I’m feeling the need to spring for a financial planner who specializes in retirement planning. Problem is, I don’t know how to find one.
My main goal is to avoid being “serviced” by someone who has something to sell.
I suspect word of mouth is a good bet, but none of the mouths I’ve asked have the Word.
I’d also be interested in hearing:
[ul]
[li]What specific info should I bring to the first meeting?[/li][li]How much should I expect to spend?[/li][li]How often should I see the planner (yearly?)?[/li][/ul]
I strongly urge you to purchase John Bogle’s book, Little Book of Commonsense Investing and read it before giving anyone any money. You may find that after reading it you won’t feel the need to hire a planner. If you still feel you need a planner, which isn’t really necessary for most people unless they have enough assets that trusts and inheritance taxes and such become relevant, do not hire a planner who charges a percentage of the assets under management. Those guys are adept at turning your money into their money.
Instead, hire a fee only planner who is bound by fiduciary rules. These planners are obligated to act in the best interests of their clients. It seems odd that there would have to be a rule stating that, because “of course they should” but without it you’re a lamb to the slaughter. There are planners out there who follow the Calvera rule, “If God did not want them to be sheared he wouldn’t have made them sheep”.
I hired a fee-only planner once basically to look at the transition plan I had to change from the accumulation phase to the distribution phase of my savings. It was a one time charge of around $1,500. Honestly, it was more of a peace of mind thing for my wife, after the once over the planner suggested some very minor changes that I ignored.
I’d say that unless you have oodles of money you don’t need one. If you do, an investment advisor in general would be good.
Unless that is you think you need someone who will goad you into saving oodles of money.
If you are a fan of Dave Ramsey (a guy who, mostly, gives common sense advice on living within your means) or if you just think that’s a good place to start, you can go to his website and click the link for “Endorsed Local Providers.”
This will get you a referral to someone vetted by his people. It’s a start. (I know, there’s a financial relationship between them and him, but some place to start–with people who agree with his guidlines–is better than picking someone at random.)
Disclosure: I’m not affiliated with Mr. Ramsey or any of his organizations. Further, I don’t agree with everything he proscribes. But I do think he provides useful and good advice on getting and staying out of debt.
Yep, and that is pretty much the extent of his expertise. When it comes to investing and retirement, I think he is a blooming idiot. I’d stay away from any of his endorsed local providers.
MMM, you need to find a financial advisor who meets the fiduciary standard, and who will work for you on an hourly rate fee, not a fee based on a percentage of assets under management. BTW, are you comfortable managing your own accounts (based on advice you receive), that is are you able and willing to actually open the accounts and manage the investment yourself, or are you looking for someone who you will give control of your funds so they can do that for you?
I hired a fiduciary about 5 years ago for $1500, and did it again this year with a different fiduciary, also $1500, just to look over things. Maybe that’s an industry standard rate? One of the things this year’s analysis showed was that one of my investment houses was charging relatively high fees. So I leaned on them and they dropped all their fees significantly. But I don’t know how I would have figured this out on my own.
I think finance is way too complicated a subject for most of us, in part because the industry makes some things confusing just to mess with us. But paying way less than 0.1% every several years seems like a very reasonable expense. As far as I can tell fiduciaries are the only people who use financial expertise in the consumer’s best interest.
I agree that fee-for-service financial advice can be very useful. I’m planning to get some in advance of my upcoming retirement. Transitions are an especially good time to have an expert look things over. Tax implications can be tricky.
While I agree that the industry tries to confuse us, I think anyone of normal intelligence can learn how to navigate the basics of financial planning. I’ve had no training, but I went out and read library books on the subject, making note of what most of them agreed on. This made it easier to tune out the deliberate BS and manage my own money. Note: my portfolio is pretty simple, just a 401(k) and an after-tax investment account. If you have things like real estate or individual stocks, it might be more complicated.
My point being: avoid the planners who want a per cent of your whole portfolio every year. They may not actually be crooks, but they cost too much.
The one that I worked with about three years ago charged $165 per hour. I did happen to run into one (and who I will likely use in the future) who charges $120 per hour. Sounds expensive, but paying for eight or so hours once every three or four years is an absolute bargain compared to paying a fee based on a percentage of your assets every single year, year after year.
Yeah, my pet peeve is the “give us a percentage of your assets and when you do good, we do good!” Unspoken is the “when you do bad we don’t do as good but we still take a profit.”
I’m looking for the planner who charges me a percent of the gains and pays in on losses!
Financial planner and investment advisor are two different things.
Investment advisor helps you understand your investments, risk tolerance, what investments are right for where you are, etc.
