Interviewing a Financial planner?

Discussion in 'Bad Dog Cafe' started by fendertx, Oct 10, 2019 at 8:36 AM.

  1. fendertx

    fendertx Poster Extraordinaire Silver Supporter

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    Any experience?

    I have a 401 to roll over, as well as couple of smaller sums I want to do something with.
    I am mid 40's and have saved some but need to start catching up.

    I've done some research, but as with everything internet related it leads to rabbit holes and I get lost in minutia.

    I meet with two different advisers next week and am trying to get prepped. So below I have a few questions I intend to ask. Let me know if you have any thoughts/advice for me



    · Is there an account minimum?

    · Who are your typical clients? Individuals? Business? Wealthy/middle class?

    · Estate planning vs financial planning?

    · How do you secure my personal info?

    · What are my options if my employment status were to change?

    · Are you a fiduciary?

    · How do you get paid? All in cost?

    · Your investment strategy?

    · Do you have an example of what my plan may look like?

    · How often do we communicate? you or your team?
     
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  2. Pualee

    Pualee Tele-Meister

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    Watching with interest...

    I'm in an almost similar position - a few years younger, a bit further behind in preparation. I'd like to see the answers too, but is a financial planner (with fees) going to beat growth based index mutual funds with automatic deposits?

    I've learned (and accepted) to stay OUT of bonds. Normal retirement funds start to 'play it safe' by moving money into bonds as you near retirement. But this really robs you of your biggest growth. The stock market doubles every 12 years. If you move to bonds 12 years before you retire - you LOST HALF of your retirement. If you stay in mutual funds... you might have to wait a year or two if the market is down, but you will have double the value compared to going into bonds for that last 12 years.
     
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  3. teletail

    teletail TDPRI Member

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    Most obvious - what are your credentials? What certifications do you hold? If they aren't a CFP (certified financial planner), then don't even bother meeting with them. I used to be a CFP and I can tell you that most "financial planners" are insurance salesmen or mutual fund salesmen with no qualifications at all.
     
  4. rangercaster

    rangercaster Poster Extraordinaire

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    You want a fee- only adviser ... Not somebody who profits by selling you stuff they make a commission on ...
     
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  5. MDent77

    MDent77 Tele-Afflicted

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    Last edited: Oct 10, 2019 at 9:21 AM
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  6. Jerry J

    Jerry J Tele-Afflicted

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    Your list of questions are pretty spot on BUT also talk to friends and/or family members that you trust for their opinions and experiences. Ultimately it is your decision who to go with. Finally, USE YOUR GOOGLE MACHINE and research reviews of any firm or adviser you're seriously considering.
     
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  7. Pualee

    Pualee Tele-Meister

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    I think this is solid advice...

    ... but for the sake of debate. I no longer trust Google results. As a tech guy - and a news freak - I keep my eye on things. I know that you can buy a position in Google's search results to steal a competitors intellectual property.

    For instance - if I have a business called "THE BEST FINANCIAL PLANNING" my competitor can buy the top spot in the Google search, when its business name is "FRAUDULENT FINANCIAL PLANNING".

    Google has become a lot of 'noise' so that it is hard to find a valid search. Companies spend a lot of time and money promoting their product to the top - even when it is not good.

    Similarly, those reviews on the web can be bought and paid for - to artificially help yourself and hurt your competition. I sympathize with the OP feeling like there are endless rabbit holes. The internet is starting to 'jump the shark' for useful information. It is time to get back to real life relationships and asking friends and family for references.

    Google has information - use it, but don't expect it to be more valid than other sources.
     
  8. jimd

    jimd Friend of Leo's

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    The number one questions is how much am I paying you!

    We went the financial advisor route because finances were not something I understood, or frankly cared about. Our guy was fine, but I realized the fees were seriously cutting into any gains we made. I talked to a few guys at work and decided to take it all on my own. I don't regret it. When my advisor heard I was leaving he was upset until he realized I was taking over. It was clear to me that he knew switching advisors wasn't really going to help me, but doing it on my own was to my benefit, and he couldn't really argue that point.

