Financial Advisors/Planners

[Neal]

I hear of financial planners and advisors yet I'm hesitant to pay someone to look into my finances and probably tell me what I already know. But what I don't know is what they do for you or how much they cost. Are they worth it? What do they do for you? Is it valuable or just someone after your money to tell you about your money?

My issues is that I invest, I save, I rarely spend that money. Getting my RV is the first time I've ever drawn from my investments. My "fear" is not getting to use my money saved (investments) etc. Money goes in but never comes out, money grows, but I don't know if I should spend it, when to spend it, etc. Someone is going to benefit from my money and not me is an honest concern.

I welcome advice from the wiser ones in the group that have been down this path that can offer advice, some of which I know have or had careers in the above.

 

[sheridany]

There are couple of ways to go about this. One is just "pure" financial planning where they evaluate your situation, timeline to retirement and they build a plan that you later execute on. Typically an hourly fee arrangement with a full financial plan as the end product you get. You make your own selections from the plan recommendations.

The other realm is both which is financial planning coupled with advisory/portfolio management where they are making actual investment recommendations (buy AMZ) when to buy sell etc. Typical compensation arrangement in these are usually a sliding scale % of assets under management. Controls are set up based on your requirements who enters the orders and who approves etc. The key in all this is find the right person/firm etc that you really trust and have fully reviewed where you feel comfortable sharing your personal financial information and feel confident they can deliver the results. If you decide to go down this road, spend the time to find the right one and it may take a few months in a rather involved search process. There are other hybrid arrangement that can be arranged based on your needs. It's a good idea to always have a plan no matter how you choose to get it.

 

[AbdRahim]

I would not be without one. I read maybe 1/2 a day about investments and finances. The do this all day long. There is no way I can be as informed as they. Two of the top companies are Edward Jones and Raymond St. James. When I retired, I only had about 1/2 of what I needed as a minimum. I split whatever I had between two financial planners. After 18 months, the one that made money won my long term business for the entire amount. He has done a wonderful job. Without his services, I would likely not be RV'ing.

One caveat; a financial planner must be managed. You can't just give him your money and expect him to make you rich. Schedule regular appointments to review everything and make changes accordingly.

 

[Akdare]

As most of you know, I’m a retired Financial Advisor/Certified Financial Planner. Good advice given from the other forum members this far. I managed my own financial plan and investments during my career. I do not manage them now; it’s managed by my old business partner who bought my book of business.

First and foremost, you must have a financial plan, the advisor will create one based on input from you. It’s only as good as the data you provide. This is the financial equivalent of undressing for your annual physical. And it‘s not just hard data, there will be many questions that fall into the “What do you want to be when you grow up?” category.

If you go with an advisor who not only develops the plan, but manages the investments as well (what I did, and what I recommend); they will offer you either commission based pricing or fee based pricing. It’s usually 1% of assets under management. And usually cheaper, at least in the beginning. I rarely took on a new client whose portfolio was in good shape, asset class wise...so lots of changes need to be made.

You can ask most any financial advisor, engineers are some of the most difficult clients. I lost count of how many engineers I inherited from other advisors. They think because there are numbers involved, they know it. I say this without prejudice, because my undergraduate is in electrical engineering. When I started as an advisor, I thought it was all math, too. I was wrong. It’s so much more, and was a humbling experience, and one I think that made me a better human being.

 

[Neal]

Thanks! I fear someone managing my portfolios because of the one time I tried this. While I have to give them credit for many of their picks I remember asking them to buy Apple stock. They said it was not something they are buying at this time (I think it was around 2003-5'ish). I said buy it! It is my most successful stock, had they not bought it then...well, who knows. They probably wouldn't have recommended Amazon either due to the high volatility of that stock, but we all know how that turned out, and yeah, I sure wish I had never sold what I had back in the last bubble crash. So it comes down to risk I'm sure but it ultimately comes down to trust. I'm not sure I trust someone to manage the portfolio, I'd be their worst nightmare of a micro-manager type I think or would want approval on any buys or sells at the very least. As to the other parts of financial planning I just don't know, being single no kids, I don't know what to plan for. I don't have any desires for travel beyond RVing (i.e. no international desires, no cruise desires) so I quite frankly don't have any desires that require the spending of the money at this time other than RV related. I have a feeling I'm saving/investing for health care as I'm sure any health issues they're going to go after my money saved before insurance/government. Sometimes I wonder if having no money is better!

