retiring

[Jstpssng]

Not thoroughly enough to post a number here that I would be confident in. My opinion is the 1% per year figure I mentioned above wouldn稚 be far off. Paying 1/4 of that would send me into convulsions. It痴 just something I can稚 bring myself to sign up for.

That works for you. As some of us have figured out, you are pretty savvy with your investments. The majority of the population-aka, ME - are probably better off paying for the services of somebody who knows what they are doing... preferably who also has a stake in the advice they give.

 

[goeduck]

Not thoroughly enough to post a number here that I would be confident in. My opinion is the 1% per year figure I mentioned above wouldn’t be far off. Paying 1/4 of that would send me into convulsions. It’s just something I can’t bring myself to sign up for.

Maybe there are no such people, those that take a one time fee and you take it from there? I have not researched at all, always done it myself and have done well. But I do not stay on top of it like I used to.

 

[RickB]

There is no doubt that this is not a one size fits all issue.
What I have not shared yet is one of the reasons I am not paying for financial planning is I have come to realize I may be better off using some of the dollars I might spend on a financial plan for tax advise as we transition from W-2s to SSI, RMDs in our future and tax considerations of some strategies like Roth conversions and capital gains tax rates vs ordinary income tax rates.

Not everyone wants to be a student of personal investment. Not everyone will agree with my thoughts, some may disagree vehemently. That is ok, everyones circumstances are different.

 

[goeduck]

Absolutely, tax adivise is financial advise as well in my opinion. Growing a nest egg is one thing. Transitioning it at retirement and keeping it is another, particularly with a wealth tax being batted around.

 

[3Ts]

The 1% figure that RickB mentioned is pretty common and typically ranges from 1% to 1.5%. I have however encountered an independent adviser that wanted 10% with no guarantees of performance. Be sure you check out the adviser and get references if you go that route. Just keep in mind that there is no one more interested in your investments than you. If the adviser gives you bad advise, you'll lose out and he'll go on to another client. The adviser wins in all situations. I finally realized this after 4 advisers made poor investment choices on my behalf so I put in the effort to learn and do my own investing. There are many people that are better at it than I am, but I've done much better than 4 investment advisers (one was a fee only adviser).

In one of the financial courses I took, it was explained to me how to get clients to invest with you. That is to get a list of 100 names, select a stock and send a note to 50 that says the stock will go up, the other 50 the stock will go down. Which ever list is correct, keep that and throw the other away. Divide the list of 50 into 2 lists and repeat. You now have a history of being right twice in a row with 25 people, when you call them, they're likely to listen.

 

[kenmac]

Have you researched what an independent financial advisor costs? I am sure it varies by quality and I would want references.

My advisor sends me checks from my account. He takes the taxes out and sends me what I need.
His fee is based on how much you have in your account anything below one million is 1% anything above 1 mil. is .5%
My advisor also does my taxes at the end of the yr at no additional cost.

 

[bird dogger]

The 1% figure that RickB mentioned is pretty common and typically ranges from 1% to 1.5%. I have however encountered an independent adviser that wanted 10% with no guarantees of performance. Be sure you check out the adviser and get references if you go that route. Just keep in mind that there is no one more interested in your investments than you. If the adviser gives you bad advise, you'll lose out and he'll go on to another client. The adviser wins in all situations. I finally realized this after 4 advisers made poor investment choices on my behalf so I put in the effort to learn and do my own investing. There are many people that are better at it than I am, but I've done much better than 4 investment advisers (one was a fee only adviser).

In one of the financial courses I took, it was explained to me how to get clients to invest with you. That is to get a list of 100 names, select a stock and send a note to 50 that says the stock will go up, the other 50 the stock will go down. Which ever list is correct, keep that and throw the other away. Divide the list of 50 into 2 lists and repeat. You now have a history of being right twice in a row with 25 people, when you call them, they're likely to listen.

