U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 06-29-2007, 07:17 AM
 
8 posts, read 31,444 times
Reputation: 35

Advertisements

Hello.

I have a really serious message that I think everyone needs to hear. It's got a lot of meat to it, so please bear with me.

First, people that use financial advisors (often really salesmen) do WORSE than people that do their own investing. Read this:

Do-it-yourself investors win the race (Page 1 of 3)

The vast majority of so-called financial advisors will charge you high fees. And look at this chart to see what fees do to your investments over time:

Retire Early: How should I select a financial advisor ? What should it cost ?

The scary thing is that 'financial advisors' are taught to SELL PRODUCTS like annuities and insurance and mutual funds that earn them big commissions. They are taught how to gain people's confidence and manipulate them.

Usually, clients don't even know about all the fees they pay. The commissions, expense ratios, the transaction fees, the wrap fees....if any of you use a financial advisor, do you know exactly what you pay? And all those fees probably come right out of your investments. You don't write a check for them. You never see a full accounting.

Investing has always scared me. I never thought I could do it myself and thought I would need professional help. But I found out the hard way that this isn't the case. I can do it and do it better than a 'professional'. It's not hard or time consuming.

If you want to make it really easy, just get a target date retirement fund from a company like Vanguard. This is a fund that has an appropriate asset allocation for someone with your retirement date and rebalances. To do your own asset allocation, just use an online tool. Like this one:

Calculators - Asset allocation wizard

The more I learn, the more I think that the financial advice industry is pretty much a scam to be avoided. I'm sure there are some good advisors out there. Probably fee only, not commissioned or charging a wrap fee and/or working for a company like Ameriprise (one of the worst). But how do you find one? And people (kids) starting out in the financial advice field are told to work their 'natural market' (friends and family) after they are taught, not proper investment principles, but hard core sales techniques like reading scripts and scaring people into unneeded insurance and expensive mutual funds.

Also, the wonderful feeling you have when you KNOW what is happening to your money is priceless.

I suggest reading one of the following books:

Moderator cut Bogleheads-Guide-Investing-Taylor-Larimore The Bogleheads' Guide to Investing: Books: Taylor Larimore,Mel Lindauer,Michael LeBoeuf,John C. Bogle

About-Asset-Allocation-Richard-Ferri All About Asset Allocation: Books: Richard A. Ferri

Little-Book-Common-Sense-Investing The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Book Big Profits): Books: John C. Bogle

There may be times when someone really does need advice. I suggest using an independent planner that charges a flat fee (not a wrap) or hourly fee. Whatever you do, don't use firms like Ameriprise (the worst - 37 regulatory actions against them and many conflicts of interest with clients!!).

Thanks very much for your time.

Last edited by Waterlily; 06-29-2007 at 07:03 PM.. Reason: link ads
Reply With Quote Quick reply to this message

 
Old 07-02-2007, 04:51 PM
 
Location: West Coast
6 posts, read 28,373 times
Reputation: 12
Default Please Don't Generalize

I very much respect your opinion on doing your own investment and retirement analysis. Not all people can, or want to do so. Yes, many financial advisors do work for brokerages and other companies and are geared to selling products, but that doesn't mean you need to buy anything from them.

More importantly, there are lots of independent financial advisors who sell no insurance, no products (sticks, bonds, mutual funds, etc.) but who are fee-only - that is, they get paid for their time and advice only. They work for themselves or small firms. If interested, you will find may of these folks with the moderator cut or National Association of Personal Financial Advisors Moderator cut

Fortunately, we live in a country that abounds with many choices and all are free to do as they see fit for their individual circumstance

Last edited by Waterlily; 07-02-2007 at 05:30 PM.. Reason: No ads
Reply With Quote Quick reply to this message
 
Old 07-02-2007, 06:11 PM
 
8 posts, read 31,444 times
Reputation: 35
Default Thanks for your reply.....

I did say: "I'm sure there are some good advisors out there. Probably fee only, not commissioned or charging a wrap fee and/or working for a company like Ameriprise (one of the worst). But how do you find one?"

I suggest reading "Who can you trust' on the EFMOODY website.

Being fee-only does not mean that the planner will do the right thing, or knows how to properly invest money. I would certainly use one before I'd use someone from one of the brokerage houses, but unless someone knows about investing, it's a shot in the dark.

Because 'we live in a country that abounds with many choices and all are free to do as they see fit for their individual circumstance' that translates to a need to be able to rationally think and research properly. I'm hoping what I posted prompts people to do just that.

Did you look at the study '"Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry"?

Thanks again for your reply and I wish I'd get a lot more!!
Reply With Quote Quick reply to this message
 
Old 07-02-2007, 08:08 PM
 
Location: california
453 posts, read 1,016,260 times
Reputation: 644
Aisa,

I have always done my own investing and agree with you 100 percent.

