Financial Planner, Financial Advisor, or CPA? Which one to use?

[All Is Lost]

Good Day,

My wife and I hope to retire next year. She will be 66 and I will be 64. I did some arithmetic to see if we will have enough money to live on as well as to help our Special Needs Daughter. In order to see if I have covered everything correctly, should I use a Certified Financial Planner, Financial Advisor, or CPA?

I am not looking to buy any type(s) of financial products. I just want to make sure that my numbers are correct and that I have considered everything.

FYI- I used the Search function but could not get the specific answer to my question.

Thank you for your help.

 

[disneysteve]

CPA is mainly for taxes and related issues.

A CFP is who you want for what you’re describing.

 

[brett]

The designations can be telling. There are many of them.

Our investment advisor has CPA (tax specialty), CFP, CFA, and TEP designations.

The latter is the Trust and Estate Practitioner designation.

 

[travelover]

Who ever you hire, pay by the hour. Don't get pulled into an annual assets under management agreement.

 

[OldShooter]

I differentiate between an Investment Advisor (IA) and a Financial Advisor (FA). The scope of an IA is pretty much limited to your portfolio. Most of them call themselves FAs but they are not. Almost for sure what you get from a brokerage house is an IA.

The scope of a true FA is much broader; your whole financial life. College tuition/529, coaching on insurance and estate planning, when to take social security, tax considerations, ... This is what you want.

The idea of "Fee Only" planners is widely misunderstood. In the industry this refers to advisors who are not paid commissions on the products they recommend. By far the most common fee only advisor charges according to your assets (Assets Under Management -- AUM). Much less common fee only advisors charge by the hour or by the project. The Garrett Planning Network (https://www.garrettplanningnetwork.com/) is said to be a good way to find these rare birds. I have no direct experience.

What the economists call "agency problems" abound (https://en.wikipedia.org/wiki/Principal–agent_problem). An advisor charging by the project is likely to have the goal of converting you to an AUM customer. An AUM advisor is likely to advise you to move your 401K to him because it will substantially increase the AUM fee. Forewarned is forearmed.

CFP is a tough call. These certificates are issued by a private nonprofit company whose president makes over $1M/year. Another agency problem; as your agent he should be limiting issued CFPs to the best and the brightest, but his paycheck grows with the volume of certificates granted. Criteria for CFPs include a college degree, but one in mortuary science is as acceptable as a double major in finance and accounting. And, no matter what someone tells you, a CFP by itself does not make the person a fiduciary. (https://www.investopedia.com/terms/f/fiduciary.asp)

Remember too that you are hiring a workman, not a friend. Just like a lawn service you want quality and reliable work, a personable and professional interface, promises kept, etc. The most financially successful advisors convince their customers that they are friends. Friends don't question friends, don't ask hard questions, trust friends to be doing a good job with their money, etc. Your friend the advisor wants to collect fees from you for the rest of your life.

 

[Midpack]

Not that you should or shouldn’t consider a financial professional, what does your probability of success look like in FIRECALC? You don’t have to tell us, might be worth your time to look. If you choose to share results, you might get some helpful feedback, but entirely your choice.

https://firecalc.com/

 

[pb4uski]

You should look for a CPA with a Personal Financial Specialist designation. Google find a CPA PFS.

 

[Luvtoride]

Good description and advice from Old Shooter above as he has covered the differences well.
The only other thing I would offer is
- ask family and friends for recommendations of advisors they use and what they like or don’t like about them. Not all will be a match for everyone.
- not sure about the “friend” designation that OS cautioned about. We have a very good relationship with our FA but that does not preclude me from asking hard questions about anything they recommend or we discuss. In fact they welcome every question we ask as it lets them know what we are thinking about.

Don’t be afraid to talk to several to find the right person/ fit for you!

 

[ERD50]

...
- ask family and friends for recommendations of advisors they use and what they like or don’t like about them. ....

The problem with this is, many family and friends have no idea what to look for in an FA.

I've had people tell me their FA is great, he's making them money! But when I ask how that performance compares to a risk equivalent passive benchmark, the look at me like I'm from Mars. Then they repeat "he's making me money!".

