<p>My parents recently sold their last house, and we need some professional help in deciding how to invest the proceeds. While we’d like recommendations about specific financial products, we do not want to talk to someone who has a vested interest in my parents’ decisions; i.e., no commissioned salesperson, no employee of any bank, investment house, or insurance company. We want someone who has nothing to sell us except their expertise.</p>
<p>So what is this service called, and where do we find it? I’ve seen those weirdly-animated ads for Charles Schwab, and someone mentioned Edward Jones. Is this the type of thing we’re looking for?</p>
<p>You want what is called a FEE ONLY financial advisor. Most of the advisors are paid by commissions that can be significant on the various financial products they try to sell you (they may not disclose the $ amount unless you specifically ask them to tell you exactly what they are making when they sell you the products they recommend–they are required to tell you in % terms but not specific $ amounts). In our state, I believe there are maybe two. In addition, some CPAs and other tax professionals are also qualified to provide some financial advice.</p>
<p>Schwab and Edward Jones are definitely commissioned salesfolks. When I was officially an “employee” of an organization, one of the benefits was seeing a financial planner/advisor. She provided I believe 10 hours of counseling/advice. Basically, it was me summarizing our financial situation and she making recommendations. She helped clarify our thoughts and talked about pros & cons of diversifying our investments more than we were at the time. She was OK, but even though it would have been free to see her again the next calendar year, we opted not to spend the time. She said we were basically on track, which was what we wanted to perception check.</p>
<p>There are pros & cons of pretty much all investments. Diversification is important, as is how much risk tolerance the people involved have, what all their assets are and what timeframe is involved.</p>
<p>There are HUGE differences in the qualifications and credentials of the different financial planners. Your folks might wish to have a free initial consultation with several different ones to figure out which one(s) make the most sense and are most compatible with their views.</p>
<p>One good way to find someone is by word of mouth (particularly in the relevant community)–people you and your family trust and are happy with how their finances are shaping up.</p>
<p>Excellent advice, HIMom.
The only other thing I would add is to ask for a referral from the attorney who drew up their will (if they have a will). Attornies who specialize in trusts and estates usually know people who specialize in the issues facing your parents, which I believe would be: preservation of assets; keeping enough to cover their needs; passing on their estate with the minimum tax consequences.</p>
<p>I can tell you everything you need to know about investing, and can do it free if you post your questions on here. I have no vested interest in any financial products.</p>
<p>OP - Your parents are to be commended for seeking an expert opinion. I’ve seen WAY too many people “go with their gut” or get talked into one investment scheme or another. (One friend’s Mom called to announce “I just invested two million dollars with a guy who came to my door! Best returns I’ve seen anywhere!”)</p>
<p>In addition to the excellent advice provided above, I’d suggest structuring the “As we start” portfolio to minimize losses in any investment that might represent a bubble forming … imagine what a two-percent rise in interest rates would do to the value of a 100% T-Bill portfolio for instance. Your parents are not going to want to spend a lot of time monitoring their investments … be sure to say that to whatever fee-only financial advisor you choose. As always, JMHO.</p>
<p>It depends on how much money you are talking about. I find Fidelity advisors are very helpful and can steer you to an appropriate asset allocation policy. </p>
<p>A rule of thumb for investing assets you need to live on is to subtract your age from 100 and that’s the amount you should have in equities. (chech the Fidelity website or other calculators for determing how much money you need to live on). For example, it your parents figure out they need a nest egg of $400,000 to live on and they are 75, no more than 25% should be in equities. The rest should be in short-term bonds (under 4 years) or money markets. </p>
<p>Most endownments & foundations use a target return to determine how much they can spend in a given year to protect principal. The most conservative I’ve seen is 4%, aggessive would be 8% in the current market. </p>
<p>I do agree that a fee only investment advisor might be helpful. Expect to pay up to $5000 for this service if they have $1+ million. Also agree an estate attorney can help structure the estate to minimize taxes if that’s a concern.</p>
<p>I think that the best approach in managing money is to learn to do it yourself and then teach your kids so that they can get a head start themselves. Most of the financial planners that I’ve met and read about use fairly standard approaches to managing your money. Many are generalists in the area of financial planning (which includes many other areas besides investing). I once met a financial planner (used by many in my company) and asked him about technical analysis. He said that he didn’t know what it was. His approach on investing was to offer several different approaches and to just take the top two performing mutual funds in each category to offer to his clients.</p>
<p>I got out of my tech stocks before the internet bubble crashed and then went short. He was fairly impressed with this (I met him around 2002). Needless to say, I didn’t enlist his services. I think that it is a pretty rare financial adviser that gives you the advice to go short on the markets.</p>
