?Hire a fee-based FA temporarily for less than fee-only

[jacoavlu]

q-school, reasonable thoughts, but to be clear the OP has less than a financial advisor. They have a salesman “advisor.” So far we’ve learned:

1. Advisor sells insurance. And has recommended said insurance-investment to OP
2. Advisor does not recommend a solo 401k for the OP because of “expenses” and “limited investment options”
3. Advisor concurrently is making it impossible for OP to do yearly backdoor IRAs
4. Advisor recommends some “sophisticated” strategy of active management for OPs investments based on unknown factors and in unknown funds/securities to us at this point

Really only have one question about the Advisor. To me it’s the classic, “Stupid, or liar?” I’ll be nice and say they’re probably a liar.

[Hank]

Snag75, you certainly can have a financial advisor if you wish.  However, please make sure you know what you're paying and that you're getting sufficient value for what you're paying. It sounds like you would be an excellent candidate for White Coat Investor's "Fire your Financial Advisor" course.  Even if you choose to continue to work with an FA, that course should teach you enough to make sure you're getting comprehensive quality service at a reasonable price.

As for insurance, it's an expense, not an investment.  Make sure that you have sufficient high quality term life insurance and own occupation disability insurance prior to dropping any current whole life, universal life, overpriced disability insurance, or anything else.

When it comes to investments, you could do something as simple as putting everything in Vanguard's balanced index fund (VBIAX) until you read enough to know what you (and your financial advisor, if applicable) want to do longer term.  There should be nothing "time sensitive" other than maxing out your qualified funds for the year.

[Snag75]

Wow, a lot to unpack with your guys' comments here.  Thank you for the rounded and educated (and helpful!) perspectives.

Yes it's hard to know how to advise without knowing details.  I contend the notion that advice to all should be equal regardless of current/future cashflow, lifestyle, family situation, and expectations for retirement.  I can guarantee that part of what has me where I am (professionally and financially) is due to life circumstances/choices that no one here shares. Not everyone has a pension to factor in, nor inheritance, nor children with special needs.  My time/energy is also extraordinarily valuable due to being a solo parent to young children with special needs (part of why I left things stay as they were for so long, didn't have the bandwidth to figure anything else out when things like employment, health, housing, and childcare were immediate priorities), yet also the reason I need to keep costs down.

So yes, the comfort of working with someone who knows my full picture and can offer educated advice COMBINED with my own research and cross-checking and decision-making seems to be where this financially unsavvy type A worry-wart will fall.  I can't justify paying $5000 to someone whose advice I will still be double and triple checking all year, even if they might have more to offer than someone I pay $1400 (sorry, at this point I can't do blind trust, no matter how much more "value" I might be unknowingly getting).  But paying $0-500 is not enough support for me at this point (though that will be my goal a year from now).

I almost wonder if I'm better off dealing with someone who does not think of physicians as "special" (even though generally we are!). I dealt with all my student loans myself, using logic and math (paid off my highest interest as a resident, and the rest of my 6 figures before age 40!), and I am not a huge earner given my responsibilities and expenses due to my family's needs and job situation (which go hand in hand).  I believe the biggest mistake of my last FA was putting me in the "rich doctor" category without considering the big picture of my life and unpredictable changing needs, despite knowing me since before my babies were born.  Anyone who asks me "Why don't you just work full-time and make more money?" clearly doesn't get our big picture and needs to F off -- not directed to anyone here, just annoying the narrow viewpoints I'm faced with, and angry that it directly contributed to poor advice in the past, hence my leaning toward help with planning right now.

More unpacking of your responses below...

[Snag75]

Peds wrote:

someone is ripping you off. the whole 1% AUM idea is dangerous for your long term financial health. on top of that the products, loads, and costs of the funds you might be in isnt likely helping.

but you didnt post any of that, so we have to assume its not great.

you also dont know what you are doing based off your posts. thats fine. we all started in the same place as well.

Click to expand...

