Thinking about getting a financial advisor...

[John105]

A very good friend of mine is a financial advisor.

His fee is one percent. It does not vary with portfolio size.

So, a client $50,000 portfolio is paying $500 a year for the same advice for which a client with a $3 million portfolio pays $30,000 a year.

It’s taken my friend 25 years to build a client base, to where it is “a good gig if you can get it”.

So, yeah, he makes a lot of money, but that is after 25 years of being in the business working 60 hours a week, busting his backside to get where he is now.

In that sense, complaining about how much he makes is a lot like complaining about how much neurosurgeon makes. 25 years of practice and expertise to get where he is .

You should be willing to pay for expert advice, whether that be legal, medical, mechanical, or financial.

Not everyone is able to DIY successfully in every area.

Many of my friend’s clients are former fighter pilots, one of them is a four star admiral. The admiral has a lot bigger things to worry about, particularly since he is the Commander of the Pacific Fleet.

The admiral pays for good advice, and delegates that aspect of his life, which allows him focus on other matters.

If you don’t think you need a financial advisor, then show me your multimillion dollar portfolio.

Show me the success of your DIY effort.

Challenge not accepted. Because it would require revealing personal numbers. Which accomplishes nothing. This isn’t a boast fest.

What does being a fighter pilot have to do with anything? My wife’s godson’s dad is such. Last I checked he is a pretty modest person and he’s never talked about finances other than that he wanted to do something different upon retirement in his late 40’s.

My wife had a 7, 66, 24 in a former life so I was around “advisers” and I’ll stick with Jack Bogle’s advice instead.

 

[Astro14]

Challenge not accepted. Because it would require revealing personal numbers. Which accomplishes nothing. This isn’t a boast fest.

What does being a fighter pilot have to do with anything? My wife’s godson’s dad is such. Last I checked he is a pretty modest person and he’s never talked about finances other than that he wanted to do something different upon retirement in his late 40’s.

My wife had a 7, 66, 24 in a former life so I was around “advisers” and I’ll stick with Jack Bogle’s advice instead.

Wasn't asking for anyone to reveal anything.

My friend, and he is a close friend, is a former fighter pilot. His clients happen to be fighter pilots - it's how he got his start.

I'm not looking to brag and I am not sharing my data - my challenge remains:

"If you're so good that you don't need professional advice - then let's see how well you've done."

No numbers needed, but, if you're still working, because you need a paycheck, well, then, you're not there yet.

 

[KJSmith]

It's really an argument about nothing.

Charlie Munger said the first 100k is the hardest.
It's probably more like 300k now.

If you have developed the good habits to get that far.... you're going to be ok.

By the time you have what you feel is enough to retire, the money is going to take on a life of its own and just grow...without a lot of help.
Just keep on doing what you are doing.

The first million is the hardest, the second is inevitable.

I've said it before.
I use a Wealth Manager so,
I don't have to worry, I can be retired,
My Wife will be ok if something happens to me,
I'll be ok if something happens to me,
I'd rather pick one now while I am still somewhat cognitive.

 

[ArrestMeRedZ]

"If you're so good that you don't need professional advice - then let's see how well you've done."

I'll take that challenge. I had no time to actively manage my retirement accounts prior to retirement (a blessing?), but in the 9 years since then, they have trippled in size with most of the gain being roll overs and earnings into a Roth.

I did use professional account management for a couple of years. I outperformed them even before their fee was taken into account, so I had to let them go.

 

[97prizm]

Here's the disclaimer, I don't know nothing about using a financial advisor, I don't know what to look for in one, besides getting one that is a fiduciary. Is there a site that rates them, on their performance, fees, et? I want them to maybe manage my 401K. I have been listening to one called American Wealth Advisors. Her fee is 1.2% of the total amount of 401K at the end of the year, I think. What do you you investors say?

If you have a large enough portfolio then it's not necessarily a bad idea. However I can't remember which book my dad recommend but several sites show that self-managed 401k's have traditionally outperformed financial investors.

 

[Astro14]

If you have a large enough portfolio then it's not necessarily a bad idea. However I can't remember which book my dad recommend but several sites show that self-managed 401k's have traditionally outperformed financial investors.

I’m not sure what you mean with this post.

Financial investors is a broad category, but we were talking about financial advisors.

If, by investors, you mean all of those who invest, then I’m again at a loss for what you are trying to get across here.

A 401(k) is a tax treatment, a vehicle, not an investment. Within that vehicle, within that tax deferred “bucket“, you can choose any number of actual investments.

