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General Category => General Discussion => Topic started by: lightning on September 15, 2021, 06:26:26 AM

Title: financial advisors? do you use one?
Post by: lightning on September 15, 2021, 06:26:26 AM
Hi all. I know the topic of the value of financial advisors has been discussed before, but I can't seem to find all the relevant threads. Maybe, I'm thinking of the CHE fora, but I think all that content  is no longer retrievable (as if that CHE fora content was retrievable even when it existed--the old CHE suffered from an almost useless search function).

I've always done my own financial planning, just like I do my own taxes. What I remember from all the "On The Money" threads are golden, especially when managing finance for the long-term.

Has anyone had any positive experiences with hiring a financial advisor (and I mean a real advisor--not a salesperson that calls themselves a financial advisor)? Did their recommendations really help you get a better return on your investments in the long-term?

Title: Re: financial advisors? do you use one?
Post by: downer on September 15, 2021, 07:26:57 AM
I meet yearly with my TIAA advisor. They are not completely objective -- they make money from what they sell. But they do have knowledge and they can make arguments which I can assess. I have also talked with an advisor from another company to compare.

A friend meets with their independent advisor quarterly and pay for it. It's tempting to pay for advice that is truly independent and objective, where the advisor has no financial incentives. But so far I've been unwilling to shell out for that.

In dealing with a parent's investments I did deal with an independent advisor. They charged about 1% of the accounts they were dealing with, and that was expensive.
Title: Re: financial advisors? do you use one?
Post by: Ruralguy on September 15, 2021, 07:38:32 AM
Honestly, it seems like too much money for fairly standard advice which you can find online and in various books.

However, I find that as I age, there are more rules to consider regarding retirement. Also, money starts to come in from more than one source, and that can be complicated as well.

I think if you are young, have one income source, and are both building up savings (i.e., ready cash) and a retirement account (mostly in equities, though it doesn't have to be), then probably an adviser won't get you much.  If you feel that you are navigating complicated rules, have multiple income sources (I don't mean more than 1 job, I just mean passive income), have a partner with differing concerns, then maybe it would be worth it.

Now, after a time, if you see that you shell out 1% to them, and they get you a gain that's 5% more than what you had been doing over the previous few years, then, hey, it could be worth it. But they can really only prove that after the fact. So, you really have to take the leap with someone with a proven track record. Is it really worth it? I've been concluding "no," with a possible "maybe" for the future.
Title: Re: financial advisors? do you use one?
Post by: arcturus on September 15, 2021, 07:41:01 AM
Short answer: No.

I met with the TIAA advisor once. They ran a monte carlo simulation and recommended I move from 4 CREF funds to something like 20 separate funds. Their analysis was that I would have a 98% probability of having sufficient $$ in retirement if I did that, compared to a 99% probability of having sufficient $$ if I stayed with my original choices. Needless to say, this did not impress.

On the taxable investment side, I looked into finding an advisor when I first started investing. All of the reputable ones required at least $200k, which I did not yet have, since I was just starting out. By the time I did have $200k, I was comfortable with my choice of mutual funds, which I hold at a low cost investment firm, so saw no reason to pay someone for advice.

The best advice I have heard - and should not be discounted just because it is free advice - is to live below your means and save some for retirement with every paycheck.
Title: Re: financial advisors? do you use one?
Post by: Caracal on September 15, 2021, 07:56:28 AM
We have all of our investments in a managed portfolio and meet with an advisor every so often. We could definitely do it all ourselves, but I find dealing with financial stuff pretty overwhelming and have a tendency to just put things off and never get around to them. The advantage of our financial advisor is that we just discuss something, and if we decide to set something up, she just sends us some forms, we fill them out and she just moves the money. I'm willing to pay the fees to just have somebody else deal with the details and avoid the anxiety.
Title: Re: financial advisors? do you use one?
Post by: lightning on September 15, 2021, 08:05:41 AM
Quote from: arcturus on September 15, 2021, 07:41:01 AM
Short answer: No.

I met with the TIAA advisor once. They ran a monte carlo simulation and recommended I move from 4 CREF funds to something like 20 separate funds. Their analysis was that I would have a 98% probability of having sufficient $$ in retirement if I did that, compared to a 99% probability of having sufficient $$ if I stayed with my original choices. Needless to say, this did not impress.

