Questions to ask Financial Advisors we interview before retiring (spouse, dumped, years)
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i would say decades away from retirement is still the accumulation stage . i can't imagine making changes that far out . why ? decades away there was no reason i would not be 100% equities as long as volatility was not an issue . but certainly whatever i was doing up to that point would still be all systems go .
i started to reduce about 5 years before
The stasis thing is usually something like a large-ish inheritance. If it's large enough, you don't feel compelled to add more to the pot out of your earned income but you aren't anywhere close to being retired and spending it yet.
I know people in that kind of fortunate situation. Most of us are adding to our household net worth until the day we stop working.
i would say decades away from retirement is still the accumulation stage . i can't imagine making changes that far out . why ? decades away there was no reason i would not be 100% equities as long as volatility was not an issue . but certainly whatever i was doing up to that point would still be all systems go .
Of course. The point isn't regarding what's a good portfolio-management strategy, but whether the 45-year-old version of Mathjak would have benefited from the boutique financial-advice that's so relevant now to the 65-year-old Mathjak.
Suppose that 17-year-old Mathjak graduated from Stuyvesant High School, and got a full ride to Columbia, where he then graduated Summa *** Laude in math. After doing his PhD in applied-math at NYU, Counterfactual Mathjak was recruited by a Wall Street investment bank in the late 1970s, where he immediately became a star. He managed to live frugally, saving and investing substantial amounts. Then, in 1998, the options-trading strategy pioneered by Counterfactual Mathjak blew up. Accusations flew, one thing led to another, and Counterfactual Mathjak was fired in disgrace. Scapegoated and blacklisted, he could no longer find employment on Wall Street. Instead, he taught calculus at a community college in Brooklyn, supplementing his income with occasional consulting-work. That was enough to preclude his having to draw from his portfolio for the past 20 years; he neither added to it, nor subtracted from it.
Question. It's 1999, and Counterfactual Mathjak is semi-retired. He's got a $10M portfolio, but only earns $30K at Kingsborough Community College. Does he need a financial advisor? And if so, what kind?
Before you starting asking questions of a financial advisor, you might begin by asking what you want to accomplish. Are you looking for help just with investing, or perhaps personal finance, estate planning or taxes? Different advisors will have different areas of expertise.
Couple of comments above bear repeating. Go to an advisor who has the bulk of clients in your income group. Do not go to a high net worth person if you do not fit in that category and visa versa.
They should ask about your risk profile and try to understand what that really means. Also your philosophy on philanthropic giving, estate stewardship, real estate holdings, concern for after retirement tax liabilities and other things that are related to your investment portfolio but not manged by them necessarily. They should be an expert in any of the areas that concern you.
They should have access to excellent will and estate attorneys, commercial lenders, etc- this is easier to check out and I judge professionals by the company they keep.
They should provide an easy to use online interface that allows for modeling.
We met with our guy twice a year and give him a spreadsheet to complete in the format that we find easier to deal with. This should not be a problem.
I like that my guy is a cpa but not necessary.
I don't look at fees just results net of fees.
Double check your investments through your (very qualified) accountant who is used to seeing lots of tax returns with similar investment profiles and get a recommendation for an independent review if you have concerns. Repeat - get a great accountant. Now that we finally have one I can't believe the difference.
Probably no brainer but make sure they have a fiduciary responsibility to you. And really understand the goals you want to meet and how the advisor plans to achieve them.
A fiduciary responsibility can be interpreted in various ways
Our advisor is a CPA which in and of itself carries a fiduciary responsibility to clients--
He does tax advice, estate planning advice in addition to investment advice
But I think some choices he has recommended have been to his advantage and his bottom line vs ours
My suggestion would be to educate yourself--
See if there are colleges in your area with continuing education classes in investment theory or if there are community centers
There is an organization called AAII--American Association of Independent Investors
They have a website with good info and a monthly newletter and there are groups in areas--like one in Dallas TX and one in FTW where I am based---
They organize speakers (often financial planners or insurance/annuity salesmen so you have to consider the source) but they also have people who are knowledgeable about investing on their own---
Read the Boglehead forums--
Lots of good info there
Read a site called AssetBuilder--
Created originally by Scott Burns who was long time investment writer for Gannett newspapers I think--
His column was in Dallas Morning News n my area
He is retired--doesn't even write for his own site--
Asset builder is an investment service--with very low fees compared to some like Fidelity--
They usually recommend DFA funds but on their site there is section on PORTFOLIOS--showing the ones they ranks on various investing styles---but there are others from other investment "gurus" with a history of performance
Your best asset is your own knowledge...
