Hiring a Financial Planner

[meleana]

So I have been looking into getting a CFP to assist with our retirement transition. I have always managed our money through an account with T Rowe Price. I do the best I can, though I am no expert for sure. I play around with fire calc and the Financial Engines tool through my husband's employer and also Future Path through T Rowe Price.


T Rowe Price also has a free advisory service in terms of investment decisions. But they always want me to take our cash- which I have a lot elsewhere- banks, etc.,- and put it in stock mutual funds. They say I am too conservative. Of course, I figure they want more of my money.



But when I use their on line tool- Future Path, it tells me we have a high score of 98 and even adjusting our asset mix with more stocks the result is the same- we are good. So I don't get why they insist I need more exposure to stock mutual funds.



What we really need is someone to help us decide when to take SS; help us with financial logistics of how to sell our home and move out of state; Advise us of how to withdraw our money to live on and taxes, since we have no pensions, Medicare and health insurance, and estate planning, etc.


What I DO NOT want is to turn our money in our T Rowe Price accounts over to the Financial Planner. I want the FP to give US the advice of what to do with it and WE take it from there on our own. Maybe meet a few times with the FP and pay by the hour or visit.



These FP's all seem to want to take our money and put it into like TD Ameritrade or Charles Schwalb and put it in their choice of funds and so forth. And it doesn't look like any of the funds are ones like Vanguard or Fidelity or T Rowe Price. They do tell me these funds they use are no load and all of that.


On top of it all- they have these huge fees- every single year.



I just recently spoke with a Dave Ramsey vetted FP from Rick Edelman Financial Engines. The charge is $800 for a financial plan and then a percentage of our assets every single year. Like 1.75% on the first $400,000 and then 1.25% on the next 350,000 and then 1% on the next $250,000 and then .75% on the next 2000000.00. You get the picture.


He, too, said we are too conservative and should go with more stocks and the Financial Engine tool also says this but yet when it calculates out what we have it looks like we are good the way we are.


I just don't get it.



This just seems so way out to me. I am trying to see if I can find someone to just give us advice on what to do. I am even considering maybe trying a CPA firm who can just look at what we have and make recommendations. Maybe at a later date as we age we would get someone to take over if and when we can't.


Any advice on this? I am really confused...

 

[akl432]

I am in a similar situation and am interested to hear others' advice. I feel for you, meleana. I have similar frustrations.

 

[pb4uski]

There are CPAs that also have specialized in personal financial planning and attained an additional credential called PFS... personal financial specialist. The link below has a link to find one in your area... but personally I think you are just as well of by posting your questions here.

https://www.aicpa.org/forthepublic/financial-planning-resources.html

 

[SumDay]

We found ours here: https://www.napfa.org/

No sales pitches, ours also happens to be a CPA so can do our taxes and give tax advice. She subscribes to several SS calculators, so we got that all taken care of. She asked for details on expenses, and gave suggestions for lowering our cell bills, cable, insurance, etc. She was VERY thorough.

She's a huge fan of Vanguard, so basically helped us decide our asset allocation and then recommended funds. She'd actually do the moving for more $$, but it's easy enough for me to do myself. She takes no % of our funds, ever.

First visit was about $2K, if I recall (that was in 2014) and whenever we need a tune-up, it's $450. First face-to-face was about 3-4 hours, and the tune-ups are about an hour. She'ls also available to answer questions via email during the year. We always submit statements and tax returns, etc., to her via a secure site so she's all ready for our meetings when we get there. She's incredibly efficient and conscious of time management, which I love.

DH is totally uninterested in such things, so this gives me someone to bounce ideas off (besides the brilliant minds here).

Good luck!

 

[flintnational]

^^ What SumDay said.

 

[ERD50]

I want the FP to give US the advice of what to do with it and WE take it from there on our own. Maybe meet a few times with the FP and pay by the hour or visit.

That is exactly the right approach, IMO. Some others can probably provide advice on how to find a fee-only, by-the-hour FA. (edit - they beat me to it!)

In addition, if you share some of your numbers, expenses, breakdown of funds, etc. People here can provide some insight, which would help you to prepare for and make the most of a visit with an FA (or maybe decide you don't even need that) meeting.

-ERD50

 

[meleana]

I used that site. But there are hardly any nearby and the one that was listed charged the high fees.

Sounds like you got a really good one.

 

[Whisper66]

.......I just don't get it.

...

Sounds like you do get it. (a) these are businesses that make money off of managing your money. If you want their advice, it does cost $$. (b) if you are consistently hearing that you are too conservative, then probably you are more conservative than most would suggest (c) if calculations like Firecalc or I-ORP (both free tools discussed here often) show you are ok with being so conservative, it doesn't matter what others suggest.....only that you are happy with that position. (d) you have a broad scope of questions you are asking help for, maybe paying the extra money is worth it in your situation.


