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My wife and I are a year or two away from retirement. We have been with a financial advisor for 2o years. The advisor is calling all the shots. Our retirement accounts have done very well. We are currently paying a 1% assets under management fee. Our advisor does not try to sell us products: he just guides the ship. We would like to reduce the amount we are paying for financial guidance. In general, are the flat-fee advisors a good choice for getting through the retirement years? What’s the best way to find one?
The benefit of a flat fee advisor is when you get good advice, but only pay for what you need. In my mind the best choice for financial guidance is when it becomes coaching that strengthens our own financial stewardship abilities and actions. That may then free us up to be much better consumers of financial advice and products no matter which option we choose.
And as has been often said, the easiest way to increase investment returns for any given amount of risk really is to pay lower fees.
One more source I read this week: Mebane Faber, who gives away one of his books at theideafarm.com “Investing is similar. …The single biggest take away from this book is to not ruin your allocation by paying too much in fees. [Global Asset Allocation, Meb Faber, 2015]”
We have had a flat fee only retirement specialist planner for over 7 years and engaged him one year prior to retirement. I am certain we pay far less than the local AUM advisor our friends use whom we interviewed and quickly rejected. It’s interesting to see the comments so focused on investment management rather than financial planning and integrating the entire financial picture holistically. It is indeed a waste of money IMO to hire an “advisor” for investment/wealth management as all one has to do is have a simple portfolio of a few index funds. The value we perceive in our advisor is peace of mind, continuity after death of spouse, minimization of stupid mistakes and advice on insurance, annuities, wills, tax optimization, and a plethora of choices in retirement and aging. It depends on what you are looking for-the comment recommending Plan Vision I agree with as they are great value for a basic look. You can look for Advice Only planners look at AdviceOnlyNetwork.com-they can do a comprehensive one time plan. Or flatadvisors.org for an ongoing relationship. Other choices are XYPlanningntwork.com and NAFPA.org. Personally I recommend looking for a small, independent shop with an advisor or two with a retirement credential like RICP or RMA who is still taking new clients but limits the number to 50 or so.
Mark Zoril of PlanVision charges $299 for the first year and $96/year thereafter. He is a big Bogleheads favorite.
Really like PV. Great value got money with access to eMoney and 1:1 calls with tax or investment specialists anytime I have a question I’d like some help with.
I already have a fairly detailed DIY retirement plan via “Boldin” (nee “New Retirement”). Most bases covered (investment, allocations, estate, etc)
I could probably use a 2nd set of eyes from a planner for sanity, maybe tax planning, and continuity in case I’m not in the picture, but when I’ve looked into it, it seems advisors all want to start form scratch and develop a plan, which I don’t need (and many more want to manage assets/do the AUM thing … not happening).
Suggestions for finding someone for 2nd set of eyes, continuity planning and maybe taking over investments if I’m out of the picture?
Boldin has “Boldin Advisors” as their top-tier service and they have a free exploratory session. I don’t use them, but I am aware of them. Since you’ve already put the data in their system, it would seem natural to at least do the free session before looking elsewhere. Other advisors are going to want to use their own system that they are familiar with.
If you’re really looking for someone to go over your tax planning, SS, IRMAA, you probably would do better with a CPA that works in those areas than a planner.
I’m wrestling with continuity planning, my first thinking is how much of what I’ve been doing isn’t absolutely necessary and can be replaced by something simpler.
Fought the IRMAA battle, SS claiming strategy, medicare transition (wife) and ACA sign-up/credits (me) battles already this year. Probably OK on taxes, main need is just a 2nd set of eyes and continuity/someone other than me who knows the plans and can run things if need be.
I’m with you on simplification.
Financial advisor here. I find it amusing that of all the comments so far, the focus is on fees and returns. That’s all fine and good, but the best advisors also manage people’s behaviors and act as dispassionate stewards of people’s money. Don’t sell this part short. If the writer has an advisor they like and trust (for over 20 years!) then I’d say they are in a pretty good spot. Now, as a husband & wife approach retirement, the conversation shifts (which it should have started doing 10-15 years ago) from the accumulation phase to the distribution phase. And these two phases of life require VERY different strategies. Is your advisor speaking to you about how you can reduce effectivec tax rates in the future? Is your advisor discussing estate planning strategies? Is your advisor talking with you about how you might handle a future need like on-going custodial care when one or both of you become inable to look after yourselves? What about social security claiming strategies? If you are one or two years away from retiring and you advisor has NOT initiated these discussions, you may want to shop around for a new advisor. Notice that none of what I say is focused on AUM or fees.
But you illustrate the problem. I have no problem with the idea of an adviser in the role of trusted expert friend doing the challenging and asking appropriate thought provoking questions. On the clock at a reasonable rate. But when it turns into a sales opportunity for a recurring revenue stream for them then the trust element breaks down.
