need to divorce my CFP? how?

[clong]

I'm in my second year in PP. I have no current loans and have started to aggressively contribute to my 401K. I would love some help with our financial investor. My great friend gave us the name of her financial investor (AAMS, CFP). She's very hush hush about him and doesn't give it out often to "just anyone" so I guess I felt lucky. We just put in our first 401K contribution ($4500 monthly as we self match) and he send me an email with the following asset allocations suggestions:

$2000 alpine capital research
$800- IVA world wide fund
$800 first eagle global fund
$700 in alpha core absolute return
$200 cash

I've been reading WCI and now Physician on Fire aggressively and realize I'm getting myself into a trap with starting with a CFP rather than doing it myself (He charges 1%). So what do I do?? Change my mind and start doing in all myself? Stay with him for a year and try to learn-- then take over my accounts? And how the heck do I do that? In regards to pulling money that he was managing and now manage it myself? I'm concerned my friend will be disappointed all well. Ugh. Would love some help.

And any advice on the above allocation? He said the benefit of cash is "optionality to use when others are selling whenever we get into a cyclical downturn." Thanks kindly WCI!!

[janettebournes]

clong wrote:

I’m in my second year in PP. I have no current loans and have started to aggressively contribute to my 401K. I would love some help with our financial investor. My great friend gave us the name of her financial investor (AAMS, CFP). She’s very hush hush about him and doesn’t give it out often to “just anyone” so I guess I felt lucky. We just put in our first 401K contribution ($4500 monthly as we self match) and he send me an email with the following asset allocations suggestions:

$2000 alpine capital research
$800- IVA world wide fund
$800 first eagle global fund
$700 in alpha core absolute return
$200 cash

I’ve been reading WCI and now Physician on Fire aggressively and realize I’m getting myself into a trap with starting with a CFP rather than doing it myself (He charges 1%). So what do I do?? Change my mind and start doing in all myself? Stay with him for a year and try to learn– then take over my accounts? And how the heck do I do that? In regards to pulling money that he was managing and now manage it myself? I’m concerned my friend will be disappointed all well. Ugh. Would love some help.

And any advice on the above allocation? He said the benefit of cash is “optionality to use when others are selling whenever we get into a cyclical downturn.” Thanks kindly WCI!!

Click to expand...

If you were able to find your way to this forum, I think you have all the knowledge necessary to do this yourself. Over the long haul, letting a financial advisor charge you 1% is going to be a very expensive proposition.

Perusing through the forum and the blog is going to be very helpful.

Even if he's managing your money, you should still be able to see where it's parked and how it's allocated. If you are unsure, you can let it sit there while you pick up knowledge as to how you want your asset allocation

Disappointing a friend should be the last thing on your mind, this is your money after all, and not your friend's.

(I also disagree with the cash allocation in a 401K. Since it appears you are a long way from retirement, I would put it to work as early as possible instead of keeping some on the sidelines for market timing opportunities)

[Lithium]

Why does your friend get disappointed if you don't use her financial advisor?  Does your friend also get disappointed if you don't use her handyman or her cleaning lady?  I'm personally happy for my friends if they're doing better for themselves.

As for your 401k, if you post all your fund choices and their ticker symbols (and preferably their expense ratios), posters can give you better suggestions for allocating it yourself.  Whatever you do, if you stick with an allocation (don't performance chase or sell out during a bear market) you're likely to outperform a similar portfolio designed by someone that charges an additional 1% AUM (and takes a 1% bite out of your returns).  I'm not familiar with the fund names you posted, but since I haven't heard of them, they're probably not passive index funds.  Hopefully you have some better options.

[Zaphod]

Get out now, not sure what you expect to learn since the only thing going on is allocation into high cost funds and a silly cash drag which makes no sense. I didnt look up those funds but since I've never heard of them I assume they have high fees/loads and are generally unfit for investors.

Determine your asset allocation and then invest it in whatever the cheapest index mix of that there is currently. Since there is a price war right now fees are dropping near to zero quite rapidly, see schwab, fidelity and vanguard for example.

In the extreme you really only need a total market and possibly total bond fund, allocate to whatever percent is aligned with your risk tolerance, though given your age it should be weighted towards equities. There are lots of mixes of allocations which you can find on here, but more complex does not necessarily equal better.

[canadianoutlaw]

Ditto the above. Get out now. You're not too deep in the weeds yet, so shouldn't be too painful. Keep your portfolio simple and can make it more complex as you get comfortable (or just keep it simple).

