Annie H.
Egalatarian
prevailing view is high earning funds into tax advantaged--no cap losses. There are other views...
Can you spot a Bad Financial Advisor?
- Thread starter Matt
- Start date
There are always cap losses - I was looking at one of your DFA funds this week, its worst 3 month performance was something like -47%
Annie H.
Egalatarian
Hey- when I talk too much you comment. When I talk too little.. you don't understand my bad. Yes, there are always capital losses but in a tax-advantaged account you cannot take them. What's the point of mirroring 9 funds in individual, same 9 funds in 401K, same 9 funds in IRA mainly because of limitations of planner software. Then spouse would have mostly the same thing resulting in more than 50 funds balances to watch/track-- not that folks who hire advisers watch. OK, going to go take the too much coffee antidote.
You said:
Which I took to mean it wasn't a 401k and IRA, but a regular and a tax advantaged account
Annie H.
Egalatarian
I'm sorry, I thought I said I was wrong-- you didn't understand that either?You said:
Which I took to mean it wasn't a 401k and IRA, but a regular and a tax advantaged account
Seriously, I need to get offline for a bit, I'm way too amped up and moving too fast, shooting from the lip. Mea maxima culpa.However, should you decide to split hairs:
http://news.morningstar.com/classroom2/course.asp?docId=144042&page=4&CN=
ElainePDX
Level 2 Member
Revisiting this thread as we need to find a Financial Advisor/Financial Planner. Ideally we'll find a fee-only planner who is local, with whom we can have face to face meetings when meetings are necessary.
I did key in my zip code to the DFA website (linked to by Annie above) which gave me a list of about 8 firms, and we'll ask around among our friends for some recommendations.
We met a few months ago with someone from the TIAA-CREF's Wealth Management area (after they did a workup to see if we will have enough for retirement) but we were underwhelmed and the fees would be .75% - 1.0% of assets managed.
Met this week with our broker-of-record at Wells Fargo Advisors. He also ran our assets and obligations through various retirement scenarios, and then pitched a plan to have us move all our assets to his firm - despite the fact that we've been slowly moving assets out of Wells and have little there at this point. He, along with someone he is partnering with, would then manage the assets under their new (or maybe not so new) fee-based structure, for a .8% fee.
Both presentations were interesting to us, since they laid out how much we have in retirement savings, and how we would blend pension funds, SSI and funds from our IRA/403B retirement assets to fund our retirement. We are confident that we'll have enough money coming in and then some, but realize that we should be doing a better job vis a vis investing the cash we have, repositioning some investments and balancing our portfolio.
And having been well-schooled by Matt, George and folks here, I now understand that fee-only is the way to go. If you can recommend someone in Oregon, please do!
I did key in my zip code to the DFA website (linked to by Annie above) which gave me a list of about 8 firms, and we'll ask around among our friends for some recommendations.
We met a few months ago with someone from the TIAA-CREF's Wealth Management area (after they did a workup to see if we will have enough for retirement) but we were underwhelmed and the fees would be .75% - 1.0% of assets managed.
Met this week with our broker-of-record at Wells Fargo Advisors. He also ran our assets and obligations through various retirement scenarios, and then pitched a plan to have us move all our assets to his firm - despite the fact that we've been slowly moving assets out of Wells and have little there at this point. He, along with someone he is partnering with, would then manage the assets under their new (or maybe not so new) fee-based structure, for a .8% fee.
Both presentations were interesting to us, since they laid out how much we have in retirement savings, and how we would blend pension funds, SSI and funds from our IRA/403B retirement assets to fund our retirement. We are confident that we'll have enough money coming in and then some, but realize that we should be doing a better job vis a vis investing the cash we have, repositioning some investments and balancing our portfolio.
And having been well-schooled by Matt, George and folks here, I now understand that fee-only is the way to go. If you can recommend someone in Oregon, please do!
Huge red flag. Not the number, that is the distraction, but the use of the phrase fee 'based' is alarming... it may well be your own terminology, but it is a great thing to fixate on regardless.
The key to the 0.8% being 'right' or not will be: what you get for that amount of money, it shouldn't be just asset allocation (investment management) but also an indepth analysis of your situation, social security planning, checking your wills.. creating an estate flow chart (where your money goes, does any get taxed) moving insurance policies into trusts if needed and so forth...
And even ignoring all the above.. what are they proposing you invest in?