You are exactly right in that one's best interests are looked out for by themselves!! They do have your interests in mind but they're also out to make a profit for their firm, earn a living for themselves, etc. I use Schwab, as I said, but do not have one of their Schwab funds. When I compared my index funds to the similar Schwab funds they were so close I left them as is. Some might have an advantage one way but were disadvantaged in another. I was never pressured to switch, only offered guidance. One advisor thought I should have some CDs and Bonds to fit the so called pie chart at my age but when I said why would I buy a CD at that time when the rates were so low and the economy was rebounding like mad...he agreed. But also suggested to keep watch as things do change. Fair enough.

Regarding completely independent brokers or advisors: The strictly advisors have their fees. If you then act on their advice, go through a broker to buy or sell, you then pay high transaction fees. Unless you use Schwab or one of the other low fee online brokerages. When I first started investing, those so called brokerages that only had your interests in mind with their independent advisors (like Paine Webber) I soon found out that that wasn't exactly the case. They always pushed their favorite mutual funds (that had high load fees). I found out that was called "making a market" or something like that. Their firm received a percentage of the investment back from that mutual fund. Those fees were cleverly hidden in the up front costs to get into the fund. I think it would be hard to truly find someone who was completely unbiased for a low fee and still be accountable for his guidance. It is a scary road to go down yourself but then you are in control. But it certainly isn't for everyone either. My wife would have our funds buried in the back yard. If I told her about the good days in the market she'd probably go on a spending spree. Tell her about the bad days and I'd be shot. She has her retirement fund in a forced annuity. (teacher) so between us there is some stability. It's also good to have a cash reserve that can get you through a downturn in the market. No one should feel bad that they don't want to go it on their own. But you should try to learn a little about "index funds", ETFs, and the different sectors like health, services, manufacturing, financial, etc. I'm of the opinion that one could do very well on their own and maybe as good or better than paying an exceptional manager, if you divvy up your funds amongst a very few index funds and ETFs, along with a few CDs or Bonds that could be laddered to give you easy access to some funds for day to day living or emergencies. I explain index funds and ETFs like a giant loaf of bread where each slice is a different individual stock. The loaf can be in a specific sector such as healthcare or as broad as any of the major indices like the S&P500, Nasdaq, etc. When you invest in those ETFs or index funds you essentially own a small "bite" out of every "slice" in the whole loaf. You really spread your risks across a major portion of the market and if one particular "slice" goes bad you still have the rest of the loaf. And chances are that one slice will heal itself in a short while.

Has anyone else noticed this: It seems that in the last 20 years +/- that the market downturns (recessions) seem to get shorter and shorter before the market recovers and is back to where it once was before it goes positive again?

3Ts, that's an interesting observation or lesson that you described about how to acquire customers! But I don't doubt it one bit.

Cheers,
David

 

[bird dogger]

Well, this thread retired rather suddenly.

dnw64, Your comment is hilarious!! Too funny!!

Cheers,
David

 

[Chris616]

You cannot be assured of getting financial advice that is only in your best interest if the advisor also sells financial products.

I know some people who are completely "hands off" when it comes to their investments. They expect their financial advisor to do everything including putting money in their bank account. For those people who need an ongoing relationship then paying an ongoing fee is essential, but paying a percentage of the account value seems like the same kind of thing as when I buy something on my credit card in a foreign currency and VISA tacks on 2.5% to do the currency conversion. The transaction costs VISA the same whether it is a $20 or $2000 purchase, so it should be a fixed currency conversion cost, not a percentage of the amount. Similar for an investment account. Does it take twice as much work by an advisor to manage an account that has twice the value?

Many people manage their investments themselves, but could benefit from an occasional (every 5 years?, or just when there is a significant life change) review by someone else to ensure that they aren't doing something grossly wrong (I put everything into a precious metals fund because it did really well last year!). For those people I'm sure that there are "fee only" advisors that you can pay by the hour for the work. Most people don't need yearly input on how to manage their investments. If you're invested mostly in a few index funds, most years you won't be making any changes to your investments at all.

Some people have an unrealistic expectation of what a financial advisor can do. How can someone be "accountable for his guidance" when they're just trying to steer you on the best path through something with huge uncertainty?