My method has been to look up mutual funds in various locations such as money magazines, the internet and ignore all the hype. I make a list of the funds I might be interested in, get a prospectus and check their returns and their histories, along with the fees. Any funds that require going through a brokerage are automatically crossed off the list.

Through the years I've gotten calls now and then from brokerage companies in town trying to get me to invest with them. I ask what return will you give me? They ask what return I would like and my response is that I'd like at least X percent. They said well no one gets that high. I said well I do, and that's the end of the call.

A dozen or so years ago I helped a friend transfer her funds that were sitting in a bank to some good funds and she was getting excellent returns for a few years. Then she told me she was going to talk to a financial adviser. I asked why and she said he seems a "nice guy" and besides she wanted someone to "handle" her funds.

I said she didn't need anyone to "handle" it, just leave the money there and it would be fine but she said he told her the percentage would be the same as before, and his commission didn't come out of her profits - which was a lie. Supposed to be the same fund right?

Well she transferred everything, had it there for awhile then wanted me to see how it were doing. Turns out the guy was skimming all of her profits, had switched 1/2 to a dead end fund where she was getting nothing and he was getting a high commission for "handling" it.

She was quite p***** off (finally) when I showed her how much she had lost, which amounted to considerable thousands of dollars. He was dropped and the funds got back on the right track. I would never do business with a financial adviser or a financial brokerage.

Another thing is to never "invest" in life insurance or annuities, which aren't really investments anyway, they just call them that so people will put their money into them. If it was me I would never get life insurance unless it was inexpensive term but the best way is to self insure anyway.

Don't consider this as "investment advice". It's just what I've done, but anyone else can do the same thing on their own.
Reply With Quote Quick reply to this message
 
Old 07-03-2007, 04:06 AM
 
79 posts, read 191,693 times
Reputation: 71
On the one hand, I understand why many folks don't need a financial advisor. They have the interest, knowledge and ability to make these decisions. From my experience in dealing with the public, this is not based necessarily on education or even experience, but the will to learn. But there are lots of folks who are simply bewildered at the scope of issues to face, don't "get it," want someone to do it for them or are too lazy. These folks need one - I would suggest at fee only - but a good one is hard to find. I am surprised that folks making over $100,000 have not saved for retirement or put their IRA into tax free bonds.
Reply With Quote Quick reply to this message
 
Old 07-03-2007, 06:00 AM
 
124 posts, read 617,024 times
Reputation: 93
I've also been doing my own financial planning for years. I may not always have gotten the highest return, but our investments have been safe and we've made a comfortable amount of money. I read financial and investment articles every day and I'm always learning something new. On the few occasions when I have toyed with the idea of using a financial advisor and have interviewed them, only once did one tell me something I hadn't already learned on my own. My husband cannot grasp financial planning and would need some help if something happened to me, but I have already asked one of his brothers (who is pretty good with finances) to guide him if and when the time comes (but I'm working hard at outliving him....hahaha).

One other very important thing to keep in mind besides how to invest your money is how to withdraw your money in retirement. Most people are probably aware of the rule that they should not withdraw more than 4% per year from their retirement savings so they do not outlive their nestegg. But you also need to be aware of which accounts, taxable or non-taxable, to withdraw from first, and how to spread your taxable withdrawals to avoid being bumped into a higher tax bracket. This is a very important part of planning that many people have ignored and it can cost you a bundle if done incorrectly. A tax consultant can help with this if one is unsure of how to plan for withdrawals. I would post the name of an excellent book on this subject but the moderator would probably cut my link to it. If you want the name, please send me a private message. I have nothing to do with the book and, you may even be able to download it for free from your library's website if your library has a download system....my library lends it online for patrons. There is also plenty of information online at various financial sites if you search on "how to withdraw your money at retirement."
Reply With Quote Quick reply to this message
 
Old 07-03-2007, 06:53 AM
 
Location: Sherman Oaks, CA
6,240 posts, read 15,468,818 times
Reputation: 8115
I work with two financial advisors, and they care a great deal about their clients. I'm not saying that they don't want to get paid for what they do, but to lump all financial advisors in the same category is just plain wrong. It's like a doctor or a lawyer; there are always good ones and bad ones. The ones I work for are very conscious of taxes, estate planning, etc.

There are many people who sit around and watch TV all day, and get the latest hot "stock tip" and want to go invest all of their money in that company. That's probably the worst thing they could do; we help put the brakes on that kind of behavior.

