Firing our FA tomorrow

[pjigar]

So now I'm trying to change the younger generation and I've started with my son and anyone that asks what do I need to do to maybe get to where ur at when I'm your age. I just say save and when your done with that save more quit living like the Jones as they really don't have it any better than you do their just in debt up to their eyeballs.

Monkey see, monkey do. DD doesn't even find it interesting when I say "LBYM and invest a lot" because she has seen us do it growing up. Her answer is "It's obvious, How else would you do it?" DD is still in college. But the proof is in the pudding, we are still hoping that she will stick with her learnings when she is gainfully employed.

Everyone has a plan until they are punched on the face.
-Mike Tyson

 

[swakyaby]

I was lucky in that during my first year in private practice in 1996, my father steered me in the right direction. In one visit to my parents, he asked me out of the blue, “”What’s your retirement plan?” I said, “What retirement plan?” He said, “You’re 6 months into your job, and you don’t have a retirement plan?”

I explained that although I was part of a small group practice, we were considered independent contractors, had to arrange for our own billing service, liability insurance, had no group retirement plan, etc. My father had some experience as an independent contractor engineer, so he suggested opening a SEP IRA. He said it had a higher contribution limit than a traditional IRA, had less paperwork than a Keogh plan (his retirement plan), and would have been the retirement plan he would have set up if it had been available at the time.

I said I didn’t understand the first thing about starting a Sep IRA. So he advised I look up Vanguard or T.Rowe Price on the internet, get their toll-free number, and inquire how to get started. So I called T.Rowe Price, and they couldn’t have been kinder or more patient. Now, that was empowering!

 

[jollystomper]

Many posters here have said that a Financial Literacy class should be mandatory in high school nowadays.
For more than one reason, I do not agree.

With this newish thing called the Internet nowadays, we have plenty of resources for those who choose to LBYM and invest the excess to figure out how to do it right.

Problem is, many folks can't or won't LBYM and therefore don't have significant $$$ to invest.
I'm glad this isn't a problem I ever had...

The question is, though, how do they find those resources unless their is someone there to guide them, and to teach them how to leverage them? Exposure without guidance to many things on the internet happens at much much younger ages, including financial instruments. Unless they are taught about them - both the good and bad - it can and will get them in trouble.

I don’t think mandatory financial literacy class in high school will help all that much. I had it in high school and remember the yawns in class through budgeting, checkbook balancing and investing. I remember thinking who has the time to wait for stocks to go up?

I think it is different today. Back then in high school, one had little access to financial tools. Maybe one had a savings account, if one was lucky. No one had access to a checking account. Stocks were too expensive for a high schooler to buy, Mutual funds, particular index funds, were hardly in existence. ETFs did not exist. Getting access to a stockbroker at that age was near impossible.There were no tools to even perform personal finance simulations.

Today, however, kids are getting smartphones before they are teenagers, you have bank and direct payment apps that one can use very young, you can but stocks/funds/bonds/ETFs in fractions with a few dollars, and of course there is That Thing Some People Buy That Must Not Be Mentioned Here that is constantly in the news. So there is a lot more ability to start directly using these things that will impact personal finance - and much easier to get in trouble via ignorance and scams. So I believe a personal finance course in today's world that encompasses all of those things would be of benefit. It is also much easier to not just have it be a series of lectures, but direct hands on how to handle accounts, payment methods, buying and selling stock, etc. Students would be able see an immediate and very personal impact.

 

[Alchemist253]

In almost 30 years of engineering consulting I have learned the value of having a second pair of eyes look at just about anything. I pay a fee only FA about $1500 a year to look over my investments and update a financial plan. He makes suggestions and observations- some things I have acted on. Other suggestions I have ignored at my peril. I think this is money well spent each year and helps me sleep better at night.

 

[zippy2020]

>>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.">>

Unfortunately, I can name 3 of our friends who had substantial IRAs and panicked, all 3 liquidating their portfolios in March 2009 - the very bottom of the Great Recession - and have never gone back in.

One of them, in fact, is the only person I have been sharing investment articles with for the past 35 years. His knowledge is considerable; his ability to endure risk turned out to be minimal.

Most people are not honest with themselves about how much risk they will actually tolerate - or they are simply unable to evaluate how much risk they are allowing in their personal finances on a holistic basis.

The FIRE forum is something of a bubble. We should remember that many people DO get spooked by media noise, and WILL NOT take the time to educate themselves, because they are either frightened of, or completely uninterested in, finances.*

* beyond maintaining enough in their checking account!

My FIL did a decent job for my MIL, but once he was gone, she was a poster child for any scammer who spent ten minutes with her, smiling and being friendly. Had anything happened to us, she would have been easily taken for everything except her bathrobe and slippers.

