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  • Independent... really?

    I'm new to WCI forum:

    Is it possible that my independent advisor is TRULY independent?
    - i.e. is it possible that NONE of the commissions from IUL, A,B,C shares kick back in ANY form of compensation, as he says?
    - I'm looking for causes of mediocre performance and
    - having a hard time believing conflicts of interest are playing no role
    - I may be ready for a fee-only fiduciary hourly advisor as needed, for this and other reasons, to improve trust/ suspicion of conflicts of interest


    ----------------------------------
    Further details:

    Fee-only fewer conflicts of interest:
    - I'm under the impression that fee-ONLY fiduciary (perhaps hourly) reduces advisor conflicts of interest best

    Fee-based currently:
    - However, my advisor of 18 years (inherited from my parents) is fee-BASED
    - registered investment advisor and broker
    - Makes it sound like Ameriprise INDEPENDENT fee-based is even better than fee-only (as he can "make a plan AND put it into action")

    Denies commissions on products:
    - ADV Part 3 says, "we are one of the few firms where Financial Advisors don’t receive commission."
    - "we don't have to push certain products over others" and are
    - not "employees of the bank or insurance company.... incentivized to sell these proprietary products to clients [with] sales quotas."
    - Cites "independent research," not "conflict of interest laden research that comes from Wall Street."
    - With management strategies not "based on what.... will make a bank or brokerage house the most money."

    Annuity complaint denied:
    - SEC advisor search discloses only one customer dispute, denied,
    - alleged inappropriate rollover of funds from non-qualified deferred compensation plan into qualified variable annuity.

    But CAN receive product compensation?:
    - Form ADV Part 2B says he receives "additional compensation" from "product companies.... to help distribute their products.
    - These companies may pay for training and education events, seminars or other similar events.... expenses for.... meetings or.... business or recreational entertainment....
    - A financial advisor may also receive a service fee, expense reimbursement, or other payments, from other companies....
    - as well as incentive programs and cash and/or noncash compensation."

    Fiduciary form fee-based but denies commissions:
    - Insists he's fiduciary.
    - But endorsed "fee-based."
    - Signed Talking Real Money Advisor Interview Form stating fee-based (fees plus commissions)
    - But attached only details of AUM fees
    - Denies referral/product/trailer fees
    - Receives other fees and compensation (but only lists financial planning fees).

    But suitability standard:
    - Every account I open comes with a "suitability" form,
    - demonstrating he's legally bound by the lower broker suitability standard
    - instead of the higher fiduciary "best interest" standard

    IUL/ annuity-like insurance product:
    - Sold me indexed universal life insurance policy
    - with $13k surrender (commission) cost
    - as "Rich Person Roth" (unmarried, no need for life insurance)
    - after I was maxing out all 457b, 453b,
    - salary too high for Roth contribution,
    - unable to do 403b in-service distribution/rollover/Roth conversion
    - Cap dropped from 10% to 6% in 7 years.
    - Categorized under "Annuity / Insurance Transactions"
    - Says commissions kicks back to Ameriprise, but not his independent advisory
    ​​​​​
    A, B, C shares:
    - A, B, C shares used intermittently
    - Including Alaska 529 plan with A shares (minimally funded).
    - Says commissions kick back to Ameriprise, but not his independent advisory

    Second opinions:
    - "moderate aggressive portfolio" look more like "moderate," and
    - "over-diversified/over-complicated/redundant."
    - 50% equities, 30% bonds/cash, 20% real estate recently, at age 45, seems way too conservative
    - I had to request more appropriate allocation for my high risk tolerance (95% on Vestory Risquiz)

    Valuation-based market timing:
    - Based on record price/earnings ratios, weighting bonds/cash up to 30%, alternatives 5% in endowment style
    - Denies this is timing as, "timing is reading tea leaves"

    Performance:
    - Second opinions (multiple fiduciary and a couple brokers) describe his performance as "low but in the ballpark."
    - 4.7% CAGR and 5.8% average annual return since 2004

    Expenses:
    - He's made 15% of what I've made, with my money on the table.

    Financial planning additional fee:
    - That 1% AUM seems unnecessarily expensive already
    - $1500 for financial plan (in addition to AUM and IUL).
    - He will not negotiate lower as, "The SEC make sure we charge the same prices for everyone."
    - But when they've overcharged me for AUM (by splitting my accounts in 2 different groups), they say, the AUM percentage is "just a guideline" and "can't be refunded if they accidentally overcharge me."

