At what point do you start hiring advisors?

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JeremiahS
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At what point do you start hiring advisors?

Post by JeremiahS »

At what point in your financial journey do you start outsourcing some of what you've been doing? CPA's, Lawyer's, what have you. I'm approaching this from the point of view of someone who doesn't own a business or have anything particularly complicated in my life. My general thinking has been that I'm going to reach the point of being 100% debt free and maxing out all of my available tax free space (401k and Roth IRA) first. That seems to be the easy bit that I don't need any help with. Then once I look at taxable investing and converting old retirement accounts to Roth, I'll hire some professional help. But there seems to be a variety of ways to go.

1. Decide my financial life is simple enough I probably don't need help
2. Only start hiring people on an as need basis when I encounter financial questions I can't answer myself
3. Look into hiring people early because they may be able to supply good advice now and speed my journey to becoming financially independent

Thoughts?
livesoft
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Re: At what point do you start hiring advisors?

Post by livesoft »

I don't see how hiring someone to tell you what you can learn here is something you should do. You still have to put in the same effort to learn from someone you are paying plus you might have to find them, research their credentials and references.

Now I suppose if you make $1,000 an hour and can trust someone who only makes $500 an hour that it might make sense. But if you are only making $100 an hour, then I don't see it happening.
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arcticpineapplecorp.
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Re: At what point do you start hiring advisors?

Post by arcticpineapplecorp. »

yep, the more simple your situation, the less need there is for lawyers, cpas, financial advisors and the like.

not sure you'd need help converting old retirement plans to Roth or taxable investing. there's lots to learn here at bogleheads.

#1 and #2 is fine. I don't know what others would be able to offer you to speed your financial independence. Max accts, live within your means, take risk, keep costs low, minimize taxes. there may be a couple things I'm missing off the top of my head, but not sure what else. keep reading here at bogleheads. you can read kitces.com, they've got lots of useful in depth articles about tax law changes, different strategies you may not have thought of etc.

just because you hire an "expert" doesn't mean they're gonna know everything. There's a lot to know, but sometimes things aren't relevant.

I'd say keep asking questions if you're unsure, or post your specific scenario if you want feedback about anything you might be missing/didn't think of:

viewtopic.php?t=6212

otherwise, sounds like your on the right track.

one caveat...if you are looking to leave inheritance, depending upon your situation a trust may or may not be suitable. You'd want to talk to an estate attorney to set things up that way later on. Also long term care insurance is something to consider when you're in your 50s or thereabouts. elder law attorney if you might need skilled care/medicaid and have a spouse you are trying to preserve assets for.
Last edited by arcticpineapplecorp. on Sun Aug 23, 2020 8:32 pm, edited 1 time in total.
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Trader Joe
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Re: At what point do you start hiring advisors?

Post by Trader Joe »

"At what point do you start hiring advisors?"

For us - never.

Advisors are a complete waste of money. Use this forum and save your money.
000
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Re: At what point do you start hiring advisors?

Post by 000 »

If you don't have complicated business or legal arrangements, what are you hoping to get out of these advisors?
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rob
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Re: At what point do you start hiring advisors?

Post by rob »

Salesmen - Never

CPA's for more complex tax - generally when you need it - usually running a business. Simple 1099/W2 income and the usual stuff that goes with them can be managed by cheap tax software easily.

Various Suits - When you get close to limits on death taxes (state / fed can be different). To setup wills/POA's/Health Care Proxy I would say once you married/commited or certainly before kids.
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Bogle7
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Never

Post by Bogle7 »

Trader Joe wrote: Sun Aug 23, 2020 8:26 pm "At what point do you start hiring advisors?"
For us - never.
Advisors are a complete waste of money. Use this forum and save your money.
+1
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Svensk Anga
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Re: At what point do you start hiring advisors?

Post by Svensk Anga »

I’d say when you don’t have enough interest to educate yourself on these matters. You have to be really careful though when you start outsourcing. You have to know enough to judge the competence of those you hire. Otherwise you could be badly served by someone who talks a good game but is actually a poor performer. You also have to guard against using specialists who optimize in their area of expertise but leave you with a sub-optimal overall plan. For instance, CPAs who minimize this year’s taxes but create higher lifetime tax bills or AUM advisors who design a nice balanced portfolio, but leave you with a big mortgage costing a higher interest rate than your bonds pay.

