OT: Picking a financial advisor

[sjbraun]

How do you pick a financial advisor? I'm retiring soon and while we've been good about saving and investing, but I have no idea how to develop a withdrawal strategy. I'm not keen on paying Fidelity to actively "manage" my retirement funds. I'm just looking for someone who can devise an intelligent plan that will provide for some growth, but also provide the funds I need to maintain my current lifestyle. There's always the internet, but so often info derived there is suspect.
Are advisors affiliated with the National Association of Personal Financial Advisors legitimate?

Thanks

[smontanaro]

Also interested in this topic, for much the same reason.

[saab2000]

Be careful about how they charge.

You can probably do it all yourself by reading a few books and educating yourself on personal finance. It's not nearly as complicated as it seems and there are TONS of books on this subject.

Just opening websites like Investopedia or scroll through the Finance section of Yahoo for articles. Just beware of the source and if they're trying to sell something.

[clyde the point]

Bogleheads.

[biker72]

I think anyone with average intelligence can manage their own portfolio. I used some of the advice given by Scott Burns. (https://couchpotatoinvesting.com/how-to-build-the-basic-couch-potato-portfolio-anywhere-for-next-to-nothing/)

I built a portfolio of low cost index exchange trades funds, (ETF'S) and mutual funds. Mabe gamble a few bucks on some stocks here and there

I retired at age 59 and am now 80. I have quadrupled my retirement account value even after having to take the required minimum distribution starting at age 70.5.

Problem with financial advisors is that you never know if you have a good one until it's too late. There are good one out there.

[pinkshogun]

My folks had a financial adviser for a about 10 years. they made money with him. he was in touch with them about 4 times a years including some house visits. they didnt hear from him in a while and calls to his office got nowhere

they googled his name and found out he passed away but had another name and identity. long story short, they money is/was safe but we still could never figure out the reason for his other name/identity

[echappist]

I think anyone with average intelligence can manage their own portfolio. I used some of the advice given by Scott Burns. (https://couchpotatoinvesting.com/how-to-build-the-basic-couch-potato-portfolio-anywhere-for-next-to-nothing/)

I built a portfolio of low cost index exchange trades funds, (ETF'S) and mutual funds. Mabe gamble a few bucks on some stocks here and there

I retired at age 59 and am now 80. I have quadrupled my retirement account value even after having to take the required minimum distribution starting at age 70.5.

Problem with financial advisors is that you never know if you have a good one until it's too late. There are good one out there.

that's the main thing. beware of people trying to sell stuff, in particular those whose income are derived from the transaction.

fee-for-service removes that, but there's nothing to say that they'd be able to pick out things better than the OP could

what would be helpful to the OP may be a CPA, someone who can help to lower taxes on the withdraws, etc.

Bogleheads.

this

---------------------------------------------------

one last thing for the OP, seriously ask yourself if you need the growth. If you've won the game, stop playing and move your assets to somewhere safe.

[Jmaxwel8]

You will have to look hard. I agree with other’s comments, most that I’ve encountered aren’t going to make you much money at all. I kind of feel like most of them are like real estate agents... at this point you can do most of the work yourself.

Granted I’m sure there are some that are making their clients a nice return. I’m just saying you will be lucky to find one. I’m also not saying that I haven’t dealt with honest advisors, just not ones that brought much to the table that I couldn’t or haven’t learned on my own.

[zzy]

Whomever you pick, be utterly certain they have a fiduciary duty towards you and have that in writing. Many 'advisors' are really just sales people in disguise who operate with their company's profits in mind. Many will do their best to dance around the fiduciary question. It's often a good idea to find a advisor who will charge by the hour, rather than take commission or a percentage. Online brokerages and exchanges make it much easier to manage your own money if you're so inclined.

[Ralph]

I'm retired from Merrill Lynch (30 year career) the financial services firm. I use Vanguard myself mostly. They have the lowest cost investments. And plenty of good free advice on their web site. You can get all your answers there. Why give anyone part of your money? If one mutual fund group has a .5% expense ratio on their investments, and Vanguard has a .1 % expense ratio.....on every $100,000 that's an extra $400 per year for your pocket. It adds up.....and I don't trust many people for financial advice. You can say, and they will say, you are investing for long term growth......but how do you know you will get it? Be careful.