I agree about the 1% AUM for longterm (plan is NOT for longterm). My original question was if I can consider that cost reasonable for some of the financial planning help I need.  Doesn't mean I will follow blindly, just use their tools and knowledge, while doing my own back-up research.  I need something, and $1400 seems the most reasonable for the amount of help I need right now, unless I went completely DIY but that's hard to do right now because of all my moving parts to consider.  How can I pass on my current holdings for you guys to review?

[Snag75]

adventure wrote:

Dont_know_mind wrote:

can you not ring Johanna Fox or one of the lower cost/fee only/non dodgy financial planners on WCI ???

Click to expand…

Do this please.

 

Snag75 wrote:

My situation is unlikely like any of yours for a variety of reasons, 

Click to expand…

Do you breathe? Then the situation is close enough. Your income vs mine vs his vs hers is irrelevant. Having a sound plan is relevant.

Click to expand...

I need a comprehensive look at all moving parts, I don't have just little questions here and there, so don't really want to spend on dedicated financial planner, esp since much of the work will likely be done myself anyway.  Disagree that situation is "close enough".  I don't need advice on holdings, but on strategies for retirement planning given my own financial and personal situation.

jacoavlu wrote:

OP: What are you asking, precisely? How would you like for us to help you?

I provided in your other thread, my opinion of simple next steps that you should take. Actionable, no-harm-done advice that will instantly save you money.

If you don’t want to take the next-step advice. Above, I asked questions I feel pertinent in helping you understand your current situation. Answering my questions will help us better advise you.

To your Thread-title question the answer is emphatically, “No.”

No one here feels like your current advisor is going to do you any good in the short term nor in the long term.

Click to expand...

I can pass on my current holdings to see if it seems reasonable, as a start, but that's really the least of my concerns and decision-making help I need right now (moreso to get a better idea of current FA's strategy).  I don't mean to be defending this FA (because obviously if I trusted his advice 100% I wouldn't be here), but it's not all or nothing either.  Advice can be helpful taken with varying amounts of salt.  I don't think this FA has any incentive to advise me poorly outside of things that affect his bottom line, which is actually mostly the help I need right now, but appreciate advice received elsewhere too.

[Kamban]

@snag75

You have posted some really lengthy posts. But if you want actionable things to take you can post your current holdings so that knowledgeable people can take a stab at it to see how you can modify it and help you succeed. I am not sure what planning help you need for that 1% AUM.

But if you want to talk about one advisor versus another and want to justify a fee based approach that is your call. As Johanna pointed out $1400 won't get you great advice.

[Snag75]

q-school wrote:

i’m not sure what percent of posters here have a FA.  let’s say < 20%.  i think it’s probably even less than that.  so, as you surmise, this may not be the right place to ask the focused question you are asking here.

however, i am one of the minority posters who has a FA.  they are 1% AUM.  i’ve had them for twenty years.  in the early years they weren’t making much.  in the later years they started making more.  i assessed their work periodically and had an idea when the value shifted.  as the accounts grew larger and larger, and my time and energy and comfort grew, i started shifting money away from them and managing myself.  it’s not necessarily all or none.  most of the people here are going to die with a huge estate.  if they die with a slightly smaller estate with the help of an advisor (which is not a fact imo) , that may or many not be painful to them.  i think on this board there is a lot of hope for optimal efficiency with investments.  however, my observations are a few big mistakes can take a long time to recover from.  slow and steady investing is going to win a lot of races.  in our doctor lunch room, index fund investing is a lonely lonely path.

money is a tool.  if you don’t like managing money, or don’t care to, or don’t want to, then you pay someone to do it for you.  same as lawncare or personal trainer or whatever.

it is my personal opinion that we will never know whether someone is better off with or without an advisor.  some people are not DIY.  some people perceive value where others do not.  that’s fine.  i would not offer you the advice that a FA would hurt you or help you.  i would ask you to reflect on whether you trust the advice from intelligent people being offered here.  if you don’t trust that’s fine, but you are going to get the same responses time and again here.  i suspect as you follow your journey to financial wisdom, if you come back here annually and reread the questions you pose, and the responses, you will see the answers as more and more reasonable every year.

i don’t think anyone intended to financial-shame you.

