Been back in the US for more than year now and been meaning to talk to a wealth manager. We finally need to get around to that. What are some good and reputable firms?
Whichever firm you select, please consider what is called socially responsible investing, also known as ethical, green or socially conscious investing. It may (or may not) be marginally less profitable than oil wells, armaments and tobacco, but you might sleep better at night. I believe SRI type funds are widely available if you don’t want to mess around with individual stocks.
If you don’t have more than ten million US dollars and a need for trust planning and estate management wealth management is a waste of money. You can handle your own assets and investments without giving between 15 and 25% of your earnings to some salesman in a suit.
Read a few books on investing and get to it. I recommend starting with Jack Bogle’s The Little Book of Common Sense Investing.
This. Maybe you do have a bazillion dollars, but “wealth management” generally means paying someone a ton of money to figure out how to hide and then eventually pass all your shit on to your kids without paying taxes on it.
Also take a look at the Boglehead forum thread on the Three Fund Portfolio - 60% Total US stock 20% Intl stock 20% Total Bond index funds (other other suitable AA) will shame almost all wealth managers.
Then pay an attorney and a tax accountant for estate and tax planning.
Thanks, all. I’ll definitely look for that Bogle book. Just starting to look around now and so far gather that index funds are better than mutual funds, fee-based is better than commission-based and fees should be less than 1% of assets. I still plan to speak with a couple of firms. I noted already that Charles Schwab’s fees are less than 1%, although I don’t yet know if that’s true across the board there.
Not sure how many assets you have nor your level of self investing expertise. If you must, any of the big banks (Chase, Citi, HSBC, ad nauseum) will have wealth management advisors and a bundle of services. There are some synergies.
I was in investment banking for 8 years. I find that the vast majority of wealth management advisors I’ve been in contact with, would not have kept up on the trading floor or institutional trading desk. In fact, most (but not all) might be less ethical and qualified than a used car salesman. YMMV
Look at Wealthfront or Betterment. They’re both wealth management firms run entirely by software with a fee structure that reflects it. Unless you have something truly exotic, you’re probably going to be vastly overcharged by some guy in a suit pretending to sell you a “boutique” solution that’s just him entering the same numbers into the same algorithms.
I suggest you focus on the individual, rather than the firm. And I’m not sure how to do that other than through references of people you know and respect/trust.
Here’s my situation. My wife’s family has a longstanding relationship with a particular ML broker. FIL is quite wealthy and notoriously cheap. Though he is a complete asshole in just about every personal respect, when our wealth got to a certain point, his recommendation on this topic carried considerable weight with us.
We pay a flat percentage of the assets managed. So he has an incentive to grow our assets. And our costs are fixed/expectable. Moreover, his office (he is being succeeded by his son) is available to us for ANY financial question. For example, I have to file financial disclosure forms annually, and they are willing to discuss that with us. Or how to save money for our grandchild’s education. Or how to gift to our kids. I imagine it might be different with a “fee for service” provider, who might want to bill for any phone call.
Moreover, ML funds count WRT BoA, giving us additional services.
I was initially a strong advocate of Vanguard or Fidelity, but my experience with this particular ML advisor has been extremely positive. I also like having a specific individual I can call - either the main guy, his son, or their administrative assistant - who knows us, or goals, and our history - as opposed to just calling a 1-800 number and not knowing who answers. But my dad swore by Vanguard, and did quite well. Just yesterday, my sister told me that they send very clear, comprehensive statements.
I definitely would look into the extent to which a larger firm stands behind the individual. Have one friend who put all her assets with an individual who misused the funds and, when they ran out, stepped in front of a train. She was fucked.
Christ, that’s true.
There is one other type of fee service, and that is a financial planner that charges an hourly rate. I used this type of planner with my parents, and it was probably the best way for them. In my case, the planner did not take control of the money, and assumed (well, verified) that my parents could manage their own accounts. They just needed advice on asset allocation and how to draw down assets when money is needed. If you are comfortable opening and managing your own brokerage accounts, then a hourly rate planner might work for you.