[54ny77]

You might try Clarence Beeks. He's got great tips in the commodities markets, in case you want to diversify.

[Ralph]

And BTW....No one advisor is better than picking good investment than another. All have lucky streaks. All know the market has been going up for about 10 years now....that at some point it won't. All know what the Fed is doing. All know the geo political news....and how that affects investments.

How they differ......and what is important to you is.....helping (as you say) diversify and devise a portfolio that gives you the income you need with minimal risk. Take market timing and politics out of the equation. You may not even need to own stock investments at this point. Shucks....I'm so tired of this see saw market.....I'm mostly in a money market fund at vanguard yielding over 2%. With some more in a tax free money market fund. I'm tired of losing money with every piece of perceived bad news, then waiting awhile for it to come back. Just going to wait for the next recession, before I invest in stocks again.

At any rate.....You mostly need some help to meet your goals. Vanguard is free, Charles Schwab and TD Ameritrade are very inexpensive. Full service places will probably want at least 1% annually for this "advice".

[Tonger]

A few suggestions:

- A financial advisor that charges by the hour is best. This removes any conflict of interest regarding potential purchases and trades.

- A good advisor will perform a detailed interview and help you determine the asset allocation that works best for you. The record bull market has made a lot of folks feel like stock market heroes that may be overexposed to a downside correction or bear market. Proper asset allocation will give you ‘sleep insurance’ and enable you to weather the downturn and optimally position yourself for the recovery.

- Our advisor knew about stuff that we were not familiar with like the use of charitable giving funds and state tax film credits which have favorably impacted our tax payments.

- A good advisor can do a retirement income simulation to give you an idea of what you can expect at your current savings state. He or she can also help you simulate life changes such as a vacation home, college tuition, or change in employment.

- The advisor should help you assess whether you have any holes in your insurance coverage - umbrella, disability, long term care, and life.

In a nutshell, picking stocks and funds is the easy part - especially in a record bull market. The role of the financial advisor is to help you think about and manage the other stuff well - downside exposure, asset allocation, insurance, legal tax optimization.

Best of luck!

Tonger

[cnighbor1]

http://www.merriman.com/ My strategy is get into a system for managing your assets. Merriman does that. They have priority systems developed by them that they lose. Why systems ? Your individual advisor may just take a vacation just before great market upheaval > little he can do away from his desk. than say a big market upheaval happens. Your one person advisor can't react to all his accounts in a day or o more. With a system in place it just reacts to market conditions and all in that system get the same buy or sell positions

[Ozz]

whomever you pick, be utterly certain they have a fiduciary duty towards you and have that in writing. Many 'advisors' are really just sales people in disguise who operate with their company's profits in mind. Many will do their best to dance around the fiduciary question. It's often a good idea to find a advisor who will charge by the hour, rather than take commission or a percentage. Online brokerages and exchanges make it much easier to manage your own money if you're so inclined.
+100

[rounder]

I am nearing retirement and went to see a financial advisor the other day. It was Merrill Lynch and went there because they have a big sign and big office in town (not recommending that any of you go/not go to Merrill Lynch). The guy I spoke with is someone I already new from our bike club, who was a First VP from that office and we spoke for about an hour. I am a CPA but did not have any idea what could be done with my 401k funds or whether they would just continue to sit in the plan.


He told me that ML would roll over the funds into an IRA account, that way there would not be any tax consequences from what would otherwise be considered a distribution. He said that options could include an annuity account where I would receive an annual amount until I die, where the remaining funds would be distributed to my survivor. Another way would be to receive some percentage of my funds each year, again where the remaining funds would go to my survivor. He suggested 3% distribution per year that could be increased whenever I needed it such as for unexpected cash needs. I asked him about what a commercial bank could offer and he said that it would most likely be limited to CD accounts because most commercial banks either do not offer many similar retirement options or are not staffed with people who can offer that type of investment advice..


He told me that either way, I could invest my funds through ML in some combination of stocks, Treasuries, etc. He also told me that the funds could be reinvested whenever I like without an additional fee for performing that service. He told me that the annual ML fee would be 1% of the fund balance.

I also asked him how often I would meet with him going forward, and he told me as often as I liked but at least once per year.