"These go to 11!"

-ERD50

 

[HarveyS]

I'd suggest you talk with an estate lawyer. You probably need to set something up with a trust for your daughter. The atty may be very knowledgeable about financial issues and/or can make a recommendation. I agree with ERD50 that your friends and family may not be able to provide leads to who you are looking for.

 

[VanWinkle]

The problem with this is, many family and friends have no idea what to look for in an FA.

I've had people tell me their FA is great, he's making them money! But when I ask how that performance compares to a risk equivalent passive benchmark, the look at me like I'm from Mars. Then they repeat "he's making me money!".

"These go to 11!"

-ERD50

Good point!!! Ask family and friends if they have multiple Annuities consuming most(80%) of their portfolio and a 100,000 dollar Roth IRA with 28 funds and 8 ETFs for diversification. This sounds funny, but I know someone who recommends this IA to friends and relatives. He is just an Insurance salesman in disguise and not well hidden at that!!

VW

 

[ChrisC]

I found this thread in the BH forum quite informative: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=360823

 

[CRLLS]

I can't say which Acronym person you need. What I will say is that any one of them will generally only use whatever info you give them to work with. As far as providing for special needs, I doubt if any of them can tell you whether your budgeted amounts for that are in line with actuarial averages. You are probably closer to that, unless you get a CFP/CPA/estate attorney or that is expert in special needs. The answers depend a bunch on your inputs such as AA, current expenses, future goals, etc. He/she might ask you about things you may have forgotten to account for.

I used a CFP on a one-time fee to look at our retirement future about 4 years ago or so. I received a lot of reports mostly a printed out spreadsheet which was valuable to me. We got his professional (?) opinion that we were OK. Steady as we go as long as nothing changes. From his reports, I built my own spreadsheet that I have used since then, tracking actual performance vs the forecasted ones he used as time progresses.

 

[brett]

Selecting the right one for you can be a challenge.

It took me 6-9 months. One advantage was that we had a poor advisor for several years. We came to understand what we did not want and what we wanted.

I asked several colleagues for their recommendation. Every one said that they were not particularly happy. So I went shopping on my own.

Narrowed it down to two firms plus DIY. One big part of the selection was personality. Especially how the advisor would relate to my spouse who was not terribly involved in our investment decisions. In the end my spouse's input clinched the final choice.

Was it worth the effort, the discussions to find the right advisor for us? Absolutely. It has been 10 years. We have had all sorts of prudent legal, tax, estate recommendations from the firm and from our advisor in addition to investment advice.

My advice to you...take your time, have a list of basic requirements and advisory services that you want. Don't pay much attention to the bumph that might be on the web site or brochure. IF you go for fee for service understand how you can relate and judge the services provided to the fee schedule.

 

[All Is Lost]

Thank you all very much for the valuable advice and taking the time to help me. I greatly appreciate it. There certainly are a lot of things to consider in choosing the right person. Your responses have given me a lot to think about.

Although we have lived in Georgia all our lives, most of our close friends have moved or passed away. The few relatives that we do have live out West. Both my wife and I work for the State and have lived in the same stick-built house for over 36 years. In addition to our small pensions that we will receive form the State, we have 390K in 401K with an interest rate of 1.9%. Since I am too scared to risk any of this money, we keep it in a stable value fund. We also have 110K with an investment firm. Overall, it loses more money than it makes. The company is always trying to sell us products and quite frankly it is overwhelming. Together, my wife and I spend over 9k a year for Term Life Insurance.

The main goal that we have is to make sure our special needs daughter is able to survive. We do have a Trust and she is the Trustee. She is NOT on Medicaid or any Government assistance, so it is vital that we make sure everything is correct.

The only other retirement goal that my wife and I have is to be able to move. We live in a very Redneck area of the county. Lots of Meth Labs in our area. On average we have at least one drive by shooting ever year and at least two (if not more) deaths on our road from people driving while intoxicated. I never thought our neighborhood would turn out this way. Ideally, we would like to move up North. Maybe the New England area. Due to the low inventory and high prices of homes, I am not sure if we will ever be able to accomplish this.

