Firing our FA tomorrow

[EastWest Gal]

Thanks to you all and my free time as a retiree, DH and I are firing our FA tomorrow. Expenses were the main issue, but mission creep was a main issue. Early in my career, the California Medical Society endorsed a financial management group that took the time to educate physicians. Their focus was on index funds, and they flew us 400 miles to their headquarters, where I learned a lot. They developed mission creep and suggested something regarding DS which ended up being an illigal Roth IRA contribution, which we had to reverse and for which DS had to pay a penalty.

We switched to a company founded by Rick Ferri, a major Bogleheads contributor. I was still working full time so did not decide to go on our own. Their expenses were far less than our previous expenses. Rick Ferri left the company and it has been sold twice and has changed names. It has become far too clear that the company's expenses to us far outweigh the benefits. Thanks to you all and to a small extent, Bogleheads, for helping us see the light. Also, read Coffeehouse Investor if you have not yet done so.

We haven't even had our Zoom meeting for the cancellation, yet I already feel free. And I'm educating DS about investing through this forum and books like Coffeehouse Investor. We had a dinnertime discussion regarding asset allocation two night ago-he gets it and is interested. Thanks to you all.

 

[pacergal]

We may be heading that way too. Our FA was one my folks had and we stayed on after she was so helpful with all of my folks estate stuff. She retired last year and the new one who took over is good, but thanks to this forum, I believe I am ready to take over myself. I have waffled about this for several years, just never did it.

Good luck to you!

 

[kgtest]

Thanks to you all and my free time as a retiree, DH and I are firing our FA tomorrow. Expenses were the main issue, but mission creep was a main issue. Early in my career, the California Medical Society endorsed a financial management group that took the time to educate physicians. Their focus was on index funds, and they flew us 400 miles to their headquarters, where I learned a lot. They developed mission creep and suggested something regarding DS which ended up being an illigal Roth IRA contribution, which we had to reverse and for which DS had to pay a penalty.

We switched to a company founded by Rick Ferri, a major Bogleheads contributor. I was still working full time so did not decide to go on our own. Their expenses were far less than our previous expenses. Rick Ferri left the company and it has been sold twice and has changed names. It has become far too clear that the company's expenses to us far outweigh the benefits. Thanks to you all and to a small extent, Bogleheads, for helping us see the light. Also, read Coffeehouse Investor if you have not yet done so.

We haven't even had our Zoom meeting for the cancellation, yet I already feel free. And I'm educating DS about investing through this forum and books like Coffeehouse Investor. We had a dinnertime discussion regarding asset allocation two night ago-he gets it and is interested. Thanks to you all.

Knowledge is power! Once, you know, you know! Best of luck. This forum made the wife and I millionaire's no doubt! I remember reading back maybe a little older than your son, and being like how do these people save so much darn money!

I figured out its a combo of a few things, but this forum has really helped me with some critical planning, especially Roth vs 401k, and the consequences of tax torpedo's, tax trifecta's, what have you. RMDs are a thing folks.

If I ask what the plan is for RMD's and the person says "huh?" I assume, they 1. have no idea 2. have it all in tax advantage or 3. plan on dying young .


Just in the past two days I talked to people IRL who had no idea that there 401k/IRA could grow so high to put them into such high RMDs. Not a bad problem to have, but some of that was avoidable. This forum gives you the knowledge to know the difference.

 

[ducky911]

Hopefully in the switch it doesn't cause a big tax burden. My tenure on this forum has taught me to buy right and hold.

 

[SnowballCamper]

There are probably a lot of us here who have done this. Congratulations! Though, an email would be a lot quicker than a zoom meeting.

 

[Jerry1]

We did the same early in the year. For a buy and hold etf/index investor, the value of a FA just isn’t there. Ours was a great guy and we enjoyed our time with him, especially as I transitioned from work to retirement. We’re happy we made the change.

 

[Lorenzo]

We did the same early in the year. For a buy and hold etf/index investor, the value of a FA just isn’t there. Ours was a great guy and we enjoyed our time with him, especially as I transitioned from work to retirement. We’re happy we made the change.

Same here, a year ago. For decades I felt I was too busy to look into all of this and just had a FA manage my rollover IRAs from various employers. As I wound down my workload and had more time, I looked into what my FA had me invested in, and I learned it was mostly index ETFs and that that kind of investing is done all the time by ordinary people with no special background training. After finding ER.org, I pulled the plug on my relationshp with the FA. There was just too little value in it to pay a 1 percent AUM fee.