Financial planners will do some investment advice, but they are more focused on planning for your future, your retirement, do you have the right amount insurance, estate planning, children’s college, etc.
I had the same thoughts when I was learning about the subject, and finding out that there *were no such planners was a ‘Road to Damascus’ moment for me questioning the value of wealth managers.
We’re inundated with lawyers promising to collect no fee “unless we win”. If these financial geniuses can really out-think the market, why aren’t they willing to take the same risk?
*Forget paying for losses - I’d be happy if they didn’t collect their fees when they lost me money.
And I realize that this is basically the arrangement hedge fund managers take. But no one who isn’t stinking rich has any business messing around with hedge funds. And if you’re stinking rich, you don’t need my advice.
It’s been a while, about 3 years, since I first looked. I think I started searching at the FINRA site, but nothing there looks familiar to me know (and it’s been pointed out to me here by others that being listed by FINRA isn’t a guarantee of finding a fiduciary). If I had to look now I would search for Registered Investment Advisor and ensure that they act as a fiduciary, but that still leaves you finding one that works on an hourly basis. I’ll keep looking to see if I can find the site I used. I may have changed or been removed.
The one I happened to run into was actually giving a pre-retirement seminar at work. I went, even though I am always somewhat sceptical about these guys. But he didn’t bullshit. After the seminar I asked him how he was compensated, and he said either as a percentage of assets under management or hourly. So sometimes you just have to ask.
I’m sure there are several out there suggesting they can beat the market. But Vanguard gets a lot of favorable comments around here, and many suggest reading Jack Bogle’s book. Why don’t we allow Vanguard to tell us why they think working with an advisor is valuable:
Between asset allocation, portfolio selection, rebalancing, financial coaching/education, and withdrawal strategies, they calculate an advisor being worth about 3%. Now, you can learn all of those things on your own. But many times, people are their own worst enemies. They know you’re supposed to “buy low, sell high” - but that doesn’t account for the fact that a lot of people tend to pull their money out when the market crashes, and buy in when it’s at a peak. And they did that because they were likely in an inappropriate portfolio for their risk tolerance, which they never went through any process to determine.
These things aren’t extremely complicated to understand. But they do require some self-restraint and self-discipline to put into effect. For a lot of people, an advisor is an extremely good value in order to do that.
When Mrs. ToKnow and I paid off our mortgage and felt like we wanted someone to review our plans going forward with us, we looked at the CFP website linked above and found a fiduciary who would do that. He was very reassuring, told us we were completely on top of things that he sees people screw up all the time, and didn’t even think we needed to become clients so we did the whole thing within the confines of a “first meeting free” deal. To be fair, I think he probably did his bread-and-butter work with people who have one or two more commas in their net worth than us, so that was probably also a factor for him.
He was careful to say that if we ever won the lottery to be sure to call him first.
I’m surprised no one’s mentioned Fidelity yet.
Because of my job, Some of my money is invested with Fidelity.
I have taken advantage of their Financial Planning and Investment Counseling; and have been very pleased.
Oh, yes, I agree - what I should have said is that normal people probably shouldn’t try to do it unless they devote themselves to some considerable learning. I think financial planners are like dentists, pilots, transmission repair people, or violin players in orchestras. They aren’t unusually brilliant people, they’ve just learned a field – and those of us who haven’t risk being sorely disappointed with the results if we dive right in.
The way I see it, the expertise these people bring to the table allows them to do three things;
Assess your appetite for risk. They will ask you questions and come up with a profile. Most of the online brokerages do the same thing, with as much accuracy.
Based on that profile and your timeline (i.e. your age) they will tell you the kinds of things in which you should be invested. For example they may recommend 40% in Large Cap equities, 40% in Bonds, 10% Small Cap, 10% International. (I am pulling these numbers from my nether regions, don’t use them). Perhaps more importantly they will make sure your investments are properly diversified so that, for instance you are not invested completely in tech companies.
They will dig out a calculator and tell you what you need to put in each year to get a specific result.
These are all things that you can figure out yourself with a small amount of education. The only reason (IMHO) to use a financial planner/advisor is if the idea of planning for retirement fills you with so much anxiety that you can’t do it without having the guidance of “someone in authority”. This was certainly my problem, but I found that education eased my anxiety.
My advice is simple;
Live beneath your means.
Have 4 to 6 months of expenses in a reasonably liquid savings (bank account, short term cd’s).
Put the remainder in index funds (let’s say 60% equities and 40% bonds).
That will work as well as anything a financial advisor will tell you. One thing to avoid at all costs is something called a “variable annuity”. These are impossible to evaluate. If you do go the advisor route, use a fee based one, not someone who is earning a commission on everything they sell you.
