Sister wants advice since I disagreed with her financial advisers.

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ohai
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by ohai »

"Main goal is growing the accounts to 7M-10M by retirement with the best tax savings possible."

This goal is laughable with their current track record and balance sheet. They will need a complete change in their approach to finances to get anywhere near this. Whatever their income is does not matter if they are the type to take out $65k of car loans before paying off student debt at 6%. Their lifestyle cost are almost guaranteed to increase with income.

They don't need a one time financial plan suggestion as they need an ideological change in their attitude towards money. What will help are books and interaction with people who have a mind set towards long term wealth accumulation.
GrowthSeeker
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by GrowthSeeker »

offthetop wrote: Wed Jan 01, 2020 5:50 pm The funds do not matter as they will be selling to move to vanguard or another local adviser unless I can talk them into not paying a 1.25% fee on accounts by doing the 3 or 4 fund that is discussed here.
Assuming a move is to be made, don't sell the funds at EJ then move cash. Have the new account (VG, Fido etc) pull the entire account(s) in kind trustee to trustee transfer; then sell at the new location. Price it out both ways but likely to be less costly this way. Also, no need to explain anything to the EJ guy and give him time to put on the hard sell tactics.
Also: depending on what funds they are in now, the BH'ers may find more bad things to say about EJ. It's likely a needlessly complicated, large number of funds; I bet a lot have high expense ratios; hopefully (probably) none with loads.
Bobby206 wrote: Wed Jan 01, 2020 7:05 pm I would argue the counter that they should keep everything at Ed Jones. The accounts are so small that the 1.25% is nothing in real dollars and she likes the advice and comfort her advisor gives her. Not everybody is a DIYer. Some people like having their own advisor to reach out to. We on BH tend to forget this and assume everybody thinks like we mostly do. I think she should keep it as is. Well, not the life insurance retirement nonsense but otherwise I'd stay with Ed. Just my two cents.
Here's why this is bad advice. While it is true that with smaller accounts the AUM fee is smaller, there are two components to getting the financial boat to the destination: speed and direction. The EJ advice points the ship in the wrong direction AND the high fees are a frictional force slowing down the speed. Sure, it's nice that at low speed the friction is small, but in time the friction will grow and the boat will be further off course.

Edit: at age 33 she may not have been earning her current salary for very long. Depending on her specialty, the longest she could have been in practice is maybe 5 or 6 years. Maybe just a few years.
Last edited by GrowthSeeker on Thu Jan 02, 2020 9:26 am, edited 1 time in total.
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Stinky
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Stinky »

offthetop wrote: Wed Jan 01, 2020 5:50 pm
Currently they are being told that they need to start a LIRP (Life Insurance Retirement Plan) to do any saving so they are unsure what to do with extra income.
LIRP is the worst idea in your post. (OK, maybe tied with others for the worst.)

If they have the funds for savings in a taxable account, they would be well-served to be in broad, low-cost, index funds. Total Stock Market, Total International Market, Total Bond Market, etc.

While term life insurance is a great product, mixing insurance and investment in a LIRP is a horrible idea. High fees, limited flexibility, tax inefficient, etc. The financial advisor that recommended a LIRP should be fired, on that recommendation alone.
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onourway
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by onourway »

To put some numbers to their retirement plan - they currently have $205k in retirement assets (half of that inherited...).

In order to reach $7M they will need to contribute $75k annually for the next 30 years and get a 6% real return. That’s a pretty tall order given their current order of operations.

It’s important to realize how important time is in one’s investment returns. Early contributions matter a LOT more than late contributions.

This article from Vanguard covers that point nicely.

https://investor.vanguard.com/retiremen ... n-to-start

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lkar
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by lkar »

onourway wrote: Thu Jan 02, 2020 9:07 am The replies in this sort of situation will tend to be a little harsh, so I hope she can see her way through that. The position they are in is not uncommon - rather it’s likely the norm for most in their situation. You work hard to get through your education and land a big job, and you want to splurge a bit.

The advice here will try to help you to see the larger picture. You should have the ability to drive nice vehicles and own a nice home, etc. But that should come after your financial house is fully in order. Taking a few more years to get everything sorted out, get used to living on a budget, saving enough, etc. will not only put your retirement goals on track, but will make it so you no longer need to rely on debt to acquire the things you want - cars, vacations, down payments, etc will all be paid for in cash (or at least financed but backed by the cash in the bank or investments). This is the much more stable way to run your financial life in the long-term.

Good luck!
Yeah, I think the reason it sounds harsh is because there are so so many 50 to 60 somethings who now have the incentive to dig deep into this stuff who, if honest, would quickly admit “I wish I had known this when I was 35.”

I read this story and I see a little of my 30 year old self and I kind of wish I could go backwards and talk to him. I estimate I could have saved myself 4 to 7 years of working. And it is really hard to make a 30 something truly understand how valuable a year feels when you are older than it does when you are younger.

So, it isn’t harshness as much as a deeply certain feeling that she just doesn’t know what she doesn’t know right now and will deeply wish she had known earlier. All it takes is a week of feeling that way to understand why this can sound like proselytizing.
EnjoyIt
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by EnjoyIt »

Ivygirl wrote: Thu Jan 02, 2020 5:28 am
Grt2bOutdoors wrote: Thu Jan 02, 2020 5:18 am
mw1739 wrote: Wed Jan 01, 2020 8:05 pm What a mess. Frankly I would steer clear of this situation. She seems like the type that will blame you when the market underperforms. If you must help, here is what I would focus on: Where is the rest of your sisters money going after their ~ $96k in expenses. Even after taxes, I would expect at least another $50k to throw at debt or retirement. I agree with others that say she needs to implement some form of small biz retirement plan. Also her life insurance is too expensive and too little. Similar age here and my wife and I have 2.75 million for a similar cost.

Totally agree on the lack of sufficient life insurance. The sister is the main breadwinner, has 2 kids and a boatload of debt. At the minimum she needs $2 million. Buy term life insurance though term4sale.com or give Zander.com a try. Buy the cheapest 20 year policy. How about disability insurance? Does she have one? Ditch Edward Jones. 1.25% for 20 years is 25% of her savings going to the advisor- does that sound good to her? Over 30 years it will cost her close to 40% of what could have been a healthy chunk of retirement savings, all in the pocket of her “nice, sweet, kind EJ advisor”. If she wants to accumulate 7-10 million she is going to have to save a boatload of money, first thing is to cut expenses to the bone including any middlemen grabbing an unfair piece of the pie.
While it is true the EJ advisor is suboptimal from a purely financial standpoint, this lady is super-busy. She wants an advisor to take one of the loads off her, the same way she might hire someone to take care of the lawn, clean the house, or deliver her groceries. If a person wants personal service, they have to pay. If you want someone to pick up the phone when you call, listen, and care about your concerns when you need them, that is going to cost. It is not irrational for a very high earning couple to pay for this service. I realize this is a minority opinion here, but little ones in the household having needs on top of two busy careers and a lot of driving around - Mr. EJ could well seem a godsend.
There are far better lower cost advisors out there. Mr. EJ is a crook who has no interest in doing anything positive for the OP's sister. They should run as fast as possible. If they need an advisor, use Vanguard's at 0.3% AUM instead of 1.25% and they will be placed in index funds that are under .2% fees as opposed to 1% or more with 5.25% loads. There needs to be a special place in hell for EJ who steal money from their clients while putting on a friendly act. They are scam artists plain and simple.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
dbr
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by dbr »