 

[sheridany]

I am not a financial planner so take what I write with a grain of salt.

The process of having a plan is not just about the money but it should include your company and eventually you may sell merge etc and or if you retire how is the company going to carry on. Succession planning And corporate hierarchy/structure should be part of the plan to run the company when you want to step aside.

Another big aspect is retirement and figuring out where and how much you will need is important. And if you have more than you could possibly spend and you don’t have kids you still have to figure out a plan for your net worth and what to do with it. Without getting personal, if you have family, you have to think long and hard about who gets what and what the implications are. Are they responsible etc? I have seen some bad outcomes from things like this.

Like you said, it comes down to trust and risk management and how you want to manage your money but a plan is essential. Also financial planning is evolutionary and ongoing and should be updated/reviewed/changed at some interval.

 

[Neal]

Outstanding replies all, thank you! How do you suggest locating and screening a financial planner?

 

[sheridany]

I am going to defer to @Akdare since he worked in the industry but talking to business owners like you might yield some firms/people to look at. Another option for comparison is your brokerage house and many offer those services. Depending on your relationship with them, they might do a plan for a reduced cost.

Some links to peruse.

CFP

FINRA

 

[texskeet]

Ever company that manages other peoples money has bad advisors , medium advisors, and good advisors. The company name means nothing. It is the person sitting across the desk from you. Take to people you know. Don't ask if they like him or her but is your account is going up and for how many years. How is your account doing in both good and bad times. That is the best way to fine the right person.

 

[Neal]

Another option for comparison is your brokerage house and many offer those services.

I use TD Ameritrade and that's how I did find the first one. TD Ameritrade no longer uses them, for the same reason(s) I dropped them. That doesn't mean it's not an avenue, it is, thanks for reminding me of that.

 

[Akdare]

I actually have a recommendation for you. Just sent you a PM

 

[RKins]

The companies I worked at all used the 401k provider of their choice but the one most often used was Fidelity, so I used Fidelity for about the past 20 years. At first I did my own selections from their funds and did ok, investing 17% annually for 30 years - usually just buried my head in the sand and threw money at it, knowing that I was a ways off from retirement and I could weather the ups and downs (like 2008 - ouch).
As I neared retirement, the planner side became much more important as I needed to have a plan for the future support of my nest egg. I contacted Fidelity, made an appointment and went in, several times. We got all of our info that he requested and then "undressed", as was mentioned earlier and gave him all the financial assets (both now and upcoming, like SSA) / monthly spend info we had or predicted. He also asked of my nestegg, both now and future, how much I wanted to be risk free and how much risk I could tolerate for the rest. We locked a portion in ladder CDs and annuities to keep that money safe and left the remainder in the market to keep growing and supporting my nest egg. Since my nest egg is with Fidelity, everything we decided, we bought right then and there and he stuffed all that info into his planning software and out came the plan for me to live by until I was 92. It showed me what my withdrawal amount would be year over year based on the info we provided him and how much of my nestegg is still there based on my investment strategy. This kind of planning I could not have done by myself and I'm glad I have him as an advisor. Just before the pandemic really took off I met with him and he explained if the stuff hit the fan, how much actual money I could lose and how much is safe. I started panicking as I saw my egg drop by $150k in like a week and I contacted him - he said that I should stay calm, we had a plan and had talked all the scenarios through, just stay calm. Boy that was hard but now the egg is almost back to where it was before the big dive, in March. As they say, you don't lose in a down market until you sell.
So my advise is having a plan is good. If you're many years away from retirement, make a plan on the % you want to invest every pay check and stick with it. I was with a 401k provider so I was investing in funds, not individual stocks. As you get closer to retirement, you need the help of a CFP to help you. Once it's done, you just ride the waves of that planning. My $.02