How To Choose a Financial Planner?

[SoReadyToRetire]

I don't feel confident in being able to keep up with all the tax ramifications, IRA-to-ROTH conversion decisions, etc etc etc, that will be required once I retire. My memory isn't near what it used to be, and there are SO many variables! I believe I'd like to get a fee-only financial planner.

That being said, I have twice hired financial planners, and both have lost money for me. I'm doing much better self-managing my Fidelity account.

First time, I chose someone who did a presentation of some sort at my workplace at the time, and I liked his style/demeanor/what he had to say. He used "model portfolio theory" but also stuck me in a couple of REITs. The REITs sucked/lost money, and the rest didn't keep up with my hubby's gains in his self-managed retirement account. (He was a CFP with a long list of credentials and good reputation.)

The second time I used someone from Morgan Stanley, who came highly recommended by a very smart friend who's also a CPA/CFO of multiple companies. This time, even the "fixed income" fund she had me in LOST MONEY. I didn't know that was even possible!

So I put all my money into an aggressive growth fund at Fido to make up for the losses, and it has worked.

Now I need someone to guide me from here. I'm 60 and want to retire on my 61st bday, 62nd at the latest.

How on earth did those of you who like your FOFP choose one? What criteria do you use? How can you know how good they are until you get in bed with em and start losing money

Thank you.

 

[SumDay]

Find a fee only planner, who isn't making $$ for the company he works for. We found ours here: https://www.napfa.org/financial-planning/what-is-fee-only-advising
They take no % of your investments - the just charge you a flat fee, which is ~.01% of our assets. Beats the heck out of 1%, or more.

We've had her for years, and meet every other year, for a tune up. She has us in Vanguard funds, and helps us rebalance our portfolio when we need it. From what I've learned here and from reading books others here have suggested, I think I'm going to be able to do it myself from how on. But she's also a CPA, so she's great for tax questions.

If there are any in your area, set up a meet & greet with a few. I think it's important you like the person, in addition to trusting them as well. You can do it!

 

[catman2020]

Hi,

Sorry to hear about the problems you've been having. Could you indicate how much money are you talking having someone manage = your retirement funds? There is a wide range of options, and some make more sense at different levels of invested assets.

 

[skipro33]

Sounds like you might better be served by working with a tax accountant, not a financial planner. Financial planners work on what is basically a commission. Either fixed or tied to the account's value, but either way, the more you have, the more you pay. Why do that; pay more to manage $1M vs $10M?

My tax man knows what he's doing to assist me in keeping my tax bill as small as possible and he doesn't base it on my worth.

 

[braumeister]

Find a fee only planner, who isn't making $$ for the company he works for. We found ours here: https://www.napfa.org/financial-planning/what-is-fee-only-advising
They take no % of your investments - the just charge you a flat fee, which is ~.01% of our assets.

I've commented on this before, and it's worth mentioning again, that you have to be diligent when interviewing these folks. I've done it a couple of times over the years but never bit on their hook. Two big reasons.

I don't know if it's a geographical thing or not, but in my part of the country many of the advisors appearing in a NAPFA search are not exactly "fee only" although that's how they describe themselves. In many cases it's more like "If your assets are in this range, our fee is $X." So not much different from the old AUM model. Frankly, I resent that and think it's deceitful marketing. Caveat emptor.

The other reason is that when you examine their websites they tell you that their clientele falls in two broad groups. First is the younger generation who want guidance to build wealth. That's fine and makes sense.

The other, and far larger part of their clientele is older people who have a lot of complexity in their finances. That's fine also, and makes just as much sense.

But for many (most?) of us, our financial situation isn't really all that complex that we need professional help managing it. Go through some of the reading material linked below and there isn't any reason that a fairly intelligent person can't manage their own money. Unless they're just too lazy. I get that some are simply intimidated by the challenge and want the comfort of leaning on an advisor. Nothing wrong with that, but IMHO that's a minority of the FIRE crowd.

Early Retirement FAQs - Early Retirement & Financial Independence Community
https://www.bogleheads.org/RecommendedReading.php

 

[SoReadyToRetire]

Hi,

Sorry to hear about the problems you've been having. Could you indicate how much money are you talking having someone manage = your retirement funds? There is a wide range of options, and some make more sense at different levels of invested assets.

I have $303K in my IRA and $120 in my current 401(k). DH has $353K in his IRA.

 

[catman2020]

I agree with posts about fee only or accountant who could support you.

 

[VanWinkle]

Would an hourly fee only advisor work for you? He/she sets up a one time plan for your investments based on hourly charges. You can then access them during the year. or at tax time for an additional hourly fee. This might be more affordable than giving them 1-1.5% of assets every year. Some of them are available at Garrett Planning Network, but make sure you confirm they charge hourly. Just another option for you.

 

[Which Roger]

You're mixing two different things in your post. In the first part, you say that you're confused about tax issues, withdrawal/conversion strategies, etc.


In the second part, you express concerns that the "advisors" you have chosen are steering you into (the wrong) actively-managed funds.


Many or most of this forum would recommend adopting a passive index-based strategy for the second part. You can do this yourself, or a fee-only planner can provide some guidance initially.


For the first part, the answers don't change a lot for a passive investor vs an active investor, although I would argue that it's somewhat simpler for a passive investor.


So the bottom line is that you need tax advice and maybe some help setting up your portfolio, but you should steer clear of the salespeople who call themselves advisors.

 

[Stonewalker]

But for many (most?) of us, our financial situation isn't really all that complex that we need professional help managing it. Go through some of the reading material linked below and there isn't any reason that a fairly intelligent person can't manage their own money.

+1 on this. The folks here are an amazing resource, and unless your retirement setup is quite intimidating, you should be able to manage it with very little time invested once you have everything set up.

 

[Nick12]

I agree. This site is an amazing resource and it's free. Similar to getting free medical advice from the pharmacist instead of paying for a doctor's visit.

 

[HI Bill]

I have $303K in my IRA and $120 in my current 401(k). DH has $353K in his IRA.

At that level of assets, I'd be inclined to just put them in a Target Retirement Date fund, and let them ride. Depending on your need/desire for growth/stability, you could choose a target date fund for those already retired, or if you want more equities allocation, choose one that matches the mix you want.

No management needed. You can call VG, Fidelity, or whoever, to help you with ROTH conversions if you want to pay taxes now, and you can set up automatic RMDs or distributions >RMDs. You can always call the firm if you need help. Just my 2 cents.