 

[OldShooter]

... - not sure about the “friend” designation that OS cautioned about. ...

A couple of examples:

There was a great post here a couple of years ago, poster talking about his friend the FA. They had lots of fun together, FA frequently stocking up the beer and inviting the poster to go on fishing trips in a nice boat. Last sentence poster said he had pulled his money from the FA and has never since been invited to go fishing.

I got involved with a very snaky FA from Morgan Stanley via a nonprofit investment committee. Her proposal was great but within a few weeks of picking her it became obvious that the proposal was mostly lies. Immediately though, all of us on the committee started getting a monthly newsletter from her. A few sentences on investments and then a page or more on what she, her assistant, and her investment guy had been doing in their non-business lives. Like a traditional Christmas letter, designed to make the recipient feel like a close friend. Brilliant tactic, actually, and the board chair of the nonprofit bought it hook line and sinker. In a subsequent committee meeting the topic turned to benchmarking and she argued that as fiduciaries we did not need to and should not benchmark her results. (She was costing them about 6%/year in underperformance.) Conclusion of the meeting discussion was I said I was an old retired fart with time to do the benchmarking and that I would be doing it. After the meeting she went one-on-one with the board chair and he fired me from the committee. He really loved those Christmas letters and thought she was his special friend.

The problem with this is, many family and friends have no idea what to look for in an FA. ...

Agreed. Consultations should be with professionals like CPAs and attorneys. Ordinary people usually have no clue, confusing bedside manner with competence. See also discussion on FA "friends."

... Since I am too scared to risk any of this money, we keep it in a stable value fund.

You are misperceiving the risk. Please read this post: https://www.early-retirement.org/fo...100-stocks-no-bonds-111472-3.html#post2685090

... Together, my wife and I spend over 9k a year for Term Life Insurance. ...

Why? Almost none of us need life insurance at the later stages of our lives.

... The main goal that we have is to make sure our special needs daughter is able to survive. We do have a Trust and she is the Trustee. She is NOT on Medicaid or any Government assistance, so it is vital that we make sure everything is correct. ...

Have you discussed this with an attorney familiar with special needs trusts? Generally the objective of such a trust is to make assets available to the beneficiary in a way that does not compromise means-tested government benefits that may be due to them. I'm 99% sure that having her as the trustee screws that up because she has personal control of the assets.

 

[All Is Lost]

A couple of examples:

There was a great post here a couple of years ago, poster talking about his friend the FA. They had lots of fun together, FA frequently stocking up the beer and inviting the poster to go on fishing trips in a nice boat. Last sentence poster said he had pulled his money from the FA and has never since been invited to go fishing.

I got involved with a very snaky FA from Morgan Stanley via a nonprofit investment committee. Her proposal was great but within a few weeks of picking her it became obvious that the proposal was mostly lies. Immediately though, all of us on the committee started getting a monthly newsletter from her. A few sentences on investments and then a page or more on what she, her assistant, and her investment guy had been doing in their non-business lives. Like a traditional Christmas letter, designed to make the recipient feel like a close friend. Brilliant tactic, actually, and the board chair of the nonprofit bought it hook line and sinker. In a subsequent committee meeting the topic turned to benchmarking and she argued that as fiduciaries we did not need to and should not benchmark her results. (She was costing them about 6%/year in underperformance.) Conclusion of the meeting discussion was I said I was an old retired fart with time to do the benchmarking and that I would be doing it. After the meeting she went one-on-one with the board chair and he fired me from the committee. He really loved those Christmas letters and thought she was his special friend.

Agreed. Consultations should be with professionals like CPAs and attorneys. Ordinary people usually have no clue, confusing bedside manner with competence. See also discussion on FA "friends."

You are misperceiving the risk. Please read this post: https://www.early-retirement.org/fo...100-stocks-no-bonds-111472-3.html#post2685090

Why? Almost none of us need life insurance at the later stages of our lives.

Have you discussed this with an attorney familiar with special needs trusts? Generally the objective of such a trust is to make assets available to the beneficiary in a way that does not compromise means-tested government benefits that may be due to them. I'm 99% sure that having her as the trustee screws that up because she has personal control of the assets.

