From CFP with .70 AUM to self-manage with $4.4 MM?
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From CFP with .70 AUM to self-manage with $4.4 MM?
Hello,
I am new here to the forum but did read the Bogleheads Guide to Investing several years ago and was inspired by what I read to consider moving from a trusted and capable CFP with a .70 AUM on a $2.44 MM account with $16,800 annually in fees (not including mutual fund expenses, so closer to 1.00 AUM or $24,400).
Between the accounts with our CFP and accounts we have outside and I manage on my own, we have $4,400,000. Our net worth is $4,800,000.
Over the last 8 years or so the annual returns with our CFP have averaged about 8% after fees. He is available anytime for advice and guidance either in person or over the phone. We meet annually for about 2 hours to review the account, discuss any changes, etc.
Frankly, I feel we are not getting $24,000 in value from this relationship, despite the high level of service and decent returns. I am college educated, self-taught on investing, and have done quite well on investing about $1.96 million on my own through my wife's 401(k), Schwab, a state-run 529 plan, and an online high-yield savings account.
My wife and I have been married 20 years, and I manage the household finances and investment responsibilities with her ioccassional input/approval. We are both in our mid 50's and college-educated. We have a 12 year old daughter.
I left work 9 years ago and she plans to retire in one year. I currently collect $59,000 annually in SSDI for myself and my daughter. I expect that to continue for 6 more years before it drops to about $40,000 when my daughter turns 18. We (including our CFP) expect that in one year we will be financially able to fully retire.
Our CFP currently has directed/suggested to us to allocate our funds with him and elsewhere as follows: US equity 58%; foreign equity 19%; cash 12%. I am comfortable with that allocation as is my wife.
Question: If I am able to convince my wife to go along with my idea to drop the CFP and self-manage with index funds and the like at Vanguard, how do I go about determining the best funds and asset allocation to suit our needs? How do I figure out the best tax strategy for us each year so that we are drawing down in a tax-efficient manner?
In closing, if my wife does not agree to leave our CFP, I am prepared to move my 50% share out for self-manage and keep hers with the CFP. Any thoughts on that approach?
Thank you in advance for your feedback. Please do not hesitate to ask questions.
I am new here to the forum but did read the Bogleheads Guide to Investing several years ago and was inspired by what I read to consider moving from a trusted and capable CFP with a .70 AUM on a $2.44 MM account with $16,800 annually in fees (not including mutual fund expenses, so closer to 1.00 AUM or $24,400).
Between the accounts with our CFP and accounts we have outside and I manage on my own, we have $4,400,000. Our net worth is $4,800,000.
Over the last 8 years or so the annual returns with our CFP have averaged about 8% after fees. He is available anytime for advice and guidance either in person or over the phone. We meet annually for about 2 hours to review the account, discuss any changes, etc.
Frankly, I feel we are not getting $24,000 in value from this relationship, despite the high level of service and decent returns. I am college educated, self-taught on investing, and have done quite well on investing about $1.96 million on my own through my wife's 401(k), Schwab, a state-run 529 plan, and an online high-yield savings account.
My wife and I have been married 20 years, and I manage the household finances and investment responsibilities with her ioccassional input/approval. We are both in our mid 50's and college-educated. We have a 12 year old daughter.
I left work 9 years ago and she plans to retire in one year. I currently collect $59,000 annually in SSDI for myself and my daughter. I expect that to continue for 6 more years before it drops to about $40,000 when my daughter turns 18. We (including our CFP) expect that in one year we will be financially able to fully retire.
Our CFP currently has directed/suggested to us to allocate our funds with him and elsewhere as follows: US equity 58%; foreign equity 19%; cash 12%. I am comfortable with that allocation as is my wife.
Question: If I am able to convince my wife to go along with my idea to drop the CFP and self-manage with index funds and the like at Vanguard, how do I go about determining the best funds and asset allocation to suit our needs? How do I figure out the best tax strategy for us each year so that we are drawing down in a tax-efficient manner?
In closing, if my wife does not agree to leave our CFP, I am prepared to move my 50% share out for self-manage and keep hers with the CFP. Any thoughts on that approach?
Thank you in advance for your feedback. Please do not hesitate to ask questions.
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
Sparkles2025 wrote: Tue Feb 04, 2025 3:20 am
Question: If I am able to convince my wife to go along with my idea to drop the CFP and self-manage with index funds and the like at Vanguard, how do I go about determining the best funds and asset allocation to suit our needs? How do I figure out the best tax strategy for us each year so that we are drawing down in a tax-efficient manner?
