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  • #46
    Nothing to do with this post now as my rant is over, but it feels like I am reading Donald Trump's twitter with all those caps haha.
    Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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    • #47
      Again, lawyers do this all the time. I don't have much interaction with attorneys but my estate planning person did a good job, a number of years ago. I paid the bill and have not contacted them, or paid anything else, since.

      "Cookie cutter" Investment: that is what you want. You WANT a three fund portfolio that does not change through the years. It may change when there are big changes in your life, but most of the time, for years on end, you want someone who will not change it. The problems with Wealthfront portfolios are not that they are too simple but that they are too complex and trade far too much. Cookie cutter is a good thing. My total stock market is the same as your total stock market, so we should use the same fund.

      Life insurance: If you could buy life insurance just before you died, the only time you needed it, you would do exactly that. No one would hold and pay for a policy for years or decades on the chance they might need it unexpectedly. Financial planning is available on an episodic, pay as you use it basis, so that is the logical way to buy it.

      If you really did have a year in which you needed to consult a planner on 5 different issues, hard to imagine but let's go with it, then you would pay for 5 instances of help. At the postulated $200/hour and $2,500 total fee, that would be 12.5 hours of advice. Absent estate planning, it would take me many, many years to use that much financial planning.

      Under a more plausible 30 minute annual check-up with nothing done the rest of the year, that $2,500 flat fee would become a rate of $5,000/hour. And as noted, a $2,500 annual fee is barely workable for the adviser.

      If you need $100-200 per year of advice, then you should spend $100-200 on that advice. Paying $2,500 or much more is a waste of money. Buy some VTI instead..

      A planner who works under AUM can be paid large amounts of money for doing nothing. A planner who can fill their client list with high networth people can make far more money for the same amount of work than someone whose low asset clients produce low AUM fees. The AUM planner on the one hand does not need to constantly recruit new clients since those clients keep paying. On the other hand, since the money management part of the job scales wonderfully- Vanguard can run a trillion dollar fund at an expense ratio approaching zero- the AUM adviser can take on lots of clients.

      The planner who charges by the hour needs a steady stream of clients paying for hourly advice. They have to market themselves to keep that stream coming, which takes time away from compensated planning work. They have uncertain future revenues. I can only assume that people put off financial planning in economic downturns because it is an expense they can cut back. Pulling your money out of a planner is a bigger step and, again I assume, happens less frequently.

      The math that works for the planner does not work for the client. The exception are those planners, few and far between I gather, who have so much business and can charge such high rates that they can thrive under this model.

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      • #48
        By "cookie cutter" I meant that they trade everyone the same way without factoring in taxes or a client's unique situation/cash flow needs. I am all for a simple portfolio and getting out of your own way.

        If you actually focus on the financial planning, there is simply a cap of clients each advisor can work with to give a good client experience.

        We break it down into two phases. Setting up a plan and getting the foundation in place (life insurance, disability insurance, p&c review, estate plan/beneficiary titling, savings plan, tax plan, benefits, Social Security, investment allocation, asset placement, retirement projections, etc.). After you have the plan in place, then it's making sure you stay on track and make adjustments along the way as life changes.

        Here are some of the things we review/do each year between 2 client meetings, which varies by accumulation v retirement phase and each client's situation and I don't know why you wouldn't review these each year:
        1) cash flow plan at the beginning of the year
        2) coordinating tax documents / working with CPA for tax prep + review tax return
        3) college planning projections / progress
        4) reviewing debt planning for refinancing opps (if student loans, helping with PSLF verification/checking all the boxes)
        5) ye tax planning (not always applicable)
        6) review benefits during open enrollment
        7) retirement projections / progress there
        8) withdrawal strategy / ye tax planning
        9) charitable giving review
        10) review outside 401k to re-balance if necessary
        11) periodic ongoing reviews every 3-5 years (estate plan, insurance policies
        12) investment education to help keep people in their seats

        Behind the scenes:
        1) rebalancing as appropriate (does not take much time, nor do we trade that often, but we check every two weeks based on tolerance bands)
        2) tax loss harvesting - this took a lot of time in March and we harvested $100k+ for a couple clients
        3) meeting notes (not a value add but you want your advisor to remember everything you talked about / make sure everything gets addressed)
        4) tasks (make sure maxing IRAs, HSAs, 529 plan contributions, PSLF verification)
        5) follow-up emails + proactive reminder emails to continue making progress on any outstanding items
        6) paperwork/logistics as needed

        As questions come up, we're available via email and the more clients you have the more "one-off" items come up. As new legislation comes out (SECURE Act, CARES Act), we proactively reach out with what it means for each client/if anything needs to be done.