Is it to be a low cost etf, ranging from 0.05%-0.2% annual expense ratio... or is it to be something else, under their control?
The total fee (underlying investment+advisory fee) and what you get for that total fee are critical.
ElainePDX
Level 2 Member
Yeah, it's my terminology - they contrasted managing the portfolio at Wells by paying $350 per trade vs. .8% of assets under management. We could change the way we did it at any time, perhaps starting with fee-based to buy into what we needed after moving all the TIAA-CREF funds over, and then switching to commission when we were doing less buying.
Yes! This reminded me of something I read in an article Annie linked to:
http://www.retireearlyhomepage.com/dfaadv.html which said:
"Certainly the tens of thousands of dollars in fees ... would only be reasonable if the advisor was providing all kinds of ancillary services, up to and including making weekly visits to your home to detail your automobile and pick up after your pets."
Indeed!
This is really bad. Don't trust these guys.
ElainePDX
Level 2 Member
Nope, we will not deal with them for this. We will stick to our original plan to continue moving the funds out of Wells. I think the offer to review our situation was a bit of a Hail Mary pass intended more to make a play for our account; to convince us to stop moving assets out.
Many years ago, after my parents died, I was put in charge of the inheritances of seven minor family members who lived all over the world. While the money was not huge, we decided that it was best to establish a relationship with a full service firm. Indeed, was very helpful in the early years. We never moved all our assets there, picking and choosing how best to get the benefits of a full service firm while minimizing fees as much as possible. At one point they lost, in house, a big check we deposited from selling a property my parents had owned abroad, and after it was resolved, they assigned us a new broker and cut the fees we paid substantially, to keep us as clients. But all of the kids are now adults and we are free to take our business elsewhere.
Pricing is a tricky topic, but what the Wells guys appear to be doing is creating a strawman in order to make you think they are fee only and in your favor - it feels from what you've said to be a real con... glad you will keep moving out.
At the very least - move the assets to somewhere where there are almost no fees, such as low cost funds at Schwab or Vanguard, and decide later if you need an advisor or not, its a win/win for you as you. The only issue is make sure that you don't sell your position to buy a new one creating cap gains when they aren't needed - should be able to ACAT (swap the position held in Wells for a new same position held off site) without a taxable event.
PurpleSquirrel
MS Nuts
I've started Schwab Intelligent Investor this spring. Really like the way they have allocated based on my age. The days of garden variety financial advisors are over. Paying somebody 1% to do what you can do because you don't have time - I'd not take that. For the last 3 years, I just invested everything into SPY and called it a day.
ElainePDX
Level 2 Member
Yes, I agree. And they claimed we'd need lots of trades to get going. I am grateful you were willing to share how you charge fees. Really puts things in perspective.
At this point, we have some assets there that are invested. No huge amounts but they should be sold and moved, taking into account how not to create a taxable event. We've just been lazy and haven't done it. There is also a decent amount of cash. With a few possible big purchases on the horizon, I like having the cash. But some should be invested and we've been lazy with that too. Hey, we still haven't filed our 2014 taxes and yes, we did make sure we wouldn't owe Uncle Sam.
Maybe lazy is the wrong word. It is more having a busy husband and not wanting to take the lead on financial things... unless they are MS-related, that is!
The thing I dislike about that platform is that the fees are murky... Do you know how much you are paying?
The other point is that firms and 'advisors' have been getting away with murder charging 1%. This is why I split services into 3, showing that for (more than they offer) I charge 0.25%.
Investment management is very different from financial planning.
ElainePDX
Level 2 Member
Yes. But as you know, not unconnected.
I think the focus for me and my husband, having bumbled through financial planning and investment management when we were younger and accumulating, needs to be on investment management initially, since we did not always make the best investment decisions, have cash that should be invested, and want to move/consolidate our assets prior to retiring.
Indeed, it was my requests for advice re: investing the cash that brought us to creating a retirement budget (done) and having our assets/liabilities run through 2 retirement planning software programs that simulate how your assets will do in hundreds of financial scenarios, as well as how long they will last.
In the course of initiating better investment management, we should investigate and/or revisit various financial planing issues, including:
1) which assets will we draw down when we need to supplement pension and SSI funds, and on what schedule do we do that?
2) the estate planning we did - what needs tweaking now?
3) tax planning as we go forward into retirement
As well as other issues, I am sure. Thus my desire to hire a fee-only planner who can help.