You may be referring to John Bogle’s great book, “Common Sense on Mutual Funds”. If you haven’t read it yet, and you’re confusing the terms, you’re the kind of person that needs a financial advisor.

The essential point of the book is this: a very low cost index fund will outperform over 90% of the actively managed funds.

In the aggregate, all mutual funds must, by simple arithmetic, underperform the market by the amount of their fees. In the aggregate, all funds are in fact the market. About 60% of the market is owned by funds. So, there’s no way that that 60% of the market out performs the market enough to cover their fees.

So, for the average investor, a low cost index fund, which was pioneered by John Bogle, will outperform over 90% of the funds available. Making the low cost index fund an excellent pick. Further, that 90% does not take into account survivor bias. In other words, the worst performing funds tend to close, so when you look at the currently available funds and look back at their performance over the last 10 years, the results are skewed by all the funds that failed and simply liquidated.

When survivor bias is taken into account, the low cost index fund out performs closer to 95% of all mutual funds.

I have posted a lot of financial book recommendations previously, but, “Common Sense on Mutual Funds” still tops the list.

There are a lot of excellent financial books at your local library. I encourage you to start reading them.

 

[Pablo]

I’m not sure what you mean with this post.

I am thinking he means (and I could be wrong) during work/early start/save to the MAX phase no one needs a 1% drag of an expert dude in a suit. Just pick the best widest low cost stock fund* and put everything into it. Every nickle. Sell the dog and rent out the gate hinges. MAX IT OUT.

That is how we did it.

*Yeah some 401Ks and such have bad funds...........

 

[Astro14]

I am thinking he means (and I could be wrong) during work/early start/save to the MAX phase no one needs a 1% drag of an expert dude in a suit. Just pick the best widest low cost stock fund* and put everything into it. Every nickle. Sell the dog and rent out the gate hinges. MAX IT OUT.

That is how we did it.

*Yeah some 401Ks and such have bad funds...........

You’re reading a lot into that post, @Pablo !

If your risk tolerance has been determined, and you know the asset allocation that is best for you, and you have a reputable company that administers your 401(k), and that company offers an appropriate fund, then, yeah, early on, MAX it out and leave it alone.

But you have glossed over the risk tolerance determination, asset allocation, and fund selection. You’ve been an investor for so long that you forget what it is like to start out.

 

[javacontour]

One doesn't need to get an advisor that takes 1% off the top of AUM (Assets Under Management)

One can pay a flat fee for an advisors time to address investments, insurance and tax plans.

If you really want an advisor, find one that is selling their time, not asking for a cut of your entire portfolio.

 

[Pablo]

I need a life coach!

 

[KJSmith]

I need a life coach!

My wife gave up on me.
She just accepts me as the person I am.

 

[gman2304]

Has anyone here ever used a ‘fee only’ financial planner?

 

[johnmyster]

Investment advice or financial advice? Two different things. Which do you want? Sadly, most financial advisors make their money off your investments, so the system is broken.

I learned a lot by having a FO-FA for 5 years, mostly by challenging them to do more for me. Fired them this summer. They were getting cranky because I rolled out of my prior 401k and was managing about 65% of our assets myself. Apparently they wanted a (3x) raise, so I fired them. It was also good timing because they were about to outsource all their market analysis and portfolio structuring, so we were going up from 1% AUM to 1.65%.

Their value was in checking over my insurances, providing sanity checks for other financial services I was paying for, etc. In the end, their retirement calcs and tax planning calcs always had errors and bad assumptions in them. They didn't put as much time into my situation as I did, and I really can't blame them. FO-FAs are for the masses, sheeple. My excel spreadsheet is more complete than their calculators.

If you have complexity in your life pay a "flat fee" advisor for a few hours a year to advise you on your big picture. If you're 54.5, it's time to start getting structured for retirement. If you have no idea what you're doing, it's probably appropriate to consult with a few and have them pitch their plans to you.

 

[Sequoiasoon]

Above to @Sequoiasoon:

That's a lot right there. You DIY. Easy.

Her, she doesn't need any more people taking her money. Pregnant and dude ran off? or husband died? I'm not going to comment more on that, unknown. BUT needs settling and turned to cash.

Father is her on again/off again boyfriend. Jumps jobs with not much stability. She said at least no current plans for marriage, not sure she trusts him to stay faithful.

1) Save money and make a real budget. Sure she can find help with this, but SHE needs to do it. Budget everything. Save at least 10%. Start NOW.