We selected an independent CPA firm for her specifically because past us, there was no viable Plan B to look out for her financial well-being.

 

[Stormy Kromer]

In almost 30 years of engineering consulting I have learned the value of having a second pair of eyes look at just about anything. I pay a fee only FA about $1500 a year to look over my investments and update a financial plan. He makes suggestions and observations- some things I have acted on. Other suggestions I have ignored at my peril. I think this is money well spent each year and helps me sleep better at night.

That is what I was looking for 35 years ago. My FA had me invest in VUL's and Annuities, Lost my A$$$. 6 figures plus.

 

[TheWizard]

Unfortunately, I can name 3 of our friends who had substantial IRAs and panicked, all 3 liquidating their portfolios in March 2009 - the very bottom of the Great Recession - and have never gone back in....

Sad to say, but we need a few folks like this,to allow us who take advantage of buying opportunities to buy low.
It's not rocket surgery...

 

[JohnRM]

I have 2 sisters who rely on a Merrill Lynch advisor group, I get a small family discount, the total fee is around 6 tenths of one percent. I figure they probably outperform what I would do alone by more than one percent? It's a gamble. I would be obsessing over it at the expense of focusing on my health, and enjoying life. The only problem I have with them, the contact guy there tends to discourage me from spending it. I think he is in cahoots with my wife. Then again, more stuff= more stress and I don't care to travel. He's a perfect FA for a carmudgeon like me.

 

[TheWizard]

I have 2 sisters who rely on a Merrill Lynch advisor group, I get a small family discount, the total fee is around 6 tenths of one percent. I figure they probably outperform what I would do alone by more than one percent? It's a gamble. I would be obsessing over it at the expense of focusing on my health, and enjoying life. The only problem I have with them, the contact guy there tends to discourage me from spending it. I think he is in cahoots with my wife. Then again, more stuff= more stress and I don't care to travel. He's a perfect FA for a carmudgeon like me.

Alrighty...

 

[jazz4cash]

Most people are not honest with themselves about how much risk they will actually tolerate - or they are simply unable to evaluate how much risk they are allowing in their personal finances on a holistic basis.

I guess some are not honest but I believe more are unable to evaluate how bad it will feel to them personally when the market is dropping. Different strokes …Maybe one person is OK to ride it out but the spouse is losing sleep. I saw a thread today about not checking portfolio values. Years ago you maybe only saw portfolio values monthly or less.

 

[PatrickW]

Financial Advisors grow up to become politicians…

 

[audreyh1]

I guess some are not honest but I believe more are unable to evaluate how bad it will feel to them personally when the market is dropping. Different strokes …Maybe one person is OK to ride it out but the spouse is losing sleep. I saw a thread today about not checking portfolio values. Years ago you maybe only saw portfolio values monthly or less.

It IMO takes exceptional imagination to understand how you would react unless you’ve already had some life experience. Most people can’t imagine their emotional reactions. I made several dumb moves early on, fortunately not involving large $ but painful enough to get it. It helped me pick an investing style that matches my personality. Even for a seasoned investor like me, Oct 2008 and March 2009 was very frightening, but I was able to stick to my plan in spite of the fear.

 

[G-Man]

In almost 30 years of engineering consulting I have learned the value of having a second pair of eyes look at just about anything. I pay a fee only FA about $1500 a year to look over my investments and update a financial plan. He makes suggestions and observations- some things I have acted on. Other suggestions I have ignored at my peril. I think this is money well spent each year and helps me sleep better at night.

Can you PM me the CFP you use. I’m a DIYer as well and looking for a fee only FA to look over my financial plan annually. $1500 a year sounds reasonable.

 

[vdesalvo]

It's not always about the fee amount as most times you can negotiate it down and if not to your satisfaction you can check to see if you can find a flat fee advisor (I have now). Most of the flat fee CFA I interviewed with fee never increases their fees once you are their client, what you pay now is what you pay 10 years from now. My spouse, and I'm should some of you on here may be in the same boat, once nothing to do with taking on the portfolio duties once I pass. So, for peace of mind I decided to follow this path not to say I don't keep a close eye on all moves.

 

[Sunset]

It IMO takes exceptional imagination to understand how you would react unless you’ve already had some life experience. Most people can’t imagine their emotional reactions. I made several dumb moves early on, fortunately not involving large $ but painful enough to get it. It helped me pick an investing style that matches my personality. Even for a seasoned investor like me, Oct 2008 and March 2009 was very frightening, but I was able to stick to my plan in spite of the fear.

And the 2000 dot-com bubble burst that saw my previous employer go belly-up along with collapse of my stock in that company.
Very scary, and I remember telling my Sister how I had lost a few years worth of work income.