The FA had offered to do some long-term "planning" that might have been valuable to me, but he delegated that to someone else at his firm, they all seemed to drag their feet and ask me loads of questions I had no clear answers to, and never were proactive in helping me with planning. If I need planning, I'll hire someone on an hourly fee basis.

 

[Luvtoride]

Also, read Coffeehouse Investor if you have not yet done so.

Is that “The New Coffehouse Investor” by Bill Schultheis? Published in 2009? I’m requesting it from my library. I’m currently reading “The Psychology of Money” by Morgan Housel. So many good books out there for investors and those of us looking to do the right things financially in retirement.

 

[PaunchyPirate]

I left my FA about 12 years ago, I guess. I was with Ameriprise (which gets a horrible reputation). Yes, I paid a lot in fees. But at the time, I didn't know what I was doing when investing. I studied the documents my advisor gave me and that helped me understand diversification and asset allocation. So in some ways, I thank my advisor for helping me understand who my investments worked. Over time, I just learned to do it myself. When I finally pulled the plug on the FA, it was largely because of how much I was paying in obvious fees -- let alone the hidden costs of their chosen investments. My advisor died from cancer and I relocated to another city, so I cut the cord at that time. No regrets on how this unfolded.

 

[Pointby2]

I just ordered the Coffeehouse investor for my niece who is thinking about leaving her FA. Merry Christmas.

 

[imjustawarrior]

I look at it this way. Assume you are doing a 4% SWR (I know no one does this) and 1% AUM. That means you are paying 25% of your portfolio income to the advisor. Yikes!

This does not even include how much you have already lost out on during accumulation. Double Yikes!

Disclaimer: Some people do benefit from a FA.

 

[ElizabethT]

Congrats EastWest!

Over here we have our portfolio split between self-managed via one of the big player brokerages and FA managed via a different big player brokerage. The FA managed side continues to outperform our self-managed side by about 1/2 a percent annually, even after fees are paid. So, we’ll keep with the FA for half our portfolio until something changes.

 

[Stormy Kromer]

You are making the right decision. Stick to your guns when they call you to come back.

I fired my FA a few years ago. Rolled everything to VG and this last year alone it saved enough to live on from the fees they were charging for "AUM" and the expensive funds they had us in, diversified enough to own shares on the moon in their complex formulas. It came to over 2% not counting the poor performance of their managed funds. FA's use complex formulas to make you think investing is hard to do on your own. I would bet any FA my house that I could beat them over the next 10 years net of fees and taxes. I'd even tell them ahead of time that "I'm putting it all in VG Total Stock Index!!!!" See you in 10 years.

FA's have their place. To keep bankers from putting old folks savings in CD's.

You'll do fine.

 

[ut2sua]

... DH and I are firing our FA tomorrow.

Congrats on being able to free yourselves. Investing using index funds are so simple, but our intelligent brains want to make it a harder problem than it should be (thus it is a simple-but-not-easy problem). You are now left with a decision to make on how to spend the $ previously paid to the FA on yourselves. Not a bad problem to have

 

[Lorenzo]

I look at it this way. Assume you are doing a 4% SWR (I know no one does this) and 1% AUM. That means you are paying 25% of your portfolio income to the advisor. Yikes!

That realization is what finally motivated me. I felt more or less okay paying my FA 1% AUM during my working years, when I had little time to devote to investment decisions, and through 7% gains plus my contributions from employment I watched my account increase steadily enough over the years. But when I was no longer contributing, and when the market tanked, my advisor's fee suddenly loomed large. Moreover, I realized that without making contributions I was now effectively paying myself a salary out of the "business" that is my investment accounts, and my FA was on the payroll for 25 percent of that "business's" annual output!

 

[Jerry1]

That realization is what finally motivated me.

My motivation came in 2022 when interest rates were going up and bond funds were getting creamed. People here were getting out of bonds and my FA stayed the course. Heck, I can stay the course for free, I don’t need to pay an FA a fee to stay the course.

 

[frayne]

As Yogi Berra might say about managing your own portfolio, "It’s not brain science or rocket surgery—as long as you can do basic math and muster the discipline not to pee your pants when the market drops 30% on any random Tuesday."

