One more reminder to stay clear from financial advisers

[bclover]

I'm glad you found an honest and competent FA. They do exist. I know plenty of smart people who have zero interest in investing and they're better off with a simple plan such as yours.

And it wasn't just about where to invest, he also taught me the best withdrawal plans so as not to get taxed crazy and what would happened to my savings when I started depleting it by taking out huge chunks of cash (buying a beach house)
I don't know a thing about taxes and no I'm not about to learn more than the basics.

It just annoys me with these comments that they're all crooks and thieves.

I remember at the beginning of covid how everyone (general use) on the internet was screaming how the scientists at the pharmaceutical companies were simply out to make money at the risk of people's health. Most of us were simply research scientists (like me) trying to fix a problem.

The bottom line is most people here are into investing and finances, I'm willing to bet the vast majority of the public is not.

Lol stepping off my soap box �� now ��

 

[theo2]

Leave me ask you all this, will you actually ever have in hand the money you saved with a financial planer before you die? Will you ever even see 75% in hand? Same with 401'k. Will you have to pay taxes on that money also? Lots of good it is to have all that money somewhere and really not have it in hand,,,,,,, just my thought's

 

[bclover]

Leave me ask you all this, will you actually ever have in hand the money you saved with a financial planer before you die? Will you ever even see 75% in hand? Same with 401'k. Will you have to pay taxes on that money also? Lots of good it is to have all that money somewhere and really not have it in hand,,,,,,, just my thought's

Not sure I'm actually understanding the question. When you say "have in hand", do you mean am I keeping a million dollars in a savings account at my credit union?? No. Do I have 6 months living expenses in a savings account? Yes. Can I easily transfer what I need within 2 days another yes.

Why would I keep that amount of cash on hand??

Yes, I will eventually pay taxes on my 401k money. But then I've paid taxes since I began working, but I haven't found a way to get around that

 

[RetiredAt49]

Not sure I'm actually understanding the question. When you say "have in hand", do you mean am I keeping a million dollars in a savings account at my credit union?? No. Do I have 6 months living expenses in a savings account? Yes. Can I easily transfer what I need within 2 days another yes.



Why would I keep that amount of cash on hand??



Yes, I will eventually pay taxes on my 401k money. But then I've paid taxes since I began working, but I haven't found a way to get around that

I believe what bclover is saying/asking is “In the grand scheme of you hiring a FA, would your financial future really be that much different in that you would have run out of money any sooner than if you had just stuck to using a few well diversified low cost index funds”?

 

[Rianne]

We use this tool often to consider different withdrawal strategies. Plus, we're going to a retirement/tax accountant next week to affirm what we calculated. It's helpful to plug in different ways to WD. And to plan ahead for RMDs, how to keep MAGI low, etc.

https://www.irscalculators.com/tax-calculator

 

[Closet_Gamer]

By and large I despise FAs. Every time I've come near one I have walked away thinking they were, at best, not that bright and, at worst, charlatans and cheats.

That said, there is a reality that managing money requires both an interest in doing it and the skills to manage it, particularly if you have any level of complexity with 529s, deferred comp, multiple brokerages due to the company selecting who runs the 401k, etc.

This thread did inspire me to chat with my wife about what she would do if I meet an early demise. She's smart and generally know how we're approaching retirement savings, etc. But our finances are moderately complicated and just dropping her into running it would probably feel like being dropped into the pilot seat on an airplane. Quite a few switches and knobs ...

We agreed that she would likely reach out to Schwab to get some help.

I'm also going to redouble my efforts to document how I have the finances wired together.

 

[CRLLS]

If people were aware of how little time they spends on your account (1 of 700), and how much money they are taking off your table, they would find a better way. For me, even the .3 VFAS is not worth it as personal investing for retirement is just so simple.

Just for fun I worked this out. Assuming a 250 workdays per year and an 8 hour workday, that works out to be a generous 2 hours and 51 minutes a year. Figuring the average account is $286,000. His fee works out to be around $3,500 per account, per year: or between $1,200 and $1,300 per hour. Not a bad gig if you can get it.

 

[Freedom56]

People who manage their money should have a back-up plan (such as training their spouse) in the event you lose your cognitive abilities or pass away unexpectedly. You should leave strict instruction on how you want the money managed. The last thing you would want is your spouse turning over all financial matters to a financial advisor who prey on situations like that to steal money. Even advisors at firms such as Fidelity and Schwab will take advantage of the situation and slowly siphon the money.