I had walked into the office without an appointment and really had no idea what to expect. To me, it was time well spent and I learned a lot. I do not know if I would commit to ML at this point, but plan to meet with others in town to hear what they say.

Hope this is helpful.

[54ny77]

^^you walked in and he started telling you about in-house managed annuities? And that a commercial bank can't offer what you need? Yep he sure saw you coming. I would never return to that office! A 1st VP is low man on the totem pole, the equivalent of walking into a real estate agent offfice on a Saturday and getting the guy who got assigned to desk duty that day. Pls seek out recommendations for fiduciaries/advisors from a trusted friend or family.

[rounder]

Actually, he talked me out of an annuity because he did not think I needed one.

If I pick a different advisor it would not be because of him. It would be more like picking someone I felt I could trust even more who would offer a significantly lower annual fee.

[echappist]

1% AUM fee is huge. Say you have 1M right now. In 20 years, yep, you guessed it, it's $200k less, due to fees. Not so trivial anymore.

The same is true in the accumulation phase. When most managers cannot beat the market average but ending up charging at least 1%, 1.05^20 is quite a bit different from 1.06^20.

[paredown]

We helped set my MIL up with a financial advisor--mostly because her late husband had managed their financial affairs for their whole married life--she needed hand-holding, budgeting advice and other external discipline that a more conventional "investment" type group would not likely provide.

We took the recommendation of a long time family friend who had done a lot of will and trust work over the years--and it was a real boon for my MIL. She probably could have made more money with a more aggressive firm--but their style suited the situation and has worked out very well. Mostly it removed any potential for family friction on the budgeting front, and allowed us to rest easy knowing that she couldn't do anything crazy....

[JasonF]

Disclosure: I am a JD (former tax attorney) and CFP but do not work with new clients so here is relatively unbiased advice:

- NAPFA and XY Planning Network are good places to start. At least with XYPN, all members must be CFP's and whatever you do, a non-negotiable requirement is that they adhere to a fiduciary standard.

- The financial advisory industry is getting increasingly specialized and I would focus on those whose practices are in developing retirement withdrawal strategies. This is a personal interest of mine and it is surprisingly nuanced and technical. NAPFA and XYPN will have scores of specialists.

- With all due respect, I would avoid "financial advisors" affiliated with insurance companies. You'll be guaranteed to receive a pitch to buy an annuity. Most are really bad (at least the ones that you'll see a sales pitch for).

- Although I have personal accounts with Vanguard, and manage client assets custodied there, their Personal Advisory Service is limited in scope of what it provides. Although low-cost, they will not advise on assets held away from Vanguard and will not advise on issues that may be tangental to investment accounts. I have tons of respect for Vanguard, and their advice to you will to buy a 60/40 portfolio and withdraw between 3-4% depending on your age. Take a look at their Lifestrategy Moderate Growth Fund for an idea of the asset allocation breakdown. There, I just saved you 30bps a year ;)

- I would lean toward hiring an advisor that charges by the hour rather than an AUM fee schedule. Also, do not be afraid to partner with a solo practitioner.

- No affiliation, but Larry Swedroe's new book "Your complete Guide to a Successful Retirement" is excellent. It will scare you but it has tons of useful information.

[Gummee]

Just like anything else, yeah, you CAN DIY, but there's something to be said for someone that does it every day.

Just like bike mechanics, there are some that are better than others.

...and that's all I'll say about that...

M

[fogrider]

I think anyone with average intelligence can manage their own portfolio. I used some of the advice given by Scott Burns. (https://couchpotatoinvesting.com/how-to-build-the-basic-couch-potato-portfolio-anywhere-for-next-to-nothing/)

I built a portfolio of low cost index exchange trades funds, (ETF'S) and mutual funds. Mabe gamble a few bucks on some stocks here and there

I retired at age 59 and am now 80. I have quadrupled my retirement account value even after having to take the required minimum distribution starting at age 70.5.

Problem with financial advisors is that you never know if you have a good one until it's too late. There are good one out there.

Just like anything else, yeah, you CAN DIY, but there's something to be said for someone that does it every day.

Just like bike mechanics, there are some that are better than others.

...and that's all I'll say about that...