Click to expand...

Thanks q-school -- I guess that's the risk of posting here, it is also a skewed set of opinions (like asking in a Crunchy Moms Forum if I think organic milk is worth the added cost), though I do agree they are educated and experienced and more bottom-line oriented than possibly anyone else I may meet in the financial industry.
I really don't want to pay 1% every year anymore unless I feel I'm getting value for that, and for the past few years I really didn't.  Right now I feel like I could use a good deal of help, but I still want to keep costs down, and, like you, minimize fees paid as that value (hopefully!) reduces.  My goal is within a year, and I hope I can make it.  I have a lot of problems to solve before then, and will likely be posting here again to crowd-source more opinions on those specific questions too.

Are you saying that you do or don't agree with index fund investing (vs actively managed funds)?  You made a few comments above about investing and I am missing your point I think.

[Snag75]

jfoxcpacfp wrote:

hi, @snag75 – you’re not going to get a year of comprehensive financial planning help for that rate from anybody but a novice. I do not want to sound snarky, either, but we don’t even break even the first year charging $5k + a $1k setup fee for the lowest tier of service.

What you’re being offered is typical of AUM advisers (most, not all) and you will not get much for $1,400 or you will be working with someone who is just not experienced enough to understand the complexities of working with physicians and you’ll end up having to teach him/her (as you’ve already done).

You have 3 choices:

1. Get a bargain


2. Get good value


3. DIY

You can combine DIY with either #1 or #2, but if your priority is #1, you will exclude #2.

Click to expand...

Can't 1+3 = good value?  Assuming that #3 (i.e. me) is proactive in getting good advice from others outside #1's world?  I wish I could justify paying $5K+ on advice, but I just can't.

 

[Snag75]

jacoavlu wrote:

q-school, reasonable thoughts, but to be clear the OP has less than a financial advisor. They have a salesman “advisor.” So far we’ve learned:

1. Advisor sells insurance. And has recommended said insurance-investment to OP
2. Advisor does not recommend a solo 401k for the OP because of “expenses” and “limited investment options”
3. Advisor concurrently is making it impossible for OP to do yearly backdoor IRAs
4. Advisor recommends some “sophisticated” strategy of active management for OPs investments based on unknown factors and in unknown funds/securities to us at this point

Really only have one question about the Advisor. To me it’s the classic, “Stupid, or liar?” I’ll be nice and say they’re probably a liar.

Click to expand...

Since I was there during all discussions (and just reported to you guys my questions as "fact-checking"), let me give the fuller story.  Again, I'm not interested in defending a FA whose advice I clearly don't trust 100% (though I don't 100% trust anyone's advice), but it's not helpful to just paint all with a broad brush when I need to make a real life decision.  I don't really have great alternatives at the moment that don't cost me more time and/or money.  Trying to be practical and look at all sides.

For #1 FA brought up the option to avoid taxes on rollovers (from other perm policies that I want to close), but also gave other options that seemed just as good, agreed that overall IUL not recommended, did not push the policy at all.  For #2 I believe he was ill-informed to other options and just went with his "go-to", but also open to whatever makes most financial sense (though this ties into #4 as he seems to like his strategy of course, which I'm not sure if I do).  #3 is incorrect, in fact he's the one who pushed to find out if I need to bother with all that and we found that I can likely just do front-door this year and reconsider all next year (though he was completely willing to go with the solo-K plan if that's what I wanted).

So my main concern re: his opinions (besides being wary of any products without checking other options) re: investing.  Can you help give an opinion on that - how can I share the plan?

[Snag75]

This is a copy-paste from the plan I have as a digital file.  I can try to give more details of holdings too.

