Transferring from Financial Advisor

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bhinvirginia
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Joined: Mon Feb 19, 2018 10:54 am

Transferring from Financial Advisor

Post by bhinvirginia » Mon Feb 19, 2018 11:00 am

Hello,

I've been using a financial advisor for the last 15 years, traditional fee of 1% of AUM. My portfolio is now in the low seven figures, and am thinking it's time to cut down the fees. I've got 2 questions for the folks here:

1. At some point does it make sense to have a financial advisor? If I take it back over I would go with a 60/40 AA and put it in index funds for both retirement and taxable. My only hesitation is when you factor in tax planning, 529s, and other situations does having someone look over your finances make sense?

2. If I do transfer, any thoughts on Fidelity, Schwab, or Vanguard? Schwab index fees seem to be much lower than Vanguard now, with Fidelity more on par. I'm interested in a firm that makes the transfer easy and offers good tools on the website that I can use going forward.

Any thoughts are appreciated, thanks!

dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: Transferring from Financial Advisor

Post by dbr » Mon Feb 19, 2018 12:25 pm

bhinvirginia wrote:
Mon Feb 19, 2018 11:00 am

1. At some point does it make sense to have a financial advisor? If I take it back over I would go with a 60/40 AA and put it in index funds for both retirement and taxable. My only hesitation is when you factor in tax planning, 529s, and other situations does having someone look over your finances make sense?
My opinion is that it makes sense but not 1% AUM worth. If you are clever and very lucky you will find a planner that will charge a one-time fee to advise you but the chances are high that won't happen and you'll end up both spending a lot of money and getting bad advice, mainly to buy things that put money in someone else's pocket. This forum can provide very good advice. I don't know if something like Vanguard PAS is effective on all the planning issues people have. It is not appropriate and would be a bad idea to take tax or legal advice from a mutual fund company rather than from an accountant or attorney. In any case self education is a prerequisite for obtaining advice from any source.

mhalley
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Joined: Tue Nov 20, 2007 6:02 am

Re: Transferring from Financial Advisor

Post by mhalley » Mon Feb 19, 2018 12:57 pm

some people need the comfort of an FA, but 1% is a huge amount to give up. You could always do vanguard pas for a year at .3% until you feel you have a good handle on doing it yourself. There are many threads on the big 3 brokerages, you can’t go wrong with any of them as long as you realize that fidelity and schwab also have high fee options you need to avoid. Make an account with all three and explore their websites and see which one you like.
I like this quote from wci on fa:
. if you want an advisor at the lowest possible cost and with the fewest financial conflicts of interest, go take a look in the mirror on your way to the library to get some good investing books.

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Oak&Elm
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Location: Undisclosed Lake, MN

Re: Transferring from Financial Advisor

Post by Oak&Elm » Mon Feb 19, 2018 3:19 pm

OP,
Let’s just assume your low 7 figures is 1.3 MM. At .01% that’s $13k per year, after year, after year, you’re forking over-to your FA. Don’t you think it’s worth your time and money to educate yourself and just DIY. I’m guessing if you’re smart enough to have made that much money you’re smart enough to DIY. This isn’t hard work like deciding whether or not to re-roof your house. You can certainly do this, especially with the help of this forum

onourway
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Re: Transferring from Financial Advisor

Post by onourway » Mon Feb 19, 2018 3:23 pm

And it's even worse than just the $13k/year. That's $13k/year you aren't having reinvested into your portfolio. Let's say your ~$1.3M earns a return of 6% for the next 20 years. That's $4.17M you end up with. If your Financial Advisor trims 1% of that annually, you end up with $3.45M.

They'd better be awfully good for $720,000 worth of advice.

If you need planning or tax assistance, hire someone by the hour.

Silk McCue
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Re: Transferring from Financial Advisor

Post by Silk McCue » Mon Feb 19, 2018 3:30 pm

You could interview and hire a fee only advisor (you only pay for their time eg Garret Network) You want someone that will recommend a broadly diverse, low expense portfolio as is recommended here. You only need to engage them once if you do a comprehensive plan but would still have the option to pay for their time in the future if you are unable to determine the correct path. You can also post questions here and get feedback from folks. Dropping the AUM fee is absolutely in your best interest.

bikechuck
Posts: 371
Joined: Sun Aug 16, 2015 9:22 pm

Re: Transferring from Financial Advisor

Post by bikechuck » Mon Feb 19, 2018 4:04 pm

I meet with a TIAA advisor at no cost (part of a former employer's agreement) on occasion to have him review what I am doing. Note that most of my retirement funds are not invested through TIAA. I have received some excellent advice from him and he has never pressured me to move funds to TIAA.

I also use this forum and bounce questions off my local Bogleheads chapter members. I plan to take advantage of Vanguard's benefit of an annual review with a CFP soon though I have not done this in the past. My understanding is there is no charge for this as long as you have $500K invested with them.