    I have a Fidelity account, but any of the big firms are probably fine. Fidelity was very helpful rolling over and transferring my accounts to them (of course they were, they are getting my money). Almost everything I have is in some sort of index fund. Index funds are mutual funds that invest in the same stocks that make up the major financial indices, such as the S&P500. There's no real management involved from the Fidelity side since the makeup of the fund is determined by the index, so the fees are very low. Nobody really does better than the market over the long term, especially if you factor in the fees. So you are really wasting your money paying someone. I wish I had done it sooner. I know I am doing better than I was with my advisor.
     
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  9. Greggorios

    Greggorios Tele-Afflicted Silver Supporter

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    +1, wise advice.
     
  10. Mike Eskimo

    Mike Eskimo Doctor of Teleocity Ad Free Member

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    Picture of his house.

    Big ostentatious McMansion?

    Go find somebody else...
     
  11. Uncle Bob

    Uncle Bob Tele-Meister

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    I am in a similar pickle with an estate. I got tired of hearing half truths, discovering bad math and hidden fees, and eventually decided to leave it with a local bank who has managed the money since 1968. There were other good reasons to leave it there besides being tired of hearing BS, and they charge a flat fee including trades, purchases, etc so there are no surprises. They're not cheap but I know what I'm going to pay and I plan to work them half to death to get my money's worth.

    One thing that our attorneys noticed, is their standard agreement includes a 1% liquidation fee. I saw that as a bonus for getting fired, and refused to pay that so it was waived for my account. Watch out for stuff like that.
     
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  12. Deeve

    Deeve Friend of Leo's Silver Supporter

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    @fendertx -
    Good questions - the ones I bolded seemed most important to me.
    Another note above - make it Fee-Paid consultation.
    You need to know who's buying you dinner, and the fee system on annuities & insurance would curl your hair if they were plainly stated (so they are hidden)

    If you've "got some catching up to do" sadly, that may mean you've got to put down that Custom Shop catalog and start packing your own lunchbag.

    Let us know how it goes.
    Peace - Deeve
     
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  13. Uncle Bob

    Uncle Bob Tele-Meister

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    The bank I use has a good bond portfolio for tax reasons. They warned to watch out for bond FUNDS because you typically end up starting out upside down due to increases in bond price over time. The guys I use actually participate in the bond market so I have specific bonds bought on the day of release so what I paid to start is what I get back at maturity.
     
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  14. Greggorios

    Greggorios Tele-Afflicted Silver Supporter

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    You're doing a great thing and are off to a good start, don't be discouraged. This is a tough time to try and learn about investing, be patient. Remember you're in for the long haul, don't panic about big swings, they're likely to be with us for awhile. Before you commit to any plan learn about "risk tolerance" and be sure you're comfortable with the concept and how to apply it to your own particular life and investments.

    You may also be able to roll over older retirement accounts into a current or new one if your current employer offers a 401K or some other retirement savings program.

    Would love to hear more about your progress as you explore. FWIW I still think a prudent mix of investments between stocks, bonds, fund, REITs, etc. still makes sense.

    As Deeve mentioned above, if you're really trying to do some "catch up" then contributing from your current earnings is important. And yeah, it's supposed to hurt; deep six the custom shop gits and lobster dinners for now.

    Gregg:)

    Good luck.
     
    Last edited: Oct 10, 2019 at 9:57 AM
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  15. twangjeff

    twangjeff Tele-Afflicted

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    If you would like to discuss further message me directly. I am quite familiar with this space.

    While all of the above points are good, I don't think that you can be quite so black and white about it as to say, "This is good, that is bad."

    The main value that a financial advisor should bring to the table is 1.) To help you make good financial decisions (Not just investment decisions) on an ongoing basis, and 2.) To help steer you away from making bad financial decisions. At the end of the day, if you talk to 5 different advisors (Assuming they are all competent), they are probably going to come back to you with similar recommendations. It's like going to a doctor in that regard. If you ask 5 different doctors, they're all going to tell you to watch your diet, and exercise right? The difference between a good and a bad financial advisor, is the same as the difference between a good and bad doctor: Your willingness to listen and accept their advice.