This was a few years ago and the rate was $165 per hour. That sounds expensive until you compare it to commissions or annual fees.
Maybe. One thing to check out with an advisor is whether they’re being paid kickbacks to sell you certain assets. For example, annuities are notorious for being great for the salesman, because they give a reward for the sale. But they’re almost always a bad idea for the investor.
If you’re getting an advisor, ask him whether he’s a fiduciary - that’s the key word. A fiduciary is required to manage your money with your best interests as the only factor. Too many commercial money managers have conflicts where they’re in it for themselves, screw you.
Yep - very important.
My vague recollection is that certain actions/disclosures were required under fiduciary rules promulgated under the prior administration, but I thought I had heard that the current administration rolled those back somewhat. I acknowledge that EVERY word in that sentence - other than the vagueness of my recollection - may be incorrect.
Siam, speak to a few then report your findings on a website like The Motley Fool. No risk in getting as much advice and help as possible.
A big problem is that it’s complicated, and the consumer needs to know what he’s dealing with. Some financial advisors operate under the ERISA rules, which require a fiduciary role, but most of the time if you’re working with the guy at your brokerage, he’s not bound by that. You should always ask whether the person you’re working with is a fiduciary, and anything other than a clear “yes” means “no.”
The new fiduciary rules that were in the news recently were the ones that pertained to IRAs and 401(k)s. Those classes of investments were regulated by the Department of Labor, not the Securities and Exchange Commission, and the DOL never had a fiduciary rule that they clearly needed to have. The Obama administration made that change which was to go into effect early this year, but the Trump administration was opposed to it. I think it officially went into effect in June, but the administration is fighting it so I’m not sure there’s enforcement going on.
Yeah - I remember talking w/ our guy about it, but don’t recall the specifics. I believe he said they were making some changes to anticipate future changes, but things I heard later suggested those changes either didn’t take effect or enforcement was lax.
Additional datapoint - neither my wife nor I want to spend too much time/attention on wealth management. Even if I go to Vanguard and search S&P 500 no load funds, I’ll probably get 20+ results, and I don’t want to spend the time trying to intelligently pick among them. And yeah - sites like Motley Fool are excellent. But if I’m reading/surfing, I’d prefer it to be on topics other than finances.
So if you are lazy/disinterested like us, there is potential benefit to paying for professional management. Whether or not it is worth it for you depends on many factors, including how you value and wish to spend your personal time. When I look at the assets I have with this guy, the ultimate number keeps going up at an acceptable rate, such that I don’t miss whatever fees he takes off the top. And, in today’s climate where it is so difficult to get prompt clear information from a knowledgeable human, it is not inconsequential that my wife and I know that 100% percent of the time we have a question, all we need to do is pick up a phone and we will be able to promptly talk to an intelligent person.
Eh, I don’t think this is that important; everyone’s sort of in their jobs for themselves. What is a financial planner supposed to say? “It would be in your best interests to not pay me and invest in a low-fee index fund, and here’s a Motley Fool webpage with everything I would have told you”? They’re not charities. Honestly, the upshot of the fiduciary rule might be that people with less money don’t even have access to any financial advice.
Now would conflicted financial advice be better than no advice? I guess that’s the question.
For me, an eye opener about fees was when I compared fees to what is called a ‘Safe Withdrawal Rate’ for ones retirement assets. Typically (debated) rates are 3-4% of assets at retirement, adjusted annually for inflation.
If you pay an advisor 1% - that amounts to 25-33% of your annual income!
(The bulk of my retirement accounts have a combined fee of 0.11%)
This. I switched from the so-called professional manager that I had who could not match the market AND cost me too much to Wealthfront. Been happy with them every since.
Do you mean someone who will help you minimise inheritance taxes or someone trustworthy who will manage your investments for you? I think the older demographic are increasing need of the latter.