You might get lucky and find a holistic planner who can link you to other competent experts you may need. My guess is that these gems are far outnumbered by the marginally competent and conflicted, so your odds are not good.

I do think you want a lawyer to navigate the nuances in your state’s laws for estate planning.

Can you tell I strongly favor self education and DIY? Given that, I suspect there will come a time when I (or DW) am not competent to manage our finances and it ought to be outsourced. Hopefully, one of the kids can take over, but it will still be questionable how competent they are.
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FIREchief
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Re: At what point do you start hiring advisors?

Post by FIREchief »

I would hire an advisor only if I aged to the point where my cognitive abilities were shrinking and I didn't have a responsible, adult family member who I could trust to assist. It would likely be Vanguard PAS at .3% AUM (assets under management).

Regarding Roth conversions. I've never heard of an AUM financial advisor who recommends them. They reduce the AUM fee, although they can ultimately increase the client's net worth. This may be the most obvious test of whether or not an advisor is acting as a fiduciary.
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MathWizard
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Re: At what point do you start hiring advisors?

Post by MathWizard »

I've tried a couple of CPAs, and they were not much help.

Lawyers, definitely for wills, partnership agreements, or any transaction that has the potential to go to court.

The problem with financial advisors is
1) most are really just salespeople, and
2) by the time you know enough to pick a good one, you can probably do it yourself.
3) unless you only get advice from them and do transactions yourself, you have to trust them.
FrownLines
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Re: At what point do you start hiring advisors?

Post by FrownLines »

Trader Joe wrote: Sun Aug 23, 2020 8:26 pm "At what point do you start hiring advisors?"

For us - never.

Advisors are a complete waste of money. Use this forum and save your money.
I hired an advisor for a few months and 100% agree. They are a waste of money. This particular advisor had a CFA and CFP and I thought that would mean she would go through my portfolio and analyze my holdings. I was wrong. Instead she wanted me to sell everything so she can plug me into one of her models. Her model was a lot of passive indexing and she had all flavor of index ETFs from Nuveen, iShares, Vanguard as well as DFA. Guess who sponsors her firm's conferences? Nuveen, State Street (iShares), DFA. Her planning involved plugging my 'numbers' into MoneyGuide Pro. You can now utilize this tool for free if you open an account at Charles Schwab. She is a grifter and charged 125 bp. I only let her manage 1/2 of my money and then fired her after a few months. Stupidity on my part and fraud on hers.
dbr
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Re: At what point do you start hiring advisors?

Post by dbr »

Without a doubt at least once for wills, estates, powers of attorney, health care declarations, etc.

On occasions an ordinary person can benefit from tax advice and/or tax preparation from a CPA. Some people may certainly prefer to pay the cost to avoid doing the work.

We here, and I personally, are strongly biased against financial advisors. I think this is not merely a bias, however, as the vast majority of the people who label themselves as such are salesmen who intend to profit from selling you things you don't need and should not buy. All I can say for those who can legitimately benefit from honest and competent advice is good luck. I think we are hampered a little bit here in that recommendations for personal services like this on the forum are chancy. I do not make recommendations myself.

There are people whose circumstances justify hiring professional help. Hopefully those people already know who they are.
dbr
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Re: At what point do you start hiring advisors?

Post by dbr »

FrownLines wrote: Mon Aug 24, 2020 10:44 am
Trader Joe wrote: Sun Aug 23, 2020 8:26 pm "At what point do you start hiring advisors?"

For us - never.

Advisors are a complete waste of money. Use this forum and save your money.
I hired an advisor for a few months and 100% agree. They are a waste of money. This particular advisor had a CFA and CFP and I thought that would mean she would go through my portfolio and analyze my holdings. I was wrong. Instead she wanted me to sell everything so she can plug me into one of her models. Her model was a lot of passive indexing and she had all flavor of index ETFs from Nuveen, iShares, Vanguard as well as DFA. Guess who sponsors her firm's conferences? Nuveen, State Street (iShares), DFA. Her planning involved plugging my 'numbers' into MoneyGuide Pro. You can now utilize this tool for free if you open an account at Charles Schwab. She is a grifter and charged 125 bp. I only let her manage 1/2 of my money and then fired her after a few months. Stupidity on my part and fraud on hers.
Yes, aside from fraud and grift you can also get incompetence, certainly no more service or insight than you can do for yourself very easily.
Naismith
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Re: At what point do you start hiring advisors?

