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Young and rich and not focused on a legacy- do we need a financial advisor?

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  • #16
    Originally posted by LIFEISBEAUTIFUL View Post
    [FONT=Calibri]
    These guys have said we need an advisor because (1) stocks and bonds can’t give you the diversity you need, (2) they are a buffer for people like me who would want to run when the market stumbles, (3) they have access to opportunities like hedge funds, and (4) the last 10 years have been unrepresentatively lucrative for index funds and with the bottoming out of interest rates, that is likely to change.
    This makes sense, but our focus on enjoying the money and not exponentially growing it, combined with the expense, makes me ask- do we need an advisor? Is the big amount such that an advisor is a given?
    Thanks so much,

    D
    1.) What else do they think you need in order to diversify? Owning all the stocks and bonds in the world seems pretty diverse.

    2.) That's an expensive buffer. For half of their fee, I can tell you not to panic whenever you want me to.

    3.) Only a minority of hedge funds outperform the market every year. If someone tells you they know which ones will outperform that year they are lying...unless there is a DeLorean nearby.

    4.) Trying to guess what the market will do is a fool's errand. If the market has comparatively decreased returns over the next 10 years then I suspect most hedge funds and other investments will continue to underperform, too.

    Comment


    • #17
      My .02 0 - a financial planner and a financial advisor and/or investment advisor a different focus. The planner is not as interested in the investments as s/he is about everything else - making sure you can have clarity about the impact of the choices you have available to you on your long-term plan. So what if you never have to worry about running out of money - that’s only the ultimate goal of planning. After you have that under control (and, quite frankly, most of the physician families here are in the same boat, but they will take longer to get to the point of having peace about this risk), you can have fun with planning and not worry. So, having that clarity about the impact of your various decisions will give most people satisfaction that they are making the decisions that fit within their values system and are also affordable.

      Don’t want to die with $200M? You have many options - again, based on your goals and values. Want to pull a Gates Foundation and give away the majority of your wealth? How much is that and how comfortable will you be giving away $10M v $12M? (Insert your own numbers and goals, of course). True financial planning is not about the investments - quite frankly, that’s the most simple part. It’s about the everything else. What do you want to happen after death, given your values and goals? For some, it is very important not to enable their children. In that situation, they typically move on to setting up a foundation, helping the underprivileged, extravagant travel, the list is endless. A good FP can help you navigate those decisions.

      Of course, it’s assumed that tax planning should be intertwined with the planning. Also asset protection. A good, experienced planner serves as an impartial advocate for you and resource to help you find the advisors who have the knowledge and expertise you need. The planner asks the difficult questions - what if this, what if that, how would you handle certain situations. Those questions aren’t inbred - they come from years of experience in working with a wide variety of clients who have had to work through a variety of difficult problems. The good planner is learning, improving, and building a knowledge base that they pass along to their team.

      I could write a book on this. But I’ve said more than enough. Yes, I think partnering with an appropriate, experienced financial planner has potential benefits, either for a year of engagement or over a longer period.

      To address Andrew’s concerns - I agree in part but not in whole. The fact that Jim has a fairly good vetting system (certainly not perfect, but far more than any other paid advisor sites) gave me the comfort level to advertise. I reached out to Jim early on to discuss ideas and uneasiness about how he previously vetted advisors (having similar concerns to Andrew’s) and he listened and asked what I thought. I hope those of you who “know” me do not think I am telling this story to elevate myself, but to emphasize how approachable Jim is and how open he was (and continues to be) to suggestions for improvement.

      While I am not 100% satisfied with the current vetting system, it’s much better than it was. Of note: I certainly do not deserve any credit for reaching out - it is Jim’s website and he has always been very frank about being in business to make a profit. But he has tempered that goal to be compatible values and determination to make sure doctors get a “fair shake”. I believe he’s given up far more revenue than he’s added to his bottom line by operating his business consistently with his principles.

      I would love to see a similar vetting process for tax strategists and he has said he’s totally open to ideas - but it is apparently difficult enough to find doctor-focused CPAs (who have the right kind of experience) without paring the list lol.

