Talk to me about why we should or should not use a financial advisor
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
DH and I are not investors/people will deep knowledge of investments and stocks. We are both lawyers. Our HHI is around 450K a year. As of right now, we've been doing all the right things in terms of maxing retirement, completely paid off our student loans (law school and undergrad), are putting money towards a 529 for our daughter, etc. We aren't frugal by any means, but have a modest savings built up (around 150K and growing approx. 4-5K a month). Our major expenses are a large mortgage, we both lease fancy cars (yeah, yeah I know but you gotta have some weaknesses right?), and we take 3 x one week vacations a year, either abroad or to a nice beach vacation spot domestically, with some weekends away sprinkled in - probably 20K total worth of travel. We don't live in DC anymore, but we live in a city with a high cost of living that requires driving (hence the two cars).
We recently met with a financial advisor from a large bank. We are waiting to hear back from him on "details" of his plan for us but I am sort of hesitant about actually using him. What, exactly, can he provide to us that we can't just gain from investing in a low-fee Vanguard account? Am I missing some sort of huge benefit to having a financial advisor? And if so, should it be someone tied to a large bank? Thanks, in advance, for any insight. |
Anonymous
|
If you want help, I'd suggest using a fee-only planner as opposed to paying someone a percentage of your assets to manage your accounts. This gets expensive and at your level probably isn't worth it. Fee-only advisor will help you create a plan and you can revisit this with them annually to rebalance/make changes. Otherwise you are likely paying 1-1.5% of your assets and have less control.
You could also do this yourself relatively easily. The general theory is: Max 401ks Max Roth IRAs Max HSA Leftover goes into taxable accounts Easiest way to setup portfolio is the following: vanguard US stock index Vanguard international index Vanguard total bond index This is pretty vanilla but it is simple, efficient, and cost-effective. There are more complex scenarios a planner can assist with (estate planning, tax moves,etc) I'd probably avoid most of the big banks (bank of America, chase, etc) and look for a smaller outfit that specializes in fee-only plan services |
Anonymous
|
I agree with PP about fee-only. You'll get a lot of people telling you you don't need an adviser, they're stupid, don't know what they're doing, but my spouse and I find it worth the cost to hire one (fee-only) because we just don't feel like dealing with it. They help us maximize our investments (things like how to use our HSA as a super-advantaged retirement account and doing the math on why it makes sense), ensure we're protected financially in a very holistic way (estate plan, insurance coverage, benefit elections at work, etc.), and also just give us peace that we're on track for our goals.
Before we hired them, it was one of those things where every few months we'd say "Yeahhhh, we really need to reassess our portfolio and make sure everything looks good" or I'd spend 4 hours on a Saturday researching how much insurance I should be carrying because I was switching from employer provided to open-market, etc. It was something we constantly procrastinated on, hated spending the time on, and even after we did it felt no confidence that we'd done it optimally. I hire a financial adviser for the same reason I hire a cleaning lady - I am sure I could do it myself if I wanted to, but I don't and having someone else do it makes my life better. It's worth it to me based on how I want to spend my time/mental energy. We did meet with/interview 4 different advisers (3 fee-only and one commission based), which was a painstaking process, but totally worth it - just like hiring someone to do a big home improvement. We ended up going with the middle-of-the-road person based on experience and where we're headed, but meeting with all of them helped clarify our needs and what was and was not worth hiring them for. |
Anonymous
| Thanks - I agree with the fee based approach. I am underwhelmed by the big bank person, honestly. I just solicited suggestions for a good fee-based advisor from colleagues. Appreciate the insight! |
Anonymous
|
Beyond going fee only, you should ask any prospective advisor, "What, exactly, can you provide to us that we can't just gain from investing in a low-fee Vanguard account?" Ideally, the advisor will say that he recommends using a low-fee Vanguard (or similar) account, but will also X, Y, and Z.
|
Anonymous
|
I can tell you right now what the details of his plan is going to be.