Post by Naismith »

We never hired an advisor per se, but we have used professional advice.

1. Starting a few years before retirement, we began utilizing the https://pralanaretirementcalculator.com/. This is not too complicated for those who are already comfortable with Excel. There is a modest annual cost for the upgrade each year. It has been great for running multiple "what if" scenarios, and has guided us on Roth conversions (since we are in the window after employment but before social security). I have heard that Pralana also makes a human being available at a cost, but we have not done that.

2. Because my job had been with a large university, I qualified for a free financial plan from TIAA. It didn't tell us much new, but confirmed the validity of our assumptions and general game plan. They don't give tax advice at all. I am glad to have a personal advisor to call if something happened--but I haven't made that call in the four years since that initial consultation.

3. Prior to Mike Piper's Open Social Security Calculator, we paid for a report by one of the services recommended in Jane Bryant Quinn's book. I also downloaded the SSA software AnyPIA and ran our numbers through that (which was NOT user-friendly, but similar to software on my job, so I managed).

The thing about those three sources, as opposed to just reading books/blogs/posts, is that we were getting advice on our particular situation, with all our numbers laid out. Even though it was still DIY.
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gr7070
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Re: At what point do you start hiring advisors?

Post by gr7070 »

JeremiahS wrote: Sun Aug 23, 2020 8:13 pm I'm approaching this from the point of view of someone who doesn't own a business or have anything particularly complicated in my life.
If this changes - to the point it's surpassed your knowledge or your time to address yourself.

Depending upon your situation it might make sense to briefly consult professionals to keep you out of "trouble". We don't know what we don't know. However, that threshold is pretty high these days with the internet and forums like this where there are experts happy to help.
Lee_WSP
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Re: At what point do you start hiring advisors?

Post by Lee_WSP »

My own personal criteria is as follows:

Does the cost of making a mistake outweigh the cost of hiring the adviser?

Does the adviser solve a problem I am experiencing and am unable to too lazy to solve on my own?

Am I too lazy to be trusted to do this task on time? If yes, ask question 1.

Oh, and absolutely no financial advisers; they're all just salespeople. Maybe an attorney or other fiduciary if I started losing cognitive abilities. Or a robo adviser if I'm feeling super lazy.
retire2022
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Re: At what point do you start hiring advisors?

Post by retire2022 »

Op

In 2000, a private Certified Financial Planner told me Mr Retire2022 you have done very well for yourself, I did not have a large portfolio, but was please that they affirmed I was on right track.

I've been using an accountant for the past 12 years (1989-2013) and their services involved reviewing my K-1s

Last year I had my portfolio and Assets reviewed by Vanguard Personal Advisory Services, I was not their client type.
I DIY my own portfolio 1.894 million as of friday 8/21/2020 and have been investing since 1987 stock market crash for 32 years.

I am still using another accountant since change over, since 2013.

I used attorneys for my two different real estate deals which were local, they understood what was involved.

Post your issues here on this board for advice.

best
mkc
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Re: At what point do you start hiring advisors?

Post by mkc »

We have only once used a financial advisor, and that was a fee-only CFP provided by one of our employers as a benefit (the company paid the fee). That was about 20 years ago and it was useful at the time to help us diversify from nearly 100% company stock. The CFP provided analysis and a plan based on risk assessment and goals, educated us on tax efficiency, asset allocation, etc., suggested some mutual funds to consider and provided details on those, but did not do any of the actual transactions. It is how we found Vanguard and Fidelity and avoided the EJ/RJ/ML/MS-ies of the world.

We have hired an estate planning attorney when a surviving parent became incapacitated and we needed take things over. That attorney was invaluable in setting up things like long term care, sale of the parent's home, and eventually Medicaid when funds were depleted.

Unless both of us were to see cognitive decline, I see no reason to pay to have someone handle our finances.
Fallible
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Re: At what point do you start hiring advisors?

Post by Fallible »

JeremiahS wrote: Sun Aug 23, 2020 8:13 pm At what point in your financial journey do you start outsourcing some of what you've been doing? CPA's, Lawyer's, what have you. ... Then once I look at taxable investing and converting old retirement accounts to Roth, I'll hire some professional help. But there seems to be a variety of ways to go.