I personally get a lot out of reading this forum, running my own calculations and other online sources. But I'm quite confident in making decisions myself based on what I read. If I wasn't, I would search for professional help that charges by the hour in my area. A google search using "financial advisors that charge by the hour" brings up lots of hits that provide a place to start.

 

[Dtail]

Perhaps a fee only couple of meetings, then if you are comfortable, you can take it from there.
I am DIY with most of my investments at Fidelity. With Private Client status (over 1mm), I get effectively "free" advice from a personal rep and many general reps whenever I want without paying any fees whatsoever.
I have learned so much from this site/Bogleheads and reading articles/books.

 

[Lewis Clark]

The advice you are likely to get in this forum regarding when to take Social Security is mixed. Some people prefer to take it as early as possible so they can start collecting benefits sooner. Other people prefer to wait as long as possible to maximize their benefits once they start collecting.

Actuarially it probably makes little difference. If we live "average lives" then it should not matter much, and the income we get from Social Security will probably be roughly the same no matter when we start collecting.

If you have health issues that make you suspect you will live less than the average lifespan, you're probably better off taking Social Security as soon as possible. On the other hand, if longevity runs in your family and you expect to live longer than average, you will probably collect greater total benefits if you delay until at least the full retirement age if not age 70. Of course, if you need the money for your current expenses, then start collecting as soon as possible.

For a married couple, it is supposed to be better for the higher earner to delay Social Security as long as possible, while the lower earner should probably start collecting at age 62. This provides a good compromise between maximizing current Social Security income, while providing maximum longevity protection for the spouse that lives longer.

This is my distillation of everything I have read from all sources.

I am not yet 62 so I don't yet have to make the Social Security decision. My current plan is for me to wait until age 70 (as the higher earner) and for my wife to start collecting at age 62. But this is not a one-time decision. Once we become eligible for Social Security, we will reevaluate our situation every year in case it becomes advisable to start collecting earlier than we are currently planning.

I'm still working part-time which reduces the need to start collecting Social Security once eligible. I teach online college classes, so I work from home on my own schedule. This work doesn't stop me from doing anything that I want to do, including most of the traveling that we do. Other than some self-inflicted meetings I am free to do whatever I want to do, whenever I want to do it. The only limitation it puts on our traveling is that we have to go where there is Internet access, which is not much of a limitation these days for the things that we want to do. Internet access from cruise ships is spotty, so we just don't take cruises while school is in session.

 

[VanWinkle]

How about Garrett Planning as a source for hourly retirement planning without minimum account requirements, sales commissions, or long-term commitments.

I have heard good things about the network, but be aware to vet the ones in your area to make sure you get the best.

 

[Midpack]

I just recently spoke with a Dave Ramsey vetted FP from Rick Edelman Financial Engines. The charge is $800 for a financial plan and then a percentage of our assets every single year. Like 1.75% on the first $400,000 and then 1.25% on the next 350,000 and then 1% on the next $250,000 and then .75% on the next 2000000.00. You get the picture.

That's absolutely outrageous, especially for someone who doesn't want or need a complicated portfolio. Most DIY investors here have simple portfolios, many with only 3 to 10 funds, many low expense ratio index funds. You can learn the basics, almost anyone can.

Almost all financial planners will try to steer you into funds they suggest (and that's not necessarily bad), and tweak the allocations between equity, bonds (and cash) to match your risk tolerance, none of them actually custom tailor a unique portfolio for each customer. The ones who do are VERY expensive, more than the above. In all cases, it's ultimately your choice what you're invested in unless you authorize them to trade on your behalf (I wouldn't).

I am not trying to push you into Vanguard, but they will advise you for 0.3% per year (even less over $5M), and provide advice on most of what you're asking for. And they won't make any trades on your behalf unless you ask them to.

https://investor.vanguard.com/financial-advisor/financial-advice

 

[SumDay]

Have you thought about using this free Bogleheads service? https://www.bogleheads.org/forum/viewtopic.php?t=6212

 

[Rianne]

That's absolutely outrageous, especially for someone who doesn't want or need a complicated portfolio. Most DIY investors here have simple portfolios, many with only 3 to 10 funds, many low expense ratio index funds. You can learn the basics, almost anyone can.