<p>I have used trading services in the past and I’d say that they’ve provided me with the benefit of getting out of the market at peaks and teaching me various forms of analysis. After a while, I outgrew those services. I also listen to some very smart traders that charge nothing for their advice. I think that they can do that as their advice is difficult to follow (it runs counter to psychology). They also require you to be fairly well versed in technical analysis. I currently use one paid service - they provide me with the tone of the market from technical points, some fundamental analysis and a great trading board with lots of trading ideas. They just charge a flat annual fee.</p>
<p>My main problem is that there really isn’t anyone that I completely trust and that financial planners can just blame the market, politicians, bankers, etc. That may make you feel better in being able to blame someone but it does nothing to benefit your account balance.</p>
<p>there are financial advisors that work on a commission-based salary that are not selling products solely based on their commissions. there are a lot of really good guys out there that can help you find the right product, the right commission/fee structure and the right philosophy for investing for you and your parents. there must be someone you know and trust in the business.</p>
<p>@BCEagle - you & I are both investment professionals (or at least I assume you are from prior posts) with significant education & work experience that would be hard for retired people to pick up. You also need to have a passion and knack for it that many people just don’t have, which is why some people have more wealth than others who work just as hard. </p>
<p>I never understood the tech market craze and never got in, so I couldn’t exit, however I pulled all my money out of the markets in late 2006 (including converting 401Ks to cash) when I saw the writing on the wall with the lunacy of the HY bond and bank loan markets. This along with the runaway residential real estate market had me convinced it wasn’t a matter of IF the market would collapse but WHEN. Shorting the market is gutsy and should only be done by educated investors (my company doesn’t allow us to, so it’s off the table for me). </p>
<p>For others, they need to find trusted financial advisors. Some crazy compliance policies going into place at my firm on Jan 1 may also force me to turn a chunk of my money over to an investment advisor in a blind fund. I’m not happy about it, but it may simplfy my life.</p>
if the financial advisors are so good at generating returns, why are they still working?<br>
the whole financial industries are based on your fear of not having enought money when you are old. They could only make money when people give them their money to play with. </p>
<p>I recently used a comprehensive on line calculator to get an estimation for my retirement age. It came back with 99% certainty that I could retire comfortably at 6x. I took the same set of numbers and gave to our FA at bank, the feedback were totally differernt - need more savings.</p>
<p>If the survey is believeable, some 40% of the workers have no retire saving at all. What happens when they can’t work no more?</p>
<p>BCEagle is correct of course … for those with the interest, aptitude and experience. My sense is that OP’s parents lack these essentials. (For the record, in 2000 I was just getting started managing my liquid investments, and I was not experienced enough to see the tech crash coming. But eight years later I was better prepared … and actually made decent money during the 2008 market crash.)</p>
<p>In volatile times “following common sentiment” is invitation to significant financial loss. Generic unbiased advice is better than no advice … but it’s no defense if the market turns. That’s why I suggested limiting investments where a quick correction would result in significant loss (which many elders fear most). Perhaps the past two weeks is an aberration, but if you put money into 10-year T-Bills on December 6th, you’re already down 2.6% on your investment.</p>
<p>If they have a trusted tax advisor, ask for a recommendation. Ditto an attorney. Ask several people for recommendations, then interview the potential advisors. Ask the same questions of each one, see whose answers make the most sense, who is willing to explain what your parents don’t understand, etc. It’s their money, they need to be comfortable with the person handling it. Then check references, etc.</p>
<p>“If the survey is believeable, some 40% of the workers have no retire(ment) saving at all.”</p>
<p>Hey, no problem. If they can scrape together $5,000 (plus my fee of course) I can put them in touch with an Nigerian prince who promises to split $16 Million if they help him get his money out of Africa!</p>
<p>Best Financial advice was from W. Worst advice was from W.
(wife)</p>
<p>Second best F advice was from commissioned Real Estate Agent.
Second worst F advice was from phD, economist, ivy, manager, older brother. </p>
<p>In my search for annuities, there are good ones, bad ones, and so-so ones. The better annuities are from agents who get paid from commission. Its hard to say ‘no’ to a, fee only, advisor when you’ve already fronted a couple of thousand for his recommendation. Another example is not filling a prescription from a MD.</p>
<p>You might want to consider looking for someone called a Certified Financial Planner: [Certified</a> Financial Planner Board of Standards Inc.](<a href=“http://www.cfp.net/]Certified”>http://www.cfp.net/) My accountant has this certification. It’s not easy to get, and it’s not about the commissions.</p>
<p>^ LongPrime - Wow, I see a whole 'nother thread here.</p>
<p>Best advice: Friend “There’s always a reason the market behaves as it does … you just have to find it.”
2nd best advice: “Last year the market was down 2% … unless you bought at quarterly bottoms and sold at quarterly tops, then it was up 37%.”</p>
<p>Worst advice: (fee only) Financial Advisor “Borrow all you can and invest everything you’ve got.”
2nd worst advice: Insurance Agent “Whole life is your best investment … even if you have to borrow to pay the premiums.”</p>
<p>;; This buffer is for notes you don’t want to save, and for Lisp evaluation.