On the taxable investment side, I looked into finding an advisor when I first started investing. All of the reputable ones required at least $200k, which I did not yet have, since I was just starting out. By the time I did have $200k, I was comfortable with my choice of mutual funds, which I hold at a low cost investment firm, so saw no reason to pay someone for advice.

The best advice I have heard - and should not be discounted just because it is free advice - is to live below your means and save some for retirement with every paycheck.

Financial planning should be so simple, yet, I'm also led to believe that it's much more complicated for a non-finance person. I've always been attracted to folksy icons like Warren Buffet, who make investing seem so simple, yet, a part of me says that it's much more complicated than what Buffet says.

I think that, even though I'm in a good place financially, something is gnawing at me like I may be missing out on something. Or is that how middle class folks get roped in by the financial advisors???

OTOH, so many people are so unbelievably undisciplined in terms of their finances, I'm wondering if financial advisors play more of a role as a life coach.
Title: Re: financial advisors? do you use one?
Post by: downer on September 15, 2021, 08:14:54 AM
I have a friend who used to be a financial advisor mainly for academics. He said that they were often argumentative and reluctant to give up their bad investing habits.
Title: Re: financial advisors? do you use one?
Post by: Mobius on September 15, 2021, 08:37:37 AM
Quote from: arcturus on September 15, 2021, 07:41:01 AM
Short answer: No.

I met with the TIAA advisor once. They ran a monte carlo simulation and recommended I move from 4 CREF funds to something like 20 separate funds. Their analysis was that I would have a 98% probability of having sufficient $$ in retirement if I did that, compared to a 99% probability of having sufficient $$ if I stayed with my original choices. Needless to say, this did not impress.

On the taxable investment side, I looked into finding an advisor when I first started investing. All of the reputable ones required at least $200k, which I did not yet have, since I was just starting out. By the time I did have $200k, I was comfortable with my choice of mutual funds, which I hold at a low cost investment firm, so saw no reason to pay someone for advice.

The best advice I have heard - and should not be discounted just because it is free advice - is to live below your means and save some for retirement with every paycheck.

Of course financial advisors will say you need managed funds. In reality, most of will do fine with index funds, or you'll lose like everyone else. I've done well with low-cost funds. I split them across a few, but the returns to the high-fee funds aren't any better.
Title: Re: financial advisors? do you use one?
Post by: clean on September 15, 2021, 08:39:23 AM
There are a lot of pieces to a financial plan. It is not just about retirement and tax planning.  Do you have enough insurance?  Do you have the right kinds of insurance?  Are you not only saving for retirement, but Enough for retirement? 
Do you have debts?  (IF so, what kind, why, and what are you going to do about it?)

Do you have non retirement goals?  What are you doing to make those come true?

I teach a class in Personal Financial Planning.  It is modeled after the Texas Tech program.  (They presented at a conference and I contacted them about their program to incorporate their first class into our MBA program).  The class I teach is the first class that anyone in that program would take.  There are a lot of pieces that go into a financial plan. 

If you are looking to find an advisor, look for someone holding a Certified Financial Planner (CFP) (or perhaps alternatively a Chartered Financial Analyst CFA) designation that is a fee only advisor.  See what they will charge. It is not likely to be 1% of your assets, but more likely a flat fee. 
Title: Re: financial advisors? do you use one?
Post by: Morden on September 15, 2021, 08:52:41 AM
I tend to think of these people in two categories: financial planners who do big picture things and financial advisors who invest in particular things.

We went to a financial planner once for a review of assets. It was a flat fee. We prepared for the meeting by not only itemizing assets and liabilities, but also going back through a year's worth of expenses and sorting them into categories.

We have also tried different financial advisors over the years. It's very difficult to find competent ones. (By competent, I don't mean "beating the market" or getting spectacular returns; I just mean someone who 1) pays attention to our holdings and 2) communicates with us in a professional and timely manner.)
Title: Re: financial advisors? do you use one?
Post by: lightning on September 15, 2021, 09:06:27 AM
Quote from: clean on September 15, 2021, 08:39:23 AM
There are a lot of pieces to a financial plan. It is not just about retirement and tax planning.  Do you have enough insurance?  Do you have the right kinds of insurance?  Are you not only saving for retirement, but Enough for retirement? 
Do you have debts?  (IF so, what kind, why, and what are you going to do about it?)