    I'll add a few things that I would ask a prospective financial advisor:

    1.) What is your succession plan for when you are no longer in the business (The average age for a financial advisor in the USA is somewhere around 62, if you're in your mid 40s and this is retirement money that needs to last the rest of your life, then what happens when you're 5 years into the relationship and the advisor retires himself?) Ideally, you would like to see another advisor in the office being trained to eventually take the reigns. I would be wary of businesses that are sold (Very common), because you don't have any control over who the business is being sold to. I would also be wary of transferring the business to family (Well when I retire my nephew Bob is taking over), because you don't know if that relative is competent or if it is just nepotism.

    2.) What resources do you have to provide insight on areas that aren't your area of expertise? Many advisors will work on teams with other professionals in the office. The lead advisor is essentially the client facing part of the business, but then they may have an investment analyst, a CPA, an estate planning attorney, a retirement plans expert, etc. etc. It is unreasonable to expect an advisor whatever their qualifications to be experts in all of these areas.

    3.) MOST IMPORTANTLY, before you become a client, agree up front to a communication frequency. The main reason that people are dissatisfied with their financial advisors is because they meet with them, hand over their life savings, and then never hear from them again. If you are a long term buy and hold investor, and don't want a lot of ongoing updates and changes, let the advisor know. Conversely, if you want to receive updates on the market, your financial plan, etc. then agree upfront to a meeting frequency (IE- Once a year, twice a year, quarterly, etc.).

    4.) Know how your advisor gets compensated. Just like any other service provider, your advisor deserves to get paid for their services, but you deserve the ability to know how and what they get paid and to evaluate the reasonableness of those expenses. When it comes to commissions vs. fees, there really isn't a BEST option. Commission based advisors will typically charge an upfront fee or sales load for the sale of a product, whereas a fee based advisor will charge an annual fee (Typically somewhere around 1% of the assets under management). If you want ongoing communication and monitoring of your portfolio and financial goals, a fee based advisor will probably be best suited to do that, because they have a financial incentive to keep you satisfied. If you are a long term buy and hold investor and just want some advice on selecting funds, a commission based broker will likely be far less expensive.

    With regards to fees vs commissions, let's look at a quick example. Say for instance you have a $100k investment to make. If you were to buy a portfolio of A share mutual funds, you would likely pay 3.5% up front, plus ongoing 12b1 fees of .25% per year. Over a 10 year period, you would have paid a total of 6%. If however you used a fee based advisor and invested in a portfolio of no load funds and ETFs, you'd likely pay 1% per year for ten years for a total of 10%. Which is better? You can't make that decision without considering the whole picture. If you want comprehensive planning on ongoing support, an advisor that you pay 10% to, but will listen to you and keep you on track for your goals, may be better than an advisor you pay 6% to, but never hear from after the money gets invested.

    I know this is lengthy, if you'd like to discuss outside the thread shoot me a pm and I'd be glad to talk.
     
  16. Despres

    Despres Tele-Holic

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    This is not entirely accurate - saying the stock market doubles every 12 years may be a historical average, but bonds increase as well. Mathematically, an investment that doubles every 12 years has averaged 6% average annual return over that 12 year term. If you assume you've lost out on 1/2 of your retirement by being in bonds rather than stocks, you are implicitly assuming that bonds generate no returns over that same period. A bond fund that averages 4% per year would double every 18 years, and would be much less volatile/more liquid during that period.

    I can't offer insights on picking a financial advisor or any investment advice, but I do not think there are any advisors out there who would suggest staying 100% in stocks up until the day one retires, because stocks are inherently more volatile than bonds. While the stock market might have greater annual returns over the long run than the bond market, the year to year ups and downs are much more pronounced, so it could be more than a year or two one needs to wait before retiring.
     
