Who has a financial advisor/planner and why?

[smitcat]

I am thinking this is similar to the decision to use a tax advisor or not. A lot of people do their own taxes, and a number pay someone else to do it. In my opinion, investing isn't harder than doing your taxes depending on how complicated your taxes are. I tend to do my taxes because I am a cheapskate and also feel that no one will be more dilligent than myself even if my knowledge level will be lesser than an advisor. However, I have reached out to advisors whenever i reach a point where I cannot resolve the issue.

Good analogy as to when to go outside of yourself.

Except that I believe that doing one's taxes is far simpler than investing.

With taxes you have a fixed set of facts / circumstances that fairly much have to be entered in a tax return in a limited amount of ways.

With investing there are way more factors involved with a myriad of possible roads to take for investing success.

Depends entirely on the users tax needs and/or the users investing needs.

Of course. And, the degree of experience each person has in each realm and how well one can research / understand concepts related to each and implement them wisely.

And that would be why we feel investing has been simpler than taxes (for the most part) in our case.

[Sandtrap]

Great points.
Well said, as always. "Thanks Lee"!!

I live in an affluent end of town with private golf course gated communities, "Wow Look At Me" homes and estates, and so forth.
Over the many years I've been here, I've met many that are not "millionaire's" (most have good pensions and SS with small well under 1 mil. portfolios that they have managed by a FA, Edward Jones, etc. It is very common to brag about one's FA, or Edward Jones.

This reminds me of the old, "EF Hutton, when he talks, everyone listens" TV commercials.
So, having a FA is like being able to say, "My Contractor", "My FA", "My Accountant", "My Portfolio". etc. The prestige of that.

It is also common to discuss one's "Portfolio", even though a pension and SS are the primary income and the "portfolio" might be 100k at best or far smaller. But, again, the "prestige" of saying, "My Portfolio".

Also, the "prestige" of using all the "prestige words" in a conversation, "tax loss harvesting", "equity", etc. when one really doesn't have much to talk about as far as wealth or things like that.

Human behavior is interesting. In Hawaii, also cultures where "humility" is a strong focus, these types of things weren't obvious or displayed except in small parts of town with mostly "non islander" residents, or snowbirds, etc. In Hawaii's Island cultures and Internationally diversified especially Pacific Rim cultures, "bragging" or "displays of wealth or affluence, etc, is frowned upon for the most part.

But, it seems more common in affluent areas in the CONUS. (continental usa).

So, in conclusion, individual perspectives of these things are interesting. Everyone has a unique perspective and opinion and onions.
(dis laimer).
j

In my social circle I do not have any of those types of discussion. I have to come to financial forums such as this one to experience personal financial "talk".
[/quote]
+1
same here
j

[gavinsiu]

The analogy with taxes in my opinion is not one to one but pretty similar. I have been doing my taxes since my teens. I also started doing my mom's tax after my father passed away when I was in college.

Both taxes and investing require a lot of learning. The tax code is much more annonying and constantly changes. There is changes in investment laws, too but I feel it is less extreme. in general, a lot of the difficult part is setting it up. The rest is just sitting around while it makes you money.

This points to another similarity, you can control the degree of complexity. You can personally research a portfolio of stocks that I can spend hours researching and the maintaining my stock portfolio but I chose to invest in such a way where I can essentially sleep on it for several decades. The same is taxes, I have tried to avoid activities that will result in increase complexity in taxes.

However, some complexity increase are unavoidable. My first tax was one page and took me 20 minutes to do. My tax rate has considerably increased because I now owe a house, have kids and make enough money to have to deal with backdoor roth. These are in my opinion first world problems. I rather have these issues than being broke, starving or live in a war zone. Since I do my mom's taxes, I get to experience retirement issues decades before I am exposed to it. At least I will be prepared when retirement comes.

My finance has also increase in complexity, but not by much. With 4 fund portfolio, there weren't that many issues, but as retirement becomes visible, I have to do more planning. I comtemplate actually hiring some advisors.

In general, I feel that investing is much easier than taxes. However, people are forced to deal with taxes every year, so investing is more abstract. The problem is that if you procrastinate, that abstract concept becomes. a brick wall that you can't recover from.

[CloseEnough]

The analogy with taxes in my opinion is not one to one but pretty similar. I have been doing my taxes since my teens. I also started doing my mom's tax after my father passed away when I was in college.

Doing taxes is more like doing plumbing, especially these days with tax software. Investing is more like being an architect or painting water colors. Not sure whether that leads you to be more likely to use a tax consultant or investment advisor.