EnjoyIt wrote: Thu Jan 02, 2020 10:31 am
While it is true the EJ advisor is suboptimal from a purely financial standpoint, this lady is super-busy. She wants an advisor to take one of the loads off her, the same way she might hire someone to take care of the lawn, clean the house, or deliver her groceries. If a person wants personal service, they have to pay. If you want someone to pick up the phone when you call, listen, and care about your concerns when you need them, that is going to cost. It is not irrational for a very high earning couple to pay for this service. I realize this is a minority opinion here, but little ones in the household having needs on top of two busy careers and a lot of driving around - Mr. EJ could well seem a godsend.
There are far better lower cost advisors out there. Mr. EJ is a crook who has no interest in doing anything positive for the OP's sister. They should run as fast as possible. If they need an advisor, use Vanguard's at 0.3% AUM instead of 1.25% and they will be placed in index funds that are under .2% fees as opposed to 1% or more with 5.25% loads. There needs to be a special place in hell for EJ who steal money from their clients while putting on a friendly act. They are scam artists plain and simple.
[/quote]

Yes, hiring a housesitter to occupy your house while you are gone is a common and sensible thing to do. Choosing the local neighborhood burglar for the job is insane.

However, no matter who is hired the kind of advisor this person wants is going to cost. I doubt the sort of thing offered by VPAS or most of the other lower cost advisors would meet the need to "take the load off her." Fidelity at a local office might be an option. While perhaps more honorable than EJ they aren't known for being cheap in their advisory accounts.
smitcat
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by smitcat »

offthetop wrote: Thu Jan 02, 2020 8:57 am WOW. Great information here, some of which I am glad got brought up. From the reading materials to budget, and questions.

I will try to get more information for you.

Her income just started getting high and along with it came lifestyle creep. She knows she needs a budget and doesnt know what is appropriate spending but is very interested in it, but time is her weak point. She is not a boglehead yet but she can be converted once she sees through the haze of the industry.

She is a materialistic person and has always been proud of a nice car and possessions but I think getting her to this forum will be a change of reality for her. As we all know it doesnt matter what other people think about us its what we think about ourselves that matters most. I drive my cars into the ground and I hope we can help her realize that by doing that she will save a lot.

The personal loans were from a bank for various purchases including a large addition that her husband and I put on to the house and a whole new kitchen that is envious of any home cook. Celiac disease runs in the family so eating out is not a huge hit on the list although I will say the monthly spending is most likely higher than she thinks, and I would imagine there are other expenditures that are not on the fore front of being noticed.

I started having her look at some of the replys and she is open to the ideas shared. In terms of some saying that I should not push the ideas if the market were to crash just doesnt make since to me due to the fact that she has goals and I can not watch some advisor end up with a butt load of her earned money. We all know here that it wont mater who your financial advisor is when the market crashes, it crashes and it's a discount sale on stocks so buy more. Even a great advisor wont be able to help you when it does crash in fact the advisor hurts you bigtime in a down market with their fees. I do understand the relationship aspect and I think if she learns the market will do what it does so buy at set intervals whether high or low to DCA and hold on to it then she will be set for the long term.



I gave her my log in information last night so she could check out the discussion and she just called to say she is currently listening to a pod cast " Choose FI: Blueprint to Financial Independance" and plans to get some books. I hope I can teach her how to reply properly so she can reply and become a memeber. Any other suggested podcast ideas or books I think she would greatly appreciate.


Again THANK YOU ALL for your time and I hope you know that you have saved another person from an EJ financial advisor. I will try to help her reply to as many of the questions regarding her current situation, maybe even get her to become a forum member so she can ask questions and get real unbiased answers. :twisted:
Great approach - please consider the large picture as well.
- She really will do best by self directing her own financial future
- If she cannot or will not do that a fee only advisor would be another solution
- She may not do either
- I would avoid becoming her 'advisor' or steering her mush more than what y9uo have already done
The last thing you want to happen is for you to become somehow responsible for her and her husbands financial success or failures.
Wishing her and yourself much luck in the new year.
an_asker
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by an_asker »

offthetop wrote: Wed Jan 01, 2020 5:50 pm Emergency funds:
3 months

Debt: 241K
2 student loans $23k/each total $46K 5.75% interest
Mortgage $124K 3.3%
my car loan $25K 3.4%
his car loan $40K 4.9%
CC debt $6K interest free always paid off before interest charges
2 personal loans: $42K ($21k each) 4.25%
With that income, I would first have them balance their life and lifestyle first. Towards that end, looking forward to 01/2021:

- both student loans should be gone
- his car loan should be way down or gone as well
- she should have put $19.5k into her 401(k)
- if they can, they should have put the max into their Roth IRA as well (back door probably)
Expenditures:
$7650/ month increasing to 8k next year:
Mortgage $1400/ month nearly the minimum and includes taxes ect.
Student loans: $350/ month (2@ $175)
Car loans: his $700/month her:$600/month
Cable, Internet, Phone: $130/month
Cell phone $280/month
Groceries: $400/month
Personal Loans: $1000/month
To make the transition gentle, I won't even suggest any changes to the above (except for the part about paying off the loans)
School Tuition currently $575/month but will go up to $12K next year
Daycare $1000/month
Spending $22k on kids who are 7 and 2 is fiscally really irresponsible. I'd rather counsel dad to stay at home, and move older kid to public school.
Health Insurance $1400/month
Dental: $90
Unless there is a major health issue with the family that I'm unaware of, I don't get these insurance rates. They are exorbitant, especially the health insurance - when mom is in the medical field.
2 500K life insurance policies for him and her $1400/year
I agree with whoever replied that the life insurance is too less for mom - she should have at least a $2 million policy.
2 529 plans for each child: $200/ month. Currently putting $100 in each account per month but would like to increase to max as both kids will be attending private schooling for education
I am curious - did mom go to private school? If not, why is she seeking private school for kids? If that is not an example of trying to keep up with the Jones, I don't know what is! :oops:

I'd rather attack all the loans first before getting into contributing towards the 529s.
Tax Filing Status:
Married Filing Jointly

She writes 400 sqft off on the taxes for her business (LLC)

Tax Rate: xx% Federal, xx% State:
Unsure of the tax rate but they live in Dane county Wisconsin


Age:
M 36
F 33
kids are 7 and 2

Income:
His:
$48K/ year no benefits but gets a check for 3% at the end of year for retirement.