1. Decide my financial life is simple enough I probably don't need help
2. Only start hiring people on an as need basis when I encounter financial questions I can't answer myself
3. Look into hiring people early because they may be able to supply good advice now and speed my journey to becoming financially independent. ...
Twice in my investing lifetime I've used a CFP as needed to answer questions I could not answer myself, or at least to my satisfaction. But that was some 30 and 20 years ago, long before there was a Bogleheads' forum to join, which could've answered my questions at no cost :-). In fact, just reading certain threads and the wiki would've helped without ever having to post a topic.

But it's another matter entirely when it comes to legal, tax, etc., areas mentioned above by poster "dbr": "Without a doubt at least once for wills, estates, powers of attorney, health care declarations, etc.

"On occasions an ordinary person can benefit from tax advice and/or tax preparation from a CPA. Some people may certainly prefer to pay the cost to avoid doing the work."
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Stinky
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Re: At what point do you start hiring advisors?

Post by Stinky »

MathWizard wrote: Mon Aug 24, 2020 10:37 am I've tried a couple of CPAs, and they were not much help.

Lawyers, definitely for wills, partnership agreements, or any transaction that has the potential to go to court.

The problem with financial advisors is
1) most are really just salespeople, and
2) by the time you know enough to pick a good one, you can probably do it yourself.
3) unless you only get advice from them and do transactions yourself, you have to trust them.
This is excellent advice, and mirrors my thinking exactly.
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TomatoTomahto
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Re: At what point do you start hiring advisors?

Post by TomatoTomahto »

CPA, mostly because of multi-state return. Helpful when audits get initiated. If you’re a high earner and NY, NJ, or CT are filed as non-resident, do not be surprised if you get audited.

Lawyer for wills and trusts.

No need for a financial planner.
I get the FI part but not the RE part of FIRE.
wwtraveler
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Re: At what point do you start hiring advisors?

Post by wwtraveler »

Attorney: Will, Advanced Directives, Trusts, or some specialty - business or occupation specific or tax specific where a CPA recommends using an attorney.

CPA: More than just a simple business, or if you don't like accounting part of running a business. For Personal taxes - if you have significant non-equity based investments that have specialized tax consequences (real estate for example), pass through business income, partnerships, or multiples of the previous where there could be a bunch of scenarios that a CPA can perform more quickly and efficiently than you could (and know to even explore it) <edit> -- significant income from multiple states or countries is another.

Insurance Broker: Once you have 2 or more policies or are in a line of business or activity with specific coverage requirements or mandates.

NOTE: Typically the above three should be local to your area or at least state. There's so much different state specific legislation around the topics above that you really need someone that is an expert of where you live. If you live in multiple states you may in fact have to consult several folks which can be a real pain. Do they have to be down the road or next town over? No, but it probably makes sense to be able to physically see them if you need them, albeit some of that is changing a bit with technology, I probably would advise against a bunch of resources that require plane flights to go see unless there's some special circumstance.

Investment Advisor: Generally speaking if your are posting here already then NO. You already showed enough interest in the personal finance by being here. What you don't know you can learn.

If you do, then for fee only and for specific situations that you post here and get lots of conflicting information and then even after researching further you are left with multiple options. In those cases I'd negotiate what the price for that specific topic is up front. A lot of this type of stuff that comes up I think would be around estate planning so you may also find your attorney to be the only resource you really need (and probably want).

One thing that wasn't addressed above is usually that we post here as individuals but there may be an entire family that gets effected by a decision made by one. Be sure to keep open and good communication with anyone that you are making joint decisions with an invite them to ask questions and poke holes at stuff. In fact, you may be very much legally obligated to do so! Also don't decide to manage Dad's retirement portfolio on a whim and start buying and selling randomly on the dinner table during Thanksgiving because of something you think ought to be done better. If you want to help then you have to do it together and slowly. That gets doubly touchy when the family members you are working with have 'their own people' and especially an investment advisor already. If you think something is really off, go slowly to address your concerns with the family member and realize they are their own person who gets to make their own decisions. This is also true for significant others that aren't married.
MittensMoney
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Re: At what point do you start hiring advisors?