I’ve had those introductory chats and while some have been honest enough to say “sounds like you’re broadly on top of things” others have been far more aggressive as in ” if you don’t have someone/us doing this for you there is no way you’ll be diversified enough”. Reality I know with some of the larger outfits is I’d just be shoved into some robo portfolio anyway and bored to tears by a bombardment of ass covering quarterly reports.
That’s all well and good, but it’s not worth a quarter of a million dollars, which is what a 1% AUM fee would have cost me since I took early retirement, plus lost compounding.
I was the DIY financial person in our marriage for 30+ years until about 5 years ago. That’s when my wife’s father died and his kids had to sort through all the finances left behind. My wife doesn’t want to deal with ours (if I go first), nor leave it for our kids to deal with. We found a local fiduciary wealth advisor (harder than expected, since we live a mountain town in the west) who we both like and trust.
I view his fee structure in a similar vein as I look at insurance costs: I’m paying for a continuing service after I’m gone and we sleep better at night. There’s been several unexpected benefits too. Having a third set of “eyes” looking at our finances has subtly changed our behavior (somehow we’re saving more and spending less). We’ve also used him in bouncing financial ideas (for example, using inherited money to pay off a mortgage and timing of retirement). Additionally, we have had introductory meetings with the advisor and our adult kids, where they now know what we have and what our plans are. We’ve been completely transparent with them on our finances, as there’s a living trust involved and one of our kids is disabled.
The big question about using an advisor is whether or not you feel capable of doing the work involved in dealing with your financial assets following the advice of your advisor, or whether you want the advisor to do it. Some advisors will only deal with clients where they actually manage the assets. Others just bill you hourly for the time they need to come up with a plan, including asset allocations. For the latter group, you might spend several thousand dollars getting an initial plan at say $300/hour. Then, you can get follow-ups as you deem necessary on a less than annual basis.
I retired in 2001 at age 55, came up with my own plan managing the assets without external advice until 2006. I then had a single consultation with an hourly advisor to get some feedback, fine tune the plan, discuss SS etc. The changes suggested at that time were minor. I know many folks who have a 1% advisor. My results are similar to theirs except that I saved all those 1% fees. Now that I am approaching 80, I have a flat fee advisor who is dong the managing. My wife isn’t interested, and my children are very busy with their own careers. I have had a few health scares and while I still feel capable of doing it myself, if I did have something more serious happen, things are in good hands. Index funds make self-management pretty easy once you know your risk tolerance, and have an asset allocation plan.
Many planners charge less for larger balances. If you have over $1M, I would say 0.6% is the market price. You may still have large balances in a 401K that are not subject to fees until you roll them over to a IRA, so you may be in for a big jump in cost. Alternative is flat fee at 300-500 hour every few years totaling $1500-$3000.
I have no need for financial advice myself. But I worry about my wife if I die first. She would be overwhelmed without professional advice and management.
A company owned by a friend at church does AUM at cost of .8% for investment only and .85% which includes financial/tax planning and tax preparation. Our portfolio is over $1.8m. I am thinking of letting them manage my Roth which has over $700k. That way I can reduce my cost somewhat and position the portfolio for my wife if I pass first.
My investment cost is close to zero as I invest in no or low cost index funds, treasuries and CDs. It is something of a shock to pay $6k for something I can do myself, but developing a relationship now will give my wife more comfort in continuing that relationship.
My number one concern with anyone managing our money is trust. I trust my friend and I know people who have invested with him for years. My wife would never invest with someone she cannot be eyeball to eyeball with periodically (I like that too).
Another advantage of this approach is tax planning and preparation for my wife. They have an inhouse CPA, who is another friend. Our taxes are not that complicated but they have a lot of moving parts. I do our taxes but she will need help if she is by herself.
Our children will inherit most of these funds because we live off of my pension and our SS income. We are 80 and 81, so they will likely inherit these funds within the next 10 years. Neither is knowledgeable of investments although my daughter has a degree in finance, but she has been a SAHM because of a special needs child. So they could continue with this firm if they choose.
Thoughts before I pull the trigger.
If your investments consist only of index funds, CDs and Treasuries (which could be replaced by another index fund or at most two), what makes you think they are too complicated for your wife or daughter to handle? How many funds do you have? Are you aware that women are held to be better investors than men?
My wife certainly knows more about “investing” than I do.
She has a Masters Degree in Finance with a concentration in Money and Banking. All paid for – except books – by the large bank where she worked as a Trust manager at before we had our first child.
I like keeping track of the investments she makes.