This has opened my eyes to so many things that I did not consider. The Financial Advisor / Friendship arrangement rings true with the FA I currently have now.

The reason for having the Life Insurance into our later years of life is so that we can leave our daughter some money to survive on. The odds are against her in obtaining a decent paying job. Is there a better route to go other than leaving her Life insurance? In addition to the Life Insurance, both my wife and I will be leaving her part of our State Retirement Pensions. Once we die, my daughter would receive a small amount of money every month for the rest of her life. That is if the Retirement System holds together.

Since my wife and I do not have any close family members, nor do we have any young enough friends who would be willing to be the Trustee for our estate, we made our daughter the Trustee. The only other options were to find a Bank or Trust Company that would act as the Trustee. Most of these places only take clients that have a minimum estate value of 1 Million Dollars which we do not have. I was told by a social worker that there are cases where people who live in multi-million dollar homes have their special needs child on Government assistance and Medicare.

Thanks again for all of your help.

 

[SnowballCamper]

Whatever alphabet soup they have after their name, ask for a reference from a current/former client with a special needs member in their family. Ask for a signed affidavit that they are a Fiduciary advisor before you pay them a dime. If they continue to meet with you without you paying them, they are a salesperson.

 

[Markola]

OldShooter referenced Garrett Financial Planning Network. 2 people I know had good success finding a fee-only planner there.

 

[OldShooter]

… Thanks again for all of your help.

Remember this critical fact: Some Guy On The Internet (SGOTI) is not competent to be your estate planning consultant. Neither is “a social worker.” You have a complicated situation involving many important decisions. I’d encourage you to seek out an attorney or CPA (maybe both) and to spend the money necessary to optimize yours and your daughter’s future.

This is complex stuff. For example, arranging for your daughter to receive pension payments may simply substitute those dollars for dollars to which she is otherwise entitled from the state. Similarly, receiving insurance proceeds may have the same effect. IOW, the dollars you have arranged for her to receive from you may be totally wasted. Or maybe not. SGOTI has no idea, but the experts you need to find will know the rules as they apply in your state. This critical planing task is far more important and should precede any discussion of a financial planner. It may cost you a few thousand $ but will almost certainly be worth it.

 

[Love This Community]

Thank you for starting this thread. I had a tough time finding a CPA with PFS that can work on a fee only basis. Most that I talked to want AUM. I will keep looking for someone that can look at my overall portfolio and pressure test or advice on simplifying.

 

[kevink]

While the OP's situation is much more complex than mine I thought I'd share this resource for those looking for a portfolio second opinion and more general advice about estate planning, social security claiming strategies and other big-picture financial issues.

I've been mostly a DIY investor for 20+ years with about 5 years in the middle using a quite good FA firm that charged a fixed fee rather than % of AUM. Being about to turn 65 I wanted to get a second opinion on my investing and withdrawal plans as well as some insights into things I may have overlooked. I read on Bogleheads that the well-known investing writer and FA Rick Ferri offered such services on a fixed fee basis and checked out his website:

https://rickferri.com/investors/

As it says there, Rick is already booked well into next year so I followed his recommendation and checked out his colleague Jon Luskin, who I ended up hiring. He was great to work with and provided insights and advice that will certainly save me a multiple of his fee over time. No overreach either - meaning that he's clear about the need to consult a CPA and/or lawyer for specific issues.

 

[Love This Community]

While the OP's situation is much more complex than mine I thought I'd share this resource for those looking for a portfolio second opinion and more general advice about estate planning, social security claiming strategies and other big-picture financial issues.

I've been mostly a DIY investor for 20+ years with about 5 years in the middle using a quite good FA firm that charged a fixed fee rather than % of AUM. Being about to turn 65 I wanted to get a second opinion on my investing and withdrawal plans as well as some insights into things I may have overlooked. I read on Bogleheads that the well-known investing writer and FA Rick Ferri offered such services on a fixed fee basis and checked out his website:

https://rickferri.com/investors/

As it says there, Rick is already booked well into next year so I followed his recommendation and checked out his colleague Jon Luskin, who I ended up hiring. He was great to work with and provided insights and advice that will certainly save me a multiple of his fee over time. No overreach either - meaning that he's clear about the need to consult a CPA and/or lawyer for specific issues.