 

[Souschef]

Even though DW does not actively manage our money, I have a backup plan. In our Estate Plan Binder is a list of all the accounts, the account numbers, addresses and phone numbers of all our accounts.
Also I have a list of all our passwords.

 

[Rianne]

People who manage their money should have a back-up plan (such as training their spouse) in the event you lose your cognitive abilities or pass away unexpectedly. You should leave strict instruction on how you want the money managed. The last thing you would want is your spouse turning over all financial matters to a financial advisor who prey on situations like that to steal money. Even advisors at firms such as Fidelity and Schwab will take advantage of the situation and slowly siphon the money.

Yes, my spouse and I talk about strategy almost daily. Especially with this golden opportunity for long-term saving. And discuss WD's strategy for tax saving. We are clearly on the same page.

 

[athena53]

Figuring the average account is $286,000. His fee works out to be around $3,500 per account, per year: or between $1,200 and $1,300 per hour. Not a bad gig if you can get it.

Especially when you consider that a lot of the work applies to multiple accounts (monitoring the market, re-thinking asset and sector allocations, etc.) A lot is also done by computer- everyone has some sort of Monte Carlo simulation. I once contacted a friend who has a decent-sized CPA firm that specializes in financial and tax planning. I wanted someone to look over my portfolio and make recommendations on withdrawal strategies (from before- or after-tax, which assets) and other tax strategies. They wanted to run a Monte Carlo simulation (my advisor already does that) for $1,000.

Here are some of the things I've learned from various sources that I would have paid someone to tell me:

1. IRAs are not a good place for stocks such as Berkshire, where a long-term capital gain will be taxed as ordinary income at withdrawal.
2. IRAs are a better place for income funds, where the value is pretty stable.
3. Leave your HSA to a charity- if left to an individual they have to liquidate it. That means you can leave more after-tax funds to individuals.
4. Roth conversion strategies, which are discussed in depth on this board.

I'm sure there are other things I've forgotten at the moment- but when I asked my brother the tax CPA where I could get individualized advice like this he said it's hard to find and it's expensive.

 

[Unpaintedhuffhines]

We have used a FA for 20+ years, but as he is a long time family friend, we agreed on a fee structure that is very reasonable (about 1/2%, but only on IRA assets, nothing for brokerage, which is the bulk of our assets). He does much more than just manage our investments - he’s more like our CFO. Set up our trust, does our wills, recommends tax strategies and other things. While I am comfortable that I could handle some of this myself, my DW could not, and has zero interest in doing so. Our children also just know that we have a money guy and when we kick the bucket, he will be there to explain the trust, life insurance, and all that other stuff. So for me, it’s peace of mind to know that someone will be there to handle things if I go before anyone else.

I don’t think I’d ever just pick a random FA - too many shysters out there.

 

[bclover]

I believe what bclover is saying/asking is “In the grand scheme of you hiring a FA, would your financial future really be that much different in that you would have run out of money any sooner than if you had just stuck to using a few well diversified low cost index funds”?

absolutely would have been different. first of all most people don't know what they don't know.
I've seen it way too often, heck I've know full fledged Md orthopedic surgeons (so not stupid people) that simply paid wazoos of taxes by hitting their 401k's way too early.

yes, I would not have done quite as well. let me add a caveat, my fp believed in Education. He always believed that after a few years I should know enough to move on.

Again, you folks here all claim to be knowledgeable and I believe you but there is a reason why the majority of people in this country are not financial literate. There are those who don't find this stuff easy, interesting or stay on top of it.

 

[jollystomper]

People who manage their money should have a back-up plan (such as training their spouse) in the event you lose your cognitive abilities or pass away unexpectedly. You should leave strict instruction on how you want the money managed. The last thing you would want is your spouse turning over all financial matters to a financial advisor who prey on situations like that to steal money. Even advisors at firms such as Fidelity and Schwab will take advantage of the situation and slowly siphon the money.

I agree with some of this, and have planned accordingly. But in truth I am less concerned about "certified" financial advisors and more about relatives and "friends" showing up and pressuring DW to give or "lend" them money. Given a choice, a good financial advisor (despite this thread I do not think good financial advisors are unicorns ) might be a benefit in this case.

I also have made clear to DW that "we have enough. If something happens to me, you do not need to make any changes to your financial situation or investments. The money will outlive you. Anyone who says you need more is full of it. If anyone tries to 'guilt' you by saying you should do things to leave more to our heirs, do not believe it. If our each heirs have to get by with "only' a mid-six figure inheritance, so be it. Life is tough" .

