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Every few years I hire a fee-for-service financial planner, operating as a fiduciary, to run the numbers for me. Since I invest almost exclusively in low cost index mutual funds I do not need more than that. I recently calculated how much a 1% AUM would have cost me over the twenty-two years since I retired, and I cannot conceive that any advisor would have been worth going on for a quarter of a million dollars. And that didn’t include lost compounding or the fees for the advisor’s choice of funds or stock trades.
Most recently I had an advisor check whether I can afford the CCRC I plan to enter next year, at 2%, 4% and 5% inflation, which led me to develop Plan B if inflation stays high (a one bedroom apartment instead of two bedrooms). On the other hand I recommended the advisor to friends who really need some hand-holding and they seem very happy.
In my 30’s opened Charles Swabb account researched and found best mutual fund manager with value vesting philosophy who was manager of year Bill Nygren. Dumped every spare penny into fund for 10 years plus till portfolio rose to 600,000. Then asked people who had a lot more money than me who is a good investment guy to use and found the one that people I trusted said will look out for me above himself. 20 years later letting him do my investing have more money than I will ever need and allows me to feed my addiction…….Muscle cars and of course my wife. (Not necessarily in that order)
For my wife and I, as we were approaching retirement-we hired a flat fee only retirement specialist. The planning seemed far more complex-with Roth conversions, when to take SS and pensions, IRMAA, asset allocation, and basically how to generate a sustainable paycheck. Hiring an FA got us on the same page, provides my wife with someone in corner who knows our finances, and gives both peace of mind and more time and ability to enjoy our well-earned retirement.
When you’re rich. 😁 More generally, when you have more money than time.
If you don’t have the interest, or won’t make the time, to understand the complexities of FP, it makes sense to find a good, independent FA. I’ve seen dramatically how having a good plan, and following it, is so superior to no plan. Also, if you have complex issues, like disabled children, finding an expert is critical. I know an elder law attorney who has helped a number of friends navigate the complex Medicaid rules and help them with sick parents.
I moved a portion of my assets to trust company once I got to financial independence and the complexity of tax planning, asset allocation and wealth transference strategies was more than I could manage.
Time and complexity. I found it super easy to effectively manage my portfolio in my 20s – maxing out tax-advantaged accounts and doing small tax-loss harvesting. Index funds. Brokerage account, HSA. Easy peasy.
As I’ve gotten into my 30s and have my own LLC, there are some complex issues. I should have invested a little time with a CPA/tax advisor a year or two ago. No big hiccups, but there could have been some opportunities to save more.
I now find myself seeing the value of the behavioral benefits of working with an advisor. Being more hands-off now that my portfolio has grown is probably a good thing to keep my emotions out of play. So I should high-tail it to a CFP, but my controlling nature/bias is stopping me. For now.
When you have neither the time nor the interest in doing it yourself.
I think “hiring a financial advisor” is a pretty open-ended term. Wealth manager, investment manager, financial planner, life insurance advisor all can serve a purpose at different life stages. Then two important questions need to be asked: do you trust them to do right for you as a fiducuary and how much should you pay.
AND, how do you find the right person(s)? I hate shopping for insurance; I can only imagine the pain in filtering thru all the choices in persons here listed.
Well in early 2016 (retired 4/2016), I interviewed 16 RIA and Investment Advisors as well as Vanguard, which held my 401k money. The least expensive was Vanguard at 0.40% per annum and the others in-between with most 1% up to 1.5%. And that was “just for” investing the money, no estate planning, no financial planning, and no tax advice… nothing but taking discretionary control of my money and investing it without my “PRIOR consent”. Two actually said, I should invest my own money because I used to be a stockbroker, had been a corporate Treasurer analyst, had a Masters in Finance plus 40 years business experience. And, the main person I spoke to was Randy L. Thurman, CFP, CPA/PFS in OKC, great guy and great books on investing. At the time, I read his ‘The All-Weather Retirement Portfolio’, great primer on retirement investing. Thus, I invest my own money, don’t try to “beat” the market and hit singles and doubles without going for homeruns. I also believe in the three bucket method of investing. Research it and you will see why. GLTA!