And frankly I would say don't put all your eggs in one basket initially---
My husband has a 401K with his former employer that is managed by the guy who was the CFO for the company--he is CPA--had his own practice in Oklahoma before he went to work for the o/g company my husband did....that company 401K has done MUCH better than the investments we have had with our financial advisor--
Partly because with OUR choice we tend to be more conservative maybe than the 401K with the company
Ensure you know what the benchmarks are that you will be judging your choices against
If you are investing for the long haul--meaning you aren't likely to do options or self-directed IRA choices or sell if there is a 30% drop in the market over several months---
Then maybe you don't really need an ongoing advisor
Maybe you only need someone to plan a strategy for you
Case in point
Our advisor had no interest in helping us keep our taxable income down to keep our Medicare IRRMA costs down even though I have mentioned that several times in our face/face meetings...
Sometimes that IS hard to do---sometimes it can be managed with some forethought---
Maybe that IS an important factor to you---and IRRMA costs are higher 2018 and going forward--and will affect more people than previously because of the income levels...
Of course. The point isn't regarding what's a good portfolio-management strategy, but whether the 45-year-old version of Mathjak would have benefited from the boutique financial-advice that's so relevant now to the 65-year-old Mathjak.
Suppose that 17-year-old Mathjak graduated from Stuyvesant High School, and got a full ride to Columbia, where he then graduated Summa *** Laude in math. After doing his PhD in applied-math at NYU, Counterfactual Mathjak was recruited by a Wall Street investment bank in the late 1970s, where he immediately became a star. He managed to live frugally, saving and investing substantial amounts. Then, in 1998, the options-trading strategy pioneered by Counterfactual Mathjak blew up. Accusations flew, one thing led to another, and Counterfactual Mathjak was fired in disgrace. Scapegoated and blacklisted, he could no longer find employment on Wall Street. Instead, he taught calculus at a community college in Brooklyn, supplementing his income with occasional consulting-work. That was enough to preclude his having to draw from his portfolio for the past 20 years; he neither added to it, nor subtracted from it.
Question. It's 1999, and Counterfactual Mathjak is semi-retired. He's got a $10M portfolio, but only earns $30K at Kingsborough Community College. Does he need a financial advisor? And if so, what kind?
there is likely a whole lot of tax planning with that kind of dough, state estate tax issues to be dealt with . you may want efficient ways of structuring charitable contributions through charitable trusts .
i would likely need the brain trust i use now . elder/law estate attorney- an accountant -a financial adviser all make up their team
I think as tends to happen here is we may be talking phrases that the opening poster is not familiar with. For example fiduciary responsibility should be explained
We have no idea the experience level of the opening poster. As a novice I too went the adviser route, I paid 1% on top of the fees on the funds he put us in. It was an expensive lesson but one I needed. Now I would never even dream of paying a fee again. Investing just isn't that complicated. Find a diverse set of low fee or index funds and then determine your risk tolerance and invest according the the stock/bond ratio that makes you comfortable.
Open etrade account or td ameritrade and transfer all of your 401K over.
Manage yourself and invest in low cost index funds like: VTI, VNIX, ITOT, SCHB and let it ride. Those funds have costs of only .03 to .04%. It has been proven time and time again that no financial advisor can beat those index returns and those that do, only do so temporarily and are very few and far between.
It is their fees and costs that prevent you from really making any money. The advisors put you in funds that have 1 to 1.50 percent fees and loads and make commissions.
FYI all financial advisors have their money in low cost index funds too because they are not stupid with their money just greedy with yours (IMO).
there is so much more involved than buy voo and agg and have a nice life .
i thought just like you when i was younger . i knew all i needed to know about investing .
but i was not smart enough to know the things i didn't know . i only learned about all that other stuff when i was on the door step of retirement .
you have to plan long before when you are younger to lay the right building blocks because of all the things linked to taxable income . you may need estate planning too .
i had no idea that when we went over new yorks estate tax limit years ago that we would not be taxed on the overage . we lost the entire 1 million dollar exclusion if we had died . .
so don't think for one second that a good plan is just about buying a few index funds .
My DD has a financial advisor, and she is a CFO. The role of her advisor is not to tell her what to invest in but about things like life and disability insurance, college savings programs for her kids. However, her advisor is fee only and recommended by other similarly situated professionals in her community.
there is likely a whole lot of tax planning with that kind of dough, state estate tax issues to be dealt with . you may want efficient ways of structuring charitable contributions through charitable trusts .
i would likely need the brain trust i use now . elder/law estate attorney- an accountant -a financial adviser all make up their team
Let's assume that our hero, Counterfactual Mathjak, has no children or family of any kind... but he remains thrifty and utterly loath to spend down his portfolio. His estate is just going to NYU when he dies. Who ought to be on his "team"? Remember, we're talking about 1999 here - not the present.
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