 

[Foghorn Leghorn]

To each is own. I paid a firm 1.25% a year for several years and then I sat down did some research and some math.

I may go down in flames one day using my lazy 4 fund approach, but I'll do it without a 1.25 fee hung around my neck

 

[RetiredAt49]

To each is own. I paid a firm 1.25% a year for several years and then I sat down did some research and some math.

I may go down in flames one day using my lazy 4 fund approach, but I'll do it without a 1.25 fee hung around my neck

I did the same thing but for less than a year…. I did a ton of research (buffet, Bogleheads, this forum, you name it, etc.) and fired my FA and am loving that I don’t have to change my 4% withdrawal rate to 2.75% (because they were taking 1.25% of it).

I did a lot of tax loss harvesting (which my FA didn’t know anything about) in my taxable brokerage account and will be capital gains free for many years thanks to the recent bear market [emoji410]

 

[Davis65]

Hourly advisor/planner would be 2000 to 3000 for a comprehensive retirement plan. Garrett is one to check out for hourly advisors. No ongoing expense.

VanWinkle: thanks for this information. That's very helpful.

 

[JJpop]

Self-managing your money does not require any type of genius or super intelligence, given the vast inventory of information available online. You just have to be willing to do the study time to increase your knowledge base and confidence. No one will manage your money more effectively than you will. Use 3rd parties (FA, CPA, etc.) for very specific projects or questions and be willing to pay for that advice. I'm happy to pay for tax advice, but I'll likely never pay anyone for investment advice. Just my philosophy and it's worked well for 20 years for me.

Very well said.
The only person that “needs” a financial advisor is someone who is totally disinterested in investing or has a mental block they cannot overcome.
Nothing wrong with hiring an hourly advisor to check your decisions but to pay someone 1.25 % AUM or whatever is very questionable at best.
But…..it is your money so you can do what you want with it.

 

[Ncc1701]

I was a financial advisor for over 25 years and even I wouldn't hire me.

 

[aja8888]

I was a financial advisor for over 25 years and even I wouldn't hire me.

I nominate this ^^^ for post of the Day!

 

[redraptor]

There are those who don't find this stuff easy, interesting or stay on top of it.

I'm all 3 of those! My wife and I literally have money scattered all over because we don't trust anyone's advice fully. I'm trying lately to get more informed and maybe by retirement time I can focus on self-directing.

 

[frayne]

And there are those who find this stuff boring, challenging or tedious and hence the reasons for the FA industry. If there is a need, someone will always be willing to step up, fill that gap and take a fee for doing so.

 

[FREE866]

To each is own. I paid a firm 1.25% a year for several years and then I sat down did some research and some math.

I may go down in flames one day using my lazy 4 fund approach, but I'll do it without a 1.25 fee hung around my neck

Yep.And after a couple decades that 1.25% you give away equates to hundreds of thousands of dollars.

 

[NanoSour]

A quick case study on why one would not use a FA:

2 30 year old investors just inherit $1Mill:

1 investor reaches out to a FA for advice and believes 1% AUM is a good deal and that that FA deserves that small percentage to "keep the lights on". Won't touch the money for 25 years and insists on a growth fund to allow maximum market growth. FA recommends American Funds Growth Fund of America with it's 0.60% expense ratio and 5.75% front end load. All the money goes into AGRHX.

1 investor goes it alone and invests in all the funds into Vanguard Growth Index Fund VIGRX.

Let's assume we are 10 years into this scenario and it started in Jan 2013. A quick check using portfolioanalyzer.com we see that investor one has $2.7Mill and investor 2 has $3.4Mill. The actual difference in the two accounts is $661,333. Simply dividing by 120 months you find you are paying the FA over $5,500 per month to help him/her keep the lights on. Imagine if you had to write that check every month. I'm sure you would fire that advisor in short order.

In my humble view these people are only one step away from the Bernie Madoffs of the world.

As a side note, I can't believe this early retiree is funneling friends and family to his financial advisor. I posted the same type comment to his video and he immediately deleted it.

 

[theo2]

Look around, I have a buddy whose son is a FA and he seems to do very good, He and his family are always going on expensive vacations, has a very nice house and all the toys to play with, he is always going on these hunting trips to Alaska and other places. Makes me wonder,,,, did i get into the wrong profession? He was always calling me wanting to know when i retired if he could take over my 401k and make me money, i said no thanks. Wasnt a year later he got into some legal trouble . The rest is history