M

We all have our own abilities...I like to do most of my own wrenching on my bike and with my money. I'll be the first that there are still lots I don't understand but willing to learn. Vanguard started indexed funds concept and pretty much everyone offers indexed funds now. Fidelity has a whole range of index funds tied to your age...their designed to pull funds from stocks to safer investments as you get closer to retirement. but remember, many people live for 20+ years after their retirement. We have an adviser that comes in and talks to our office and typically the advice is regarding mutual funds and index funds. for the most part, they don't advise buying your stocks. They refer to funds as products and charge you a fee for buying in.

So, yes, mutual funds and index funds are certainly the safest way to invest and I have about 50% of my funds there. I have the rest in stocks and do some trading with about 10%. if nothing else, it makes me feel like I have skin in the game and keeps me on my toes.

[Aaron O]

This is something that I feel very strongly about...

You pick the lowest fee, indexed vanguard account.

The simple facts are that almost none of these people beat the market after fees over even two years. They have no fiduciary responsibility. The ones I know are sales guys. That’s all they are. I wouldn’t trust most of them with a dollar.

Morgan Stanley...in a law suit...claimed that their own adds were puffery as a defense.

As far as retirement strategies, you max IRAs, 529 plans, HSAs, and what your employers offer. Your accountant, if a CPA, does have a fiduciary duty to you (unlike your finance person, they’re an actual professional) can tell you what vehicles to use.

[Aaron O]

https://www.forbes.com/sites/robertberger/2016/12/19/the-dirty-little-secret-investment-advisors-dont-want-you-to-know/#42656c3e6f96

[veloduffer]

Disclosure: I am a JD (former tax attorney) and CFP but do not work with new clients so here is relatively unbiased advice:



- NAPFA and XY Planning Network are good places to start. At least with XYPN, all members must be CFP's and whatever you do, a non-negotiable requirement is that they adhere to a fiduciary standard.



- The financial advisory industry is getting increasingly specialized and I would focus on those whose practices are in developing retirement withdrawal strategies. This is a personal interest of mine and it is surprisingly nuanced and technical. NAPFA and XYPN will have scores of specialists.



- With all due respect, I would avoid "financial advisors" affiliated with insurance companies. You'll be guaranteed to receive a pitch to buy an annuity. Most are really bad (at least the ones that you'll see a sales pitch for).



- Although I have personal accounts with Vanguard, and manage client assets custodied there, their Personal Advisory Service is limited in scope of what it provides. Although low-cost, they will not advise on assets held away from Vanguard and will not advise on issues that may be tangental to investment accounts. I have tons of respect for Vanguard, and their advice to you will to buy a 60/40 portfolio and withdraw between 3-4% depending on your age. Take a look at their Lifestrategy Moderate Growth Fund for an idea of the asset allocation breakdown. There, I just saved you 30bps a year ;)



- I would lean toward hiring an advisor that charges by the hour rather than an AUM fee schedule. Also, do not be afraid to partner with a solo practitioner.



- No affiliation, but Larry Swedroe's new book "Your complete Guide to a Successful Retirement" is excellent. It will scare you but it has tons of useful information.


+1 on the above. Also, you can also have a financial advisor for a portion of your money and you can manage the balance, so all your “eggs” are not in the same basket.







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[Ralph]

https://www.forbes.com/sites/robertberger/2016/12/19/the-dirty-little-secret-investment-advisors-dont-want-you-to-know/#42656c3e6f96

Every investor should understand this. Especially if saving and investing for retirement.

[biker72]

https://www.forbes.com/sites/robertberger/2016/12/19/the-dirty-little-secret-investment-advisors-dont-want-you-to-know/#42656c3e6f96

I have a friend that has no idea how much his financial adviser is charging him.
"He's making me money. That's all I care about".

Mickey Mouse could make money in the current bull market run.

[echappist]

I have a friend that has no idea how much his financial adviser is charging him.
"He's making me money. That's all I care about".

Mickey Mouse could make money in the current bull market run.

Sad state of affairs that many don’t even know how to compare things

Investing in a CD makes money as well (and there’s no loss of principle), doesnt mean that one should be all in CDs

It’s all about marginal utility, oppurtunity cost, and risk, but those two concepts are poorly understood

The person you quoted may be miffed to learn that the advisors make money refardless of how the account is doing...