      So yes, Andrew Musbach makes a good point, but I don’t believe it is valid given my personal experience with Jim’s high standards (which I believe are greater than any other website - physician finance or something else). I believe the other advertisers would say the same.

      TLDR: financial planning has the potential to be very beneficial to LIFEISBEAUTIFUL. Andrew’s point is understandable, but not valid Impo. Fwiw, Andrew and I know each other personally and I truly respect him, just happen to disagree on this topic.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #18
        Not trying to be superfluous here, but my initial comment would’ve excluded Johanna because her support for everyone speaks for itself. She’s on here actively helping to answer questions / honestly I think she’s paying to “advertise” (used loosely given she has more than a full practice) only to help further support WCI and the platform that has helped so many.

        It goes without saying that WCI has done SO much good for the industry, but when an advisor says their main value add is how low of a fee they charge, I question the caliber, especially given the free advice people could get on this forum where few of these “recommended” advisors give advice.
        Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

        Comment


        • #19
          For $15m sitting in the bank, who advised you on the sale?
          You need advice, not an advisor. Step on is to find a good CPA. Deal is done, too late for advice, now you need to get advice on how the taxes will amount to and take care of that.
          Forget being “fancy” for 5 years. You are at the level now you qualify for HNW offers. Don’t take them. Don’t take the private investments. Keep it simple and set aside as modest of budget as possible for the next five years.
          The way athletes and lottery winners lose is the buy things, and they tend to be expensive things.
          Don’t do it at all for 5 years, use this time really work on your life plan, not the money.
          Pay for a FP and a CPA. Investing can be as simple as a the fund/ETF portfolio. As stupid as it sounds, if you manage the portfolio the same as a $100k-$200k portfolio you will be just fine.
          You mentioned the opportunities an “advisor” brings to the table. They make money on other people’s money, yours. You want to pay for advice, not the investment. That is how new money is lost.
          Make a budget and keep it simple. Pay the fixed fee or hourly for a CFP or CPA to critique it or give advice. You don’t want to pay someone to run it.
          Private Wealth Management
          You'll have your own wealth management team, led by your Fidelity advisor, and comprehensive financial planning and investment management.


          Minimum investment:
          $2 million managed through Fidelity® Wealth Services or Fidelity® Strategic Disciplines and $10 million or more in total investable assets4
          Gross advisory fee: 0.20%–1.04%3, 5

          For 5 years you can keep your money working for you rather than pay someone to manage it. Pay for advice and live within your budget (including any family assistance).
          Not a think wrong with paying a CPA and/or CFP for advice. Just because you can afford AUM, doesn’t make it the best choice. Most of the time the best choice is doing nothing.
          In 5 years the “new wealth” and your long range plan will be much easier. Time for estate planning and the like. In the mean time get a will just in case. Change it in five years.


          Comment


          • #20
            Congratulations for winning the game. What I would do is take a few weeks to relax, then take a few weeks/month to read through WCI and bogleheads as your new job. Don't make any hasty decisions. Even if you left $15M in the bank with terrible interest for the rest of your lives, you would still be living ok.

            If you can't come up with a reasonable plan for your finances after that, then hire someone that's fee only for advise and doesn't charge AUM. If you still don't think you can manage after that then feel free to hire someone to manage your wealth for you.

            Comment


            • #21
              Originally posted by Nysoz View Post
              Congratulations for winning the game. What I would do is take a few weeks to relax, then take a few weeks/month to read through WCI and bogleheads as your new job. Don't make any hasty decisions. Even if you left $15M in the bank with terrible interest for the rest of your lives, you would still be living ok.

              If you can't come up with a reasonable plan for your finances after that, then hire someone that's fee only for advise and doesn't charge AUM. If you still don't think you can manage after that then feel free to hire someone to manage your wealth for you.
              Thanks, Nysoz. Seems like taking a deep breath and taking time to research is key. Is there an amount invested when AUM makes sense?

              Comment


              • #22
                Originally posted by CordMcNally View Post

                1.) What else do they think you need in order to diversify? Owning all the stocks and bonds in the world seems pretty diverse.