Almost all financial planners will try to steer you into funds they suggest (and that's not necessarily bad), and tweak the allocations between equity, bonds (and cash) to match your risk tolerance, none of them actually custom tailor a unique portfolio for each customer. The ones who do are VERY expensive, more than the above. In all cases, it's ultimately your choice what you're invested in unless you authorize them to trade on your behalf (I wouldn't).

I am not trying to push you into Vanguard, but they will advise you for 0.3% per year (even less over $5M), and provide advice on most of what you're asking for. And they won't make any trades on your behalf unless you ask them to.

https://investor.vanguard.com/financial-advisor/financial-advice

+1 Dave Ramsey? I would loudly complain to his "get out of debt" program!

 

[38Chevy454]

Perhaps a fee only couple of meetings, then if you are comfortable, you can take it from there.
I am DIY with most of my investments at Fidelity. With Private Client status (over 1mm), I get effectively "free" advice from a personal rep and many general reps whenever I want without paying any fees whatsoever.
I have learned so much from this site/Bogleheads and reading articles/books.

Agree with above, if you have $1M in assets with fidelity you can get free advisor help. They won't recommend specific funds unless you are under a fee advisor plan, but can help you with the planning and allocation questions you have. Become self-directed with some advisor guidance is what you will result in. As stated by several previous replies, the basic financial industry is set up to make money off your money. Besides watching fees on the funds, a major source for many FAs is the 1% (or whatever fee they charge for assets under mgmt) annual fee. Most on the board here are self directed and do not pay the AUM fees.



As for your consistently getting a too conservative answer, that is probably vs the avg for persons in your age and financial position. If you are content with the less risk approach and understand the potential issues like inflation erosion, it is fine for you to stay the course. If you run the calculators and they have a result you are happy with, that's OK to stick with it. Just beware of inflation, that is why most recommendations are to have more stock equities allocation, to provide inflation protection. Your time frame is a factor to consider. Of course trying to plan when you will die is not easy to be accurate, so assuming you are around 55 years age, you need to plan for 35-40 years or more of retirement.


Keep reading on here, ask questions, get some advice from a professional if desired, and educate yourself. You can do it, the best investment you can make is in your knowledge. As been said here many times, the financial advisor with your best interests is you.

 

[meleana]

Perhaps a fee only couple of meetings, then if you are comfortable, you can take it from there.
I am DIY with most of my investments at Fidelity. With Private Client status (over 1mm), I get effectively "free" advice from a personal rep and many general reps whenever I want without paying any fees whatsoever.
I have learned so much from this site/Bogleheads and reading articles/books.

I have that advisor service also with T Rowe Price, but it is mainly focused on my investments and asset allocation and not the other things I mentioned.

 

[meleana]

That's absolutely outrageous, especially for someone who doesn't want or need a complicated portfolio. Most DIY investors here have simple portfolios, many with only 3 to 10 funds, many low expense ratio index funds. You can learn the basics, almost anyone can.

Almost all financial planners will try to steer you into funds they suggest (and that's not necessarily bad), and tweak the allocations between equity, bonds (and cash) to match your risk tolerance, none of them actually custom tailor a unique portfolio for each customer. The ones who do are VERY expensive, more than the above. In all cases, it's ultimately your choice what you're invested in unless you authorize them to trade on your behalf (I wouldn't).

I am not trying to push you into Vanguard, but they will advise you for 0.3% per year (even less over $5M), and provide advice on most of what you're asking for. And they won't make any trades on your behalf unless you ask them to.

https://investor.vanguard.com/financial-advisor/financial-advice

We have a lot of funds, but that is because we have a lot of accounts with T Rowe Price. IRA's, Roths, Inherited IRA;s, Rollovers, Brokerage....me and my husband.I have the free advisor service there, but it is focused on the on the investments and allocations themselves, not the other things I need help with.


Are you saying that Vanguard helps with things like estates, and taxes and income withdrawel and SS and Medicare and so on?


And- yes- the FP at Edelman I spoke with said he would trade on our behalf. Again- I am not crazy about that anyway. Don't these guys get paid something every time they place a trade? (eevn though they get no so called commissions?)

 

[Jerry1]

I think you will get a lot of value from a visit ir two to a CFP. I chose to go ahead and let them manage my money, but that was only recently. The value I’ve received so far has been from the planning tools they have. You can get those from a fee only advisor. The plan was structured from significant consideration of our input. It discussed SS, taxes, RMD’s and ROTH conversions, among other things. They have tools and insight that are hard to get on line. Not that you can’t do it on line, but you will have to put in a lot more time. And, for me, I really appreciated their tools. I found I-ORP difficult to understand and therefore hard to trust. Again, I could have put in the time to understand it, but I didn’t want to and I appreciated the input from a person, in person.

