Financial advisor

Parent Cafe
21

<p>This thread is just what I have been wondering about. Kid #1 is done w/ the college searc, was admitted to 1st choice school (which is a lot cheaper that we had been saving for) & now it is time to try to take care of other long-neglected things. I have been so impressed w/ the quality of information you all share on all sorts of topics that I am taking a leap & am asking for help.</p>

<p>H & I interviewed our 1st financial planner this week &, while I am sure he is not horrible, I didn’t feel like we clicked. Unfortunately I didn’t have enough experience/info (absolutely shameful at my age) to be certain of my assessment of him.</p>

<p>Pluses:
– He works for a subsidiary/something affiliated w/ our credit union (which I love & trust).<br>
– He did make a few very concrete suggestions about out assets, which are a total hodge-podge of IRA’s, etc. that we would pick on the spur of the moment (using up against some IRS deadline) & then completely neglect.
– He is a CFP (& there were some other initials that I don’t remember)
He gets paid 1.25% annually of our account. (Although I have no idea whether 1.25% is ‘good’ or ‘bad’ for this kind of thing…)</p>

<p>Minuses:
– He suggested that we put various old retirement accounts/a good chunk of cash that is sitting in a bank account (way too much, I know) into a ‘managed’ account. The little I have read said that index funds are more cost efficient & that managed accounts seldom really out-perform them.<br>
– He spent a bunch of time sort of trying to reel us in (that’s how it felt, anyway) w/ listing off all the types of investments that seemed pretty exotic to us & listing off these incredible rates of return they got last year… which, of course, did not excite me but just made me think that we missed the boat on those investments.
– When I said that I wanted to do some reading to get a little knowledgeable on the topics he was discussing, he couldn’t make any suggestions (I will look into Ric Edelman’s book… we live in the DC area & I think he is local… I have heard his seminars advertised on the radio from time to time.)</p>

<p>I didn’t have the list that a previous poster mentioned about how to choose a financial planner, so I have no idea of the methodology used – he mentioned something about the staff of 40 researchers… just made me wonder why I would just use Fidelity’s/Vanguard/Schwab (we have small accounts w/ <em>all</em> of them, sad to say) researchers or something… (although he said they had access to virtually any investment/fund/whatever, not just one firm’s offerings)</p>

<p>So, my questions are:
– 1.25% annual fee. Reasonable or not?
– Any other beginner reading material I should consider? (Not that I have a ton of time for reading, but I could make this a priority for a while)
– Other sources to consider for finding a financial planner besides our credit union? USAA, etc., offers a free review of your situation but I have never taken them up on it. I tried to look on Angie’s List for references but couldn’t find enough references to make me want to follow up w/ any one entry. I have asked a <em>few</em> friends, but haven’t gotten anywhere w/ that yet.</p>

<p>Thanks for listening. I am sure this is somewhat incoherent, but that is just a reflection of the reality of the situation!</p>

22

<p>A fee based on assets may not be that bad since he does have a
long-term incentive to grow your assets. In my opinion, an advisor is
ultimately worth the work that you don’t have to do and your rate of
return.</p>

<p>Managed accounts can do much better than the market if you have a very
good manager. The very good managers tend to manage high-net-worth
money though. As a caution, Madoff would have been in this category of
managing high-net-worth customers where customers begged him to take
him in.</p>

<p>I personally think that multiple investment approaches are fine. I do
use index etfs. I own one mutual fund right now that I bought back in
2001 and I have owned a few mutual funds here and there. I generally
prefer individual common stocks that I know well.</p>

<p>You might want to ask about additional fees. Access to multiple mutual
fund families might imply sales loads.</p>

<p>Financial planners, to some extent, have to be salespeople. They are
selling a product and they don’t get to use their financial skills if
they don’t have any customers. So yes, they are making a sales pitch.
Last year, you could have made good money with a dart board. There are
a few sectors that didn’t do well but the market had a nice V-bottom
which makes everyone look like a genius. A ten-year track record would
be more interesting.</p>

<p>I favor fewer accounts with fewer companies as management and taxes are
easier. You may also wind up with favorable transaction fees if you meet
certain dollar thresholds so concentration can have its advantages.</p>

23

<p>Periwinkle,
Our FP is in the Edelman group (but not Ric); I sent him my 403B options list 15 months ago, he recommended 5 and their relative percentages. Today that account is up more than 30%.
PM me if you like.</p>

24

<p>“But where are the clients’ yachts?”</p>

<p>It was the search for a FP that convinced DW and I to do our own financial planning. Whole life, variable annuities, trading portfolios, and then the final straw … “We include the market value of your house in our fee-based calculation.” Ugh.</p>

<p>There are some people who are simply not equipped to do their own financial planning. But I’d encourage everyone to start by educating themselves. If at that point you don’t feel comfortable doing your own planning, at least you’ll be able to ask better questions.</p>

25

<p>The QLDs (NASDAQ tracking ETF) was up 240% from the trough and 140% since the beginning of last year. It’s a 2X fund (and my main market trading vehicle) so just going long the QQQQs would have given you 120% and 70% respectively. Last year was like shooting ducks in a barrel.</p>

26

<p>Thanks for the input, everyone. I am no closer, really, to a concrete plan yet, but you have given me much to think about.</p>

<p>BCEagle: I am sure it would not have been like shooting anything in a barrel for us, but it is good to know (as I suspected) that the guy we met was bragging about an unusually good year & that ‘past performance does not guarantee future results’ or whatever they say on the ads…</p>

<p>Mominva: I will PM you… can’t hurt to get a name, even if I still feel paralyzed w/ indecision!</p>

<p>Thanks again to everyone.</p>

27

<p>kitty:</p>

<p>If you have accounts with Fidelity, Vangurad they do offer such services for free. If you never had one, you may want to try them out first. The professional advisers may charge you up to $2,000 to make a plan for you. Then they would want to manage your portfolio @ 1%/yr. The funds they sell, can’t be bought in public and they usually have high expense ratio.</p>

<p>If you really want to get picture of what you have and if the assets you have will last you in retirement or not (without talking to any one), you may want to try Financial Engines or Fidelity’s retirement planner. Most Financial Planners use software similar to that.</p>