[smitcat]

The analogy with taxes in my opinion is not one to one but pretty similar. I have been doing my taxes since my teens. I also started doing my mom's tax after my father passed away when I was in college.

Doing taxes is more like doing plumbing, especially these days with tax software. Investing is more like being an architect or painting water colors. Not sure whether that leads you to be more likely to use a tax consultant or investment advisor.

I find investing fairly easy to understand and impossible to predict.
I find taxes very hard to understand and impossible to predict.
Our tax situation has not been simple, we try and keep the investment situations simple.

[gavinsiu]

Doing taxes is more like doing plumbing, especially these days with tax software. Investing is more like being an architect or painting water colors. Not sure whether that leads you to be more likely to use a tax consultant or investment advisor.

That's a good analogy. Once the architect gets the building built, it is done. Taxes is the toilet that gets clogged every year. I have actually employ tax advisors several times when my return exceed what I can look up or the issue requires too much effort. For example, my mom got a letter from IRS indicating that she own thousands in taxes. I tried calling the IRS for a month to try to get it resolved and I also spend hours trying to figure out what happened. I eventually just hired an RA who took an hour to look at it and announced that the IRS screwed up somehow and use the wrong calculation method and calculate all of the long term capital gain as income. It only took him an hour.

[tibbitts]

The analogy with taxes in my opinion is not one to one but pretty similar. I have been doing my taxes since my teens. I also started doing my mom's tax after my father passed away when I was in college.

Doing taxes is more like doing plumbing, especially these days with tax software. Investing is more like being an architect or painting water colors. Not sure whether that leads you to be more likely to use a tax consultant or investment advisor.

I don't know: "doing taxes" in terms of tax prep for ordinary cases (vs. tax planning) might be as you say, but there are some tax tasks (estate tax returns, etc.) that are more complex. On the other hand, investing, if you follow a 1/2/3-fund model, isn't exactly architecture either.

[stan1]

Maybe we all can agree that people can and should have different needs and wishes rather than assuming everyone should be identical to me? There's a range of what is reasonable and multiple ways to meet a need. The resistance to having a professional with decades of experience on retainer to ask personalized investing questions of for $96 per year is weird (its a bargain for anyone who wants or needs that service, and the fact that there appears to be only one business offering this service may indicate that there is just a small demand for it).

[vnatale]

Maybe we all can agree that people can and should have different needs and wishes rather than assuming everyone should be identical to me? There's a range of what is reasonable and multiple ways to meet a need. The resistance to having a professional with decades of experience on retainer to ask personalized investing questions of for $96 per year is weird (its a bargain for anyone who wants or needs that service, and the fact that there appears to be only one business offering this service may indicate that there is just a small demand for it).

It is strange if it is true that there is just a small demand for it as it seems like there is definitely a strong need for it.

[tibbitts]

Like many engineers, my financial life in retirement is captured in five spreadsheets of my own making.
...

I'd guess that outside of Bogleheads, "many" is probably about... three.

2 millionish engineers in the US alone, 1.995M who spend hours every week of their lives on spreadsheets for various purposes.

I'm actually very curious as to your "take" here. Doesn't align with the reality of my peer group unless there was a joke I missed.

Honestly curious.

My take is that outside of Bogleheads a tiny minority of engineers (or anyone) who use spreadsheets in their employment every day build their own spreadsheets to analyze their personal finances. It always seems to me that Bogleheads don't realize how atypical they are.

You are saying that your non-Boglehead peer group members typically would have created five spreadsheets to analyze their financial lives in retirement? And would have talked to you about it such that you were aware of it?

Five in my own limited circle of a 70ish member group of 75% engineers. I'm confident there were 10+ others that I wasn't aware of.

5 each? 4 each? 3 each? I never asked that level of detail. but we all were more or less interested in the same things.

Engineers parse data with spreadsheets. They tend to be too cheap to buy Quickbooks for a minimal use like personal finance.

Typical uses would be budgeting, portfolio management, tax estimation, valuing of pensions vs lump sum, Roth conversion approaches. The crazier ones map Bollinger bands and god knows what else in attempts to beat the market (that's confirmation they are NOT closet Bogleheads).

Anyway, thanks for your own perspective. I appreciate it.

Honestly that's surprising to me, since it's not like these functions aren't available in already-developed spreadsheets or online calculators for free or low cost. It would seem to follow that software engineers would all be writing their own tax prep software, for example. Is that really happening? We should probably clarify that we're talking about developing spreadsheets for financial functions, not merely using them.

[MoreTaxes]

To my way of thinking, doing one's taxes is way easier than investing.