    Trust-eroders:
    - This is how he described years of consistent administrative mistakes/miscommunications
    - I can't afford to give him this much of my money and my time (studying so I can better understand what suits me, identifying paperwork mistakes, educating his staff, requesting he employ the strategies he lectures on, repeatedly requesting answers and corrections)
    - Keeping 9 month list of backlogged action items and questions unanswered (like a performance plan for an employee being fired)

    Outgrown its role:
    - I outsourced my investing to him since 2004
    - This played a great role, as it was relatively cheap and I had confidence (ignorant bliss?) to power through 2008 and upward
    - But with higher AUM it's become more expensive
    - I'm concerned I'm not getting as good of value
    - I've been trying to work with him to improve communication/ make the service better value, but I'm not sure I can change his practice

    Expanded too fast:
    - I fear he's expanded his practice too fast, to client:staff ratio of 111:1
    - The rapid expansion has diluted the service (accuracy and responsiveness)
    - Now I've finally had some time to get just enough education to be concerned about what I'm seeing
    - My sub-advisor quit without telling me (I discovered this on the website)
    - I've been introduced to a new top sub-advisor
    - I'm optimistic for a fresh start, but tired.
    - His staff appears to be trying but I'm experiencing more of the same administrative mistakes that eat up my time

    One foot out the door:
    - I've already taken 1/4 of my portfolio to Schwab, upon the advice of a fee-only hourly fiduciary advisor.
    - This got some attention from my lead advisor, until he started no-showing meetings again, after I waited 6 weeks to meet with him
    - The same portfolio is doing >2% better (annualized) at Schwab, which I attribute to a) not draining with fees b) missing 2 quarterly rebalancings in rising market.
    - Also separately using some of Paul Merriman's M1 pies.
    - Since trust is so important, and mine has been eroded, perhaps it's time to go completely to Schwab, and transition to my fee-only hourly fiduciary advisor as needed, strategically transitioning to a more simple portfolio, perhaps rebalancing every 1-3 years.

    Conclusion:
    - Even if my fee-based advisor is TRULY independent and actually acts as a fiduciary, perhaps it's time for a different approach, for the other reasons above.
    - I remain grateful to him for a way better start than I likely would have had on my own
    - This allowed me to focus almost entirely on my best investments- my medical education, career and family.
    - And provided a foundation for seeking better financial education.
    - I remain open to more intensive advising as I prepare for and execute the distribution phase.

  • #2
    Even NAPFA-registered fee-only advisors have internal discussions on whether it is possible to be 100% independent, since we all charge for our services and “fee-only” includes AUM advisors. TLDR, but I’ve caught a few snatches that your advisor is ignoring you and you are losing trust. You seem to be well-informed, so why not try the DIY approach. For many, the only reason to use an advisor for investments is to offload the work, at least for WCI readers. (Honestly, investing and rebalancing is one of the easiest parts of financial planning.)

    Otherwise, stay engaged here - you will find a very helpful, honest (sometimes blunt😉) community of like-minded souls to support and mentor you, as needed, in many more areas than simply investing.

    Welcome to the forum!
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      Ameriprise is on a short list of companies that will never advertise here. No fee-based advisors are listed on our financial advisor list.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

      Comment


      • #4
        The White Coat Investor, thank you! Interesting b/c I asked him yesterday to apply/go through your advertising vetting. He agreed but said, "Looks like they no longer have this email address ["[email protected]"], but if anything you can see how I would have filled out the application" [no application attached]. This is just a daily example of their lack of attention to detail and administrative mistakes; par for the course.
        Tortoise
        Member
        Last edited by Tortoise; 01-14-2022, 08:44 AM.

        Comment


        • #5
          jfoxcpacfp, thank you! Sorry for TLDR. I'm new to forums in general. Should I edit down for better engagement?

          Comment


          • #6
            If you have so many questions/issues about your advisor then that should tell you all you need to know.

            Comment


            • #7
              Good job doing extensive research on shares, fee structures, FINRA’s broker check and the SEC, etc.
              I’m pretty sure you already know what you should do.

              You said you are unmarried. Do you have a kid? Not sure why you would need life insurance or a 529 if you don’t have dependents. If you need a 529, you should buy it directly rather than paying fees to buy it through an advisor.