I am not criticizing women in general. As a group, they are just as capable as men. But I know my wife and son. Neither has any interest in investments. My wife thinks investing in the stock market is gambling. Our portfolio is low cost index funds, mostly VTI, and TIPS, CDs and treasuries. Tax planning and management is also an important part that the investment firm will handle. She will need a lot of hand holding to deal with our investments and taxes. My daughter has a severely disabled daughter (age 24) whom she cares for. She is capable but does not have the time to do this.
I’m very sorry to hear that your granddaughter is disabled. That must have been a terrible blow to your daughter and you as well. I know it is daily struggle and my thoughts go out to you and your family.
There is no reason to spend a lot of time on it, and while I don’t think investing in the stock market is a complete gamble I see no reason to spend a lot of time thinking about it – I simply hold an S&P index fund, an extended market index fund and an international index fund. Once a year I take RMDs, which requires a phone call to Vanguard (which has already calculated the amount due) plus mailing the QCD checks. At that time I will rebalance if necessary. When one of my CDs expires I buy another. Once a year I collect the paperwork needed for my CPA to do my taxes. What else do you think needs doing?
Our advisor rebalances our Prudential Annuities yearly. However, they have added a $500 yearly cost for advice. Over 20 years, we have discussed life choices, but now in deep retirement, they are using AI to predict our future economic life and it just does not fit our current dilemmas. We cannot shift the annuities as we are getting monthly income from them.
Unfortunately, it sounds like you were sold a variable annuity.
So you pay for the advice whether you want it or not?
Schwab, initial charge, $300, then $30.00 per month, Garrett Planning Network, XY Planning Network or the Fee Only Network. Vanguard also has advisors.
“We have been with a financial advisor for 2o years. The advisor is calling all the shots. Our retirement accounts have done very well. We are currently paying a 1% assets under management fee.”
1% AUM x 20 years results in about 18% less in assets than had you done it yourself with broad market index funds. Just FYI.
That would be $180,000 less on a potential million dollar portfolio after 20 years, not chump change.
Here’s a resource:
The National Association of Personal Financial Advisors (NAPFA). This is for fee only advisors. I would make sure anyone you hire is a fiduciary.
If you like your advisor and feel he is giving you good advice – – – then tell him he needs to reduce his fee (be prepared to tell him what you would accept) or you will begin the search for an alternative.
I don’t generally use an advisor. Almost all my portfolio is in very low cost index funds at Vanguard (the few exceptions would incur capital gains taxes if sold). Every few years I hire a fee-for-service planner to check that I am on track and unlikely to run out of money. The last one cost me $1,500 and confirmed that at persistent 5% inflation I needed a Plan B (stop traveling and move to a smaller apartment at my retirement community) but would otherwise be fine.
I once calculated how much it would have cost me to pay a 1% AUM fee over the preceeding 20+ years and the result was frightening. And that was without the lost compounding.
There are sites that list fee-only advisors – maybe someone else here can list them. Also, only deal with an advisor operating as a fiduciary.
I like this way of using an advisor and have considered it as well. Sort of a “Here’s what we’re doing, and here are our questions…”.
You may want to look into Facet (www.facet.com). They offer three price levels for flat fee advising — $2k, $3k, and $6k per year. You must commit to one level for a year, but can then change levels up or down. All 3 levels include investment management as well as personal financial advice. The $3k offers two meetings per year starting in year 2, and the $6k offer quarterly meetings. Only the $6k plan includes Roth conversion and estate planning — the estate planning actually includes a will, trust, and the other necessary estate planning docs for your state– including a review from an attorney licensed in your state, to my understanding. Facet partners with Wealth.com — for estate planning services.
That said, I am not signed up with Facet yet, but am seriously considering this service. For the past year, I have been using a highly qualified solo planner (CFP, CFA, Wharton MBA, industry experience at Goldman Sachs, Fidelity, Schwab, etc.). I found him on the XY Planning Network, not a bad place to start looking for a flat fee advisor. My flat fee rate is $250/month based on retaining the responsibility to implement all investment advice I receive from my planner. The advice has been excellent generally, but I’m not sure about the fixed income allocations.
What I’ve learned over the last year is that I have not taken the time to use the software he has made available to me, which is “best of class” IMO. I also have difficulty “pulling the trigger” to actually implement some of his recommendations. For instance, my large (34%) cash position served me well during the stock and bond declines in 2022 – 2023, but that’s not where I need be invested as interest rates come down. So I may consider switching to Facet for these reasons.
While Jonathan Clements has never personally endorsed Adam Grossman (and I wouldn’t expect him to), the fact that he publishes Adam’s weekly newsletter on HD each Sunday suggests that he views him favorably.
https://www.mayport.com/
I did look carefully at Adam’s site because of what he has written here, and he also has a very interesting fee structure. He offers some of his writing for free through his website, so if you like what you read here….