I would go to getting started in the Wiki https://www.bogleheads.org/wiki/Main_Page and read everything in every article in the Wiki. I would also read a few good books such as Swedroe, Ferri, and Bernstein.
In closing, if my wife does not agree to leave our CFP, I am prepared to move my 50% share out for self-manage and keep hers with the CFP. Any thoughts on that approach?
I think you risk both you and the CFP working at cross purposes and not being effective. This is not a forum for marital advice, but it might be better for a couple to be on the same page about how you manage your assets.
Thank you in advance for your feedback. Please do not hesitate to ask questions.
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
My only thought is that the second that this idea popped into my head, I would have just blurted it out and gotten a reaction from my spouse. It would never have occurred to me to post here first or filter the idea in any way. Of course, that might be a reason you're still married... but now I'm curious what sequence (discussing here vs. with spouse) other Bogleheads would have chosen.
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
There are also a whole bunch of advisors who provide financial planning + investment management, on a flat-fee basis for less than $24k per year. You can find several here:
https://www.flatfeeadvisors.org/
Some are also on this list:
viewtopic.php?t=440158
https://www.flatfeeadvisors.org/
Some are also on this list:
viewtopic.php?t=440158
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
It sounds like you are more than capable and have the self-awareness to fly solo without your CFP.
I would be upfront and honest with him as to why you are moving on, he will appreciate it but will obviously try to make a pitch to keep you. If you value his relationship, then tell him you'd love to continue it but it has to be on a flat-fee basis, such as where you can pay him hourly when you meet, maybe similar to how you do the annual review now but you'll get an invoice after meeting with him
. Most of the big name financial advisor companies don't do this in my experience, but I do know some are thinking about it and there may be many RIA's w/ CFPs who offer it. Not sure where your guy falls.
And in terms of answering your question about determining best funds and strategy for withdrawals etc...you have already found likely the best free source of knowledge on the entire Internet here in Bogleheads. Spend some time, maybe 30min a day reading through posts on the forums, do some searches for specific topics, you will find everything you need and more. Then supplement that with some investing books that focus on index approaches and follow the BH ethos (once again you can search to find all these and more), and after a couple months (if that) you will be more than confident to go out and do it yourself. And if you still want a safety net and your guy doesn't do the fee-only, then find someone who will do that.
Cheers!
I would be upfront and honest with him as to why you are moving on, he will appreciate it but will obviously try to make a pitch to keep you. If you value his relationship, then tell him you'd love to continue it but it has to be on a flat-fee basis, such as where you can pay him hourly when you meet, maybe similar to how you do the annual review now but you'll get an invoice after meeting with him

And in terms of answering your question about determining best funds and strategy for withdrawals etc...you have already found likely the best free source of knowledge on the entire Internet here in Bogleheads. Spend some time, maybe 30min a day reading through posts on the forums, do some searches for specific topics, you will find everything you need and more. Then supplement that with some investing books that focus on index approaches and follow the BH ethos (once again you can search to find all these and more), and after a couple months (if that) you will be more than confident to go out and do it yourself. And if you still want a safety net and your guy doesn't do the fee-only, then find someone who will do that.
Cheers!
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
My spouse liked our CFP more than I did and was dubious about letting me go DIY. So I created a written proposal describing my tax-efficient target portfolio, rebalancing strategy, and cash flow plan. Most persuasively, I showed how much money we would save. I won the job, and both the money and marriage seem fine.
So my advice is to do your homework and get spousal buy-in before ditching the CFP. Good luck!
So my advice is to do your homework and get spousal buy-in before ditching the CFP. Good luck!
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
Most on here would think the $24k in value isn’t worth it, but if your wife isn’t on board could be a reasonable fee for marital peace. If there’s a 50% drop in stocks next year (and you are 78% stocks) better to have an advisor to blame from the standpoint of your wife?
You could also ask the advisor if there are any discounts on the fee, perhaps they’d drop to 0.3% rather than losing you. If it’s only 2 hours of work per year plus an occasional phone call he might be willing to continue doing that for 5-10k / year as still a good hourly rate.
You could also ask the advisor if there are any discounts on the fee, perhaps they’d drop to 0.3% rather than losing you. If it’s only 2 hours of work per year plus an occasional phone call he might be willing to continue doing that for 5-10k / year as still a good hourly rate.
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
One thing I constantly come back to is the fees are not the worst part of a financial planner, it's the lower returns oftentimes from bad investment decisions. At least in my experience.