Taylor Larimore has suggested that if you move a large/complex portfolio, especially if in a taxable account, one can use Vanguard’s Personal Advisor Service. VG advisors are not paid w/commissions, will give unbiased professional advice, and handle the transfer. low cost, 0.30%/year. At the end of a period (i.e. 12 mo) you can cancel the service if you feel comfortable managing things yourself. They can also specifically work with you in setting up a portfolio you feel comfortable managing and then giving you the reins.

[jfoxcpacfp]

Just say you've changed your mind. No other explanation is necessary.

(Although, personally, the pseudo-word "optionality" is setting my teeth on edge.)

[VagabondMD]

I am not sure that I understand the circumstances completely. Are you investing in your workplace 401k? Are these your investment options?

If you have money invested with the advisor just initiate a transfer to Vangaurd or Fidelity. No need to have a conversation about it. Or send the advisor an email saying that you have decided to move in another direction. If your friend has a problem with it, she is not your friend.

[Gas_Doc]

Get rid of this guy ASAP. Agree with Vagaboond MD: if you have a choice of where to put your 401k money (which you might because you are self-matching), transfer it to Vanguard or Fidelity. And as far as "learning from him over the next year," you will only learn bad habits. If you are really nervous about managing your finances for the first year, get a fee-only financial planner that will help guide you through the process and only charge you by the hour, thus eliminating the conflict of interest.

 

And just in case you care, I ran the numbers trying to simulate your situation:

If you have $100k in retirement now, contribute $50k/year for 30 years and get a 5% real return, you have $3.92 million at the end of the rainbow. In contrast, if you do the same exact thing but have a 5% load on all your transactions (likely) and the 1% AUM fee while still getting the 5% real return, you'll have $3.09 million. Sticking with this guy will cost you, on average, close to $1 million over the next 30 years!

[Gas_Doc]

Also, to echo what others have said, keep your portfolio simple. The Three Fund Portfolio (article by PoF) is a great place to start.

[Joseph]

Odd that you feel emotionally bad about maybe disappointing a friend who gave you a bogus contact.

You can do much better. (by yourself)

[clong]

Thanks everyone!

[VagabondMD]

Let us know when you pull the trigger (figuratively, of course!).

[adventure]

clong wrote:

total market and possibly total bond fund, allocate to whatever percent is aligned with your risk tolerance, though given your age it should be weighted towards equities. There are lots of mixes of allocations

Click to expand...

The cash is there to pay the 1% (often paid monthly), so as not to remove capital when paying the CFP. Future dividends are expected to cover the fees, and leftovers usually reinvested.

 

[clong]

I asked my CFP a few more question....... Thoughts?

 

So the structure in which we utilize for clients is a flat 1% free on the investments, advice, and everything associated with your financial planning. No other charges, fees or commissions will be charged. For all of the mutual funds we use, we utilize the institutional share class (lowest operating cost of all funds) which carries no upfront "load" or charges. If you look at the fact sheets under Institutional shares you'll see he associated cost of the mutual fund on an annual basis. Most are just under 1% but can confirm all fund costs this week.

All advice, performance reporting, custodian costs etc from BFE are covered under the 1% annual fee. The fee is charged quarterly (Jan, Apr, July, Oct) and will be full transparent in the account. So theoretically if there is $100k being managed, the fee is $1k per year.

The insurance company pays me a 1 time commission (roughly 80% of the first years premium) for placing the term policy but I will not receive any other compensation from them moving forward.

As your 401k grows we can eventually utilize a different account structure called a "separate account". These types of accounts utilize a separate manager to purchase individual stocks or bonds in your account. Similar to creating your own mutual fund of sorts. I can get into the nuances of this structure over a phone call but they cannot be accessed until the account has reached $100k.

The long and short of it is you'll accumulate that associated amount in the next 2-3 years and we will likely transition to that structure then. One thing to note is blake and I operate as fiduciaries so we will always act in your best interest with regards to recomendsrions ans advice. We do not have any conflicts of interest with funds, managers or strategies so any and all advice will be what we garner to be the best for your families situation.

[jfoxcpacfp]

Fiduciaries don't get commissions, whether one time or not, but if that's all they get, that's not much. The real key is how much financial planning they do. Ask how many hours a year they will spend with you on planning. Will they work with you directly? How often will you meet? How often will your plan be updated?

I am flat out against an account with individual stocks, of course, but others have their own preferences. A portfolio is not a plan. A plan utilizes a portfolio as a tool to reach the goals of the plan. Very different viewpoints.