki9]

The CFA exam is reasonable achievement for anybody with the ability to study on their own, who has had some sort of exposure to finance, and college statistics. It's more about hard work than background.

 

[FinanceDude]

The CFA exam is reasonable achievement for anybody with the ability to study on their own, who has had some sort of exposure to finance, and college statistics. It's more about hard work than background.

Sorry......too much work for me, I got clients that keep me busy............

If a CFP and CIMA aren't good enough, oh well................