Tuesday, July 29, 2014

Meeting with the Financial Planner

In my opinion, there are two reasons to pay someone else to do something:  1) I am incapable of doing it, or at least incapable of doing it was well as the person I am hiring or 2) I don't want to do it.  Our decision to hire a financial planner was based a little bit on both.  As I mentioned in the first post in this series, the death of my father along with some other things going on in life have reinforced the idea that retirement is not that far away.  Further I now have a bigger pot of money to deal with at one time than I ever have before (my inheritance).  We have always managed our own investments and at one time we (particularly me) kept up with the world of personal finance.  I COULD do it alone I think, but looking at my portfolio performance lately, and looking at things I've read in the last month or so, it was pretty obvious that I had not been keeping up with things, and it was costing us money.  We decided to give a professional a try, and decided to use our CPA, as noted in the original post in this series.  Last week we had our second meeting with him.  The first was a no-obligation sales pitch about why we needed financial planning services and why our CPA was the person we should hire.  We also discussed fees--a percent of the assets under management.  By the second meeting, we had decided to hire him, so it was time to get to work.

What I Wanted:

In order to evaluate the performance of any professional, you have to decide on your goals.  Me, I want to be so rich I can buy whatever I want whenever I want and I want to be able to give lots to charity.  Ok, that's not realistic--I'm not Bill Gates and no matter how good my financial adviser, there are always going to be things I can't afford.  Seriously, though, I had several goals before we met with the adviser:

  1. I wanted to know if we were on track for retirement at or above our current standard of living, given our current income, current savings rate, and current expenses (particularly the three two-legged expenses that live in our house).  
  2. I wanted to know if we could save less and spend more--or if we needed to spend less and save more.  While I certainly want to save for the future, I don't want to be one of those people who lives in little better than poverty, only to die with a huge nest egg.  
  3. I know our investment portfolio is not doing as well as the market and our funds have low Morningstar ratings.  It it time to move them into something better and I wanted help with that.
  4. The funds we have were winners in their time.  Unfortunately, that time is past, and probably has been for some time.  I need someone to keep an eye on the funds and know when it is time to say goodbye.  I could do that myself--Morningstar ratings are readily available but the reality is that I haven't done so, and the paperwork involved in moving IRA money from one fund family to the next is a nuisance.  
  5. I wanted help with asset allocation.  I keep reading that people my age should not be fully invested in the stock market--that we should have bonds and other investments as well.  I don't know a lot about those options, but I do know that the mutual fund I own that has a lot of bonds in it is not performing well.  That doesn't exactly encourage me to buy more.
  6. I have a special needs son. I need to make sure he is taken care of when we can't do it any more.  
  7. I'd like to minimize taxes, both now and in the future.

Were My Goals Met?

We have only met with him those two times, and plan more meetings.  All is covered in the fee of a percent of our assets under management.  At this time, I'll tell  you this about meeting my goals:
  1. We aren't there yet.  He has said they have a program where they input your goals, your income and your savings and then tell you if you are on track, and that we will get to that.
  2. This is pretty much in the same place as #1.
  3. He got copies of all our investment statements, asked about our savings and what I'm expecting from my Dad.  We are keeping our Roth IRAs where they are since we are happy with their performance and giving him the other investment accounts to re-invest.  He works with a company that advises him about mutual funds and which develops model portfolios based on risk tolerance.  Also, he got the list of available funds into which we can invest our 401Ks and will advise us on which to choose as part of our overall portfolio. 
  4. That company also watches those funds and pulls people out if managers change, performance lags or their needs change.
  5. He agreed with me about bonds, even before I mentioned I wasn't crazy about them.  He said that in his opinion, at least at this time, the returns weren't worth the risks.  He had barely heard of peer-to-peer lending but thought it sounded interesting.
  6. He suggested seeing an attorney to set things up for my son, but did mention that we might want more savings than many people in our economic bracket, specifically to leave something for my son.
  7. He is going to take a look at our assets and our tax situation and see if there is anything else we can do.  Specifically, he is going to run the numbers on converting our IRAs to Roth IRAs.  Also, he agreed with me that living on the portion of my inheritance that I have already received, and socking away as much of my paycheck as possible in my 401K for the next six months was a good move (even though it means less money for him to manage and charge for).
Only time will tell whether we get our money's worth from him, but I figure that if we get the advice I'm seeking on #1 and #2, that's worth a year's management fee.  After that, he'll have to convince me either that he is making us more money that I would or that dealing with all of this is more trouble than I want.

Do you have a financial adviser?


  1. Yes, I do, for the very reasons you mentioned. The services you are being provided sound exactly like mine. I have been with same person 20 years and it has been worth every penny.

  2. I was going to say my adviser has been worth every penny, but you beat me to it.


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