Her:
Self-employed in the medical field
Income is variable but is roughly $220k-250k/year
$105/Hr-200/Hr
Working 40-45 hours a week
Planning to partner with one of her colleagues at no cost to her. She is not sure what is the best for her situation so I am not sure on the details of her practice.



As for allocation I think that they would want to be heavier on the stock end for quite a few more years as they are young and healthy. Main goal is growing the accounts to 7M-10M by retirement with the best tax savings possible.

Current retirement assets

His retirement:
Both at EJ advisory solutions. The funds do not matter as they will be selling to move to vanguard or another local adviser unless I can talk them into not paying a 1.25% fee on accounts by doing the 3 or 4 fund that is discussed here.
Roth 11k
T-ira 11k

Her Retirement:
all at EJ as well
Roth 27K
Inherited T-IRA 106K
401k- 50K


Contributions:

Currently they are being told that they need to start a LIRP (Life Insurance Retirement Plan) to do any saving so they are unsure what to do with extra income.

Available funds:

Will be going to vanguard so I will be suggesting VOO, VTIAX, VFIAX, VTSAX, and for their comfort initially having them go with an adviser at vanguard to answer questions I do not feel comfortable answering.

Her Questions:
1. Why should I move from Edward Jones since he has been so helpful with answering my questions and setting up accounts for me and guiding me through the process.
2. Why should I move to vanguard or fidelity vs a local financial adviser.

If I move to vanguard
3. What is the best way to save money for retirement as I have been told the only way I can save is through a LIRP type of account.
4. Should we continue to file jointly or is there an advantage to filing separately so he can contribute to a Roth and T-IRA
5. Goals are to be debt free in 6 years unless investing should be more of a priority due to fixed low loan rates. To retire with 7-10M
6. Will the advisers be able to answer business related questions for investing my income
7. How much will making the switch save me by the time I retire.
8. Should I consider opening my own practice or partnering with someone I know and live very much and have worked for before.


Thank you all for taking the time to help my sister save a substantial amount of money and educate her on how easy it is to manage her own retirement plans.
I didn't read all the replies and I cannot answer some questions - have no clue what an LIRP is - but I do want to second the suggestion to read Dr. Jim Dahle's book. It is by a physician for a physician. I am sure reading his blog would be helpful to her as well.
an_asker
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by an_asker »

offthetop wrote: Thu Jan 02, 2020 8:57 am [...]
I gave her my log in information last night so she could check out the discussion and she just called to say she is currently listening to a pod cast " Choose FI: Blueprint to Financial Independance" and plans to get some books. I hope I can teach her how to reply properly so she can reply and become a memeber. Any other suggested podcast ideas or books I think she would greatly appreciate.


Again THANK YOU ALL for your time and I hope you know that you have saved another person from an EJ financial advisor. I will try to help her reply to as many of the questions regarding her current situation, maybe even get her to become a forum member so she can ask questions and get real unbiased answers. :twisted:
I also suggest a couple of things:

- an excel spreadsheet (or an app) to track spending
- Dave Ramsey's book(s), especially on getting out of debt. The only difference we here have with him on that methodology is that we suggest going from high interest rate to low interest rate (his technique is low balance to high balance). But if she finds herself unable to follow the high interest rate to low interest rate technique, Dave's is only a little, but not much, worse.
Ivygirl
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Ivygirl »

It's possible the EJ advisor serves a "status signaling" purpose. As in, fellow high-earner at cocktail party asks, "So who handles your investments?" and it sounds more prestigious to say "Oh, I have a guy at Big Financial Services Firm Everybody Recognizes, he says..." than to say "I do it myself using low cost index funds in a three fund portfolio."

Bogleheads of course would instantly fall in love with OP's sister if she said that. The people in her actual social circle might look blank even after she explained it. Status signaling is not mere vanity; it also has career and life satisfaction value.

A recommendation for a financial advisor who charges less, is a fiduciary, and has a prestigious name might be well-received by OP's sister.
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BL
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by BL »

Author Jane Bryant Quinn has published sensible personal finance info for a long time, and her book(s) would be handy to have around as a reference when thinking about insurance, investing, etc. I got her books from the library over the years and now own the retirement one, How to Make Your Money Last, for retired folks.

Here are a couple good ones:
Smart and Simple Financial Strategies for Busy People (condensed but thorough)

Making the Most of Your Money Now: The Classic Bestseller Completely Revised for the New Economy (This is a big reference book!)

Here is her website: http://janebryantquinn.com/
deikel
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by deikel »

offthetop wrote: Wed Jan 01, 2020 5:50 pm

Her Questions:
1. Why should I move from Edward Jones since he has been so helpful with answering my questions and setting up accounts for me and guiding me through the process.

She should not switch since all she would gain is money, but she seems to value the advisor to help her understand and invest. You gain nothing to convince her otherwise. This is the one reason advisors are useful, they help people that don't understand and yes they take money for that service

2. Why should I move to vanguard or fidelity vs a local financial adviser.

see above, you move because its cheaper there, but you also have to learn at least a little about investing for yourself. Its like owning a car, you can just drive it and have it fixed at the dealer, you can learn a little and bring it to a local shop or you even fix it yourself - its just the overall dollars involved that are different.

If I move to vanguard
3. What is the best way to save money for retirement as I have been told the only way I can save is through a LIRP type of account.

Whats LIRP ? Use TIRA/Roth, you employer provided tax advantaged space, your taxable account, make sure you get any match and tax advantaged space you can, otherwise fill in this order

4. Should we continue to file jointly or is there an advantage to filing separately so he can contribute to a Roth and T-IRA

Roth or TIRA are independent of filing status as far as I know, they are sometimes not available to you, but single filing status does not change that ?

5. Goals are to be debt free in 6 years unless investing should be more of a priority due to fixed low loan rates. To retire with 7-10M

Maybe given the general inexperience in investing knowledge it would be a good idea to kill the debt first ? Money wise it makes sense to invest up to tax advantaged spaces and use only extras to kill debt. If 10 M is desired at the time of retirement, it would be good to calculate backwards what that means in terms of needed investments a year - just to provide some sticker shock and start early.

6. Will the advisers be able to answer business related questions for investing my income

Depends on their experience and desire to get involved, yes

7. How much will making the switch save me by the time I retire.

roughly 1% times the account value (increasing over the years of course) times the years till retirement, this ignores a lot of losses and compounding, but its usually a good sticker shock to get motivated if the acccount is large enough. To put it another way, the year before retirement (when the account is 10M as desired, you loose 100k dollars that year alone, that's a full salary for learning a little about investing, if that is not motivating, nothing will

8. Should I consider opening my own practice or partnering with someone I know and live very much and have worked for before.