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  17. joealso

    joealso Tele-Holic Silver Supporter

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    I have an employee. He makes a good salary. He's had the same financial adviser for over 20 years. He pays her around $5000/year and she tells him exactly what to do and he follows her advice. He maxes out his 401k every year. He contributes to an IRA. They speak at least once a month. If he wants to buy a car, he asks her how much he can afford. Etc. The man is 57 years old and has over a million dollars saved/invested.
     
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  18. BorderRadio

    BorderRadio Poster Extraordinaire Silver Supporter

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    I clicked for some punk content.

    Hey, there's no punk content!!?
     
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  19. JL_LI

    JL_LI Friend of Leo's

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    My wife has been a life insurance agent for 15 years. She helps older folks with 401K rollovers, usually steering them toward guaranteed future income annuities and recommending ways to prepare for the need for long term care, something often neglected. She has us both pretty well covered. I’m not recommending that anyone else emulate our planning but I can give some good advice. You’ll learn at least as much from the questions the planner asks you as from how he answers yours. A good planner will not only advise you on new investments, he or she will also suggest what to leave in place. There are commissions to the planner when you move money. There are often costs to the investor to move it. Good luck. I plan on retiring next June. Good planning will enable my wife and I to maintain our life style even in the event of adversity.
     
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  20. Preacher

    Preacher Friend of Leo's

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    I was in my late 40's and my wife's work had a finance guy come in to talk to the people there about retirement, investments and so on.

    She brought the info home and said she had signed up for a personal meeting with the guy. I remember being livid with her for making that appointment and telling her I was not interested in paying someone to tell me what to do with my money. Because I love my wife we went anyway. I was in a really bad mood and was not my normal agreeable self. I listened to their pitch, I watched them play a video talking about how bad it will be by the time I retire and I needed to put money away for the future. They then gave me a small book based on my age, health and financial position that read like a graphic novel of gloom and doom.

    The man who was working with us sat the book down on the tabletop and then looked directly at me and said, "I can tell you are not enthused with this meeting. Tell me what is on your mind."

    So I let it go. I told him I did not see any benefit of paying him a yearly fee to manage what I was already managing. That his "stock tips" could be worse than some of the tips I get when I play golf with friends. That my 401K has seen limited growth (this was 2014) and I was seeing some returns there. Then I dropped my bomb. I told him I did not like to have anyone tell me what I could and could not do with MY money. It was my money and if I wanted to spend it on a corvette then I understood that was not a wise financial decision but if I wanted to do it I would do it.

    He just nodded his head. Then he said, you are absolutely right, it is your money. And I am not here to tell you how to spend your money. I am hear to advise you on what you can do to get the most of your assets and plan for the future. If I can help you right now save some money by making one change that would pay for my services for the next five years and would not cost you a dime would you do it?

    I was shocked he was so direct so I told him to give it his best shot. He pulls out my tax return from the previous year which we had supplied. He had highlighted deductions that my certified accountant who prepared my taxes had missed (my wife owns her own business, we have a side business as well as my normal job) that could have gotten us thousands of dollars in taxes back. He looked me dead in the eye and asked if I was willing to use a local accountant that he could recommend if he could save us some additional money? I told him yes and we had a meeting two weeks later with the said accountant. He was able to get us close to $10GRAND more in a refund than my previous tax person, and he was actually cheaper too to file the taxes. The financial guy then made some suggestions on my 401K which paid off as well.

    He was not too happy when we did a sit down three years ago and told him we were buying a much larger house with a much larger payment. He explained what that would do to our ability to invest for the future but then he said, "but hey, it has a pool and you guys should enjoy life while you are living it also, so if you feel good about it do it."

    Now I will say three years into buying this house we left little room for error in our budget, and since property taxes continue to rise here I am considering selling the house to alleviate some debt and free up some of my monthly income for stuff other than a house payment.

    So my advise would be to find a personal finance guy and have him prove himself to you that he has your best interests in mind, you might be surprised.
     
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