                2.) That's an expensive buffer. For half of their fee, I can tell you not to panic whenever you want me to.

                3.) Only a minority of hedge funds outperform the market every year. If someone tells you they know which ones will outperform that year they are lying...unless there is a DeLorean nearby.

                4.) Trying to guess what the market will do is a fool's errand. If the market has comparatively decreased returns over the next 10 years then I suspect most hedge funds and other investments will continue to underperform, too.
                Thanks so much. Re #1: they say stocks and bonds are now correlated and don't offer diversification (they reference March when both tanked). Re #2: I know. I guess it relies on someone "taking care of things" and folks not worrying. I wonder if the AUM model is better for older folks who are not interested in growing and don't want to be bothered since they have enough to provide for themselves.

                Comment


                • #23
                  Originally posted by Tim View Post
                  For $15m sitting in the bank, who advised you on the sale?
                  You need advice, not an advisor. Step on is to find a good CPA. Deal is done, too late for advice, now you need to get advice on how the taxes will amount to and take care of that.
                  Forget being “fancy” for 5 years. You are at the level now you qualify for HNW offers. Don’t take them. Don’t take the private investments. Keep it simple and set aside as modest of budget as possible for the next five years.
                  The way athletes and lottery winners lose is the buy things, and they tend to be expensive things.
                  Don’t do it at all for 5 years, use this time really work on your life plan, not the money.
                  Pay for a FP and a CPA. Investing can be as simple as a the fund/ETF portfolio. As stupid as it sounds, if you manage the portfolio the same as a $100k-$200k portfolio you will be just fine.
                  You mentioned the opportunities an “advisor” brings to the table. They make money on other people’s money, yours. You want to pay for advice, not the investment. That is how new money is lost.
                  Make a budget and keep it simple. Pay the fixed fee or hourly for a CFP or CPA to critique it or give advice. You don’t want to pay someone to run it.
                  Private Wealth Management
                  You'll have your own wealth management team, led by your Fidelity advisor, and comprehensive financial planning and investment management.


                  Minimum investment:
                  $2 million managed through Fidelity® Wealth Services or Fidelity® Strategic Disciplines and $10 million or more in total investable assets4
                  Gross advisory fee: 0.20%–1.04%3, 5

                  For 5 years you can keep your money working for you rather than pay someone to manage it. Pay for advice and live within your budget (including any family assistance).
                  Not a think wrong with paying a CPA and/or CFP for advice. Just because you can afford AUM, doesn’t make it the best choice. Most of the time the best choice is doing nothing.
                  In 5 years the “new wealth” and your long range plan will be much easier. Time for estate planning and the like. In the mean time get a will just in case. Change it in five years.

                  Wow, Tim, thanks for the straight talk. We had a great bank advise on the sale, but they dillligently steered clear of certain post-sale issues like taxes. Can I ask- why do you say "modest budget for the next five years"? What is special about that time period? Your counsel on paying for advice not investment makes a lot of sense. It seems beyond that advice, you are just paying for someone to hold your hand. Question- how do you handle rebalancing? Get that planner on a regular basis to review? How often do you recommend?

                  Comment


                  • #24
                    Originally posted by LIFEISBEAUTIFUL View Post

                    Thanks so much. Re #1: they say stocks and bonds are now correlated and don't offer diversification (they reference March when both tanked). Re #2: I know. I guess it relies on someone "taking care of things" and folks not worrying. I wonder if the AUM model is better for older folks who are not interested in growing and don't want to be bothered since they have enough to provide for themselves.
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                    Stocks and bonds moving the same direction is nothing new. Once again, this just goes to show there are a lot of people out there who just don't know what they are talking about or are flat out lying. I don't know which one is worse.
                    Attached Files

                    Comment


                    • #25
                      I think if you are asking the question, you would probably you are looking for some one to help you with the answer. It sounds like you very good at running a business and selling it for a profit, but that may or may not translate into a good long term financial plan. If you built up you savings slowly and learned along the way you might feel much more comfortable with you decision. I think it is well worth it to you, to get a written financial plan, not necessarily someone to manage your money on an ongoing basis, especially if you feel comfortable in sticking to the plan. It may be worth it, just for advice in regards to tax consequences of your investment decisions alone.