The last 8 years, a Total market fund has averaged over 14% a year . That's likely not perfect apples to apples, but it should at least be compared next to the same risk profile of your portfolio that was being managed.
What was the asset allocation that the CFP was managing for that 8% average? Your financial advisor has likely cost you over a million dollars versus a similar risk profile with 2-3 commonly recommended index funds. The $24k a year fee is the least if your worries.
The last 8 years, a Total market fund has averaged over 14% a year . That's likely not perfect apples to apples, but it should at least be compared next to the same risk profile of your portfolio that was being managed.
What was the asset allocation that the CFP was managing for that 8% average? Your financial advisor has likely cost you over a million dollars versus a similar risk profile with 2-3 commonly recommended index funds. The $24k a year fee is the least if your worries.
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
I think if you were to go to Vanguard you'd use what your advisor has suggested and what you're both comfortable with:Sparkles2025 wrote: Tue Feb 04, 2025 3:20 am Question: If I am able to convince my wife to go along with my idea to drop the CFP and self-manage with index funds and the like at Vanguard, how do I go about determining the best funds and asset allocation to suit our needs? How do I figure out the best tax strategy for us each year so that we are drawing down in a tax-efficient manner?
58% US Stock (e.g., Van Total Stock Market (VTI or VTSAX))
19% Foreign Stock (e.g., Van Total Int'l Stock Market (VXUS or VTIAX)
12% Cash (Probably best held in a Tax-Deferred account, but depending on tax-bracket then VMRXX, VUSXX, or VMSXX)
That only adds up to 89% when it should total 100%, so perhaps it's intended to be an asset allocation (AA) of 80/20 with 25% of stocks in int'l, which would be 60% US, 20% Int'l, and 20% Cash = 100% (or perhaps Short-Term Treasuries or Treasury Inflation-Protected Securities (TIPS) since cash puts a drag on total portfolio performance).
I will say an AA of 80% stocks when retinting in just a year seems pretty aggressive, but if your "other income" from pensions/annuities, Social Security, SSDI, rental properties, etc. covers the vast majority of mandatory expenses, then 80/20 might be just fine. However, there is always the possibility that your CFP is thinking something like "80/20 will grow my AUM fee more than 60/40 and these guys can stomach the volatility." A CFP is supposed to act in your best interest but there's an inherent conflict of interest whey they get paid on commission/AUM and the CFP board doesn't seem to fine its members (hard to prove they're NOT acting in your best interest). A flat-fee (regardless of portfolio size) advisor that gets no commission for recommending fund A over fund B is likely a better choice if you have to have an advisor because at least the AUM/commission conflict is likely removed.
Regarding tax-efficiency, that's usually based on placement and not so much which accounts you draw down first (see the Wiki topic on Tax-Efficient Fund Placement). Taxable and Roth should be 100% stocks, while all your bonds/cash (and the balance of stocks) is in Trad Tax-Deferred accounts. If one is doing Trad to Roth conversions, the typical order of drawdown is Taxable, then Tax-Deferred, then Roth. That will vary depending on your unique tax situation and the sizes of your three account-types. RMDs from Tax-Deferred will be forced on you at age 73, which is also a factor.
I also make all the investment decisions in our household (it's all self-managed, no advisor). I used to try and review the budget every month and the investments every quarter with my wife, but she's just not interested despite understanding it all. Now we really only sit down in Jan to review last year's spending and investment performance history & projections (and largely to decide how big are this year's budgets for gifting and home improvements). Subsequently, if I have a portfolio management change I'm thinking of I'd likely run it by here and then present it as a peer-reviewed concept to my wife for review (if I wanted input from anyone other than my spouse).tibbitts wrote: Tue Feb 04, 2025 8:59 am I'm curious what sequence (discussing here vs. with spouse) other Bogleheads would have chosen.
I'm sure that decision is unique to each couple's situation: mutual interest in budget/investments, capacity to understand, shared vs assigned responsibility (e.g., you do ABC and I'll handle XYZ with little cross-talk among responsibility areas), etc.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
It can be difficult to move away from an AUM-managed portfolio. Many financial advisors have a knack for making things much more complicated than they need to be hoping that you become reliant on their tools and methods.
I would recommend that you ask for a portfolio review in this format (with approval from your wife).
https://www.bogleheads.org/wiki/Asking_ ... _questions
Many folks get tremendous help for free.
You can find many such requests in: Personal Investments
I would recommend that you ask for a portfolio review in this format (with approval from your wife).
https://www.bogleheads.org/wiki/Asking_ ... _questions
Many folks get tremendous help for free.