 

[Rocky mtn high]

Fired my FA a year ago and haven’t looked back. He used to invest in individual stocks and bonds but then started investing in mutual funds with fees and some eft’s. I decided I can do that. Also agree, I was thinking 4% withdrawal rate and he’s taking 25% of it. Enough

 

[youbet]

I left my FA about 12 years ago, I guess. I was with Ameriprise (which gets a horrible reputation). Yes, I paid a lot in fees. But at the time, I didn't know what I was doing when investing. I studied the documents my advisor gave me and that helped me understand diversification and asset allocation. So in some ways, I thank my advisor for helping me understand who my investments worked. Over time, I just learned to do it myself. When I finally pulled the plug on the FA, it was largely because of how much I was paying in obvious fees -- let alone the hidden costs of their chosen investments. My advisor died from cancer and I relocated to another city, so I cut the cord at that time. No regrets on how this unfolded.

My experience is almost the same. In about 1972, I answered the doorbell one day and it was a bag-dragger from Ameriprise (called Investors Diversified Services - IDS - back in those days) and he did a judo move and stood on my chest until I signed up for an account. At the time, I had nothing going on beyond routine banking.

He put us into an aggressive equity fund called "IDS New Dimensions" which, despite high fees and being a load fund, did OK. That guy moved on and our little account was taken over by a retired school teacher named Dorthy who was both well versed and patient. She spent many hours at our kitchen table tutoring us on basic investing despite the fact our account was small. When she retired, we weren't enthused by her replacement, we had become fans of Bob Brinker and we moved the account to Schwab and went completely DIY which, decades later, we still are.

I know, I know.......... if we had gone straight to DIY at Schwab without the several years at IDS/Ameriprise, we'd be better off today. But we just didn't know at the time. There was no FIRE Forum, no highly visible advocates of DIY investing, at least that were getting through to us. So the aggressive, commissioned FA got us started and diversified away from being exclusively savings accounts and CD's. And it's worked out fine for us.

 

[PaunchyPirate]

My experience is almost the same. In about 1972, I answered the doorbell one day and it was a bag-dragger from Ameriprise (called Investors Diversified Services - IDS - back in those days) and he did a judo move and stood on my chest until I signed up for an account. At the time, I had nothing going on beyond routine banking.

He put us into an aggressive equity fund called "IDS New Dimensions" which, despite high fees and being a load fund, did OK. That guy moved on and our little account was taken over by a retired school teacher named Dorthy who was both well versed and patient. She spent many hours at our kitchen table tutoring us on basic investing despite the fact our account was small. When she retired, we weren't enthused by her replacement, we had become fans of Bob Brinker and we moved the account to Schwab and went completely DIY which, decades later, we still are.

I know, I know.......... if we had gone straight to DIY at Schwab without the several years at IDS/Ameriprise, we'd be better off today. But we just didn't know at the time. There was no FIRE Forum, no highly visible advocates of DIY investing, at least that were getting through to us. So the aggressive, commissioned FA got us started and diversified away from savings accounts and CD's. And it's worked out fine for us.

Yep. My Mom and Dad started with IDS as well. They were school teachers and knew nothing about investing and there were very few sources to teach them at that time in the 1970s. They contributed little by little and over the years, they had a healthy nest egg that funded a nice retirement for them. Mom is now 86, living in an assisted living facility and still spending down here now-Ameriprise IRA. She's quite happy that she used them. I have chosen to not try to fight the battle to change her to a lower cost solution at this point.

I started with them when they were American Express owned and selected them because of my parents recommendation. I didn't know much about other options.

To each their own. Whatever works at the time it needs to work.

 

[braumeister]

I'll take the contrarian view and point out that your average FA has a lot of expenses that justify the high fees.

 

[Koolau]

I fired my last FA over 20 years ago. Can't say I've done better without him/her 'cause I'll never really know. BUT I have only myself to blame when I don't do well. Now I feel like a real expert when I do well. And best of all - I'm very cheap. Also I know for a fact that I am my most important client and I have a vested interest in doing well on my own. YMMV

 

[chris2008]

@EastWestGal : how did it go?

 

[swakyaby]

Cheering you on, EastWest Gal! They really should have included a few classes in personal finance in medical school so that new physicians don’t feel so reliant on the “expertise” of others for retirement investments.

 

[rembrandt]

Cheering you on, EastWest Gal! They really should have included a few classes in personal finance in medical school so that new physicians don’t feel so reliant on the “expertise” of others for retirement investments.

When I worked in a bank, I once had a doctor as a customer who had no idea what an IRA was.