So, if you want to spend a significant amount of time doing research, finding tools and discussing your situation on line, that’s certainly an option. If you want to get some help, I think it is worth it. My CFP charged $1,500 for a very thorough plan and 3 months of follow up questions.

As for being too conservative, that can be addressed in your goals, but if you have enough and you don’t want to leave an even larger legacy, then I’m in the camp that it’s better to sleep at night than take on risk for something you don’t feel you need. Only you can draw that line for yourself.

 

[meleana]

Agree with above, if you have $1M in assets with fidelity you can get free advisor help. They won't recommend specific funds unless you are under a fee advisor plan, but can help you with the planning and allocation questions you have. Become self-directed with some advisor guidance is what you will result in. As stated by several previous replies, the basic financial industry is set up to make money off your money. Besides watching fees on the funds, a major source for many FAs is the 1% (or whatever fee they charge for assets under mgmt) annual fee. Most on the board here are self directed and do not pay the AUM fees.



As for your consistently getting a too conservative answer, that is probably vs the avg for persons in your age and financial position. If you are content with the less risk approach and understand the potential issues like inflation erosion, it is fine for you to stay the course. If you run the calculators and they have a result you are happy with, that's OK to stick with it. Just beware of inflation, that is why most recommendations are to have more stock equities allocation, to provide inflation protection. Your time frame is a factor to consider. Of course trying to plan when you will die is not easy to be accurate, so assuming you are around 55 years age, you need to plan for 35-40 years or more of retirement.


Keep reading on here, ask questions, get some advice from a professional if desired, and educate yourself. You can do it, the best investment you can make is in your knowledge. As been said here many times, the financial advisor with your best interests is you.

Thanks. As I mentioned I already have free advice through T Rowe Price- but it is just regarding investments and asset allocation- not the holistic picture of the other factors we need to be concerned with in retirement, though they do give SOME input on that, of course.



I need help with how to tax efficiently draw down our money for income to live on and so forth. How can we afford to move? I am just a bit overwhelmed I guess.



.

 

[Spock]

re: "too conservative/need more stocks"
I get that a lot, with some calling my very low stock % "just plain silly".
But. My interest income is higher than my expenses (for now) and I personally believe stocks are more of a casino than an investment.
Somebody is quoted as saying "when you've won the game, quit playing". Why take on more risk for (hopefully) better return if the potential downside damage of that risk, controlled by an unknown algorithm, out weighs the benefits?
If you can sleep at night with your returns vs inflation, there is no such thing as "too conservative". (I actually had one jerk try to tell me there was no such thing as an age appropriate portfolio). Unless you can find somebody who's perspective naturally matches yours (vs. "I disagree with it but I'll do as you say"), DIY.



re: when to take Social Security
This is another gamble based on expected life expectancy, etc. At one time (when life expectancies were shorter), when to take SS was mathematically neutral. The higher amounts you got by waiting were balanced by collecting over a shorter time period.
Fiddiddle with places like https://opensocialsecurity.com/ (I tried the SS option tool added to Financial Engines but their numbers don't add up). I'm biased to taking it earlier vs. later as I expect the eventual changes to "save SS" won't be neutral for those who haven't started it yet. I'll probably hit something in the middle by starting my SS at 65 when my wifes spousal benefits max at 50%... I haven't plotted it exactly but I suspect that where the steepest part of the waiting gains are... (hmm... I see another afternoon of spreadsheeting in my future)

 

[pb4uski]

.... What we really need is someone to help us decide when to take SS; help us with financial logistics of how to sell our home and move out of state; Advise us of how to withdraw our money to live on and taxes, since we have no pensions, Medicare and health insurance, and estate planning, etc. .....

Any advice on this? I am really confused...

IME you'll have little luck finding someone to advise you on that broad a set of issues... most are handled by specialists.

For SS, while we have great debates here on when to take, the difference in expected present value (expected benefit payments after considering mortality and the time value of money) is fairly minimal... about 5% difference between the best and worst alternatives IIRC. I'm a big fan of opensocialsecurity.com. Be sure to select the Advanced Options tickbox near the top of the page. If I compare their optimal solution vs taking as early as possible, taking as late as possible, at 65 or at FRA, the differences are fairly modest.

Not sure what you mean by "financial logistics" of selling a home and moving out of state... people do it all the time... working and retired.

On withdrawals, it is a bit situational but you could do a lot worse than taxable first, then tax-deferred and then tax-free. If you're willing to share some details then you can get some good advice on that and other topics here.

 

[Midpack]

Are you saying that Vanguard helps with things like estates, and taxes and income withdrawel and SS and Medicare and so on?