        Not everyone wants to do this themselves, or worry about the details, or are aware of what they don't know, so our job is to handle everything and make it as easy as possible for our clients. So we aren't just doing "nothing" for our fee. Not everyone is you or shares your opinions on what they need or don't need.

        Again, the reality is that not many advisors charge a flat fee or hourly because of everything I mentioned earlier. It doesn't matter how bad I want Disney World to be cheaper because it won't change anything. If I want to go to Disney World, I know that I have to pay for it. Some people will go once, some will choose not to go, and then some put on the mickey mouse shirts and go multiple times a year. Everyone has a different perspective of what is worth using their money on whether that's paying for advice/the services you get, cars, trips, cable, etc.




        Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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        • #49
          “Under a more plausible 30 minute annual check-up with nothing done the rest of the year, that $2,500 flat fee would become a rate of $5,000/hour. And as noted, a $2,500 annual fee is barely workable for the adviser. “

          If the advisor simply spends 30 minutes annually asking if anything has changed, you don’t need an advisor.
          Same is true for tax preparation or probably legal advice.
          Your desire as a client is to under utilize a professional and reduce their contribution to clerical.
          Same is true for using a physician only for an annual flu shot. Might as well use a pharmacy.
          Personal choice.

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          • #50
            most docs are bad with money generally and would be well served to use johanna or some other competent advisor, to keep them from doing dumb ************************

            most docs here don’t need an advisor

            most docs don’t hang out here

            most docs could educate themselves enough not to need an advisor, in a fairly short period of time, but never will

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            • #51
              Originally posted by jacoavlu View Post
              most docs are bad with money generally and would be well served to use johanna or some other competent advisor, to keep them from doing dumb ************************

              most docs here don’t need an advisor

              most docs don’t hang out here

              most docs could educate themselves enough not to need an advisor, in a fairly short period of time, but never will
              Amen.

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              • #52
                DOUBLE AMEN-those AUM fee advisors will be obsolete
                For many the issue is whether BOTH spouses can manage the affairs
                Look at "THE BIG BOOK OF EVERYTHING" to maintain a file of all your documents

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                • #53
                  Originally posted by kennyt7 View Post
                  double amen-those aum fee advisors will be obsolete
                  for many the issue is whether both spouses can manage the affairs
                  look at "the big book of everything" to maintain a file of all your documents
                  DOUBT IT. many of my colleagues don’t know what a mutual fund is.

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                  • #54
                    Originally posted by Tim View Post
                    “Under a more plausible 30 minute annual check-up with nothing done the rest of the year, that $2,500 flat fee would become a rate of $5,000/hour. And as noted, a $2,500 annual fee is barely workable for the adviser. “

                    If the advisor simply spends 30 minutes annually asking if anything has changed, you don’t need an advisor.
                    Same is true for tax preparation or probably legal advice.
                    Your desire as a client is to under utilize a professional and reduce their contribution to clerical.
                    Same is true for using a physician only for an annual flu shot. Might as well use a pharmacy.
                    Personal choice.
                    Good analogy. You don't need someone with an MD and years of training to give you a flu shot. I see a doctor when I need a doctor. I usually get my flu shot when the hospital sets up a shot clinic in the lobby. The people giving shots might be nurses. Definitely not NPs or docs. Or I go to a local pharmacy.

                    Not trying to reduce a professional to a clerical job. Happy to pay a professional when I need one.

                    ​​​Most of the items in the Andrew's list do not require professional help. They are simple and I do myself. Takes too little time to even estimate. There are things about which I think " this is complicated and time consuming. I could do it myself but I can hire someone who will do it well enough and pay them less than I charge for my hourly services. So I hire someone to do it for me". I do this for some home repairs. Let the plumbers hang around, get their hands dirty, find and use the correct parts while I practice my day job. I would have a different attitude if plumbers wanted an annual payment based on my assets and would then do my plumbing "for free".


                    Most of the other things on his list arise rarely, require expertise beyond a financial planner (estate planning) or don't apply to me.

                    As I said, if you are running a business, you need someone who knows how to run a business. That may or may not be a financial planner who spends most of their time on completely different things.

                    For someone who REALLY does not want to learn how to do these things themselves, then a planner is the only option. Just don't pay too much.

                    Rebalancing a $3M 3-fund portfolio is no more work than doing it for a $500k 3-fund portfolio. Why pay one cent more? People with both size assets need insurance, plan for retirement, have kids, etc. If the work is no different, why should one pay more than the other? Would you put up with it if your pharmacist wanted to charge you more for a flu shot because you had greater assets than most patients?

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                    • #55
                      Welp, it sounds like we've settled this and are all on the same page - make sure you find an advisor that charges AUM
                      Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

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                      • #56
                        OP gone since the first page.

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