              As for the Roth IRA, you do make too much to contribute directly to a Roth IRA or to make a tax deductible contribution to a traditional IRA. However, you can make a non-deductible contribution to a traditional IRA and then make a back door conversion to a Roth IRA. Once you’ve maximized the $6,000 back door Roth contributions each for 2021 and 2022, you should invest in a taxable brokerage account rather than some life insurance plan masquerading as an investment vehicle.

              Does this salesman have any professional certification such as a certified financial planner (CFP)? He seems both ill-informed and possibly dishonest. He also doesn’t work for a company that I would choose to hire.

              Comment


              • #8
                Hank, thank you.

                You're right. I'm loyal, patient and persistent to a fault (with my former medical biller, office staff, insurance companies, financial adviser, etc.). This helps me treat challenging chronic pain patients but may leave me vulnerable to staying in onerous situations longer than I should.

                I was unmarried when I bought IUL.

                Now married with 2 kids

                Fee-only hourly fiduciary 2nd opinion steered me to Utah 529 where I bought directly (using Paul Merriman/ Chris Pedersen 2-Funds For Life strategy (target date fund with small cap value/ emerging markets glide path)).

                Now I'm under-insured for life and disability insurance, with working wife as I near independence.

                Yes, in 2021 I made non-deductible contributions to our traditional IRAs, plan to make my 7th year of back door conversion to a Roth IRA in 2022. Thank you for reminding me it's time for 2022 non-deductible contribution! (Wish my advisor had been guiding me to this all along... I bring ideas to him instead of vice versa

                My taxable brokerage account is moderately healthy (spill over after I maximize solo 401k, HSA, FSA, etc.). I've really underfunded this life insurance, heel dragging most the way. Working with insurance specialist on IUL exit strategy (makes barely enough to pay premiums, but keeps my $67k hostage with $12k surrender charge).

                Yes, my advisor has CFP.

                I respect him as a person but others close to me have less kind things to say. I'd like to think he's honest but have some questions.

                If he's really looking to act as fiduciary, to avoid "conflicts of interest" as his Form ADV Part 3 says, I question his judgement, associating with Ameriprise, with broker license, selling insurance.

                He says he "doesn't work for Ameriprise, as he's independent."

                I'm just having a hard time believing that "independent" means completely independent (though he says it does).

                Comment


                • #9
                  Tortoise
                  Member
                  Tortoise

                  Why are you still with this advisor if you are doing most of the leg work and basically DIY. Why not cut off ties with him and make it full DIY?

                  Comment


                  • #10
                    Since you have a spouse and kids depending on you, get sufficient term life insurance and disability coverage in place pronto. Saving 30 or 70 basis points on investments and investment management pales in comparison to needing sufficient insurance and not having it. Work with a high quality independent insurance broker. There are some good ones who advertise on WCI. Consider contacting one of the insurance agents who actively contribute to WCI Forums.

                    You mentioned that you contribute to an HSA and an FSA. Just to confirm, this is a dependent care FSA, not a health FSA, right?

                    From your post above, it seems like you’re bright, motivated, and able to do the research necessary to manage your finances. It certainly looks like you could do this yourself. That said, no harm in paying a few hundred dollars or low four figures to sanity check your current overall plan, get advice on a specific topic, or plan or adapt with major life events.

                    You didn’t mention estate planning. Do you have your ducks in a row with will, revocable living trust, advanced health care directive, etc.? Odds are pretty close to 100% that you’ll slip this mortal coil one day. Might not be a terrible idea to give yourself a deadline of 30 or 45 days to take care of term life, disability insurance, and estate planning. If you’re revising your financial plan or moving to a new advisor, you want to make sure all the parts fit together properly and your spouse and kids are taken care of.

                    Comment


                    • #11
                      Kamban agreed, thank you. My CPA and father recommend I outsource to an advisor, so I can focus on my biggest money maker, practicing medicine.

                      But after listening to 200+ hours of podcasts (WCI, Sound Investing, Talking Real Money, some Money Meets Medicine and Bogleheads on Investing), interviewing a handful of true fiduciaries and tracking my portfolios at Schwab and M1, it seems that The White Coat Investor is right; learning to manage my own money is a great investment. I like it! Similar to running my own practice, I can do it so much more effectively/efficiently myself.