I will say, "Proceed with caution." There are certainly unscrupulous advisors out there, so always make sure you understand what you're invested in, and if there are any penalties to get out early (annuities, for example - or "B" share mutual funds). But to lump them all together as evil is wrong, sorry!
Reply With Quote Quick reply to this message
 
Old 07-03-2007, 07:26 AM
 
13,773 posts, read 33,958,617 times
Reputation: 10563
After my husband passed away, I consulted a financial advisor. He charge me a flat rate to start but when I asked him questions like 'should I pay off my mortgage?' he didn't know the answer. He then asked someone else and said I should get a variable rate mortage and invest the money I would use to pay off the mortgage so I could pay off the mortgage in 5 years. He also was really pushing hard for long term care insurance which cost $300.00 a month.
I thought about what he said and then asked for my money back. I was looking for someone to give me advice after my husband's death and he was only looking for a paycheck from me.
I did invest my late husband's 401K using a financial advisor with the credit union I belong too. But he didn't try to sell me anything, although he does sell the longterm care too.

All I can say is 'BEWARE' and do ask family, friends what they think..
Reply With Quote Quick reply to this message
 
Old 07-03-2007, 01:24 PM
 
8 posts, read 31,444 times
Reputation: 35
It's great to get all these replies!

"But to lump them all together as evil is wrong, sorry!"

I did not do this.

"There are many people who sit around and watch TV all day, and get the latest hot "stock tip" and want to go invest all of their money in that company. That's probably the worst thing they could do; we help put the brakes on that kind of behavior."

This doesn't seem to be the case in general. The study I've talked about proved that 'financial advisors' actually contribute to such behavior.

Again, the study is called "Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry" is written by Daniel Bergstresser of Harvard Business School, John Chalmers of the University of Oregon, and Peter Tufano of Harvard Business School. They had the cooperation and support of some of the largest and most respected industry groups and research organizations in America in working on this study.

Massive amounts of data were involved and were analyzed for years from many different angles. Researchers from several major universities around the country gave guidance and expertise to the authors. Morningstar and Financial Research Corporation contributed data. Staff members of the Investment Company Institute and representatives of various mutual fund companies assisted the authors. There are no rebuttals or studies that contradict the findings of the study.

Also, the study found that advisors do not provide superior asset allocation.

I have never met an advisor/broker that has set clients up in a low-cost, diversified portfolio of all or mostly index funds, keeping their fund costs under .25% and charging them less than $500 for the service, leaving aside Vanguard planners.

John, you bring up life insurance and annuities. I just looked up the cost of a popular VUL:
5% premium payment (front end load)
.9% M&E
1.25% (estimated) fund expenses (12b-1 fees, manangment fees)

There's also the cost of insurance, depending on age, health, etc and a cost of $7.50 a month.

Then there are all the riders, but I'm ignoring them.

These 'financial advisors' from this firm shove these VUL's at clients like crazy.

I decided to take a brief look at returns. The returns were horrible. The vast majority of the funds that I looked at did not come close to market returns and way underperformed their benchmark. The biggest shock was that the S & P 500 fund in the VUL had, over 5 years, a return of 6.85%. Over the past 5years Vanguard's S & P 500 fund had a return of, get ready for it, 11.77%.

I was sickened when I thought of all the people that had been sold this 'investment' by their trusted 'advisor'.

Mrrumples, you say: "But there are lots of folks who are simply bewildered at the scope of issues to face, don't "get it," want someone to do it for them or are too lazy."

Then how can these pople find a good financial advisor when they have no knowledge? They don't know what questions to ask and are ripe to be taken to the cleaners.

Investing is simple. Really. It's very simple to buy a fund of funds from Vanguard. I have an article that shows how to set up a really nice, low-cost, diversified portfolio.

Also, ongoing, I spend about 8 hours a year on my investments, since the best way to insure success is to 'stay the course'.

Thanks for all the replies. I am happy to see that you folks do your own investing.
Reply With Quote Quick reply to this message
 
Old 07-04-2007, 10:00 AM
 
Location: West Coast
6 posts, read 28,373 times
Reputation: 12
Default Keep Doing it

Aisa:

It's apparent that you are an intelligent, well-read and savvy individual, when it comes to investments and other aspects of financial planning. It is a complex topic and even the pros cannot be experts in every possible area. Hopefully, the ones who are independent and fee-only utilize a cadre of folks who have specific expertise in the areas where they may not. To be a competent advisor, they shouldn't hesitate to refer clients to appropriate experts in specific areas especially if the client needs, for example, life insurance for their estate planning purposes, etc. Many examples abound.

However, many, many people, especially many pre-retirees have simply little or no knowledge about how to make good financial decisions, especially as they will be living off their savings, IRAs, 401(K) plans, etc. They are caught in a tirade of newspaper and "popular" magazine articles and can easily be confused by the so-called "free advice", which is often fine general reading, but each situation is specific and needs to be analyzed carefully on an individual basis.

For those folks, using a quality advisor who has a [b][i][u]fiduciary duty to the client (an independent RIA for example), can be of immense help. There are many to choose from - and the quality advisors will share their reference list and can be checked out on NASD also.

Keep up your good work!
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top