I do need to be more tax efficient, and plan to sell many/most of my IRA accnt stocks and purchase TIPs / Bonds as now I see inflation could kill purchasing power. Plus in a downturn it will hold value, as I'm pretty heavy into stocks.

 

[LateToFIRE]

For years I had used an FA and my recent retirement gave me the push to go it on my own. The FA was valuable over the years, as my demanding career did not allow time to self-manage.

My reasoning for self-managing is as follows:

1) As our portfolio grew, the annual (AUM-based) management fees added up to a significant figure.

2) In consolidating all our various accounts and transferring 401K's to IRA's, etc., and receiving proceeds from various asset sales, deferred income, etc., the portfolio was going to become sizable and attendant management fees would have been equally hefty (even after fee discount for increased size).

3) Once I started digging into how our investments were allocated, I saw that we'd been put into proprietary funds that were not great performers and that mostly had hefty +1% fund-level fees associated with them. This one really pissed me off - there must have been some sort of kick-back to the FA for putting us into these expensive funds. Why else would you do that to your clients?

4) Those mutual funds the FA had us in have been kicking out chunky realized capital gains distributions in our taxable account, making tax planning a real headache. ETF's and individual securities would have been a much better option.

5) I'm a finance professional myself, so though there is a learning curve on the personal investing side, the feeling of control is well worth it.

I've now consolidated my portfolio under one no-fee brokerage house, and converted as much of the old expensive mutual fund investments to ETF's and individual bonds/stocks where practical. Stuck in some of the highly appreciated stuff that is in taxable account until I can get my AGI down to a lower tax bracket once the dust settles.

I figure I am saving at least $100,000 a year between the annual advisor fee and the expensive fund level fees I would otherwise have been paying. If I make some minor mistakes along the way, I think the savings will more than offset that. The way I see it, managing our portfolio is my new sweet part-time gig. If I spend 5 hours a week on it, I'm making $385/hour ($100K / 5x52).

P.S. Adding that as a back-up, the brokerage house we're at has a Private Client team assigned to us to answer questions and help where needed and they can take over managing the portfolio or a designated portion of the portfolio (for a fee of course) should something happen to me or I just get tired of doing it. So far seems like best of both worlds - FA vs self-managed.

 

[ransil]

My FA fired me ......I was trying out a free one from credit union
By call #3 after our chat session I was wondering who the FA was cause he was stating he may never retire.
call #4 was him pitching the funds they use and I should convert mine to them.
call#5 I told him I was not interested in those funds , he dropped me so fast this call lasted less than 2 minutes , he had a real good speech to get rid of me.

 

[FedRetired50]

Re: learning financial literacy. I learned hands-on, partly because someone gifted me a few shares of AT&T in the early-mid 80s and I watched that grow (slightly) in my teens until I cashed it out for college. Partly because I grew my own lawn mowing biz in high school and had a thousand+ in cash stacking up every month (not bad in the late 80s). And partly because my father guided me to invest some of that cash at T. Rowe Price, which I did for several years until I cashed that out for college, too.

Bottom line, real life experiences and having a financially literate Dad got me interested in investing. Which lead me to saving for retirement starting at 22. Teaching it in high school sounds great on the surface but I agree with others that it will just be a yawn fest unless they have their own skin in the game like I did.

 

[Gumby]

Re: learning financial literacy. I learned hands-on, partly because someone gifted me a few shares of AT&T in the early-mid 80s and I watched that grow (slightly) in my teens until I cashed it out for college. Partly because I grew my own lawn mowing biz in high school and had a thousand+ in cash stacking up every month (not bad in the late 80s). And partly because my father guided me to invest some of that cash at T. Rowe Price, which I did for several years until I cashed that out for college, too.

Bottom line, real life experiences and having a financially literate Dad got me interested in investing. Which lead me to saving for retirement starting at 22. Teaching it in high school sounds great on the surface but I agree with others that it will just be a yawn fest unless they have their own skin in the game like I did.

When I was a kid, my parents always had month left at the end of the money, so they were of no help at all. And personal finance was not something ever taught in a high school where virtually everyone else's parents were in the same boat. So after I joined the Navy at 18, I had to figure it out for myself. I did not even have a checking account until I was 21. I made a lot of mistakes, but I eventually did catch on. You are quite correct that having skin in the game concentrates the mind.

 

[OldShooter]

I have 2 sisters who rely on a Merrill Lynch advisor group, I get a small family discount, the total fee is around 6 tenths of one percent. I figure they probably outperform what I would do alone by more than one percent? It's a gamble. I would be obsessing over it at the expense of focusing on my health, and enjoying life..