                      However, like any relationship, change can be difficult. I will miss having the continuity of the devil I know, my advisor's website, my old statements (though many of which I've now saved as PDFs), the Ameriprise Total View including app., showing me a snapshot of performance since 2007, net worth (easier to use than Personal Capital), which I calculate almost daily (I find this reassuring, fun and interesting, as I learn to track to CAGR, IRR, etc. of my net worth and various accounts, real estate, etc.). But, though I track closely, I make changes slowly (obviously, as it's taken me 3 years of questions and I still haven't left my advisor).

                      I've been inching out the door. Maybe 2022 is time for a more substantial move away. I now have a relatively clear exit strategy to Schwab/fee only hourly fiduciary as needed.

                      I've considered switching to a 0.95% AUM fee-only fiduciary, including financial plan, similar holistic consultation with their real-estate team, tax team, practice development/sale consultation, etc. But, as Rick Ferri points out, I'm unlikely to need to pre-pay for all these services every year. I could always purchase similar consultations a la carte.

                      I like my current advisor's focus on holistic multigenerational wealth management, tax efficiency, child financial education, etc. But I could still listen to his free webinars if I'm so inclined (my parents are still with him, grumbling but also slow to change).

                      I don't want to be mercurial, but I think it's time for this glacier/tortoise to leave this advisor.

                      Comment


                      • #12
                        Originally posted by Tortoise View Post
                        Kamban agreed, thank you. My CPA and father recommend I outsource to an advisor, so I can focus on my biggest money maker, practicing medicine.

                        But after listening to 200+ hours of podcasts (WCI, Sound Investing, Talking Real Money, some Money Meets Medicine and Bogleheads on Investing), interviewing a handful of true fiduciaries and tracking my portfolios at Schwab and M1, it seems that The White Coat Investor is right; learning to manage my own money is a great investment. I like it! Similar to running my own practice, I can do it so much more effectively/efficiently myself.

                        However, like any relationship, change can be difficult. I will miss having the continuity of the devil I know, my advisor's website, my old statements (though many of which I've now saved as PDFs), the Ameriprise Total View including app., showing me a snapshot of performance since 2007, net worth (easier to use than Personal Capital), which I calculate almost daily (I find this reassuring, fun and interesting, as I learn to track to CAGR, IRR, etc. of my net worth and various accounts, real estate, etc.). But, though I track closely, I make changes slowly (obviously, as it's taken me 3 years of questions and I still haven't left my advisor).

                        I've been inching out the door. Maybe 2022 is time for a more substantial move away. I now have a relatively clear exit strategy to Schwab/fee only hourly fiduciary as needed.

                        I've considered switching to a 0.95% AUM fee-only fiduciary, including financial plan, similar holistic consultation with their real-estate team, tax team, practice development/sale consultation, etc. But, as Rick Ferri points out, I'm unlikely to need to pre-pay for all these services every year. I could always purchase similar consultations a la carte.

                        I like my current advisor's focus on holistic multigenerational wealth management, tax efficiency, child financial education, etc. But I could still listen to his free webinars if I'm so inclined (my parents are still with him, grumbling but also slow to change).

                        I don't want to be mercurial, but I think it's time for this glacier/tortoise to leave this advisor.
                        Dude just do it already..

                        Edit: classic advisor nonsense re: focus on making money. aside from us forum finance nerds who (mostly) waste time here, investing should take almost no time. welcome to forum!

                        Comment


                        • #13
                          Why do you want the hand holding that you aren't even getting (and paying for)? Cut bait. Manage yourself. Sounds like you pretty much are anyway.

                          Comment


                          • #14
                            Hank thank you! These things are super-important to consider. Thank you for making me think this out/defend my reasoning in writing