;; If you want to create a file, first visit that file with C-x C-f,
;; then enter the text in that file’s own buffer.</p>
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<p>I’m a software engineer. I’d rather develop a new application or write
a technical book than invest and trade. I have taken several courses
in accounting and finance in undergrad and have written many accounting
systems but that was in the 1980s. I have never worked in the financial
industry though. I make more money trading than I do in my day job and
that allows me to dabble in technical areas which are far more enjoyable.</p>
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<p>Well, I don’t think that I have a passion for it. It’s just something
that I studied for a while as I think that it’s as necessary to learn
as driving a car. The knack is just training, someone to learn from
and practical experience.</p>
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<p>There are tangible benefits to society from the tech bubble. There was
a lot of experimentation, ressearch and development. Many ideas
fizzled but a lot of them succeeded back then or have succeeded since
then. The tech bubble goes to the idea of secular markets. The secular
bull market started in 1982 and ran to 2000, 18 or 19 years which is
in the range of a secular market. After that we had the secular bear
market which I believe that we are in now. Many have predicted an exit
from the secular bear around 2015 or 2016. We’ve had a few cyclical
bull markets within the secular bear.</p>
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<p>You were ahead of the curve.</p>
<p>I have my 401k in a brokerage account and can go to cash in about five
minutes (basically as fast as I can execute sell orders). I have all
individual stocks and ETFs in my 401K.</p>
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<p>It took me several months for my first brokerage to add margin to my
trading account (you need margin for shorting). Since then, many
short, double short and triple short ETFs have been added. You can
double short the QQQQs by just buying the QIDs. The double-short is
probably a synthetic mix of put options.</p>
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<p>I’ve seen a lot of financial scams get discovered in the last ten
years and someone would have to earn my trust - I’d need to look at
their past results, recommendations over time, etc. I would rather
trust my son to manage my money than an outside adviser right now. He
has the appropriate amount of fear to be careful. I’d like to teach my
daughter to trade and invest but she hasn’t shown any interest.</p>
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<p>The interest can just come from the desire for self-preservation.</p>
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<p>Same with me. I ran into a technical analyst and a fundamental analyst
and both recommended getting out of the market. It was there when I
spent a lot of time studying technical analysis. I had a ton of tech
stocks in the 1990s and just basically held on until two people
advised that I exit. After that I wanted to learn why they thought
that I should exit.</p>
<p>Regarding trusted advisers: they can be quite good and then run into
financial problems and then start tapping their clients’ wealth. They
can also be well-known personalities. There was a famous case in the
Boston Area several years ago - a guy bought a radio station and ran
it as a financial news station. He and his wife were financial
advisers but he was raiding the accounts of his clients. His radio
station ran for several years I believe. His wife didn’t know about it
(I had a friend that did guest commentary for them from time to time)
and was devastated when it was discovered.</p>
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<p>Some just farm it out to others or just listen to the conventional
wisdom. They have value in helping you with estate planning, setting
up funds for college, dealing with tax issues, providing or finding
legal resources, etc.</p>
<p>The best guys are running successful hedge funds where you need big
money to get in the door.</p>
<p>1) Financial advisors–at least the trustworthy ones–aren’t going to make you massive short-term returns on your money. They’re going to help you lay out a game plan towards major life goals like retirement, home ownership, college savings, leaving an estate for your heirs, donating generously, changing careers, whatever. That’s generally a slow and steady approach which will pay off over decades. Same deal for the financial advisor. </p>
<p>2) Fear of not having enough money in your old age is entirely rational. Many of our parents didn’t have to worry about this because they had pensions. The pension managers were the ones who were responsible for all of the work associated with managing the retirement funds. Now we have defined contribution retirement plans, not defined benefit plans, so we either need to take responsibility as individuals for our retirement funds, or hire professionals.</p>
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<p>DadII, your results are going to depend on the model being used. Given the same comprehensive data, one calculator might make far more rosy predictions, while the other will be more downbeat. Our certified financial planner uses two different highly respected financial models when looking at our financial picture. Each of those models, in turn, gives us a range of estimates of how much we can figure on having in retirement. If the market takes off like a rocket, we get one number. If it’s in the doldrums, we get another number. I like the first number much more than the second but I would never rely on it. Maybe the FAs you talked to were just looking to drum up business. But maybe they were making different assumptions than the online calculator you used.</p>
<p>One of the best traders I know wrote this back in March 2009. The QLDs (his main trading vehicle) is up over 300% since then. He posts his buys, sells, stops and targets publicly and has been doing this for at least 11 years. I know another guy that is also very useful for trading - he also posts all of his analysis online for free. </p>
<p>Bernie never charged a fee, never a commission, and came with gold plated credentials and recommendations. He gave free advice and invested money for his church. Took money from his kids. </p>
<p>All round nice guy. </p>
<p>Financial Planning for Dummies, is a pretty good place to start.</p>
but I would never rely on it. Maybe the FAs you talked to were just looking to drum up business. But maybe they were making different assumptions than the online calculator you used.</p>