" ... probably outperform ... " Ay, there's the rub. Actually, there is an easy way to remove the "probably" from sentences like this: Segregate the equity and income tranches into separate accounts. Then it's easy to compare each account's performance with an appropriate benchmark. I am on the investment committee for a small nonprofit (running about $5M) and I had the FA do this and to set the equity benchmark as the ACWI (All Country World Index). It has worked marvelously in focusing the FA's attention on performance and on fund fees.

OK, back to "probably." WADR @JohnRM, my guess is that the Merrill group is "probably' underperforming by several percent. First, remember that to give you your 1% they have to also cover their 60bps fee. Also, you can be pretty sure that the advisor group you talk to is not actually running your sisters' money. It will be invested in one of several "sleeves" that someone at Merrill has defined and maintains. The particular sleeve will have been selected based on your advisors' assessment of your sisters' account objectives (Do you know what they have chosen?) among categories like speculation, long term gains, low volatility, etc . Really not customized management at all. So your sisters are just a line item in a big ledger. Nothing special. If you do segregate the equities and watch for two or three years you will be able to remove the "probably" in your mind because you will have actionable data.

Regarding the FA discouraging you from spending: Of course! Spent money is money that he will not be getting fees on.

Re running it yourself that is a different matter that has little to do with investing. With our nonprofit, we have an FA. One of the committee members has pointed out that we need "a throat to choke." Our committee could easily run the money, but in good times and in bad times, the nonprofit board will always be wondering if the investment results would be better if the money wasn't being run by "amateurs." No fun. We don't need that, so we happily pay 58bps on $5M.

 

[TheWizard]

Re: learning financial literacy. I learned hands-on, partly because someone gifted me a few shares of AT&T in the early-mid 80s and I watched that grow (slightly) in my teens until I cashed it out for college. Partly because I grew my own lawn mowing biz in high school and had a thousand+ in cash stacking up every month (not bad in the late 80s). And partly because my father guided me to invest some of that cash at T. Rowe Price, which I did for several years until I cashed that out for college, too.

Bottom line, real life experiences and having a financially literate Dad got me interested in investing. Which lead me to saving for retirement starting at 22. Teaching it in high school sounds great on the surface but I agree with others that it will just be a yawn fest unless they have their own skin in the game like I did.

Yes, I agree.
High school is way too early for most of what 40+ year old adults need to know for what qualifies as adult financial literacy.

I suppose there is something that could be productively taught to 17 year olds concerning money management, but I'm not quite sure what it is...

 

[OldShooter]

... I suppose there is something that could be productively taught to 17 year olds concerning money management, but I'm not quite sure what it is...

I agree with the thought of some high school financial education but the various state legislatures are regularly adding mandates for teaching various STEM and hot spot subjects without (AFIK) adding any hours to the 24-hour day. Mandates to the schools for new subject should always come with identification of what current subjects are to be dropped to make the time for the mandate.

 

[mrfeh]

" ... probably outperform ... " Ay, there's the rub.

OK, back to "probably." WADR @JohnRM, my guess is that the Merrill group is "probably' underperforming by several percent.

+1

 

[Exchme]

Can you PM me the CFP you use. I’m a DIYer as well and looking for a fee only FA to look over my financial plan annually. $1500 a year sounds reasonable.

There is a thread on bogleheads.org where folks were sharing names of one-time-fee planners, no idea about prices, skill or fit. Probably a lot of folks could benefit by having a pro look at the portfolio, examine Roth Conversions, tax efficiency, drawdown strategies, etc. It's the AUM types that I object to as their fees will rob you blind.

Potential Financial Planners to Consider - Bogleheads.org

 

[Badger]

I have 2 sisters who rely on a Merrill Lynch advisor group, I get a small family discount, the total fee is around 6 tenths of one percent. I figure they probably outperform what I would do alone by more than one percent? It's a gamble. I would be obsessing over it at the expense of focusing on my health, and enjoying life. The only problem I have with them, the contact guy there tends to discourage me from spending it. I think he is in cahoots with my wife. Then again, more stuff= more stress and I don't care to travel. He's a perfect FA for a carmudgeon like me.

We had no choice but to use ML for my wife's 403b. When we sat down to discuss a plan with the advisor he wanted to have control over buying and selling their mutual funds in which many were funds with a load. I immediately remembered some advice about "Churning" and had the money put into a money market account. My plan was to move the majority of the money to Vanguard each quarter into a no-load fund. Me told me I couldn't do that. After a few months of asking a lot of questions to a number of people I found this was not true. For 8 years they created problems and constantly slow timed the transfer of the money. After she retired we had all the money transferred and closed the account. They are not even in the top 1000 of companies I would do business with.