@Matt, might you have a clone in Oregon?
Great stuff on the retirement budget. Regarding the planning software analysis, thats good, but only as good as the people running it. I have similar monte carlo simulation software and it requires certain 'assumptions' to be entered in regard to things like inflation and growth of assets. While the two you have are likely correct, nothing is foolproof..
An important part of having the right advisor is constant monitoring and adjusting of the plan - for example, if today you are at a 98% chance of success, but in the next 12 months your assets appreciate higher than you expected, you should adjust your strategy here and take more from the 'at risk' pile and move it to the safe pile. This constant adjustment means that you can really enhance your long term success, by not just riding the storm, but by tweaking constantly.
My firm is national, we work remotely in all states. The first registration was in NY, just due to the residence. It seems that many people prefer to be able to work remotely via phone, video conference and screen sharing, because it frees up time having to go to a meeting, even local clients prefer it. That said, I'm always happy to fly in to meet with a client should there be enough interest... so just let me know.
Here's my schedule: https://guidewealthmanagement.com/schedule-a-meeting/
At the very least I'd be happy to speak with you about your situation in more depth and offer some ideas.
ElainePDX
Level 2 Member
Yes, I am realizing that we can't just retire and pull assets as needed. We will have to do more work than that. Another reason to hire a planner.
I will talk it over with my other half. I thought face to face meetings where both of us (him and me!) must be present would eliminate the role I often take as the less busy one, where I gather info and report back as we make a joint decision. I don't want to be a middleman, uh, person on something as important as this, esp. since it is not my strength. But there are certainly ways to do it remotely.
I've enjoyed learning more about your firm in the course of this discussion - the website is great - and I hope it provided others listening in with useful info too.
Voyaging Doc
Level 2 Member
I've been working with a financial advisor working with ny life. he's charging $1500/year flat but for handling my investments he says for accounts more than 25k the management fee is 1.25%. He is recommending that 20% of the amount I set aside each month be put into cash value life insurance to make up the conservative part of my plan (as I was also thinking about life insurance) as the rest is "aggressive." What are your thoughts on the fee + CVLI?
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I think you are in trouble. You've got a guy working for a life insurance company building a plan that involves selling you a high cost item (CVLI...) that pays him a healthy commission.
The vast majority of people who need life insurance need Term Life (Low cost, does the job perfectly) anything else is very dubious. As a part of my planning process I create life insurance needs based analysis - IE we map out exactly what you need to cover your plan/family/goals and no more - we then buy it from an affordable source.
The difference with going with an advisor who isn't there to sell you their products will be huge.
Voyaging Doc
Level 2 Member
I did suspect that. Is 1.25% a normal management fee? Seems pretty pricey
It's on the high side of what the wirehouse firms charge. But it's more than that.. the fee (and the $1500) are both high and insulting because they distract from where the real money they are making from you lies... in the kickbacks.
This guy has 4 revenue channels from you:
- Financial Plan $1500
- Management Fee 1.25%
- Kickbacks from funds he 'miraculously recommends' ..? Perhaps 0.2% (you pay 0.6, they split the difference)
- Commission from starting the life insurance, and payments every month from it.. 1% upwards
The difference between a fee only planner and one who is commission based (they sometimes call themselves fee based.. trying to ride on the fee only vibe) is that the latter are being paid big money to make you get into investments, and they don't need to be very suitable at all. A fee only planner makes sure that the insurance salesman doesn't try to trick you.
PurpleSquirrel
MS Nuts
The way I stipulate is they beat S&P 500. I offer 50% over the index gain(or loss). So, if SPY makes x%, they get to keep 50 % of profit over x%.
So far, no financial advisor has taken my offer because they want the reliable front end/back end commissions.
Back to topic, as Matt said, you are being taken for a ride and this guy is siphoning money off you. Go with a fixed fee advisor and fire this guy.
Well... if I didn't care about you (and wasn't a fiduciary bound by law to put your interests first) I'd jump on an offer like that.. all I'd need to do is put you in a 60/40 portfolio, in a bear market I'd win, if it was a bull market and I was lagging the SP500 I could just take super high risk bets with your money, if they fail you'd be screwed, but I would have lost anyway, and if they win, I get lucky..
Compensation is difficult.