Only she can know that

Thank you all for taking the time to help my sister save a substantial amount of money and educate her on how easy it is to manage her own retirement plans.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
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Bernard
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Bernard »

Happy New Year, offthetop!

Let's face it, your sister isn't an outlier. She is like the overwhelming majority of Americans. She is like me and many of us before we've seen the light. It's just "normal" to live paycheck to paycheck, and to indulge in lifestyle creep. That's what we do, and that's why Americans' finances look so dire when viewed from a wider angle.

I've lived decades like that. I had the coolest cars, watches, clothes, spent $600 per month at Starbucks and close to $200 per month on DirecTV. I've been there, done that.

Then I discovered FIRE and MMM. And I was hooked. And I was sad that I wasted decades on stuff that I didn't need instead of investing. And now I'm behind, way behind. But I've seen the light, and I think it was the most important discovery of my adult life, an almost religious experience.

Your sister needs to be exposed to our school of thought. Away from consumerism, where you -- as Dave Ramsey says -- borrow money for stuff you can't afford and don't need to impress people you don't really care about, to thinking about financial freedom and happiness in a completely different way.

Happiness is a state of mind. A child in the slums of Calcutta may be super happy if she has plenty of food and a nice place to sleep, and a guy like Michael Jackson might be unhappy despite having been able to buy his on zoo on Neverland.

MMM (sorry to have to bring him up) made me realize that I can find happiness by not buying stuff, by not going to the mall for entertainment, by brewing my own coffee at work, and invest the savings for my retirement. I've never been happier. If you can expose your sister to this, she may experience the trigger that has become a life-changer for me and millions of others.

Only thereafter will she seek out to maximize pleasure by spending less and saving more. A $40K car loan is the antichrist to what our non-church preaches. I'm a lifelong car guy, drove a Ferrari Dino at age 26, but now I'm into $5K cars and enjoy it so much, you won't believe you. When I was young, I looked at the young dude in the fancy new car with envy. After having read "The Millionaire Next Door" (the only book I read twice), I now see that same person with other eyes. I feel sorry for him. Imagine he would be able to figure out what a continuous monthly car payment of $400 for 30 years does really cost him. He could be a millionaire when he retires, instead of a sucker who's living off SS and can only be mad at his younger self.
boglesmind
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by boglesmind »

Ivygirl wrote: Thu Jan 02, 2020 5:28 am
Grt2bOutdoors wrote: Thu Jan 02, 2020 5:18 am
mw1739 wrote: Wed Jan 01, 2020 8:05 pm What a mess. Frankly I would steer clear of this situation. She seems like the type that will blame you when the market underperforms. If you must help, here is what I would focus on: Where is the rest of your sisters money going after their ~ $96k in expenses. Even after taxes, I would expect at least another $50k to throw at debt or retirement. I agree with others that say she needs to implement some form of small biz retirement plan. Also her life insurance is too expensive and too little. Similar age here and my wife and I have 2.75 million for a similar cost.

Totally agree on the lack of sufficient life insurance. The sister is the main breadwinner, has 2 kids and a boatload of debt. At the minimum she needs $2 million. Buy term life insurance though term4sale.com or give Zander.com a try. Buy the cheapest 20 year policy. How about disability insurance? Does she have one? Ditch Edward Jones. 1.25% for 20 years is 25% of her savings going to the advisor- does that sound good to her? Over 30 years it will cost her close to 40% of what could have been a healthy chunk of retirement savings, all in the pocket of her “nice, sweet, kind EJ advisor”. If she wants to accumulate 7-10 million she is going to have to save a boatload of money, first thing is to cut expenses to the bone including any middlemen grabbing an unfair piece of the pie.
While it is true the EJ advisor is suboptimal from a purely financial standpoint, this lady is super-busy. She wants an advisor to take one of the loads off her, the same way she might hire someone to take care of the lawn, clean the house, or deliver her groceries. If a person wants personal service, they have to pay. If you want someone to pick up the phone when you call, listen, and care about your concerns when you need them, that is going to cost. It is not irrational for a very high earning couple to pay for this service. I realize this is a minority opinion here, but little ones in the household having needs on top of two busy careers and a lot of driving around - Mr. EJ could well seem a godsend.
Edward Jones Godsend? :oops:
It is wrong on so many levels I don't know where to start. Many others have pointed out excellent fee-only services or low cost AUM based services such as Vanguard PAS as suitable for OP's sister. To ignore that and claim that "time-starved folks" have only EJ as the option is downright shameful and doing disservice especially to one who is a practicing medical professional who obviously has managed to go thru many years of medical school balancing their time and who knows how to prioritize. Sure they don't seem to be handling money well so far but I am certain OP's sister can with benefit more with advice from WhiteCoat investor or Rick Ferri or Vanguard PAS than EJ. Let's stop arguing for EJ nonsense and the time to get out of EJ is now and not later.

[OT comments removed by admin LadyGeek]

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Re: Sister wants advice since I disagreed with her financial advisers.

Post by LadyGeek »

I removed some off-topic comments and a post conjecturing on possible moderator action. Concerns regarding moderator actions (or inaction) should be done via PM or by reporting the post. Please do not post comments here.

As a reminder, opposing points of view are welcome. The points about EJ (Edward Jones) have been made by both sides (pro and con). Let's move on.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by pkcrafter »

Assuming a move is to be made, don't sell the funds at EJ then move cash. Have the new account (VG, Fido etc) pull the entire account(s) in kind trustee to trustee transfer; then sell at the new location. Price it out both ways but likely to be less costly this way.

This is a fine idea as long as Vanguard carries all the funds now held. If there are a few that they don't carry they won't be transferred. They will remain in the EJ account and create a mess. You need to check this before attempting to transfer all EJ funds.

EJ tactics.

https://advisorhub.com/edward-jones-sue ... -accounts/

EJ Review

https://smartasset.com/financial-adviso ... ent-review

Satisfaction Survey

https://www.consumeraffairs.com/finance ... jones.html




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GT99
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by GT99 »

onourway wrote: Thu Jan 02, 2020 9:28 am To put some numbers to their retirement plan - they currently have $205k in retirement assets (half of that inherited...).

In order to reach $7M they will need to contribute $75k annually for the next 30 years and get a 6% real return. That’s a pretty tall order given their current order of operations.

It’s important to realize how important time is in one’s investment returns. Early contributions matter a LOT more than late contributions.

This article from Vanguard covers that point nicely.

https://investor.vanguard.com/retiremen ... n-to-start

Image
And if they manage to save $75k per year for 30 years, even if their returns at EJ are "only" 1% lower than a 3 Fund portfolio, they would have over $1M less. Over 30 years, EJ could easily cost them $2M. And most definitely will cost them more than $2M if they go the LIRP route. If they choose a LIRP, they will never, ever get to $7M.