Account Type: INDIVIDUAL IRA Rollover
Investment Profile: Moderate Growth
Program / Product: NEXT Select Rep Managed Program - Series
7 5NXC01
Model: Moderate Growth - Series 7
Investment Amount: $140,000.00
Estimated Annual Fee: 1.20%
// Selected Asset Class Allocation
Asset Class
Percentage of
Portfolio Investment Amount
Equity 74.00% $103,600.00
Fixed Income 17.00% $23,800.00
Cash 9.00% $12,600.00
Total 100.00% $140,000.00
// Selected Asset Class Allocation
Asset Class
Percentage of
Portfolio Investment Amount
Cash 9.00% $12,600.00
Fixed Income 17.00% $23,800.00
Equity 74.00% $103,600.00
Total Portfolio 100.00% $140,000.00

[Snag75]

Hank wrote:

Snag75, you certainly can have a financial advisor if you wish.  However, please make sure you know what you’re paying and that you’re getting sufficient value for what you’re paying. It sounds like you would be an excellent candidate for White Coat Investor’s “Fire your Financial Advisor” course.  Even if you choose to continue to work with an FA, that course should teach you enough to make sure you’re getting comprehensive quality service at a reasonable price.

As for insurance, it’s an expense, not an investment.  Make sure that you have sufficient high quality term life insurance and own occupation disability insurance prior to dropping any current whole life, universal life, overpriced disability insurance, or anything else.

When it comes to investments, you could do something as simple as putting everything in Vanguard’s balanced index fund (VBIAX) until you read enough to know what you (and your financial advisor, if applicable) want to do longer term.  There should be nothing “time sensitive” other than maxing out your qualified funds for the year.

Click to expand...

Yes, I'd like to take that course sometime -- the issue is always time, but I'd like to add that to my "re-vamping plan" for the year.
I just bought up my employment insurance so I can feel comfortable getting out of the permanent policies for now, but I also have to research how the portability would work and compare to if I bought more term on the open market now (part of the plan).  Once I get rid of the permanent policies, I'll only have $250K in my own term insurance, so I have to consider the costs if I leave my job and don't get another comparable group policy.
I do have own-occupation disability, but due to pre-existing conditions at the time I was applying it only covers 5yrs.  I could consider applying again, but of course now I'm older and already had a big claim with my pregnancy (several years) so I expect I'd be rejected again.  Another thing to consider though.  Otherwise I just figured that I would have 5yrs to find another way to generate income (as MD or not), or just be a vegetable on SSI. :P

[Snag75]

Hope this is readable:

Scenario 1 - Account 1 Moderate Growth - Series 7
// Selected Target Allocations
Asset Class Holding
Investment
Type Symbol
Target
Allocation Asset Value
Cash
Cash Default Cash Security OTHER CASHGL 9.00% $12,600.00
Fixed Income
Fixed Income
EATON VANCE FLOATING RATE FUND
(INSTITUTIONAL SHARES) MF EIBLX 6.00% $8,400.00
Equity
Equity IVY INTERNATIONAL CORE EQUITY FUND CLASS I MF ICEIX 7.00% $9,800.00
Equity SCHWAB STRATEGIC TR INTL EQUITY ETF ETF SCHF 6.00% $8,400.00
Equity T ROWE PRICE SMALL- CAP VALUE MF PRSVX 5.00% $7,000.00
Equity IVY ENERGY FUND CLASS I MF IVEIX 4.00% $5,600.00
Equity T ROWE PRICE FINANCIAL SERVICES MF PRISX 2.00% $2,800.00
Fixed Income
Fixed Income
PIMCO CREDIT ABSOLUTE RETURN FUND CLASS
P MF PPCRX 4.00% $5,600.00
Fixed Income SIERRA STRATEGIC INCOME FUND CLASS R MF SSIRX 4.00% $5,600.00
Equity
Equity T ROWE PRICE GROWTH STOCK MF PRGFX 8.00% $11,200.00
Equity CONOCOPHILLIPS COM Equity COP 2.00% $2,800.00
Equity MARATHON PETE CORP COM Equity MPC 2.00% $2,800.00
Equity
SCHWAB STRATEGIC TR SCHWAB FUNDAMENTAL
U S LARGE CO INDEX ETF ETF FNDX 10.00% $14,000.00
Equity
SCHWAB STRATEGIC TR US LARGE CAP VALUE
ETF ETF SCHV 12.00% $16,800.00
Fixed Income
Fixed Income PIMCO SHORT TERM FUND CLASS P MF PTSPX 3.00% $4,200.00
Equity
Equity MFS MID CAP VALUE FUND CLASS I MF MCVIX 8.00% $11,200.00
Equity IVY SMALL CAP VALUE FUND CLASS I MF IVVIX 3.00% $4,200.00
Equity MFS NEW DISCOVERY VALUE FUND CLASS I MF NDVIX 5.00% $7,000.00
Total Portfolio 100% $140,000.00