ElainePDX
Level 2 Member
So yesterday, after getting two followup calls from our broker at Wells Fargo Advisors, I told him that no, we are not ready to sign all the forms we got at our meeting. as we are looking to work with someone who is fee only, who charges a lower fee and who is able to recommend investments like Vanguard or Fidelity which will also have lower fees. I mentioned that some CFPs charge an hourly rate as well. I guess I shouldn't be surprised that I got the following email this morning from his partner-in-crime :
[First bolding was his, second bolding is mine]
Hi Elaine,
[Broker1] discussed with me the conversation the two of you had on the phone yesterday.
Would it be helpful to you for us to provide you with an illustration of our annual proposed fee broken down into an hourly rate? I think having this will assist you in making your decision to work with us.
Also, I have attached a document which explains all the various types of services we are comfortable with and provide to our clients. We believe all the services we provide and the holistic approach we take with our clients is what leads to a successful financial retirement, and we do not individually or hourly charge for all these services.
We look forward to working with you more so all your short term and long term financial goals are met during retirement, and you are doing things with your investments that are always in your best interest. We do not think this is the case if you turn over the management of your assets and liabilities to someone or an organization that is going to charge you an hourly fee for consultation.
Let me know?
Enjoy this beautiful day.
Sincerely,
Broker2
The attachment was a marketing piece reminding me that they offer investment plans, education savings, wealth management, tax planning, yada, yada, yada. It is interesting that he had nothing at all to say about our preferring a fee only advisor who can suggest Vanguard, etc. investments - indeed, there is little he can say. We are not such a huge account, but they clearly won't go down not fighting. And we clearly will be moving assets out rather than in.
:[First bolding was his, second bolding is mine]
Hi Elaine,
[Broker1] discussed with me the conversation the two of you had on the phone yesterday.
Would it be helpful to you for us to provide you with an illustration of our annual proposed fee broken down into an hourly rate? I think having this will assist you in making your decision to work with us.
Also, I have attached a document which explains all the various types of services we are comfortable with and provide to our clients. We believe all the services we provide and the holistic approach we take with our clients is what leads to a successful financial retirement, and we do not individually or hourly charge for all these services.
We look forward to working with you more so all your short term and long term financial goals are met during retirement, and you are doing things with your investments that are always in your best interest. We do not think this is the case if you turn over the management of your assets and liabilities to someone or an organization that is going to charge you an hourly fee for consultation.
Let me know?
Enjoy this beautiful day.
Sincerely,
Broker2
The attachment was a marketing piece reminding me that they offer investment plans, education savings, wealth management, tax planning, yada, yada, yada. It is interesting that he had nothing at all to say about our preferring a fee only advisor who can suggest Vanguard, etc. investments - indeed, there is little he can say. We are not such a huge account, but they clearly won't go down not fighting. And we clearly will be moving assets out rather than in.
That makes no sense - it is the inverse..
Here's a chart that might help shed light on WF..
Beltway Explorers
Level 2 Member
Does anyone have experience with an online, fee only adviser? LearnVest keeps bombarding me with a $50 credit off their $299 service. I would appreciate a second opinion, but I can't find any reviews online about them (unless you count Yelp). I'm open to other companies as well.
Annie H.
Egalatarian
LearnVest is a robo-advisor that has partnered with Fidelity.
http://www.thinkadvisor.com/2014/12/02/fidelity-partners-with-robo-advisor-learnvest
I'm not a robo-advisor fan but it can work for smaller investors who cannot meet the minimums for some of the other fee-only planners.
http://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp
The advisor I've worked with for more than four years, fee-only is John Gorlow of Cardiff Park Advisors. He's the most ethical advisor i've ever met, knows his stuff, works harder than any 1% or more FA I've ever dealth with.
If nothing else, take a look at his website and use it as a tool--spend time reading each tab, it's free education!- to educate yourself not only about fee-only advisors but also passive investing, modern portfolio theory, etc. I've heard there's a little wiggle room in his minimums investment amounts.
http://www.cardiffpark(dot)com/
http://www.cardiffpark(dot)com/investment-philosophy
PS-- thanks Matt for allowing this
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Voyaging Doc
Level 2 Member
In case you weren't aware, Matt also is an FA. I can't do a comparison only having an n of 2 but he certainly works very hard, knows his stuff, and preaches ethics on his posts, minus his pitch to try to get us to donate $100 to wounded warriors ;D
link-break: https://saverocity [ d0t ] com/travel/how-to-score-big-with-ebates/
link-break: https://saverocity [ d0t ] com/travel/how-to-score-big-with-ebates/
Annie H.