Last I knew she was doing 10% in her 401k (plus the company matches 1/2 of first 7%) and it's in S&P 500, Fidelity Growth and another small cap which are some of the work options. Budgeting unknown, haven't gotten that deep, not planning on it. Did help her with some car repair and reliability advice when she was having issues but pointed toward a place I have used when I was closer by that area.

3) Are you on board as a guidance or are you trying to offload, as your employee - precarious. You definitely want her to succeed but tough to have a heart to heart talk, which she REALLY needs. As in "If you don't get you sh#$ together you could blow this and be way worse off". She has a great opportunity, extremely rare opportunity - use, don't squander moment.

I want to point her toward better advice and step back as much as possible. I'll probably tell her to go to local Schwab or Fidelity office. Had some of those conversations already and also the lottery winners that are bankrupt a year later. Told her to contact our HR as we have some free services for basic wills etc for outlining potential issues for child care which made her think a lot toward financial security.

3A) I will pray for her.

That's always good!

 

[Dave Hess]

Lots of good advice given.
Don’t forget tax planning for when you retire, beneficiaries and asset distributions to children.

Wife has to be involved in ALL ASPECTS of the family finances while you are still alive.

Investments, retirement accounts, bank accounts, Taxes, paying bills, liabilities, savings, finances, insurance policies, cookie jar money, etc….

If she doesn’t want to get involved and be in the know…… people will take advantage of her.

*** Make sure all beneficiaries are correct ***

Too many women are in the dark when their husband suddenly dies and they have zero idea of the family finances. Court ordered Probate can get very expensive if all parties involved don’t agree on an amicable outcome.

 

[johnmyster]

Don’t forget tax planning for when you retire, beneficiaries and asset distributions to children.

I'm 20 years from retirement and I've already planned/modeled my retirement tax strategy because it informs how I pay taxes now. In fact, it also informs my parents' choices. And FWIW, that level of detail was well beyond the commitment level of my paid advisors, which is why they were fired. My parents' advisors care at that level of detail.

 

[raaizin]

Wasn't asking for anyone to reveal anything.

My friend, and he is a close friend, is a former fighter pilot. His clients happen to be fighter pilots - it's how he got his start.

I'm not looking to brag and I am not sharing my data - my challenge remains:

"If you're so good that you don't need professional advice - then let's see how well you've done."

No numbers needed, but, if you're still working, because you need a paycheck, well, then, you're not there yet.

We all do what we think is best for us. I am a DIY kind of guy and manage my own portfolio over the last 10years I have averaged 10.2% average each year. Some folks get nervous when the market goes down and sell after its too late locking in their losses. Those folks might be ok with a FA. My issue is with a 3M portfolio giving him 30k a year is ridiculous. Besides you never know if you have a good FA till many years down the road. Over the long MOST FA cannot beat the market. As far as not having enough time and too busy I spen pretty much ZERO time in the last 35years. I have 2-3 funds which is pretty much all you need

 

[Fitter30]

Look at Fisher been with them for almost two years need 500k to start with them. Have been very happy .
Was with financial engine mutual funds they sucked. They cost me a out $12k, $3k a quarter im happy.
When i hired a law firm for disability ssi. Cost me $10k cost 0 out of pocket 90 days i had my full ssi.
My brother spent two years on his own then got a lawyer.

 

[supton]

*** Make sure all beneficiaries are correct ***

At work, every couple years (maybe every? it's not like I don't fall asleep) at work someone from Fidelity comes in and talks about our 401k's -- and harps on this. Has a story about how someone diligently was piling into their 401k but passed away before retirement. Thing is, he got remarried early in life--but never updated the beneficiary. Ex-wife got the 401k, not the newer wife. Something about how this beneficiary selection is ironclad and hard if not impossible to overturn in probate, something like that.

 

[Strommen95]

Example of a good one?

ex 1: Fid Low Priced Stock outperformed Fid Freedom 2030 by about 4X in ave annual ret

I know this post is a year old but a 2030 fund is going to be extremely conservative at this point. As retirement date approaches, a target date fund becomes more conservative and focused on bonds. These funds are not about maximizing profit, they're about maximizing or minimizing risk relative to the fundees retirement timeline. It would be more appropriate to compare the Fid Low Priced Stock to a 2050, 2055, 2060 or a 2065 fund which will be heavily, if not entirely, focused on stocks.

Target date funds are great for people that want to set and forget their money. They do exactly what a financial advisor would do at a cheaper expense ratio.