Also...why $7M-10M??? I plan to have a fun retirement, and my target is $3.0M. And, while I don't live in a high cost area, it's higher than Wisconsin.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

amp wrote: Wed Jan 01, 2020 8:00 pm Does this mean that his sister intends to stay at EJ but invest in Vanguard funds? As far as I know that's not possible. In fact, if you look up Vanguard at the below link on the EJ site, all the Vanguard funds are marked as "SELL ONLY".
https://www.edwardjones.com/planfees/fe ... -fees.html
[ quote fixed by admin LadyGeek]

No, she intends to move all assets to a self directed account with Vanguard, Fidelity, or the like. All while incorporating a 3'rd party advisor after reading these posts.
Last edited by offthetop on Thu Jan 02, 2020 9:09 pm, edited 1 time in total.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by scubadiver »

GT99 wrote: Thu Jan 02, 2020 9:06 pm Also...why $7M-10M??? I plan to have a fun retirement, and my target is $3.0M. And, while I don't live in a high cost area, it's higher than Wisconsin.
^^This.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

Big Dog wrote: Wed Jan 01, 2020 7:52 pm I'm guessing that the personal loan was from friends/family to help with the down payment on the house? Regardless, get it paid off. Agree with the others. A consulting phone call with Rick would be a good use of a few hundred bucks. Finally, not enuf life insurance, IMO, particularly with kids in private schools.

Move on from EJ.
The loans are from a bank but were for some of the remodeling of house and from when she was unable to work for 6 months due to being a Nurse Practitioner and not being allowed to work at her old job as a RN. She was waiting for credentials to come through for state licensing.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

lkar wrote: Wed Jan 01, 2020 8:04 pm
HomeStretch wrote: Wed Jan 01, 2020 6:18 pmYour sister would do better to consult a tax accountant and/or attorney for tax advice related to her business. I don’t believe the EJ advisor or an advisor from a low-cost brokerage will offer tax advice.
This.

Whether or not to stick with the EdJo guy is an important question but they are in serious need of an overall plan. Including tax and corporate structure planning.
We know that there needs to be a plan for expenses and finances and now that school is done for her she can take some of her spare time to plan and initiate that planning.
lkar wrote: Wed Jan 01, 2020 8:04 pm
They are living beyond their means and if they are serious about reaching their goals they are frittering away very peak savings and planning years, in an extremely low (maybe historically low) tax friendly environment for self employed married people who can organize as pass through and who have taxable income under the 199A phase out.
what is a 199A?
lkar wrote: Wed Jan 01, 2020 8:04 pm Unless their income is expected to be on a serious upwards trajectory, they are going to need to start thinking about serious changes to reach their goals. Or they are going to leave the kids with serious student loans. They are looking at 12x2 years of private school before college and they are currently paying 6.5 times more for their cars than they are putting in 529s and paying personal loans despite $250 to $300k annual income.
She plans to max 529 so she does not incur any gift taxes. So she plans to contribute $15k to the 529 per year to pay for schooling and leave whats left to grow for the college education if they do not receive scholarships which is unlikely that they wont at this school.
lkar wrote: Wed Jan 01, 2020 8:04 pm If she has the opportunity to structure as a pass through entity she and her husband are below the QBID threshold and they have the opportunity to be socking away upwards over $50,000 per year in a tax advantaged way. They are going to need upwards of $1 million to get the kids through 24 combined years of private school and college at 2032 and 2036 rates. Probably more. He is going to be 56 when their youngest is a senior in college and so will be around the age where you need to start thinking about sacrificing higher returns for more conservative asset allocation. Not sure what maxing out the 529s means but it needs to seriously modified.
Why would or how would one incorporate a pass through entity and what is a QBID?
lkar wrote: Wed Jan 01, 2020 8:04 pm
I get it. They had debt, two parents working with young kids is hard and expensive. These are the super fun years. But if the 7-10 million thing is really their goal, the compounding fee they are paying their guy is not helping, but it is secondary at this point. They need a big picture plan.
Thanks for understanding their situation. She was making 60K prior to this year and had gone to well known private school for college. these years are the fun years and i think learning to budget will be the first big step to getting things straightened out. Getting set up at a DIY place i think is very important as the average person gets stuck in the gutter and continues down that road for to long.
Thanks again for your advice!
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

mw1739 wrote: Wed Jan 01, 2020 8:05 pm What a mess. Frankly I would steer clear of this situation. She seems like the type that will blame you when the market underperforms. If you must help, here is what I would focus on: Where is the rest of your sisters money going after their ~ $96k in expenses. Even after taxes, I would expect at least another $50k to throw at debt or retirement. I agree with others that say she needs to implement some form of small biz retirement plan. Also her life insurance is too expensive and too little. Similar age here and my wife and I have 2.75 million for a similar cost.
It wouldn't matter to me if things got rocky because I would know that even if the markets dropped she could blame me but she would still be far ahead because the market goes where it goes and all an advisor will do is take in good years and bad. This will then make it harder for them to reach their goal. Some people can't handle that but I can.

What insurance provider are you using? Her insurance was set up when she was making 60K a year. She is going to be increasing the policies. And I assume that Term Insurance is the only way to go?
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by CedarWaxWing »

HEDGEFUNDIE wrote: Wed Jan 01, 2020 6:06 pm Have your sister read this and then ask her why Edward Jones didn't mention these options:

https://obliviousinvestor.com/sep-vs-si ... solo-401k/
In regards to the EJ person "explaining" things to you... he/she is most certainly obfuscating things... and giving sales pitches, not providing any significant financial education or knowledge.

The LIRP is all part of the same scam:

"But many advisors don’t recommend using life insurance to fund retirement for one big reason: “It’s a very costly way to invest,” says Jeff Vistica, a financial advisor in Carlsbad, California."

“The insurance costs, marketing and commission costs, premium taxes, subaccount costs … quickly add up and will eat away at your returns,” he says. Vistica estimates that these expenses cost about 3% per year."

https://www.nerdwallet.com/blog/insuran ... etirement/
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

Wiggums wrote: Wed Jan 01, 2020 8:27 pm They have $300k salary with $96k in annual expenses.
Maybe the expenses does not include taxes ?
This is Gross income...
Wiggums wrote: Wed Jan 01, 2020 8:27 pm When investing, fees matter. Both AUM and fund load fees will affect total return.

Retire savings rate is low given 7-10 million goal. This does not appear to be a reasonable goal at this point.

$75k in car loans. 40k at 4.9% is high.