Most people don't need a financial advisor during the "accumulation" phase of funding a retirement. It's fairly simple, as others have suggested. Save as much as you can and invest in something with low fees that will give the best return on your investment, over a long time frame. That is stock index funds. Accept that there will be years when your investments are worth less at the end of the year than they were at the beginning.

During the "de-accumulation" phase when you're funding your retirement, which is quite a bit more complicated, you might need some advice if you're not that interested in investigating the best ways to minimize tax when pulling money from the different sources of income that might be available to you (tax sheltered accounts, tax free accounts, regular investment accounts, gov't benefits, inheritances, etc.).

Chris

 

[drssg]

I think at least some financial advice is also warranted during the accumulation phase. After all, you can't spend it if you don't accumulate it.

I've known people who put most of their 401k money in a fixed low return fund because they don't want to lose their money. If someone walked them through what their expected long-term nest egg would be, they might develop more tolerance to risk.

 

[KennyG]

Whether you use an advisor or not, you need to educate yourself on investment options, tax impact etc. If you use an advisor, make sure he's really fee only. Investments with the highest commissions necessarily have higher risk or lower returns for the investor.

I've done almost all my own investing, focusing on index funds or broad based low overhead funds, both stocks and bonds, and have done very well. It's not that hard if you are patient and don't panic. I've invested with advisors recommended by friends a couple of times with small amounts to see how it would work and performance was very poor.

Some years ago (before it was practical to trade stocks yourself), I bought some stock which was highly recommended by a broker. When it tanked, I deduced that it was because of a transient condition and wanted to double down and buy more. The broker wouldn't return my calls (probably because there were so many irate clients) and I missed the chance to make a small fortune when it recovered, as I expected.

I have no interest in working with any advisors now. Because of the size of my investments, I regularly get solicitations from Fidelity and Vanguard (who I recommend highly) to use their free advisor services and I just politely decline.

 

[Chris616]

I think at least some financial advice is also warranted during the accumulation phase. After all, you can't spend it if you don't accumulate it.

I've known people who put most of their 401k money in a fixed low return fund because they don't want to lose their money. If someone walked them through what their expected long-term nest egg would be, they might develop more tolerance to risk.

I don't think that we have different opinions on this, Rick. I'm just saying that most people don't need to pay a financial advisor (either directly or via commissions) to be told how to accumulate a retirement fund, because the basics are pretty simple. If they're interested enough to consider getting financial advice it isn't difficult to educate themselves on the basics.

What you've mentioned brings up what I see as a looming issue coming down the pipeline, though. For many in my parents generation, working for a company for most of their life meant a pension (assuming that the company stayed solvent). Most companies have gone away from "defined benefit" pensions to "defined contribution" systems where they and the employee contribute and it's up to the employee to manage that money. The problem is that many people are ill-equipped to manage their own investments and will do things like the example you gave. They might be a great plumber, engineer, nurse, etc., but most people just don't have an interest in learning about how to invest their money to provide for their retirement income.

Chris

 

[Travelover]

My experience is that by the time you learn enough to competently evaluate a financial advisor, you know enough to do it yourself. My advice for anyone who has no interest to learn would be to go to Vanguard, Fidelity or Schwab and just invest in a Target year fund. You choose the year that you will probably retire and the fund balances the stock / bond ratio year to year with an eye on the end date. No excessive fees, automatic balancing. At Vanguard you can even move it to retirement fund where they will manage the withdrawals and send you regular checks.

 

[bird dogger]

My experience is that by the time you learn enough to competently evaluate a financial advisor, you know enough to do it yourself. My advice for anyone who has no interest to learn would be to go to Vanguard, Fidelity or Schwab and just invest in a Target year fund. You choose the year that you will probably retire and the fund balances the stock / bond ratio year to year with an eye on the end date. No excessive fees, automatic balancing. At Vanguard you can even move it to retirement fund where they will manage the withdrawals and send you regular checks.