With taxes, there is basically only one way to complete them. There is no such thing as a "wise tax preparer." You either are or are not required to submit a given schedule, and there is basically only one number you can write on each line of that schedule that is actually correct. It's all explained in the form instructions and IRS Pubs, so it is just a matter of following a cookbook recipe for how to enter the correct numbers in the correct places. No deep thinking or strategizing is required. And I say this as someone who had 23 pages of tax forms last year. It just takes time to fill out each form. That's it.

Investing is way harder. There are a million ways to proceed. Just answering a strategic question such as, should I invest in a traditional tax-deferred account or a Roth one, requires understanding more about taxes than doing your taxes does. Should I convert to Roth? When should I take SS so as to optimize over all portfolio value and risk? That question may take understanding the SS Trustee report and solvency timeline. There are 10 other tough questions like that that one has to answer, before one can even get to the point of having funds in an account ready for investing. That final step, of buying a 3-fund portfolio or whatever, is fairly easy, but it takes deep thinking about a multitude of paths before you can conclude that you are investing wisely. Because there is such a thing as a "wise investor."

[MoreTaxes]

I'd guess that outside of Bogleheads, "many" is probably about... three.

2 millionish engineers in the US alone, 1.995M who spend hours every week of their lives on spreadsheets for various purposes.

I'm actually very curious as to your "take" here. Doesn't align with the reality of my peer group unless there was a joke I missed.

Honestly curious.

My take is that outside of Bogleheads a tiny minority of engineers (or anyone) who use spreadsheets in their employment every day build their own spreadsheets to analyze their personal finances. It always seems to me that Bogleheads don't realize how atypical they are.

You are saying that your non-Boglehead peer group members typically would have created five spreadsheets to analyze their financial lives in retirement? And would have talked to you about it such that you were aware of it?

Five in my own limited circle of a 70ish member group of 75% engineers. I'm confident there were 10+ others that I wasn't aware of.

5 each? 4 each? 3 each? I never asked that level of detail. but we all were more or less interested in the same things.

Engineers parse data with spreadsheets. They tend to be too cheap to buy Quickbooks for a minimal use like personal finance.

Typical uses would be budgeting, portfolio management, tax estimation, valuing of pensions vs lump sum, Roth conversion approaches. The crazier ones map Bollinger bands and god knows what else in attempts to beat the market (that's confirmation they are NOT closet Bogleheads).

Anyway, thanks for your own perspective. I appreciate it.

Honestly that's surprising to me, since it's not like these functions aren't available in already-developed spreadsheets or online calculators for free or low cost. It would seem to follow that software engineers would all be writing their own tax prep software, for example. Is that really happening? We should probably clarify that we're talking about developing spreadsheets for financial functions, not merely using them.

Yes, I have engineer friends who maintain their own tax spreadsheets for doing or planning their taxes. This is not surprising to me.

And of course I have my own personalized spreadsheet for managing my finances. That's a given for most engineers, I would think.

[Sandtrap]

Maybe we all can agree that people can and should have different needs and wishes rather than assuming everyone should be identical to me?

There's a range of what is reasonable and multiple ways to meet a need.

The resistance to having a professional with decades of experience on retainer to ask personalized investing questions of for $96 per year is weird (its a bargain for anyone who wants or needs that service, and the fact that there appears to be only one business offering this service may indicate that there is just a small demand for it).

+1
well said

Each person's financial path can represent a "comprehensive snapshot" of, sometimes, a large part of life and life stages (financially). So, there's different needs for services, IE: taxes, FA, Legal Counsel, et al, at different times.

What applies to one person may or may not, usually not, apply to another.
But, in sharing...there's a lot of benefit to others...ie: "what to do", "what not to do"...etc.
Thus,....the "boglehead forum" can be tremendously helpful.

j

[HeavyChevy]

I'd guess that outside of Bogleheads, "many" is probably about... three.

2 millionish engineers in the US alone, 1.995M who spend hours every week of their lives on spreadsheets for various purposes.

I'm actually very curious as to your "take" here. Doesn't align with the reality of my peer group unless there was a joke I missed.

Honestly curious.

My take is that outside of Bogleheads a tiny minority of engineers (or anyone) who use spreadsheets in their employment every day build their own spreadsheets to analyze their personal finances. It always seems to me that Bogleheads don't realize how atypical they are.

You are saying that your non-Boglehead peer group members typically would have created five spreadsheets to analyze their financial lives in retirement? And would have talked to you about it such that you were aware of it?

Five in my own limited circle of a 70ish member group of 75% engineers. I'm confident there were 10+ others that I wasn't aware of.