Vanguard will give you the basics on taxes but that's about it. But most FP's won't provide much beyond the basics on estates, income withdrawal, SS and Medicare. Only a tax accountant or attorney will give you unique advice.

If you need to set up a trust, you need an attorney who specializes in that, not an all purpose FP. It costs, but it's a one time fee. And I suspect any FP will tack on additional costs.

When to take SS is not rocket science, you can find countless summaries here, Bogleheads and elsewhere. There's no need to pay anyone.

Same with income withdrawals. There are several schemes and choosing among them is just fitting to your needs capabilities. Lots of summaries here, Bogleheads and elsewhere. No need to pay anyone unless you read up and still don't understand.

Medicare advice is free through your local insurance broker. Why not use free services from a specialist instead of an all purpose FP.

Again, an FP won't match a specialist - some are free.

And paying 1.75% annual on total assets under management is ludicrous. Lots of people do it because they're intimated and don't know better. It's been shown many times that the net return on a planner vs a good lazy portfolio won't make your portfolio better, more likely the same or worse. I know it's counter-intuitive, but it's been shown many times.

That all comes right off the returns you could be getting - will cost you a fortune over the span of your retirement. If annual return is 6%, you'll net 4.25% with Edelman. You'll net 5.7% with Vanguard. Over 20-30 years that 1.45% difference compounded is a LOT of return you're giving someone else.

 

[OldShooter]

Lots of good thoughts here. I'll add a few:

There is a difference between a financial advisor and an investment advisor. The latter, which is pretty much what you get from a brokerage house, does not get into many important areas of your financial life. It sounds like you have figured this out, so just keep at it. IMO the best financial advisors are at small firms, maybe three or four people.

Hiring an advisor is not much different than hiring a lawn service. You are not hiring a friend, you are hiring someone to use their skills for you. One difference though, is that when a lawn service does a lousy job it is fairly easy to spot and it doesn't have long-term effects. Neither is true of financial advisors.

Any financial advisor wants to be your friend, especially if he/she is running your money. Friends don't ask friends tough questions, friends trust friends, and friends don't move their portfolios away from friends. I am loosely involved with a nonprofit that is wasting tens of thousands of dollars per year because of a lousy portfolio. Every month, the FA sends out a little newsletter telling what's going on in her life, what's going on in her office, and what's going on with her assistants' life. Babies, dogs, travel, ... warm, fuzzy stuff. Just like a Christmas letter but totally irrelevant to the job she was hired to do. But the people at the nonprofit have swallowed it hook, line and sinker. They actually believe that she is their friend. Don't let this happen to you.

Fees are negotiable. For $1M AUM, the total fee should be at or under 1%. I am involved with another nonprofit where the FA is running about $4M and the customer is high-maintenance. Lots of to-ing and fro-ing with funds, mandatory annual trips for the FA to meet with the board, etc. They are charging 68bps on equities and much less on fixed income, which is all in individual bonds.

In your quest, shop around. Interview at least three or four FAs before settling on one. You'll get some free education and you'll become a more informed consumer. Anyone you plan to talk to, start here: https://brokercheck.finra.org/ Look for years of experience, the type of companies the FA has worked for, his/her licensing, and customer disputes. On a lark, I went to one of those steak dinner pitches but looked up the guy before hand. Twenty-one customer disputes, many settled for six figures. Fired by his employer about three days after the last dispute, now hanging out his shingle as an insurance salesperson. Another brokercheck I did revealed that the guy lost his securities licenses because he was forging customer signatures on documents.

 

[meleana]

I am not understanding that Social Security site. I put in my SS benefit of 1678 and it says my annual benefit would be $15,000. Well-no- it would be $20,136.


Same for my husband's. I put in 2286 and it is saying his annual would be $36,210.


I am not working and he is.


It is saying I should take it now and he should take it at age 70.


Then it says if i wait to collect at my FRA, we get less money overall? But still have to pay taxes on it. But after taxes I guess I could invest it for the year or two until my husband retires.


Hmmmm....

 

[pb4uski]

It is adjusting the PIAs that you input for taking SS early or late. $15,000 ~ 75% of $20,136 so that sounds about right... I assume that you are ~62?

For him, $36,210 is about 132% of his PIA of $27,432 which reflects 4 years of delayed retirement credits at 8% a year, so I'm guessing that he was born between 1943 and 1954.

Now note what the present value would be for the recommended strategy. Then at the very bottom, test alternative claiming strategies of both taking now, both taking at age 65, both taking at FRA (full retirement age) and then you taking at FRA and him at age 70 and note the present value associated with each alternative.

I'm guessing that the present values of the various alternatives are not all that different.