1) He is going to invest your money in a number of different investments, many of which will pay him a large commissions. 2) On top of this he will "manage" your investments for you for a between 0.5%-1% of your account balance every year. 3) He will sound very knowledgeable and use all sorts of fancy language and sales tactics to convince you that he is securing your financial future or that his big bank has access to all sorts of different investments that have great returns that others don't have access to. At the end of the day, though, you could be far better off just by investing your money in low cost index funds. |
Anonymous
|
Anonymous
|
-Use a bank for a checking account and mortgage (WF, BoA, Citibank, etc.)
-Use an insurance company for insurance (State Farm, Geico, Progressive, MetLife etc.) -Use an investment management company for investments (Vanguard, Fidelity, Schwab, etc.) Don't get the services and providers mixed up, because you'll only get burned if you do. |
Anonymous
|
I think it all depends on what this advisor provides and how "good" they are. We've found that there's a wide gap out there.
We started with an advisor that worked for one of the big firms and we stayed with him for way too long (over 10 years). He "analysis" was no more detailed than any of the retirement calculators that you can find online. Our $$$ was invested in SO many different things, we could barely keep up with it. Many of these things not only accrued a fee to our advisor, but other managers of the funds (which made you wonder what our advisor was collecting a fee for). And simple question (like, what do you think of this investment) was met with a 30+ minute ramble that left me more confused than I started with. Over our decade plus with him, he never ONCE suggested that we max out our 401K or 401K (we invested enough each year, but he just had us put it in our brokerage account). He also never provided any advice on savings or anything beyond the stocks in our brokerage account. And on top of all this useless "guidance", he made a pretty large administrative error with on of our accounts that put us at risk. When we left, we considered managing our assets ourselves, but luckily we also interviewed a few recommended advisors and found someone wonderful. Not only is their fee much less than what I was paying before, they are an independent advisor (so unlike the big firms, no one is pushing him to sell certain things or make quotas...), who is simplifying our investments and can actually answer our questions quickly and with clarity. I'm able to understand the direction we are going in with our assets and see the active management in my account. This advisor also provides his clients with a weekly email that summarizes his thoughts on the current environment and provides savings/investment/tax tips. He's more than just an investment advisor- he's helped us better understand and structure our finances from paycheck to retirement. To me, this is where the value is. In my experience, there are many more of the first types out there... |
Anonymous
| OP I am the wife of a two lawyer family too. I know about investments, my DH is clueless. I met with three different advisors and concluded, regardless of fee structure, that low cost Vanguard funds were the way to go. Our income is about the same as yours. |
Anonymous
|
OP,
Before you make a decision about hiring a financial advisor, it would be prudent for you to learn a little about what you can do yourself with finances. Read some DIY financial books and THEN meet with a financial advisor if you still are considering it. That way, you won't be so mesmerized by the lingo they are using or the concepts they are suggesting. You'll have some basis for evaluating what they say. Then make your decision. A couple of books: Your Money Ratios (Charles Farrell), The Smartest Money Book You'll Ever Read The Smartest Investment Book You'll Ever Read The Little Book of Common Sense Investing. Start by educating yourself enough to be able to evaluate what a financial planner is saying. They are sales people. Maybe you will want what they are selling, maybe you won't. But you don't go into an auto dealership without knowing anything at all about cars. Same thing x10 with financial advisors.... it's just your future, your children's future, your means of eating/living on the line... it deserves a few hours of your time to learn a little. |
Anonymous
That's a really good point. Thanks. |
Anonymous
Nothing. You are not missing anything. Vanguard is the best one too. How old are you? You should be doing IRA's too. If you don't have any yet, you can do "backdoor Roths." At your income level, I would try to save closer to $100k/year but overall I think you are doing ok. Just beef up the savings a bit. |
Anonymous
| Advisers are not the same as portfolio managers. Some banks provide the advisers for free as long as you have an account. Fidelity has this, I chat with my adviser all the time about retirement, big purchases, etc but they don't anything to my actual accounts. |
Anonymous
| If you have enough invested in vanguard they give you a free advisor to talk tbings over. We are doing our investments ourselves and are almost at that threshold. |