5 each? 4 each? 3 each? I never asked that level of detail. but we all were more or less interested in the same things.

Engineers parse data with spreadsheets. They tend to be too cheap to buy Quickbooks for a minimal use like personal finance.

Typical uses would be budgeting, portfolio management, tax estimation, valuing of pensions vs lump sum, Roth conversion approaches. The crazier ones map Bollinger bands and god knows what else in attempts to beat the market (that's confirmation they are NOT closet Bogleheads).

Anyway, thanks for your own perspective. I appreciate it.

Honestly that's surprising to me, since it's not like these functions aren't available in already-developed spreadsheets or online calculators for free or low cost. It would seem to follow that software engineers would all be writing their own tax prep software, for example. Is that really happening? We should probably clarify that we're talking about developing spreadsheets for financial functions, not merely using them.

I hope we are not talking past one another.

I'm talking about fairly simple excel spreadsheets that are primarily used to track and visualize personal financial data. My own historical returns, asset levels over time, ratios of asset classes within my own holdings.

The what ifs around Roth would be one of my more complex spreadsheets, but fundamentally it is just many columns of asset categories (taxable, after tax, Roth), a column for annual expenses, one for Roth conversion amount, calculated federal taxes, state taxes, capital gains taxes with rows representing individual future years. These are manipulated manually. Each asset class has an assumed growth rate that is a variable at the top of the column. I enter a conversion amount for next year, or every future year, or whatever and see how balances in the classes evolve. There is a column for calculated RMD's for ages past 72 (or 75) There is no solution given. The spreadsheet just manipulates my assumptions and I manually observe the resulting behaviors. Not complex at all.

So to be clear, this type of spreadsheet is not a solver that produces an answer. It just provides a mechanical calculation based on inputs that must be done manually. In my prior work life, simple spreadsheets representing experimental data and data manipulation were constructed manually all the time. Modern tools like MATLAB and simulink, etc. that are actually programming languages are orders of magnitude more powerful for the younger generation.

[tibbitts]

I hope we are not talking past one another.

No, I don't think so. I'm just saying that among the engineers that I've known, certainly spreadsheets (and MATLAB etc.) are common in their work - although that's true (well not the MATLAB part) for many other professionals now, too. But only a tiny percentage of them automatically extend that application at work to personal finance d-i-y the way Bogleheads do. Certainly not to the extent of developing a spreadsheet to model Roth conversions as in your example. In fact the idea of doing a Roth conversion would simply never occur to them. Most of them, like other professionals outside of Bogleheads that I know of, "have a guy" for investments, etc. and really aren't interested in managing their own.

[Wash.Invest]

....

I think everyone can do their own investing now that it’s so damn simple, it’s just a choice to pay someone else to take care of it. Kind of like yard work.

And FA is about the same cost as yardwork! $10k/miliion $, or $12k / yr yardwork (On that 'spiffy place in an HOA)

If you have the dough, and value the extra time... spend the dough and gain the time. (Wondering how many hours / yr I spend on my 5 spreadsheets)... ~ 4hrs / week (max), = 200 hrs / $10,000 = High Value wages. I' guess I'll stick with my spreadsheets and take more vacations or buy more toys with the $10k saved.

I'm still attempting to go 100% 'Lazy" but still too analytical. Using my 5% 'play money' as extra earnings for toys and travel.

Looking for the stats on Wealth Managers by risk factors / allocations. (should be available). I note a few retirees with AUM at FA, discovered they were holding the same investments and allocations as their age 30 something kids. (at same FA)

If they earned their $10k / $1m, and always WON.... I would value their services. Or if they just took a % of the winnings, rather than the % of the stuff they stick in Cash Equivalents as they 'manage' your LT growth.

Advisor services were helpful determining the transition from income to 100% outflow / and scheduling appropriate asset classes, tax, withdrawal, and savings strategy. At some point... old timers should be able to enter autopilot phase. (without fear)

[Raraculus]

I feel I don't need a financial advisor right now. All of my investments are on autopilot, I have an asset allocation, a brokerage account, and index funds.

But, what about later? I may need to protect my finances from myself. My retirement plan has 'independent' financial advisors at no charge. I can call them up to discuss my portfolio, retirement, etc. They are supposedly fiduciaries. The service even extends to spouses.

What's the catch?

[tibbitts]

I feel I don't need a financial advisor right now. All of my investments are on autopilot, I have an asset allocation, a brokerage account, and index funds.

But, what about later? I may need to protect my finances from myself. My retirement plan has 'independent' financial advisors at no charge. I can call them up to discuss my portfolio, retirement, etc. They are supposedly fiduciaries. The service even extends to spouses.