                            My spouse and kids are only partially dependant on my income. My wife and I have diversified our income/disability risk in a partnership model by fostering both our careers. She makes nearly as much as me (maybe she'll pass me soon). We're close to self-insuring/independent wealth (without considering inheritance, social security, her work-sponsored life/disability insurance (I consider useless), my $600k IUL life insurance benefit, or her partial ownership of a few businesses she co-founded, etc.). My insurance broker gave me a net worth target at which most families can self-insure (approximately matching the 4% rule). We may hit this target within a couple months at this pace. So, my wife and I have been heel-dragging on going through another underwriting, if the insurance policy may not be necessary for very long by the time a policy would get in place. If I pass away and my wife becomes completely disabled (extremely unlucky and unlikely combination of events, especially given our degree of caution, exercise and good health of both our families), the remaining mouths to feed could still maintain our current expenditures based on the 4% rule. Ideally we're aiming for the 3.3% rule and better. But if this cumulative disaster strikes before we reach the 3.3% threshold, we have lots of local family support/ minimally disruptive backup housing options if necessary, which my wife has already agreed to (plus all the other wildcard options we didn't consider above, such as both our social security, IUL, etc.). The odds of a completely healthy 45 year old man dying or becoming completely disabled for a prolonged amount of time are relatively small, based on the death and disability calculators I've used (Personal Disability Quotient calculator is down right now, or I'd give some exact numbers). I believe our chances of receiving an inheritance are significantly higher than the chances of us both dying or becoming completely disabled early. This is a gamble, but I'm comfortable with these odds. (Plus, I don't want anyone incentivized to off me Additionally, I understand that, with insurance, the house wins. As a physician, I generally do not trust the insurance industry, so would rather minimize my participation/ stop padding their pockets as soon as prudent.

                            My insurance broker says he is independent. I trust him but is there a way to check?

                            He was recommended by a senior physician colleague. https://brokercheck.finra.org/ says he has 36 years of experience and no disclosures. I believe he is high quality. He seems very knowledgeable. But I'm not sure how to gauge quality. He only sold me one small disability policy (Principal, own specialty) in 2013 to supplement my existing Guardian (own specialty) policy once I became an attending. He otherwise consults for "free" so far, evaluating my wife and our needs, balancing best options for disability, term life and existing IUL (running scenarios such as decreasing IUL death benefit early, switching options, paying surrender charge, trying to minimize financial damage of IUL) until the point at which we can self-insure. For the past 8 months I've been asking my financial advisor if it's possible to lower my IUL death benefit year 10, so I can relay this data to my insurance broker. Then my insurance agent can calculate how much additional term I may need. Upon your prompting, I contacted both of them today to poke this process forward.

                            I am also open to contacting one of the insurance agents who actively contribute to WCI Forums. If you have a specific favorite, please let me know.

                            Yes, my wife's job allows us to maximize the HSA and do some dependent care FSA, not health FSA. Good point, thank you.

                            I agree that it would be great to adhere to The White Coat Investor guideline to never again spend >4 figures annually on a financial advisor. Paying a few hundred dollars or low four figures seems a good investment as a sanity check on my current overall plan/ advice on any specific topic/ plan/life event.

                            We completed estate planning. Yes! That felt good as I see others procrastinating. Our estate attorney did not recommend a revocable living trust. Our estate plan included a will, health care directive (living will), financial power of attorney, health care power of attorney and burial instructions.

                            Again, your post has prompted me to clarify any uncertainties with my estate attorney, insurance broker, financial advisor, etc. today. Thank you!!

                            I've placed a reminder on my calendar for 1 weeks to take next steps forward with term life, disability insurance.

                            My disability insurance covers about 40% of my gross pay (collections as single member LLC), which seems fine, given how close I am to net worth necessary for self insurance. (My insurance advisor points out that I can't match my old premiums due to my age difference now. I'm healthy but not interested in underwriting again if the policy won't be necessary for long.)

                            Again, thank you for your help making sure that I, my spouse and kids are taken care of!

                            Comment


                            • #15
                              childay, thank you.

                              Agreed. RE: "classic advisor nonsense re: focus on making money." Reminds me of Paul Merriman (Sound Investing non-profit) who agrees, "early-on in your investing life, you're the hero, as most gains are due to you. Later in your investing career, your portfolio is the hero, with most gains due to the portfolio." Especially during the recent market, I've felt that my portfolio has been the hero (not a focus on work).

                              I obviously also "waste" too much time learning about this stuff. But I agree with The White Coat Investor that learning this stuff may actually pay more per hour than doctoring. Especially considering I may have been paying someone, with the equivalent of 2.5 weeks of training, $1000/h to do it for me. Doh! Plus, it would have likely gotten way more expensive from here. Good to nip this in the bud/cut my losses. Better late than never.

                              My wife is tired of hearing about investing and personal finance. Nice to meet other finance nerds who can teach me/discuss!

                              Great to find the forum, so thank you!

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