Travelover, that's another excellent suggestion/option for those that want very low fee and hands off investing. I forgot about those. I think you can even choose your investing style in those, whether it be safe, moderate, aggressive, etc. Those three firms you mentioned are all high class firms for any investor from novice to expert.

I don't know if its been mentioned earlier, but I remember as a youngster going to some investing classes within those continuing adult education courses. You might pay a very small fee for a 1 to 5 night class in the evenings. The ones offered by maybe a math guru teacher or similar, at least not anyone that's associated with a brokerage firm, etc. They're completely unbiased and are just there to give you the basics and explain the ins and outs of the different things that make up the investment world. They'll (the good ones) will tell you what to watch out for, what questions to ask a prospective advisor, what fees to expect or avoid, and just about anything you need to get you going on your own. And everyone in the class is a greenhorn and there to learn so you don't feel out of place or behind at all. at today's prices they might still be well under $100. Money well spent for some good unbiased education starting form ground zero. A call to the local high school, chamber of commerce, college should turn up something on that order.

 

[goeduck]

My advice for anyone who has no interest to learn would be to go to Vanguard, Fidelity or Schwab and just invest in a Target year fund.

I do not have experience with Schwab but I can attest to both Vanguard and Fidelity. Both very good investment houses. I also like T Rowe Price.

 

[dnw64]

Travelover, that's another excellent suggestion/option for those that want very low fee and hands off investing. I forgot about those. I think you can even choose your investing style in those, whether it be safe, moderate, aggressive, etc.

To make a target year fund more or less aggressive you just choose a target date sooner (less aggressive) or further out (more aggressive) than you actually plan to retire.

 

[RickB]

This is one of the more informative and generally on point TBN threads I have participated in in a long time. No matter what your experience level I bet you read SOMETHING here and thought; hmmm.

 

[Travelover]

I don't know if its been mentioned earlier, but I remember as a youngster going to some investing classes within those continuing adult education courses. You might pay a very small fee for a 1 to 5 night class in the evenings. The ones offered by maybe a math guru teacher or similar, at least not anyone that's associated with a brokerage firm, etc. They're completely unbiased and are just there to give you the basics and explain the ins and outs of the different things that make up the investment world. They'll (the good ones) will tell you what to watch out for, what questions to ask a prospective advisor, what fees to expect or avoid, and just about anything you need to get you going on your own. And everyone in the class is a greenhorn and there to learn so you don't feel out of place or behind at all. at today's prices they might still be well under $100. Money well spent for some good unbiased education starting form ground zero. A call to the local high school, chamber of commerce, college should turn up something on that order.

Some of those adult Ed classes are good and some are taught by people in the business trying to find customers, so if they offer more help outside of class for a price, run. One excellent source of self education is the Bogleheads site. There is a ton of information on investing as well as a forum. John Bogle started Vanguard and the Bogleheads are people that prescribe to his low fee, indexing philosophy.

 

[Jstpssng]

This is one of the more informative and generally on point TBN threads I have participated in in a long time. No matter what your experience level I bet you read SOMETHING here and thought; hmmm.

My employer sponsored 401k allowed me to choose 1 of four plans, or do it ourself. After finding out last fall that my fund actually went down, while the stock market was doing well, I moved 1/2 of my account into the safest slot that I could find and put the rest into Vanguard, based on comments made by some of the more savvy members here on TBN. We just changed providers, apparently I was not the only dissatisfied participant.(Wells-Fargo... go figure. ) I havent had time to log in and see what it looks like.

 

[Travelover]

My employer sponsored 401k allowed me to choose 1 of four plans, or do it ourself. After finding out last fall that my fund actually went down, while the stock market was doing well, I moved 1/2 of my account into the safest slot that I could find and put the rest into Vanguard, based on comments made by some of the more savvy members here on TBN. We just changed providers, apparently I was not the only dissatisfied participant.(Wells-Fargo... go figure. ) I havent had time to log in and see what it looks like.

Not all 401k plans are employee friendly. Some have high fees and bad choices. Until recently, employers did not have to reveal charges, so it pays to ask questions and look for low cost index fund options.