Professional Financial Planning

[Buster]

I've got my annual "check up" with my financial planner next month. I'm still tracking to be about 2 1/2 years until retirement.

My question to those of you who have retired is - do you feel there is enough information out on the internet that isn't a "sales pitch" to do the planning yourself with your new found time? As I'm getting older, I realize that this stuff really isn't that complicated. I may miss an investment here or there, but in reality it's about staying diligent with your risk tolerance and being well diversified.

I haven't felt I had the time to do this properly while working, but I'm thinking I can do it once I retire. Has anybody who has done this regretted the decision and gone back to professional planning?

 

[TJ&LadyDi]

I think the difference between having a pro manage your finances and doing it yourself boils down to the rate of return and effective tax planning. We retired in 2005 and did it ourselves for a couple of years, then went back to using a CPA/Certified Financial Planner. The rate of return went up about 3 percent for us. The best thing about it has been that I don't have to spend time doing research and shifting investments around. The cost of the CPA/CFP has been well below the increased rate of return and tax savings.

YMMV

TJ

 

[Buster]

Sounds like you made the right move going back to a professional. I'm guessing that 2007/2008 timeframe may have cause a bit of stress. Thanks for the input.

 

[Akdare]

OMG. A thread where I won’t get chastised for going off topic.

I’m a retired Financial Advisor & Certified Financial Planner. So important to have a professional do a proper Financial Plan for you, really get to know you, and guide you to the correct asset allocation suitable to your goals, risk tolerance, etc.

I retired this year, in February. Of course, before I retired, I did my own, but created my own financial plan using the very good software I had available to me. A year before I retired, I selected a fellow broker, that I believed shared my investment philosophy to take over my book of business (I.e. buy my book). I was also choosing the person that would manage my financial plan/investments post retirement. I still take a look from time to time to make sure I’m on track, as I can see it online. But, I no longer actively manage it. I don’t do my own taxes either, I have a professional do it.

It is far more complicated than it looks...there are a lot of moving parts to a financial plan. A good CFP will make it look easy, and make complicated concepts look easier than it really is. Example: what is the correct retirement plan for a self-employed person?

If you’re shopping for a new financial advisor, I would look for one that’s a CFP. The exam is, without a doubt, the hardest thing I’ve ever done; and I’m pretty smart (BSEE, MBA). I had clients that were CPA’s and Estate Attorneys that confided in me that they were hiring me because they could not pass the test. The pass rate when I took the test was only 30%.

I’m happy to answer any specific questions on this thread if you think it would benefit the entire group, or by PM.

 

[Buster]

Very insightful that a retired financial planner would choose to not do that for themselves in retirement. Tells me a lot. My current CFP is not a CPA, so I don't get the tax planning benefit. My previous one was, but didn't feel the rate of return on the investments offset the tax planning benefits.

WIth retirement around the corner, maybe the answer is to get someone who can do both again (and is good at both) or find a good accountant to help me through the early years when tax planning will be the heaviest.

 

[Akdare]

Taxes are a big part of a CFP’s training. Tax free investments (municipal bonds) have a lower rate of return than taxable investments (gross simplification). You can figure the taxable equivalent yield to see if you would get a higher income on taxable or tax free investments. I could give you the formula, but it would probably be easier to use this calculator. https://www.calcxml.com/calculators/inc11. Who cares if you give Uncle Sam some money as long as there is more in your pocket.

Tax free bonds are attractive if you have a high income, either earned or passive (investments), or live in a state with income taxes. Living in Texas, I don’t have to worry about state income tax, but I had clients all over the country...California comes to mind for the state tax side.

The most crucial transition is moving into retirement...going from the accumulation phase to the distribution phase. I started 2 years before I retired moving my investments into income-producing securities, while preserving the same asset allocation. It’s not only a difficult transition for you, but some financial advisors have trouble with it too.

 

[deaton]

I haven't felt I had the time to do this properly while working, but I'm thinking I can do it once I retire. Has anybody who has done this regretted the decision and gone back to professional planning?

I’m nowhere close to being a CFP. Nor am I a CPA. But I did work as a Managing Partner in an Investment banking company and later served as a chief Financial Officer (CFO) for some fairly large companies.

My approach to managing my investments is just the opposite. For over thirty years I managed all my investing activity myself. In those days, I felt “plugged in” to what was happening in the financial world. I was reading all the journals and other business pubs on a daily basis and staying ahead of the curve. Made a lot of money.

As I approached retirement, it occurred to me that I was tired of having to say on top of my accounts on a daily basis. So I decided to engage a professional CFP. That was six years ago.

Although I have changed advisers twice, overall it’s been a good experience. The two guys I have now are making good progress, but in this economy, that’s not such a hard task. I could not imagine having to take up that burden again. It would wreck my retirement. I stay on top of their activity and I’ve become a fairly conservative investor. It’s working for me.