Thank you so much for sharing this.

 

[target2019]

Good Day,

My wife and I hope to retire next year. She will be 66 and I will be 64. I did some arithmetic to see if we will have enough money to live on as well as to help our Special Needs Daughter. In order to see if I have covered everything correctly, should I use a Certified Financial Planner, Financial Advisor, or CPA?

I am not looking to buy any type(s) of financial products. I just want to make sure that my numbers are correct and that I have considered everything.

FYI- I used the Search function but could not get the specific answer to my question.

Thank you for your help.

Thank you all very much for the valuable advice and taking the time to help me. I greatly appreciate it. There certainly are a lot of things to consider in choosing the right person. Your responses have given me a lot to think about.

Although we have lived in Georgia all our lives, most of our close friends have moved or passed away. The few relatives that we do have live out West. Both my wife and I work for the State and have lived in the same stick-built house for over 36 years. In addition to our small pensions that we will receive form the State, we have 390K in 401K with an interest rate of 1.9%. Since I am too scared to risk any of this money, we keep it in a stable value fund. We also have 110K with an investment firm. Overall, it loses more money than it makes. The company is always trying to sell us products and quite frankly it is overwhelming. Together, my wife and I spend over 9k a year for Term Life Insurance.

The main goal that we have is to make sure our special needs daughter is able to survive. We do have a Trust and she is the Trustee. She is NOT on Medicaid or any Government assistance, so it is vital that we make sure everything is correct.

The only other retirement goal that my wife and I have is to be able to move. We live in a very Redneck area of the county. Lots of Meth Labs in our area. On average we have at least one drive by shooting ever year and at least two (if not more) deaths on our road from people driving while intoxicated. I never thought our neighborhood would turn out this way. Ideally, we would like to move up North. Maybe the New England area. Due to the low inventory and high prices of homes, I am not sure if we will ever be able to accomplish this.

This has opened my eyes to so many things that I did not consider. The Financial Advisor / Friendship arrangement rings true with the FA I currently have now.

The reason for having the Life Insurance into our later years of life is so that we can leave our daughter some money to survive on. The odds are against her in obtaining a decent paying job. Is there a better route to go other than leaving her Life insurance? In addition to the Life Insurance, both my wife and I will be leaving her part of our State Retirement Pensions. Once we die, my daughter would receive a small amount of money every month for the rest of her life. That is if the Retirement System holds together.

Since my wife and I do not have any close family members, nor do we have any young enough friends who would be willing to be the Trustee for our estate, we made our daughter the Trustee. The only other options were to find a Bank or Trust Company that would act as the Trustee. Most of these places only take clients that have a minimum estate value of 1 Million Dollars which we do not have. I was told by a social worker that there are cases where people who live in multi-million dollar homes have their special needs child on Government assistance and Medicare.

Thanks again for all of your help.

If you do decide to come to the northeast, you might want to put the state of Delaware on your list. Each state has different programs for special needs, and you'll need to research to see if what you are looking for is possible in a particular area. There are higher home prices, and higher real estate taxes. The big problem now is the escalation of real estate in the NE. It will be tough to buy in.

My brother, his spouse and special needs daughter collect something from SSA. They do have additionla money saved but he works full time at 72 on various non-profit projects he put together to help those like his daughter.

You do need to be careful who you speak with, as you've found out there are sharks in the water.

One thing you mentioned is the stable value fund investment. Note that in times of inflation you lose a significant amount of buying power each year.

It is not an easy path, I know. I wish you well.

 

[MTB4me]

A lot of good information and recommendations in this thread. Best of luck to the OPs on their situation. My experience with the whole CFP thing: it’s not worth the paper it’s written on. Worked for a short time with a CFP at Ameriprise, solely because my folks had an account with them for awhile at a different office. She was all about extracting as much money out of me as possible. Tried to churn my accounts and sell me products that benefited her way more than me. Couldn’t run away fast enough. Have received 100x more value from this forum than with that Ameriprise hustler.