Egalatarian
If your post is directed at me, I'm well aware that Matt is a FA (that's why I thanked him for allowing me to post a link to another FA). I agree with everything you say about him, especially his ethics. Back in the day when he didn't agree with "pimping" (his words) credit cards on this site we had a fairly intense discussion about the ethics of collecting those commissions and then donating them to charity. Guess who won
--- the charities!I have no experience with him as an FA so can't recommend him but glad to provide a link:
Code:
https://guidewealthmanagement.com/More importantly it should be noted that LearnVest was acquired by an insurance company. Which caused quite a kerfuffle in the fee only industry...
http://fortune.com/2015/03/25/northwestern-mutual-acquires-learnvest/
PS my fees are less (because your guy uses DFA) and I work more... but I'm not sure that makes me smart!
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Annie H.
Egalatarian
Another very important thing to do when checking out a financial advisor is to read their
FORM ADV OMB: 3235-0049
UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION which is:
"Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at
Beginning in 2011, Part 2 requires investment advisers to prepare narrative brochures written in plain English that contain information such as the types of advisory services offered, the adviser’s fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser. The brochure is the primary disclosure document that investment advisers provide to their clients. When filed, the brochures are available to the public on the IAPD website."
Information can also be found on the "Financial Industry Regulation Authority" website using their "broker check" function:
FORM ADV OMB: 3235-0049
UNIFORM APPLICATION FOR INVESTMENT ADVISER REGISTRATION which is:
"Form ADV is the uniform form used by investment advisers to register with both the Securities and Exchange Commission (SEC) and state securities authorities. The form consists of two parts. Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees. Part 1 is organized in a check-the-box, fill-in-the-blank format. The SEC reviews the information from this part of the form to process registrations and manage its regulatory and examination programs. Although designed for a regulatory purpose, investment adviser filings of Part 1 are available to the public on the SEC’s Investment Adviser Public Disclosure (IAPD) website at
Code:
www.adviserinfo.sec.gov.
Code:
http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx
Code:
http://brokercheck.finra.org/Frankly, I'd be a bit scared about Learnvest being a shell for insurance sales after the acquisition, but I've not heard either way on that (it is logical though). I did meet a guy from there back in 2013 on a course and he was smarter than I thought he would be, as I'd pegged their quality to be low based on price.
One thing with the Robos (and Learnvest was always a bit more human than robo) is that they are cheap but offer very little in the way of advice. So if you want just asset allocation, they do that well, but the cheap price suddenly becomes expensive because they don't do real advice, so you aren't paying for much.
You might want to look at a human advisor, they start quite affordably. Check out Matt here, I've chatted with him a few times and trust him to know his stuff.
https://momanddadmoney.com/work-with-me/
Annie H.
Egalatarian
You bring up another interesting point. There are large, well respected FA firms-- Buckingham (Larry Swedroe is a principal) comes to mind who claim fee-only status:
Code:
http://buckinghamadvisor.com/choosing-a-trusted-advisor-041713/"OTHER COMPENSATION In their separate capacities as registered representatives and/or insurance agents or brokers, our Advisory Representatives are eligible to receive incentive awards (including prizes such as trips or bonuses) for recommending certain types of insurance policies or other investment products that we recommend. While we endeavor at all times to put the interest of our clients first as part of our fiduciary duty, the possibility of receiving incentive awards creates a conflict of interest, and may affect the judgment of these individuals when making recommendations. OR
"As disclosed in the preceding section of this Brochure (Item 10), related persons of our firm are separately registered as securities representatives of a broker-dealer, investment adviser representatives of another registered investment adviser, and/or licensed as an insurance agent/broker of various insurance companies. Please refer to Item 10 for a detailed explanation of these relationships and important conflict of interest disclosures."
Also many of the larger FA firms are compensated by custodians -- Fidelity, Schwab, etc.-- with special software, money, other services. From Evanson Asset Management website (fee-only) "The firms [(custodians] also make available other products and services which may benefit [Evanson]. and its clients.
Fee-only is not as precise as one might want it to be!
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Yeah, I actually edited my point to note that I'm cheaper because I don't use DFA... that's another 40-50 BPS right there... I rejected them at the time because I felt it was outsourcing asset management while charging for it...