What's the catch?

Most people here will tell you there has to be a catch, and probably there is, but maybe not. My employer used to provide that service and I utilized it and in fact there was no "catch" at all. On the other hand for "free" it's unreasonable to expect the endless hours of analyzing complex scenarios that so many Bogleheads do for themselves.

[GaryA505]

As I "slide into retirement", my goals in retirement are to keep it simple and low maintenance.
- Implement a "set it and forget" investment strategy.
- Implement a simple withdrawal plan

The goal is totally DIY for now, but knowing I will get older and my brain will get older, we will probably need some help.

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

[tibbitts]

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

Unfortunately, an extremely rare one.

[GaryA505]

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

Unfortunately, an extremely rare one.

You get the prize for the least helpful comment of the day!

[tibbitts]

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

Unfortunately, an extremely rare one.

You get the prize for the least helpful comment of the day!

Here's an even less useful one: thank you for the prize! So, what's the prize? Maybe a list of hourly fee-only, fiduciary advisers who also do tax prep?

[smitcat]

As I "slide into retirement", my goals in retirement are to keep it simple and low maintenance.
- Implement a "set it and forget" investment strategy.
- Implement a simple withdrawal plan

The goal is totally DIY for now, but knowing I will get older and my brain will get older, we will probably need some help.

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

"For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?"
For the taxes that is typically a local company found thru local reviews - see if they are small enough to care but large enough to have a longer term business plan which will help ensure they are around.
Similar with the financial planning person...in that it is best to source thru referrals but not needed to be local.
I have not found a person who fits both categories and/or is completely informed on both.

[GaryA505]

As I "slide into retirement", my goals in retirement are to keep it simple and low maintenance.
- Implement a "set it and forget" investment strategy.
- Implement a simple withdrawal plan

The goal is totally DIY for now, but knowing I will get older and my brain will get older, we will probably need some help.

For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?

"For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?"
For the taxes that is typically a local company found thru local reviews - see if they are small enough to care but large enough to have a longer term business plan which will help ensure they are around.
Similar with the financial planning person...in that it is best to source thru referrals but not needed to be local.
I have not found a person who fits both categories and/or is completely informed on both.

Thanks. It doesn't need to be one person/company. Finding the tax person is much easier.

[tibbitts]

"For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?"
For the taxes that is typically a local company found thru local reviews - see if they are small enough to care but large enough to have a longer term business plan which will help ensure they are around.
Similar with the financial planning person...in that it is best to source thru referrals but not needed to be local.
I have not found a person who fits both categories and/or is completely informed on both.

Exactly. I know of someone local to me who does both tax prep and planning... but also sells commissioned insurance and annuity products as a part of the planning, so I believe most Bogleheads would reject that. I do believe the integration of planning and tax prep is extremely valuable though.

[tibbitts]

Thanks. It doesn't need to be one person/company. Finding the tax person is much easier.

That isn't what you asked for: someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that? That's why I replied the way I did.

I believe there'd be a huge value to having exactly what you asked for: one person performing both services. Maybe you were unaware of the difficulty of finding such a person.

[GaryA505]

Thanks. It doesn't need to be one person/company. Finding the tax person is much easier.

That isn't what you asked for: someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that? That's why I replied the way I did.

I believe there'd be a huge value to having exactly what you asked for: one person performing both services. Maybe you were unaware of the difficulty of finding such a person.

Yes, it was poorly-worded due to my ignorance. One person/company would be optimal, but two would be fine with me.

[smitcat]

"For my older self and my wife all I should need is someone to do income taxes and give us an annual check-up and maybe some advice from time to time, for an hourly fee. What kind of financial person is that?"
For the taxes that is typically a local company found thru local reviews - see if they are small enough to care but large enough to have a longer term business plan which will help ensure they are around.
Similar with the financial planning person...in that it is best to source thru referrals but not needed to be local.
I have not found a person who fits both categories and/or is completely informed on both.

Exactly. I know of someone local to me who does both tax prep and planning... but also sells commissioned insurance and annuity products as a part of the planning, so I believe most Bogleheads would reject that. I do believe the integration of planning and tax prep is extremely valuable though.

Our CPA was able to give us a number of good referrals for fee only advisors - I am sure there are some small groups that do both as well, but we are just not aware of them.
Since being mostly DIY we find no real advantages to having income taxes and planning combined.

[GaryA505]

I wouldn't hire any kind of advisor who sells anything because he/she might try to sell my surviving wife something. But that's just me.