Do you have non retirement goals?  What are you doing to make those come true?

I teach a class in Personal Financial Planning.  It is modeled after the Texas Tech program.  (They presented at a conference and I contacted them about their program to incorporate their first class into our MBA program).  The class I teach is the first class that anyone in that program would take.  There are a lot of pieces that go into a financial plan. 

If you are looking to find an advisor, look for someone holding a Certified Financial Planner (CFP) (or perhaps alternatively a Chartered Financial Analyst CFA) designation that is a fee only advisor.  See what they will charge. It is not likely to be 1% of your assets, but more likely a flat fee.

Yes, and this complexity is what prompted me to post in the first place. For example (bringing back another financially related previous recent thread), I spend a relatively large portion of my summers in a summer residence, and I've been paralyzed with making a decision on whether to continue renting vs buying and how each decision interplays with my other goals and my overall financial plan through retirement and estate planning. I'm starting to feel out of my element, but I'm also tepid about the ROI on hiring a financial advisor, mainly because I've done it myself for so long (and yes, when I was younger, it was easier to make decisions because I didn't have nearly as much $).

Thank you all for letting me think out loud and for all your thoughts. They are always very helpful, and that's why I keep coming back to tap the minds of all the smart people.
Title: Re: financial advisors? do you use one?
Post by: arcturus on September 15, 2021, 10:11:30 AM
At the recommendation of someone here, on a different finance-related thread, I have been looking at: https://www.bogleheads.org/forum/index.php (https://www.bogleheads.org/forum/index.php) There is a lot of noise (discussion of FIRE, etc), but some valuable insight into a variety financial situations, with a few genuine experts posting on some topics. As always with an internet-based discussion board, YMMV.
Title: Re: financial advisors? do you use one?
Post by: secundem_artem on September 15, 2021, 10:45:32 AM
I got a guy since our local TIAA folk have rapid turnover and the advice I've had from the in the past has not been helpful.

My private guy looks after our Roth IRAs as well as a modest portfolio of stocks, bonds and mutual funds.  He will also offer general advice on my TIAA funds - "you are over weighted in equities for your age.  Get that down to 65% and move some of your funds into bonds."

The deal with his financial company is that their fees are charged only as a percentage of any money I make.  If I don't make money on his products, neither does he.  Although I sincerely doubt it's quite that straightforward.

Overall, the dude makes me money and I am reasonably assured that  I should not have to eat cat food in retirement.  The other thing I've learned is that a million dollars is not nearly as much money as you think it is.
Title: Re: financial advisors? do you use one?
Post by: Cheerful on September 15, 2021, 10:48:49 AM
Quote from: arcturus on September 15, 2021, 10:11:30 AM
At the recommendation of someone here, on a different finance-related thread, I have been looking at: https://www.bogleheads.org/forum/index.php (https://www.bogleheads.org/forum/index.php) There is a lot of noise (discussion of FIRE, etc), but some valuable insight into a variety financial situations, with a few genuine experts posting on some topics. As always with an internet-based discussion board, YMMV.

+1  I spent a couple years reading the Bogleheads message boards (Investments, Personal Finance, Consumer) and some of their Wikis.  I don't visit as much now -- relevant topics on Investment board are often about things I now know.  I learned a great deal.  Important knowledge that has changed my life for the better and given peace of mind.  Also got valuable advice/info from trusted relatives that aligned with Bogleheads advice.

Had two meetings with TIAA advisors.  One long ago, one more recent. First was unpleasant person who pushed investing in 15 different TIAA funds -- completely against Bogleheads philosophy.  Glad I didn't do it, though I knew relatively little at that time.  Second was pleasant person who wanted access to all financial data including personal savings accounts.  No, thank you.
Title: Re: financial advisors? do you use one?
Post by: Parasaurolophus on September 15, 2021, 10:49:19 AM
When my partner inherited a six-figure sum, she got one (with a fiduciary responsibility). It was a total waste of time and money. So was the second one she hired.