[JasonF]

The importance of having a fiduciary advisor act as your coach cannot be understated. Even Vanguard has calculated that a "good" advisor can add 200bps of alpha through helping a client not blow themselves up.

I find statements like "I'll only use an advisor that will beat the market" or "my advisor makes me money" to be relics. The real benefit is helping a client prioritize financial obligations, ensure that these obligations (including living expenses) are funded, and most importantly, keep the client away from their own worst instincts. The "why" is as important as the "how".

For better or worse, I have seen scores of highly educated, exceptionally intelligent people ruin themselves financially through poor decisions and bad behavior. It has actually changed my life. A "good" advisor can prevent this.

Since this post originally was asking about retirement withdrawals, I will say that a lot of people have no problem with the accumulation phase (max up to 401k match if not more depending on the sponsors investment choices, fund an HSA, fund a Roth if possible, etc, etc...). It's the transition to the withdrawal stage that is fraught with landmines. How do I manage the sequence of returns risk? Which strategy should I implement? How do I tell family members on the dole that I'm cutting back? What's the best Social Security claiming strategy? Are my non-investment affairs in order (estate, insurance, etc...).

[Aaron O]

I have a friend that has no idea how much his financial adviser is charging him.
"He's making me money. That's all I care about".

Mickey Mouse could make money in the current bull market run.

My dad told me at a young age...

Never confuse a genius with a bull market.

Over time, basically none of these people add value. They have no obligation to add value. You can’t net out their fees for tax purposes.

They also play games...they have 5 accounts, and they show you the two that won.

I’ve been a CPA for a year, and a tax guy for 2.5...and have had 5 try and make “mutually beneficial” arrangements for client referrals. No thanks.

[raygunner]

You might try Clarence Beeks. He's got great tips in the commodities markets, in case you want to diversify.

This!

[Fuzzy2964]

I’m in the process of straightening out our finances as retirement approaches in a year or 2. My wife and I have stocks, mutual funds, bank accounts all over the place. I did work in the mutual fund industry for a short while and held a Series 6 and 26 license. I am now moving most of my investments to Fidelity - I will not be paying any financial advisor fees, but do have access to a CFP and other Fidelity services. Why Fidelity ... mostly because my wife is “comfortable” with the person we have been working with there, they have an office close by, I already have some assets at Fidelity and a neighbor who worked at Standard & Poors for over 30 years has given them pretty high marks and keeps most of his investments at Fidelity. For me this is more about getting everything in 1 place and with a company my wife can easily work with if I go first (hopefully not for a long time :) ). I’m not looking for them to necessarily direct my investments, but just simplify things a bit. This is not an endorsement for Fidelity ... just how I am getting my finances in order for retirement. As others have stated - I would try to avoid paying a % for financial advice/services.

[Alan]

Some advisors are worth considering. I recommend discussing your situation with DFA advisors who offer the DFA family of funds. See link below:

https://us.dimensional.com/

Note that you can find their advisors in your area and have a beginning discussion. Their funds are mostly passive but have typically matched or exceeded comparable managed and many Vanguard funds. DFA fees are very low. Most of them combine portfolios of DFA and Vanguard funds which have outperformed most others even after advisor and fund fees but you should ck it out on your own.

Their local advisors typically have an account minimum but there are some on-line with no minimums and my advisor has a group that services all investors. Anyone can PM me if interested.

Alan

[ontarget]

A prior poster recommended the Merriman Group. Their founder, Paul Merriman, who is now retired and no longer owns the company, has authored two excellent books. One is called "Financial Fitness Forever" and the other is "How to Live It Up Without Outliving Your Money ". He also has an educational website where you can download three other books of his for free (www.paulmerriman.com). Paul has devoted his retirement years to educating investors. He no longer advises and doesn't sell anything (except his books), but rather provides education. I think he's fantastic.

If you're looking for an advisor, I recommend a fee-only advisor, which is one who simply charges by the hour and has no conflict of interest. A great way to find a properly credentialed and reputable one is through the Garrett Planning Network (www.garrettplanningnetwork.com). They only list fee-only advisors with a fiduciary responsibility.

Properly managing your money can greatly impact your standard of living, so it's important to do it right.

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