You can find many such requests in: Personal Investments
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
How to determine asset allocation: this isn't a hard science. But there are guidelines. Start with your retirement expenses, as you are 1 year out from both being retired. How much of your savings can you afford to lose in a stock market crash and still have enough for your retirement, which could last many years? The way I plan to handle this is to allocate several years worth of expenses to stable investments like US treasuries (nominal and TIPS). Every year, we'll decide whether to sell stocks or bonds for retirement expenses based on whether the stock market is "up" or "down". If we need to sell bonds for a few years, fine - when the stock market recovers, we will sell and replenish the supply of bonds.Sparkles2025 wrote: Tue Feb 04, 2025 3:20 am Hello,
I am new here to the forum but did read the Bogleheads Guide to Investing several years ago and was inspired by what I read to consider moving from a trusted and capable CFP with a .70 AUM on a $2.44 MM account with $16,800 annually in fees (not including mutual fund expenses, so closer to 1.00 AUM or $24,400).
Between the accounts with our CFP and accounts we have outside and I manage on my own, we have $4,400,000. Our net worth is $4,800,000.
Over the last 8 years or so the annual returns with our CFP have averaged about 8% after fees. He is available anytime for advice and guidance either in person or over the phone. We meet annually for about 2 hours to review the account, discuss any changes, etc.
Frankly, I feel we are not getting $24,000 in value from this relationship, despite the high level of service and decent returns. I am college educated, self-taught on investing, and have done quite well on investing about $1.96 million on my own through my wife's 401(k), Schwab, a state-run 529 plan, and an online high-yield savings account.
My wife and I have been married 20 years, and I manage the household finances and investment responsibilities with her ioccassional input/approval. We are both in our mid 50's and college-educated. We have a 12 year old daughter.
I left work 9 years ago and she plans to retire in one year. I currently collect $59,000 annually in SSDI for myself and my daughter. I expect that to continue for 6 more years before it drops to about $40,000 when my daughter turns 18. We (including our CFP) expect that in one year we will be financially able to fully retire.
Our CFP currently has directed/suggested to us to allocate our funds with him and elsewhere as follows: US equity 58%; foreign equity 19%; cash 12%. I am comfortable with that allocation as is my wife.
Question: If I am able to convince my wife to go along with my idea to drop the CFP and self-manage with index funds and the like at Vanguard, how do I go about determining the best funds and asset allocation to suit our needs? How do I figure out the best tax strategy for us each year so that we are drawing down in a tax-efficient manner?
In closing, if my wife does not agree to leave our CFP, I am prepared to move my 50% share out for self-manage and keep hers with the CFP. Any thoughts on that approach?
Thank you in advance for your feedback. Please do not hesitate to ask questions.
How to determine the best funds: You can find a list of the most common index funds in the forum wiki. And this forum has a zillion threads finely parsing the difference between different index funds with similar goals. But it doesn't really matter. All the index funds of the same class (e.g., US Stock) will yield almost the same return.
How to determine a tax-efficient strategy: That's a tough question because there are so many variables. Almost half your savings is in a tax-deferred account, so that you'll have to take RMDs eventually. One common strategy is defer taking social security until age 70 and do Roth IRA conversions every year until then. Because your only income will be from the conversions (and your $40k SSDI?), you can convert at a favorable tax rate. But there are a few pitfalls along the way. One is that if you have a low income, you get a subsidy on health insurance purchased via the ACA. That can make a big difference before age 65 when Medicare kicks in. And just before and after age 65, you have to worry about IRMAA. Basically, Medicare part B insurance premiums in a given year depend on your income (more or less, your AGI) from 2 years prior. Those are (I think) the main things to worry about - figuring out the most tax-efficient strategy would require some predictions and math.
"Financial ignorance is expensive."
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
60% US equity
20% Foreign equity
10% cash
10% fixed income
20% Foreign equity
10% cash
10% fixed income
illumination wrote: Tue Feb 04, 2025 3:44 pm One thing I constantly come back to is the fees are not the worst part of a financial planner, it's the lower returns oftentimes from bad investment decisions. At least in my experience.
The last 8 years, a Total market fund has averaged over 14% a year . That's likely not perfect apples to apples, but it should at least be compared next to the same risk profile of your portfolio that was being managed.
What was the asset allocation that the CFP was managing for that 8% average? Your financial advisor has likely cost you over a million dollars versus a similar risk profile with 2-3 commonly recommended index funds. The $24k a year fee is the least if your worries.