                      Comment


                      • #26
                        Originally posted by LIFEISBEAUTIFUL View Post

                        Thanks, Nysoz. Seems like taking a deep breath and taking time to research is key. Is there an amount invested when AUM makes sense?
                        For sure take a step back and take a deep breath. I know taxes aren't factored in yet, but $15M over 40 years is $375k a year just by leaving it in a bank account. If you traditionally invest, you'll be able to withdraw 3% a year or $450k a year and likely still have $15M or more invested at the end. You have time to figure things out.

                        If you read the bogleheads theory of investing, the same simple portfolio works with $100k to $100M. Paying someone else invest for you is mainly for people that don't want to learn how to do it themselves. Either out of indifference or disinterest. There's also the perception or possibility that having that much money opens more opportunities for other types of investing but it's definitely not needed.

                        Comment


                        • #27
                          A lot of people on here look at the fee in vacuum and make the assumption that advisors are a commodity and thus you should just pay the lowest fee. People discount the actual value that you can receive (both the hard dollars and cents and the peace of mind/softer side of things). As the $$ amounts get higher, yes the hard $$ amounts of fee get bigger under an AUM structure but so does the potential $$ value. If an advisor could help do .25%-50% or whatever the percentage amount between investment allocation, rebalancing and tax loss harvesting, then on $15 million, that's also $37,500 or $75,000 of savings. That's without factoring in the other areas of actual financial planning (tax planning, estate planning, etc.). Regardless, it's a simple equation of looking at the value relative to the fee and making sure you receive enough value above the fee.

                          It's like planning a couple nice trips every year (sore subject for a lot of people here in 2020). The cheapest route would be to plan it yourself, but if you wanted someone to help, you could just look for the cheapest route or pay more for someone that is going to plan things you (or another cheaper travel agent) didn't even know to think about and make their fee worth every penny.

                          I don't think giving blanket advice to avoid AUM is very helpful for the average consumer given the reality is that there just aren't many flat-fee firms, especially as you move into the higher net worth space. Just look at the WCI "recommended" advisor list and see how few are there, which is on a site with a disdain for AUM fees. The vast majority of flat-fee advisors also just work with younger clients on the basic planning items. You want a fee-only advisor (which means they don't receive commissions or kickbacks from any recommendations they give) and then educate yourself on what value you think you'll get for the fee. After you talk with several advisors, you'll get a feel for who you want to work with and how they'll be able to help. If you think two are the exact same in terms of the value you'll get, then absolutely go for the lowest cost option.
                          Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness

                          Comment


                          • #28
                            Originally posted by LIFEISBEAUTIFUL View Post
                            These guys have said we need an advisor because (1) stocks and bonds can’t give you the diversity you need, (2) they are a buffer for people like me who would want to run when the market stumbles, (3) they have access to opportunities like hedge funds, and (4) the last 10 years have been unrepresentatively lucrative for index funds and with the bottoming out of interest rates, that is likely to change.
                            This makes sense, but our focus on enjoying the money and not exponentially growing it, combined with the expense, makes me ask- do we need an advisor? Is the big amount such that an advisor is a given?
                            Thanks so much,
                            None of these make any sense. Maybe Number 2 a bit, but all the others are bull.

                            Please, please don't choose AUM model. Maybe a fee only planner. Or one like Johanna who charges a set annual fee for periodic reviews. But with 4 young children and $15M you need an estate planner who is an attorney and can work with an accountant.


                            Comment


                            • #29
                              “A great bank” advised you? Banks are not a fiduciary. A good m&a attorney and a CPA should have given you advice. Retail and commercial bank definitely simply wanted your money deposited. I would venture a guess they “want to provide a full range of services”. Water under the bridge.
                              https://www.kitces.com/blog/hierarac...advisor-value/
                              Everyone has something to sell you. It will be specifically tailored to your emotions. The above link is the Advisor to the Advisors. How to “sell value” is the training routine.
                              Mid a lottery winner or a pro athlete makes it past five years, the probability of losing it approaches zero. Thus, at the end of 5 years your life, money situation and sorting things out will take care of virtually everything. It is easy to rationalize $100k as a need or a good idea with new wealth. Just like you rationalized stocks and bonds lacking diversity. That’s how you will get suckered.
                              Determine your plan, don’t let someone sell you a plan. Impulse buying is the big risk, not a simple 3 fund portfolio.