I plan to pay an attorney to update my will and give me any additional advice they might have on managing my estate for my eventual demise in the near future. My estate is not large enough to incur estate taxes when that time comes so this should be very simple. That said I plan to do this and keep my ears open.

My wife's retirement funds are with Schwab and we plan to meet with them at some point for a discussion but we will not enter into any arrangement with them where they manage money for us in exchange for a fee.

I think that Vanguard, Schwab and Fidelity are all excellent and you cannot go wrong choosing between them. That said I would never invest all of my money with one institution. There is some small risk there could be a systems outage or attack at any company. That would likely eventually get sorted out but it could take time and happen when you need access to some funds. You can reduce that risk by investing your portfolio with at least two of these fine institutions.

rookie87
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Joined: Wed Feb 07, 2018 12:57 pm

Re: Transferring from Financial Advisor

Post by rookie87 » Mon Feb 19, 2018 7:49 pm

I just went through this exercise and when I took a good look at it I realized it was a no brainer for me. The AUM fee was the deal breaker. Just think, no matter what you do when you invest on your own your already 1% ahead of where you were with the FA.

I transferred my assests to Vanguard, at my assest level (+500,000) they provided me with a free teleconference with a CFP. We spoke for over an hour and it was quite informative. Frankly it was a better discussion than I had ever had with my FA. Although I informed him I was going with the 3 fund model he booked us for one more meeting (free) once my accounts have all settled at Vanguard. I will use this session to bounce a few more questions off him but I am ready to go on my own so I won't be signing up for the PAS service. To make my life even easier I have decided to forgo the 3 fund model and just put everything in VSCGX, no rebalancing needed.

Make the break!

bhinvirginia
Posts: 3
Joined: Mon Feb 19, 2018 10:54 am

Re: Transferring from Financial Advisor

Post by bhinvirginia » Mon Feb 19, 2018 8:28 pm

Thanks everyone! Such great advice and very much validated what I was thinking.

MrMojoRisin
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Joined: Tue Dec 01, 2015 7:25 pm

Re: Transferring from Financial Advisor

Post by MrMojoRisin » Mon Feb 19, 2018 9:58 pm

I found a true "Hourly Fee Only" FP using the Garrett Planning Network. I live in Oklahoma and he does business in Texas but it was worth the drive across the Red River for me. Very pleased with the service and attention to detail we were given. Plan on going back every few years for a tune up.

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burt
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Re: Transferring from Financial Advisor

Post by burt » Tue Feb 20, 2018 7:52 am

onourway wrote:
Mon Feb 19, 2018 3:23 pm
And it's even worse than just the $13k/year. That's $13k/year you aren't having reinvested into your portfolio. Let's say your ~$1.3M earns a return of 6% for the next 20 years. That's $4.17M you end up with. If your Financial Advisor trims 1% of that annually, you end up with $3.45M.

They'd better be awfully good for $720,000 worth of advice.

If you need planning or tax assistance, hire someone by the hour.
+1
$720,000 that gets your attention.
Could be even worse. Front end loads? High expense funds? Variable annuities?
Or even worse... for $13k/year are you getting sound advice or are you sold products which benefit the FA ?

burt

capthawk
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Joined: Wed Nov 08, 2017 2:49 pm

Re: Transferring from Financial Advisor

Post by capthawk » Tue Feb 20, 2018 11:44 am

If you have $13,000 of your own money in cash IN YOUR HAND, would you just reach out and put it in your advisors hand because of his "advice"?

amateurnovice
Posts: 167
Joined: Wed Mar 11, 2015 1:56 pm

Re: Transferring from Financial Advisor

Post by amateurnovice » Tue Feb 20, 2018 3:10 pm

The only reason I can think to have one is if certain criteria for the client are met and the client is the one to decide on those criteria.

I think that being a high net worth or ultra high net worth investor and relatively unsophisticated would be part of that criteria.

Secondly, if you have a spouse or children who will inherit the assets someday, a brick-and-mortar office with an in-person financial advisor will come in handy when it's time to pass on those assets. You might have some peace of mind knowing that they will be able to go directly to a fiduciary with whom you've cultivated a business relationship. It is also important to leave information on who to contact if they feel the need to file a complaint (SEC or state jurisdiction securities authority).

1% is fairly common, but you may be able to negotiate a lower fee, especially if the advisor is interested in keeping your business.

Also, the trading strategy involved is something to consider. If the advisor generates a required amount of monthly income using dividend equities or different time interval bonds, you may want to consider keeping him. Trading those on your own in a self-guided account could rack up high commissions. Then again, if your preferred strategy is to buy and hold mutual funds and reinvest capital gains and dividends, a self-guided account might work for you.

There are plenty of scenarios to consider before switching.

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