Put the investing question aside for a minute. I think they need a financial plan that will help them meet their long and short term goals.
I will agree with you 1000%
This was all about getting her to start a plan, learn to budget, and learn what fees really are. I was just trying to open her eyes to the world beyond the industry garbage.
Wiggums wrote: Wed Jan 01, 2020 8:27 pm I’d eliminate the debt faster than 6 years.
She said she could try to get debts paid off in 2 years but her EJ guy said it was more important to save for retirement. These guys are salesman and make it sound like they are trying to do right by you while the make huge profits from bad advice. What happened to fiduciary duties?
Wiggums wrote: Wed Jan 01, 2020 8:27 pm I’d suggest that they track expenses to a written budget.
I am going to have her join BH and learn to budget by asking questions herself.
Wiggums wrote: Wed Jan 01, 2020 8:27 pm I’d verify the annual expenses.
The expenses are what she recalled form the top of her head and as always subject to change. I will however request that she refines the numbers and creates a new post under account.
Wiggums wrote: Wed Jan 01, 2020 8:27 pm Private school goal but only $1,200 a year in 529. I’m assuming private elementary school for 7 year old?
This would be correct. Private all the way. This is a well known school that you can not just go to you have to be a son or daughter of someone who went to the school to get in.
Wiggums wrote: Wed Jan 01, 2020 8:27 pm Is this term life insurance? He might be over insured at 500k and she might be under insured.
Yes it is Term 20 year. Is this something they can increase without needing a new policy?
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Dregob »

100k in loans for 2 cars and personal loans! Does she want help AND will she make needed the changes. Doesn't sound like she is ready for either to be honest. It would make sense to move to Vanguard/Fidelity/etc. but EJ fees are not really the problem-lifestyle choices are.
Last edited by Dregob on Thu Jan 02, 2020 11:12 pm, edited 1 time in total.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by FI4LIFE »

They will have to start putting away at least $60k + per year to reach their goals invested fairly aggressively, assuming a 7% return for 30 years. Start there and then live life with the rest.

We all started somewhere. They are doing pretty well with retirement savings and now that she is earning more they are in a great position to really start putting a ton away. If there is money leftover their 529 contributions are very light should they want to make a meaningful dent in college costs.

Others have covered the rest.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Katietsu »

The White Coat Investor book that I mentioned comes as an audiobook if this fits her lifestyle better. He also has a podcast but I would not skip the book for the podcast alone. And the web site has recommended advisors that are as vetted as you are likely to get anywhere.

Kudos to your sister for maximizing her income. That is quite impressive for an NP.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by lkar »

offthetop wrote: Thu Jan 02, 2020 9:31 pmwhat is a 199A?
It is a new deduction that went into effect last year. It allows self-employed people to take a deduction of as much as 20 percent of their net income attributed to their business. You need to be organized as a pass through entity — a partnership, sole proprietorship, S Corp, etc.

There is a phase out for taxable income above $321,500 for married filing jointly, so your sister is comfortably in the sweet spot.

It can result in tax savings of several thousand dollars. It is complicated and optimizing it can be difficult when a couple has qualified business income and wages. And maximizing the deduction can lead to some counterintuitive ideas about whether to make pre-tax or after-tax retirement contributions. In some cases, it can even make sense to seek to add taxable income (in the form of roth conversions) or to make non-deductible roth solo 401(k) contributions instead of deductible ones to maximize the deduction.

I don’t want to get too far in the weeds in a thread where you are asking about something much different, but 199A may very well represent a relatively short-term boondoggle for those with self-employment income, and she should not miss the boat. A good tax professional is really essential.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Jags4186 »

Ivygirl wrote: Thu Jan 02, 2020 5:28 am While it is true the EJ advisor is suboptimal from a purely financial standpoint, this lady is super-busy. She wants an advisor to take one of the loads off her, the same way she might hire someone to take care of the lawn, clean the house, or deliver her groceries. If a person wants personal service, they have to pay. If you want someone to pick up the phone when you call, listen, and care about your concerns when you need them, that is going to cost. It is not irrational for a very high earning couple to pay for this service. I realize this is a minority opinion here, but little ones in the household having needs on top of two busy careers and a lot of driving around - Mr. EJ could well seem a godsend.
Oh, come on. These people have nothing. And the little they do have is all in tax advantaged accounts. She could be set up at a low cost brokerage and autoinvesting into 1, 2 or 3 funds in 20 minutes. Just log in once a year to rebalance--if even that. Not like they have some complicated financial situation that has to be unravelled.
Last edited by Jags4186 on Thu Jan 02, 2020 10:44 pm, edited 1 time in total.
CFOKevin
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by CFOKevin »

It sounds like she's willing to work on this. If she's interested in meeting a great group, the Madison Bogleheads have a January meeting on the 11th and another one on March 14th. She might find it assuring that so many people actually do this themselves.

The local Schwab office has served me well and I'd be happy to make an introduction to the advisor there. I'm a 30+ year Schwab client and have never paid more than 25 basis points annually for fund fees. They are great on administrative tasks and are always available for discussion.

PM me if you are interested.

Good Luck,

Kevin
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offthetop
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

pkcrafter wrote: Thu Jan 02, 2020 12:02 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm
As for allocation I think that they would want to be heavier on the stock end for quite a few more years as they are young and healthy. Main goal is growing the accounts to 7M-10M by retirement with the best tax savings possible.

Current retirement assets

His retirement:
Both at EJ advisory solutions. The funds do not matter as they will be selling to move to vanguard or another local adviser unless I can talk them into not paying a 1.25% fee on accounts by doing the 3 or 4 fund that is discussed here.

I don't understand the above. Are you saying they might stay with EJ if the 1.25% advisory fee is waived?
No they will be moving all assets. As they have seen enough information to realize that they are getting screwed.
pkcrafter wrote: Thu Jan 02, 2020 12:02 am Is the 401k a self-employed individual plan through EJ? What are the holdings?[/color]
Is through a previous employer. I am working on getting funds as she has not even set up a an account to log in... the funds might just be sitting in a cash account.

Sad to say that she also divulged that their are probably also other accounts floating out there that she has never set up an account for but has contributed to.
SlowMovingInvestor
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by SlowMovingInvestor »

offthetop wrote: Thu Jan 02, 2020 9:58 pm
She said she could try to get debts paid off in 2 years but her EJ guy said it was more important to save for retirement. These guys are salesman and make it sound like they are trying to do right by you while the make huge profits from bad advice. What happened to fiduciary duties?
I don't believe that EJ advisors are fiduciaries. That is not a justification for selling high cost investments, of course.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

Ivygirl wrote: Thu Jan 02, 2020 4:50 am
Wiggums wrote: Thu Jan 02, 2020 4:39 am
Ivygirl wrote: Thu Jan 02, 2020 4:32 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm Groceries: $400/month
Unless they are doing something unusual, like maximum oatmeal and lentils, for a family of four I think they are probably spending much more than this on groceries. Possibly hundreds of dollars more. It might be worth tracking this expenditure, as well as tracking how much food waste is occurring, for an easy win to double the amount being saved for kids' college funds.
Good point. I had a similar question about their expenses.
Odd but true, this might be a bigger financial drain than their EJ guy, and more important to get in check.