                              Comment


                              • #30
                                I know I am likely speaking to an annoyed forum, but I'm genuinely not trying to be self-serving here with my points and instead just lay out the reality to help people from spinning their wheels and at least understand their options.

                                Johanna is a fantastic advisor, which is why she's at capacity and no longer able to take on new clients right now (I know this may change in the future).

                                After Johanna, just my opinion, but I think it'd be helpful to at least list specific recommendations of at least a rough pecking order of actual flat-fee firms/advisors to check out where physicians have had a good experience or heard of people having a good experience.

                                Maybe that is just point back to the recommended advisors on the site, which I checked below because now I am curious

                                I listed all the firms that having nothing to do with AUM (at least based on the description in the recommended advisors section), which hopefully can be a helpful guide/you all can see how all the "ideal" flat-fee recommended advisors on here charge for a comparison:

                                1) Physician Family Financial Advisors:
                                -
                                Manage $115,000,000 for 109 clients
                                - The fees are $165/mo on low-end and up to $615/mo on high-end

                                2) Panoramic Financial Advice (it says flat-fee, but in the ADV there is an AUM fee):
                                - Manage $14,526,125 with 74 clients
                                - The fees are $3k - $12k + upfront fee of $600 to $2,400. Also offer hourly at $400/hr. AUM = 1% for first $1,000,000 and .25% for everything after.

                                3) Fox & Company:
                                - Mange $32,734,400 for 115 clients
                                - The fees are $1-2k setup fee + $5,000/yr to $15,000/yr. There is an AUM fee in the ADV, but that must just be for old legacy clients.

                                4) Wealthkeel:
                                -
                                A part of a brokerdealer, so hard to see AUM or # of clients.
                                - The fees are $1,500 upfront and then from $3,600/yr to $13,200 (based on Net Worth and a longer calculation)

                                5) Forward Thinking Wealth Management:
                                - Manage $11,547,000 for 28 clients.
                                - The fees are $8,400/yr to $10,000/yr + an additional .20-.40% fund fee paid to a third party manager deducted from client's account.

                                6) FPL Capital Management - (it says flat fee, but they charge a flat-fee based on AUM)
                                - $540,592,096 discretionary + non-discretionary with 185 clients
                                - Basic investment management fee (no financial planning) = $1,000 on low end to $10,000 on high-end
                                - Concierge wealth management = $5,000 to $25,000 of annual fees
                                - Family office services = $25,000 to $50,000 of annual fees

                                7) Mayport Wealth Management (flat fees are still tiered based on AUM):
                                - $111,424,763 in AUM for 34 clients
                                - The fees are $5,000 to $20,000 in annual fees or offer hourly services from $250-500/hr

                                8) Olson Consulting:
                                - $0 AUM with 3 clients
                                - The fees are $1,200/yr to $3,600/yr

                                9) Plumtree Financial Planning:
                                - $0 AUM with 50 clients
                                - The fees are $1,800/yr to $12,000/yr or $250/hr

                                10) RFK Capital Management:
                                - $0 AUM with 30 clients
                                - The fees are a one-time DIY charge of $1,800 with ongoing hourly work for $150/hr

                                11) Solari Financial
                                - $3,900,901 discretionary AUM with 6 clients + 49 clients helped throughout the year
                                - The fees are $3,000 to $10,000 per year (but may be as much as $25,000 in some cases) and hourly of $150 to $300.

                                12) SwitchPoint Financial Planning
                                - $44,600,000 of AUM with 34 clients + 8 clients helped throughout the year
                                - The fees are $4,800 to $8,400 per year ($150/hr)

                                13) Fisher Financial Strategies
                                - $0 AUM with 57 clients
                                - The fees are up to $250/hr
                                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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