Post by MittensMoney »

At the same point you hire a personal trainer. Are you motivated? Do you have or can you find the knowledge needed? Do you have what it takes to be consistent and stay the course in order to get long term results?
goos_news
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Re: At what point do you start hiring advisors?

Post by goos_news »

At some point, life gets complicated and thoughts turn to mortality, and a lawyer becomes necessary. And a good review of insurance.

When our taxes really started to get complicated with short term rental income, and then expanded to two countries, professional help really navigated the waters. I remember one time I was on an overseas assignment and I had taxes so unusual, KPMG had to have a cross-country conference call to debate and research my situation. That's an extreme, but real, situation.

Many employers offer up a free retirement planning session. The 3rd party advisors usually are very familiar with the particulars of your benefit package. It's free and can be worth your time -- not all are hucksters. And even fee based, as a check up and second set of eyes, it may be worth it to you, especially if you have an unusual situation.
sschoe2
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Re: At what point do you start hiring advisors?

Post by sschoe2 »

As a general principle, I don't hire people to do what I am able to do myself. Maybe if I was a super high net worth individual earning several hundred $ per hour but my time is rarely worth enough to hire something out especially with my house where most contractors quote me hundreds of $$ per hour for a project.
Kelrex
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Re: At what point do you start hiring advisors?

Post by Kelrex »

I have a whole team of professionals, but that's because my situation is complicated. If I could avoid using them, I happily would.

You really need a good reason to seek expensive professional help. Once you have that good reason, then it's often downright reckless to not get that help, but until it's really needed, it often doesn't add much of value.

I hate having everything so complicated, but I really don't have a choice, and the more professionals I have involved, the less I can even understand my own situation, so I don't recommend complicating things unnecessarily.
fyre4ce
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Re: At what point do you start hiring advisors?

Post by fyre4ce »

For investment and personal finance advice specifically, I'm not sure that someone who already participates on these boards would need that with any amount of money. You can get great advice on here for free. The amount of money doesn't strongly affect the need for an advisor. We advocate simple and low-cost investing approaches that work almost exactly the same for a $10M portfolio as $10k.

It can make sense to hire professionals for specific situations, such as:
  • A CPA to prepare taxes. I advocate that most people prepare their own personal taxes using TurboTax or similar, mostly because it teaches you how taxes work. Business taxes are a different beast, and especially because the IRS is less forgiving with business taxes than personal. My wife and I use a CPA for her corporate taxes, at the cost of a few thousand dollars a year (fully deductible). Our plan is to wean ourselves off and do it ourselves eventually, but are too busy to focus on this for now.
  • An accountant for a more-than-simple business accounting
  • An estate planning attorney for a revocable living trust, will, etc
  • A business retirement plan administrator to run a 401k for a business with employees, and/or a defined benefit pension plan
There may be others I'm forgetting.
stimulacra
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Re: At what point do you start hiring advisors?

Post by stimulacra »

I think Bogleheads has been the single greatest source of financial and investing advice I could ever have.

Never hired an advisor but have gotten free sessions via the firm that managed my previous employers 401k. Throughout my tenure there he told me I was doing fine and liked my allocations. When I was separated from the employer and wanted to roll over my balance, he took me out to lunch and came up with a basket of funds and individual stocks that looked savvy and sophisticated on paper if I rolled over to his brokerage gateway. Then I noticed the 1% annual advisor fee on top of some other fees… I politely declined and told him I was rolling everything over to Vanguard and ran a few set-it-and-forget-it portfolios by him. He shrugged and said that all sounded fine and paid the lunch tab. Didn't offer desert lol.

If I ever get into rental properties or needed to set up an LLC for some passive income ideas I might consult with specific attorneys to help structure things and do basic asset protection. But for investing; minimizing fees and transaction costs, and taking emotions out of investing has served me well.
petulant
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Re: At what point do you start hiring advisors?

Post by petulant »

BH is a great resource for financial and investment advice, but even so individual posters resort to emotional decision-making after other being reinforced by other posters. As an educational tool, BH can really take a long time to learn and understand many concepts that become important for those approaching retirement; I think it's much simpler for accumulators. I tend to think that those approaching retirement who don't want to spend the time getting educated may be better served by a fiduciary financial advisor that can piece together estate wishes, taxes, investments, social security, and other issues into an optimum plan.
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