With the two kids in daycare, and the two working adults out of the house, it's possible their grocery bill really is $400, but their restaurant and takeout bill is $800. No way to know unless it is tracked.
what is the best way to track these expenses. Different Cards?
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Katietsu »

offthetop wrote: Thu Jan 02, 2020 11:08 pm
Sad to say that she also divulged that their are probably also other accounts floating out there that she has never set up an account for but has contributed to.
The good news is that she did not cash them in as she changed jobs. And there is a good chance that they are invested appropriately as many retirement accounts default to a target date fund if nothing is selected.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

an_asker wrote: Thu Jan 02, 2020 11:41 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm Emergency funds:
3 months

Debt: 241K
2 student loans $23k/each total $46K 5.75% interest
Mortgage $124K 3.3%
my car loan $25K 3.4%
his car loan $40K 4.9%
CC debt $6K interest free always paid off before interest charges
2 personal loans: $42K ($21k each) 4.25%
With that income, I would first have them balance their life and lifestyle first. Towards that end, looking forward to 01/2021:

- both student loans should be gone

She works for a rural area and is eligible for student loan forgiveness where they will pay up to 25K a year and it is a 2 year program... I am not and she is not 100% on this but is this something to really dig in to deeper?
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

GT99 wrote: Thu Jan 02, 2020 9:06 pm
onourway wrote: Thu Jan 02, 2020 9:28 am To put some numbers to their retirement plan - they currently have $205k in retirement assets (half of that inherited...).

In order to reach $7M they will need to contribute $75k annually for the next 30 years and get a 6% real return. That’s a pretty tall order given their current order of operations.

It’s important to realize how important time is in one’s investment returns. Early contributions matter a LOT more than late contributions.

This article from Vanguard covers that point nicely.

https://investor.vanguard.com/retiremen ... n-to-start

Image
And if they manage to save $75k per year for 30 years, even if their returns at EJ are "only" 1% lower than a 3 Fund portfolio, they would have over $1M less. Over 30 years, EJ could easily cost them $2M. And most definitely will cost them more than $2M if they go the LIRP route. If they choose a LIRP, they will never, ever get to $7M.

Also...why $7M-10M??? I plan to have a fun retirement, and my target is $3.0M. And, while I don't live in a high cost area, it's higher than Wisconsin.
It is a number she picked. She also wants to leave a legacy account for her kids and grandkids. Since she loves what she does she does not see retiring early which is why she has such a high goal. Reach for the stars.
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offthetop
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by offthetop »

SlowMovingInvestor wrote: Thu Jan 02, 2020 11:20 pm
offthetop wrote: Thu Jan 02, 2020 9:58 pm
She said she could try to get debts paid off in 2 years but her EJ guy said it was more important to save for retirement. These guys are salesman and make it sound like they are trying to do right by you while the make huge profits from bad advice. What happened to fiduciary duties?
I don't believe that EJ advisors are fiduciaries. That is not a justification for selling high cost investments, of course.
I am pretty sure they have Fiduciary duties... Although as many times before and many more times I could be wrong.
https://www.investopedia.com/articles/f ... -funds.asp
2cents2
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by 2cents2 »

The insurance gaps mentioned upthread should be fixed ASAP.

The term life insurance is very important.

Also equally important is disability insurance for your sister. Here is a link from the WCI explaining disability insurance. https://www.whitecoatinvestor.com/what- ... insurance/
Ivygirl
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Ivygirl »

offthetop wrote: Thu Jan 02, 2020 11:35 pm
Ivygirl wrote: Thu Jan 02, 2020 4:50 am
Wiggums wrote: Thu Jan 02, 2020 4:39 am
Ivygirl wrote: Thu Jan 02, 2020 4:32 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm Groceries: $400/month
Unless they are doing something unusual, like maximum oatmeal and lentils, for a family of four I think they are probably spending much more than this on groceries. Possibly hundreds of dollars more. It might be worth tracking this expenditure, as well as tracking how much food waste is occurring, for an easy win to double the amount being saved for kids' college funds.
Good point. I had a similar question about their expenses.
Odd but true, this might be a bigger financial drain than their EJ guy, and more important to get in check.

With the two kids in daycare, and the two working adults out of the house, it's possible their grocery bill really is $400, but their restaurant and takeout bill is $800. No way to know unless it is tracked.
what is the best way to track these expenses. Different Cards?
That is a good suggestion. She and her husband would need to have the same card, and use it only for food purchases. It's likely that some non-food purchases would sneak in too and those could be identified by keeping the receipts.

It's time-consuming to track expenses but it gives a ton of valuable information, even if one only does it for one month. "Men do not realize how great a revenue thrift is." - Cicero. Your sister could turbocharge her goals without harming her quality of life.
onourway
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by onourway »

offthetop wrote: Thu Jan 02, 2020 11:35 pm
Ivygirl wrote: Thu Jan 02, 2020 4:50 am
Wiggums wrote: Thu Jan 02, 2020 4:39 am
Ivygirl wrote: Thu Jan 02, 2020 4:32 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm Groceries: $400/month
Unless they are doing something unusual, like maximum oatmeal and lentils, for a family of four I think they are probably spending much more than this on groceries. Possibly hundreds of dollars more. It might be worth tracking this expenditure, as well as tracking how much food waste is occurring, for an easy win to double the amount being saved for kids' college funds.
Good point. I had a similar question about their expenses.
Odd but true, this might be a bigger financial drain than their EJ guy, and more important to get in check.

With the two kids in daycare, and the two working adults out of the house, it's possible their grocery bill really is $400, but their restaurant and takeout bill is $800. No way to know unless it is tracked.
what is the best way to track these expenses. Different Cards?
Step 1 is to track what they have been spending. They would download statements from their current cards and go through and categorize their spending. This sounds like a lot of work, but in reality it will take a few hours. This is really an essential step because it gives a baseline of where they are at and gives a good reality check. For example that $400 for groceries from memory is probably at least double that number and could be triple.

In the longer term tracking expenses is not really that time consuming or difficult, especially if one minimizes the number of checking, savings, and credit accounts. I track nearly everything to the dollar and spend ~1 hour per month on it, but it provides me with complete control in our financial direction. There is never any anxiety about money because everything is planned for well in advance. I use You Need a Budget software which I can’t recommend enough.
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Wiggums »

Stinky wrote: Thu Jan 02, 2020 9:26 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm
Currently they are being told that they need to start a LIRP (Life Insurance Retirement Plan) to do any saving so they are unsure what to do with extra income.
LIRP is the worst idea in your post. (OK, maybe tied with others for the worst.)

If they have the funds for savings in a taxable account, they would be well-served to be in broad, low-cost, index funds. Total Stock Market, Total International Market, Total Bond Market, etc.