I wouldn't generalize from that experience, save to say that if you've got a not-inconsiderable sum squirreled away, watch out for grifters. Pretty much everyone she ever hired to help with anything related to her money was a total nincompoop (seriously, it was unbelievable). At least, those who "specialized" in relatively large sums. The kinds of specialists who help ordinary people were all completely competent.
Title: Re: financial advisors? do you use one?
Post by: Volhiker78 on September 15, 2021, 11:00:55 AM
Has anyone had any positive experiences with hiring a financial advisor (and I mean a real advisor--not a salesperson that calls themselves a financial advisor)? Did their recommendations really help you get a better return on your investments in the long-term?

I use a financial advisor for about 50% of my portfolio - mostly IRA.  I started using him when companies had to open up their 401k outside of their limited offerings (this was >20 years ago).  At that time,  I moved all of my 401k outside of the company offerings to much wider potential outside of the company.  My advisor was working for Merrill Lynch but has since moved to UBS.

Things are different now.  Everyone has virtually unlimited options for their 403b or 401k plans.  No need to move outside of your employer.  It is a legitimate question whether I should continue to use my advisor.  But, he has provided a nice return over the 20 year period I've used him (>7%) and I'm not sure I could have matched that myself.  He doesn't make many trades anymore and my IRA is pretty conservative now.  I guess I continue to use him because I trust that he won't do anything stupid and also because if something should happen to me,  he would take care of things for my spouse who really doesn't have much interest in financial planning.

If you are reasonably literate about financial stuff, and don't mind keeping up to date on things,  i don't think a FA is necessary. 
Title: Re: financial advisors? do you use one?
Post by: financeguy on September 15, 2021, 11:28:46 AM
I agree with clean to get a CFP. I've taught in a couple programs leading to this designation and would not work with anyone without it. Anyone can call themselves a Financial Advisor, Investment Consultant or other general title and many have only recently passed very basic investment and insurance licenses. The CFP is a comprehensive designation involving 7 courses, a bachelors degree, a two day exam, a background check, and minimum experience requirements.

Prior to selling a practice and teaching, I worked in planning for many years. To be honest, an academic grilling me over what they read on a website would be advised in a pleasant manor to keep doing what they're doing, have their parking validated and be shown out the door in about 15 minutes. DIY clients are often in search of someone to "sign off on" (i.e., be liable for when things go south) one or another hair brained scheme they learned on a reddit forum. Those who do not actually want advice are not generally a candidate for someone in the advice business.

A planner will deal with the following areas:
-General Topics (Budget, Debt management, etc.)
-Investments
-Insurance
-Retirement
-Tax
-Estate Planning

The goal is not to get or beat a particular return but to deal with all of the above areas, not just individually but also handling the implications of how they relate to one another. If you convert your assets to Roth this year, what will the implications be now and in the future, for example? How will social security taxation/provisional income be affected by that decision in future years, or the Medicare parts B and D premiums, or the degree to which dividends in taxable accounts will fall into brackets other than 0% vs escaping tax entirely? Are these assets held in such a way that they will be considered for Medicaid eligibility (including potential long term care) in your state and if so can you arrange that this isn't the case by changing titling or type of asset?

Those very simple hypos are small examples of issues having nothing to do with investment management, which many planners delegate anyway.

I'd avoid choosing on price since what you'll likely get is a concealed price such as a product sale. If you really want an inexpensive way to see if a planner has a value add in your situation, consider attending Financial Planning Days which the CFP Board puts on in many major cities. In this event  you can attend presentations but also have one on one meetings with one or more than one CFP professionals who are not allowed to hand out business cards or solicit business. If you want to reach out at a later point, that's your call, but the event is free/pro bono info only.
Title: Re: financial advisors? do you use one?
Post by: Anselm on September 15, 2021, 02:16:09 PM
I can't imagine any need for one other than moving money around and avoiding taxes.   I don't see how any advisor will do better than the folks who pick stocks for TIAA.  These guys have too strong a faith in the American economy and assume that we will never have a Japanese style decades long malaise.  I picked some funds based on gut feeling and here is what happened:

2002  $0
2010   $40k
2013   $100k
2021   $400k

Not bad, IMHO but I have no illusions.  I am expecting a few more crashes along the way.   I did not add any extra money in beyond the normal contributions.   Be aware that some of these guys with gray hair do not have 30 years of experience.  They made a late in life career change.

J.L. Collins gives his advice here, spliced in with scenes from The Gambler movie.
https://www.youtube.com/watch?v=eikbQPldhPY

Use headphones at work.