[Lithium]

I don't see why this is so complicated. This guy isn't a fiduciary. The money you lose by getting swindled is a lot more than the difference in cost between fee-based and fee-only planners, let alone the FYFA course and robo-advisors. Have you not read or heard how WCI got fleeced by a couple of salesmen when he started out? That's what inspired him to start all this. If it can happen to him, it can happen to anyone.

What level of assets are in question here? If this is $100k or more in a taxable brokerage, he is most likely getting a cut of the bloated ER's (which will cost you thousands a year), not to mention load fees and capital gains taxes if the stock market goes up again.

Bottom line, you're going to be paying a lot more than $1400. Salesmen keep their fees opaque for the sake of business.

[Snag75]

Lithium wrote:

I don’t see why this is so complicated. This guy isn’t a fiduciary. The money you lose by getting swindled is a lot more than the difference in cost between fee-based and fee-only planners, let alone the FYFA course and robo-advisors. Have you not read or heard how WCI got fleeced by a couple of salesmen when he started out? That’s what inspired him to start all this. If it can happen to him, it can happen to anyone.

What level of assets are in question here? If this is $100k or more in a taxable brokerage, he is most likely getting a cut of the bloated ER’s (which will cost you thousands a year), not to mention load fees and capital gains taxes if the stock market goes up again.

Bottom line, you’re going to be paying a lot more than $1400. Salesmen keep their fees opaque for the sake of business.

Click to expand...

Please see above and let me know if you can tell if those holdings would be costing me extra in ERs and loads.  Also I don't understand your point about capital gains.  How much would you estimate I am paying him per year (1% advisor fee and 0.2% program fee)?

[Snag75]

While I'm at it, I just got notification from Fidelity that it is classifying the funds I have through employer as "conservative".  I am expecting retirement in 2040, so I don't want to be too conservative, right?

Symbol	Description	Quantity	Most Recent			Change Since Close		Action
			Price	Change	Value*	Dollar	Percent
92202V559	VANGUARD TARGET 2040	83.991	53.980	-$0.14		$4,533.83	-$11.76	-0.26%	Select Action for [VANGUARD TARGET 2040]. Menu closed
949907703	WF STABLE VALUE E	202.278	53.428	$0.003	$10,807.27	$0.63	0.00%	Select Action for [WF STABLE VALUE E]. Menu closed
FLCNX	FID CONTRAFUND K6	976.430	$11.54	$0.06	$11,268.00	$58.58	0.52%	Select Action for [FID CONTRAFUND K6]. Menu closed
FRGXX	FIMM GOVT INST	5,641.400	$1.00	$0.00	$5,641.40	$0.00	0.00%	Select Action for [FIMM GOVT INST]. Menu closed
OANIX	OAKMARK INTL INST	193.443	$22.03	-$0.31	$4,261.54	-$59.97	-1.39%	Select Action for [OAKMARK INTL INST]. Menu closed
PRILX	PARNASSUS CORE EQ IS	226.257	$40.85	$0.08	$9,242.59	$18.10	0.20%	Select Action for [PARNASSUS CORE EQ IS]. Menu closed
Total:					$45,754.63	$5.58	0.01%