While term life insurance is a great product, mixing insurance and investment in a LIRP is a horrible idea. High fees, limited flexibility, tax inefficient, etc. The financial advisor that recommended a LIRP should be fired, on that recommendation alone.
+1000
kimura king
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by kimura king »

It's going to be hard to win, let alone get to 7 million with all that debt and the husband making 45k a year with a 40k car note. I'd recommend using "you need a budget" as recommended earlier, fire the advisor, go with vanguard or fidelity and keep investing down to around 10% (still would be about 30k a year with their income), build an emergency fund and aggressively pay off debt. She has a great income and a great career, wonderful that she wants to work for a long time and has big goals.
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Sandtrap
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by Sandtrap »

123 wrote: Wed Jan 01, 2020 6:01 pm The number of loans indicates that there is some need for a budget and cost cutting. Student loans, car loans, personal loans seem to indicate a free-spending lifestyle. Beyond accumulating an adequate emergency fund I would prioritize getting rid of debt (other than mortgage) and taking advantage of work related retirement plans. They don't need Edward Jones to hold more of their money.
+1
No "advisor" is needed to tell them to reduce/get rid of debt as a #1 priority.

Financial strategy and planning: keep it simple.

j :happy
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MaryO
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by MaryO »

offthetop wrote: Thu Jan 02, 2020 9:09 pm
amp wrote: Wed Jan 01, 2020 8:00 pm Does this mean that his sister intends to stay at EJ but invest in Vanguard funds? As far as I know that's not possible. In fact, if you look up Vanguard at the below link on the EJ site, all the Vanguard funds are marked as "SELL ONLY".
https://www.edwardjones.com/planfees/fe ... -fees.html
[ quote fixed by admin LadyGeek]

No, she intends to move all assets to a self directed account with Vanguard, Fidelity, or the like. All while incorporating a 3'rd party advisor after reading these posts.
[ quoted post fixed by admin LadyGeek]

She came around fast! Excellent. I realize that being a NP, dual career couple with little kids means life is very busy. But Vanguard makes investing incredibly simple. The website has many ways to track one's portfolio, invest automatically, and get answers to any question she might have. I don't think she'll miss the EJ advisor one bit.

I believe every poster addressed this couple's need to attack their debt and control spending. Absolutely necessary. Some have questioned the need for private school, but if that's important to your sister there's no reason they can't tighten belts elsewhere to send the kids where they believe is the best option.

The car loans stuck out for me. I believe a young, busy family running around to jobs and daycare, particularly in a rural area, needs very reliable cars. But what is the husband driving? 40K loan? Yikes. Maybe consider getting something more utilitarian.
GrowthSeeker
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by GrowthSeeker »

OP's salary estimate for the sister may be inaccurate. AFAIK, not many NPs make over $200k per year, especially in their first year of work as an NP. I could be wrong.
Just because you're paranoid doesn't mean they're NOT out to get you.
an_asker
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by an_asker »

offthetop wrote: Fri Jan 03, 2020 12:15 am
an_asker wrote: Thu Jan 02, 2020 11:41 am
offthetop wrote: Wed Jan 01, 2020 5:50 pm Emergency funds:
3 months

Debt: 241K
2 student loans $23k/each total $46K 5.75% interest
Mortgage $124K 3.3%
my car loan $25K 3.4%
his car loan $40K 4.9%
CC debt $6K interest free always paid off before interest charges
2 personal loans: $42K ($21k each) 4.25%
With that income, I would first have them balance their life and lifestyle first. Towards that end, looking forward to 01/2021:

- both student loans should be gone
She works for a rural area and is eligible for student loan forgiveness where they will pay up to 25K a year and it is a 2 year program... I am not and she is not 100% on this but is this something to really dig in to deeper?
I don't know how those programs work. If it is set in stone that they will go away on their own in two years and they are OK staying where they are, I would say "why not?"

But that would mean that "his car loan" should be gone by 01/20201 and the two personal loans should start getting hit hard.
BrownEyedGirl_27
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by BrownEyedGirl_27 »

elainet7 wrote: Wed Jan 01, 2020 5:58 pm call rick ferri a well known author and advisor to give you a plan and then you can set up the investments with vanguard
with income at that level you gotta learn how to invest on your own or it will cost you dearly by making mistakes
do not use advisors who charge an aum fee; use an hourly advisor to get you on the right track from the get go and START READING books by bogle, swedroe, malkiel, and Bernstein
Google " IF YOU CAN HOW MILLENIALS CAN GET RICH SLOWLY"-COPY IT AND FOLLOW HIS ADVICE PRONTO!!!!!!!!!!!!!!
+1. “If You Can” by William Bernstein was the best financial “book” I have read so far. Bernstein recommends a book called “Your Money and Your Brain” by Jason Zweig—have them read that one too! They need to be saving more given their large income. It sounds like your sister and her husband have a case of lifestyle inflation...can they sell some possessions/buy cheaper cars to increase their savings rate? Do they insist only on private school education because of their peer group?

Does her spouse need reassuring about Vanguard or is he pretty on board with what you’ve advised them to do? This is a great post, good on you for helping your sister.
"Your mind has a mind of its own. At the very moment when you are most convinced of your own rationality, you may be feeling rather than thinking your way toward a decision.” | Jason Zweig
stoptothink
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by stoptothink »

onourway wrote: Fri Jan 03, 2020 6:59 am
offthetop wrote: Thu Jan 02, 2020 11:35 pm
Ivygirl wrote: Thu Jan 02, 2020 4:50 am
Wiggums wrote: Thu Jan 02, 2020 4:39 am
Ivygirl wrote: Thu Jan 02, 2020 4:32 am
Unless they are doing something unusual, like maximum oatmeal and lentils, for a family of four I think they are probably spending much more than this on groceries. Possibly hundreds of dollars more. It might be worth tracking this expenditure, as well as tracking how much food waste is occurring, for an easy win to double the amount being saved for kids' college funds.
Good point. I had a similar question about their expenses.
Odd but true, this might be a bigger financial drain than their EJ guy, and more important to get in check.

With the two kids in daycare, and the two working adults out of the house, it's possible their grocery bill really is $400, but their restaurant and takeout bill is $800. No way to know unless it is tracked.
what is the best way to track these expenses. Different Cards?
Step 1 is to track what they have been spending. They would download statements from their current cards and go through and categorize their spending. This sounds like a lot of work, but in reality it will take a few hours. This is really an essential step because it gives a baseline of where they are at and gives a good reality check. For example that $400 for groceries from memory is probably at least double that number and could be triple.
Or it could be less. Family of 4 here and our food spending last year averaged ~$300/month. But yes, it should be carefully tracked as that is an area where people tend to spend a lot more than they think they do.
stoptothink
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Re: Sister wants advice since I disagreed with her financial advisers.

Post by stoptothink »

GrowthSeeker wrote: Fri Jan 03, 2020 10:15 am OP's salary estimate for the sister may be inaccurate. AFAIK, not many NPs make over $200k per year, especially in their first year of work as an NP. I could be wrong.
Yes, that is curiously high. National average for NPs ~$105k/yr.
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