@Iglooo, you are right. 1% is not a small amount. The fee ought to come with a suite of services (monitoring risk, doing the obvious things like rebalancing and thinking about allocation switches, access to specific kinds of investments that would be harder to get directly, help with estate planning, various kinds of services, working with kids, etc.). Someone who is retired and does not need those services or someone to pay attention to what is happening to the money should not buy the services or do so on an hourly basis.
For me, I am too busy a) making money; b) doing pro bono work; c) exercising; and d) trying to spend time with my family and friends.
@gpo613, true â if I eliminated my other income, it would reduce my tax rate on my RMDs. Interesting suggestion, but I think this would be local rather than global optimization. It would be a harder choice if I didnât love what I do. Iâm having one of the most interesting years Iâve ever had.
I didnât know FP also offer the variety of services you listed such as advising kids and estate planning. How is a FP different from a wealth manager? Or can they be one and the same?
@mom60, Iâm not really sure what the differences would be. In my mind, they can be the same and I think of the wealth manager as competing directly with the FP â they provide financial planning services. Both help manage your money and help you make financial decisions. They both think of tax implications of choices. I think they choose the scope of their practice. The FP I chose is holistic â starts with the big picture of what you want to do with your life and then helps you figure out how to finance that (or if some of your dreams need to be scaled back). The wealth managerâs scope has broadened over time, though it is not as broad as our FP. Both our FP and our wealth manager are happy to work with children (in the latter case, when asked). But, it is a smart business practice as a) they figure the kids of clients are likely to inherit money; and b) in our case, ShawSon and his wife are likely to do very well financially over time. In fact ShawD has worked with them and ShawSon has not.
We have been searching for an hourly or fee-based advisor without success (Not an AUM model). Specific recommendations appreciated (PM). Has anyone ever heard of, or used âPlanVisionâ?
We just want to ask occasional questions of an advisor. Examples:
⢠Which specific funds in our non-Roth retirement accounts should we raid first for income, RMDâs, or high-ticket purchases (car, etc.).
⢠We would also appreciate a yearly review of our accounts (which we now manage), for a second opinion, or glaring problems.
At this point in our lives, full planning seems unnecessary. We are comfortable with our spending vs. savings, barring a financial catastrophe. There are also web-based âMonte Carloâ projections if desired.
We had 2 fiduciary AUM advisor (companies), for about 7 years each â so plenty of time to evaluate their worth. The main reason we left, was that the cost/benefit ratio was no longer working for us, as our savings grew, but lives simplified. They answered questions quickly, but rarely offered pro-active suggestions. We met once a year, and the plan was always the same: on track, no changes, supposedly their performance met their benchmarks (Frankly their performance over time was no better than index funds).
So we feel it is time to âdownsizeâ (with occasional oversight).
Less than a year ago, we started using a Vanguard Personal Service adviser. The only requirement is that you have at least $500k at Vanguard.
I mention it, because, even though technically itâs an AUM set-up, the charge is so low (.3%) that, for us, the cost is about what the fee-only people with whom we met charged. Our guy has taught us quite a bit. In fact, I handled everything on my own for so long that I feel like we could drop him now that Iâve learned some tricks and gained some retirement-specific insight, but dh likes him a lot so Iâm OK with keeping him for now. He doesnât manage our brokerage or dhâs Roth, but he has them linked to my managed account so he is looking at the whole picture.
One thing that gives DH comfort in retirement is his print out of our Balance Sheet. There are things in there that vary a little bit and it is not linked to this (like we have a lower 6 figure joint fidelity account which is in indexed funds - and this is to draw off for home improvements prior to sale of home), but the key things that vary are linked. So DH sees his sizable 401k which does vary some, but remains sizable. He has comfort seeing our âbottom lineâ.
It depends on household situation, but when DH retired 7 months before he turned 65, I continued to work for almost another year until I turned 65 - in part to carry health insurance for both of us under my employer, and then both of us getting the additional health insurance beyond Medicare A for DH and Medicare transition for me. My working saved us out of pocket over $1,000/month for difference with COBRA health insurance, and I had my net salary cash flow in. Prior to DH turning 66, we turned on non-penalty annuity streams and turned on his SS. I took SS right at 65.
I hear ya. My friends loved their guy from the get-go, but it took a couple of sessions for me to warm up to my guy. One reason we might leave him â and this could be part of your story with your guy â is that there are specific guidelines that they use. I rate a âvery assertiveâ on the risk scale, but he told me that once I hit 62 that he/the system wonât let me be as aggressive as Iâm used to being. That probably makes sense as the idea is that I should be saved from myself. But thatâs also one reason we wonât let him touch dhâs Roth; we donât want him to have any say in dhâs Roth so that dh can do what he wants (overcommit to stocks).
I wonder whether thatâs part of your personâs thinking ⌠maybe he thought your previous portfolio mix didnât align with your current stage of life?
Yes, itâs a lot. But for those who are not comfortable handling these matters themselves, having a knowledgeable professional handling them or assisting with them can be worth the expense. People pay for expertise all the time.
I pay 0.58% with one of the two FAs. The other is at 1% as they have a smaller amount but told me that they would charge 0.5% if they had all of our assets with some other benefits.
If using AUM advisors, you can still self manage other part of your portfolio. The fee is only for assets they manage.
For those who opt for a AUM arrangement in retirement, it can be arranged to be tax-advantaged. (Helpful since as of 2018, FA fees are no longer deductible.)
Possibly pre-tax expenses: When you pay AUM fees out of pre-tax IRAs, you effectively pay the fee with pre-tax dollars. Thatâs similar to getting a deduction for the fee you pay, as opposed to many fees you pay by writing a check or using a credit card. However, if the fee is for financial planningâand not AUMâyou are not allowed to pay from an IRA
Now thatâs interesting. My motherâs Vanguard advisor always takes his 0.3% out of her brokerage account. Sounds like it would be smarter if he took it out of her pre-tax IRA. I would have never thought of that.
If Google is correct, it looks like you can pay the advisor fees out of your pre-tax IRA without it being considered a distribution. But only the fees to manage that IRA. So usually my mom gets the fee for the entire amount deducted from her brokerage account (both brokerage account and IRA are managed), they would have to break up the fee and deduct only the IRA portion from the IRA, for it not to be a distribution.
Responding to @Maya54âs comments from upthread. I have to say I would share your discomfort re: the aggressive attitude from your financial planner.
Agree with others that it likely comes from a place of wanting you to get the most out of your money (presumably) - but any kind of aggressive/pushy direction on major decisions like when to leave a career I would find invasive and somewhat patronizing. Even from a FP.
Perhaps your career is more than money? And he seems to be injecting his own âwow wouldnât I love a Porscheâ desires into the advice as well (and thus not appreciating your general satisfaction certain frugal choices).
When a fee-based or fee-only advisor suggests bigger spend down of assets, at least you know itâs not being done to optimize fees. Frugal clients would are better for their bottom line.
A big thank you to @bluebayou for posting the link to Open Social Security. Like others here, I was surprised when I input our information. I had always operated on the premise that both of us delaying until 70 would maximize our benefits but didnât take into account the spousal rules, so weâve changed our SS timing plans.
Our retirement planning never included SS but weâll be seeing monthly deposits soon. I know weâve earned it, but itâll feel like free money.
But thatâs also one reason we wonât let him touch dhâs Roth; we donât want him to have any say in dhâs Roth so that dh can do what he wants (overcommit to stocks).