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
Sparkles2025 wrote: Fri Feb 07, 2025 11:22 am 60% US equity
20% Foreign equity
10% cash
10% fixed income
illumination wrote: Tue Feb 04, 2025 3:44 pm One thing I constantly come back to is the fees are not the worst part of a financial planner, it's the lower returns oftentimes from bad investment decisions. At least in my experience.
The last 8 years, a Total market fund has averaged over 14% a year . That's likely not perfect apples to apples, but it should at least be compared next to the same risk profile of your portfolio that was being managed.
What was the asset allocation that the CFP was managing for that 8% average? Your financial advisor has likely cost you over a million dollars versus a similar risk profile with 2-3 commonly recommended index funds. The $24k a year fee is the least if your worries.
https://www.portfoliovisualizer.com/bac ... YKZRqrs6iM
This rough example of some Vanguard ETFs with that portfolio allocation is saying 9.38% CAGR.
It all adds up, this underperformance probably represents several hundred thousand "lost" dollars with the the same risk. Would easily be "millions" less on a longer timeline. And then you have to analyze the tax efficiency if the FA is buying and selling.
On a side note, I would say 10% in literal "CASH" (not fixed income) on a $4.4 million dollar account is silly. That's $440,000 that should be earning around 4.5% interest. That's almost $20,000 a year in lost interest. At least put it in a money market account.
Re: From CFP with .70 AUM to self-manage with $4.4 MM?
Elm wealth will do the same thing for 0.12%
Vanguard for 0.3%
Vanguard for 0.3%
“You can have a stable principal value or a stable income stream but not both" |
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
As long as your spouse knows your old CFP and you will only do as well as the market does. If and when the market tanks next time she may blame it on you. Makes sure she understands you will do just as the market does but no fees so ahead either way.
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Re: From CFP with .70 AUM to self-manage with $4.4 MM?
I think that you and your wife are certainly capable of managing your own portfolio and your finances. If you choose. Selecting a desired asset allocation is easy. Picking appropriate index funds or ETFs is easy. There are very knowledgeable folks here that can assist you (I'm not one of them). It isn't necessary to move your accounts to Vanguard. If your accounts are currently at Schwab, it may be simply to leave them there. If you want to change brokerages, consider looking at Fidelity as well as Vanguard. Each of the three houses have advantages and disadvantages. My accounts are all at Schwab and I've been very happy with them.
The more complicated issues would be in managing tax issues, taking into account state and federal taxes, IRMAA, SS etc.... However, those are not beyond you and your wife. There are other professionals that can provide assistance with those on a fee for service basis as well.
More important in my mind is keeping you and your wife on the same page, working together to achieve a common goal. Finances are a huge issue in a marriage. I think a .7% AUM fee is a lot less costly to a happy and successful life, than introducing unnecessary points of friction in your relationship. So I would suggest you bring up the idea with your wife, provide her with some of the same resources that you used to inform your opinions. Then jointly come to a decision. It may not be a binary choice, ie all or none. However, I would guard against the "take my toys and play elsewhere" option.
The more complicated issues would be in managing tax issues, taking into account state and federal taxes, IRMAA, SS etc.... However, those are not beyond you and your wife. There are other professionals that can provide assistance with those on a fee for service basis as well.
I've only been married for 43 years, so I'm still trying to figure it out. However, one of the things that has helped us immensely is that we don't have "my" or "your" money. Everything is "ours". There are practical reasons for this. One of the best pieces of advice that bogleheads will give is to consider your portfolio as a whole. If you and a CFP are independently managing your assets you may end up working at cross purposes.Sparkles2025 wrote: Tue Feb 04, 2025 3:20 am My wife and I have been married 20 years, and I manage the household finances and investment responsibilities with her ioccassional input/approval. We are both in our mid 50's and college-educated. We have a 12 year old daughter.
In closing, if my wife does not agree to leave our CFP, I am prepared to move my 50% share out for self-manage and keep hers with the CFP. Any thoughts on that approach?
More important in my mind is keeping you and your wife on the same page, working together to achieve a common goal. Finances are a huge issue in a marriage. I think a .7% AUM fee is a lot less costly to a happy and successful life, than introducing unnecessary points of friction in your relationship. So I would suggest you bring up the idea with your wife, provide her with some of the same resources that you used to inform your opinions. Then jointly come to a decision. It may not be a binary choice, ie all or none. However, I would guard against the "take my toys and play elsewhere" option.
On investing; I have lots of questions, many opinions, and little knowledge. A dangerous combination. Be warned.