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I've decided to consult a financial advisor because I simply do not have the time to manage my finances. It's very hard for me to give up the control, but I have to imagine they can do a better job than me. At the bare minimum, I'll use them for a year to get a plan in order.
Can you please tell me if the following is normal:
1) He is a fee-only financial advisor that has been working in finance for 30 years. The fee is 1% of managed assets (he waived a lot of his normal "getting started" fees due to my income and potential for growth).
2) I have funds with Vanguard, Fidelity, and a few others - he requires that we "transfer" these funds over to Charles Schwab as a custodian (which he is in no way affiliated with). I put transfer in quotes because I'm confused with this point in particular. He made it seem like I could keep the original funds if that made sense (e.g. I could keep VFIAX from Vanguard).
3) I need to give him my username/password to manage my employers 401k.
Thanks!
Why are you paying a fee to anyone to keep funds that you already chose?
I would find one of those advisors that you meet with once or twice a year and pay an hourly fee, if you feel the need to have someone keep you on track.
A lot of 401k's have management services that are much lower than 1%. I think that is high, unless you have a lot of assets to manage and you are just basically giving someone else the management responsibility because you don't feel like doing it.
You can input the mutual fund ticker into Schwabs website and see if they hold it...they probably do.
also, they have managed portfolios for no fee, if you feel the need to go in that direction
Thank you for the response. I appreciate you questioning my original premise. However...
Which low cost funds? Since I have funds in Vanguard, Fidelity, etc. should I consolidate them into a single fund? Is my 401k contribution appropriate? Should I increase it for tax implications? In general, how can I minimize taxes? How should I save for my kids college fund? I could keep going...
My point is, it's not as trivial you put it. Managing finances does take time.
You seem to be on the side that I should invest time into understanding finances. That's reasonable. Based on my laundry list of questions above, it would seem to me that I should sit down with someone, and get a plan in order. How would you recommended that I establish this basis?
Yes, it takes time but many of those questions that you have proposed can be answered by one of the financial calculators on bankrate.com or even your own 401k website.
If you want to see the effect on your paycheck from 401k contributions you can go to paycheck city and run a sample
robo came to mind for me also. just put the money in betterment and relax. i dont know at what point those robo advisors make money. they charge such low fees, they will need much larger AUM to earn a decent amount.
They make money on the management fees on the ETF's, the spread and (Schwab in particular) on the cash portion of the account. The real truth is probably that people have been overpaying advisors for decades and the true cost of managing a portfolio is very, very low.
It is likely that you won't talk to a person more than once a quarter with a robo advisor, but I can tell you that you won't with a regular advisor either. They will always be out on sales calls trying to find someone with more money than you have to sign up. If you have substantial assets it might be different but accounts under $250k are generally unprofitable unless the person never calls into the office.
They make money on the management fees on the ETF's, the spread and (Schwab in particular) on the cash portion of the account. The real truth is probably that people have been overpaying advisors for decades and the true cost of managing a portfolio is very, very low.
It is likely that you won't talk to a person more than once a quarter with a robo advisor, but I can tell you that you won't with a regular advisor either. They will always be out on sales calls trying to find someone with more money than you have to sign up. If you have substantial assets it might be different but accounts under $250k are generally unprofitable unless the person never calls into the office.
Well this is simply untrue but if you wish to simply make things up to try and make your point please go ahead
Yes, it takes time but many of those questions that you have proposed can be answered by one of the financial calculators on bankrate.com or even your own 401k website.
If you want to see the effect on your paycheck from 401k contributions you can go to paycheck city and run a sample
Those online calculators don't really do anything in the form of coaching, providing discipline at all. I'm going to guess you've never actually worked with investors for any length of time have you?
I've had very little exposure to financial advisers but my (limited) experience is that they are either idiots, or salesmen who are selling you investments that they make a commission on, or both idiots and salesmen.
I've had very little exposure to financial advisers but my (limited) experience is that they are either idiots, or salesmen who are selling you investments that they make a commission on, or both idiots and salesmen.
Best luck to you, OP.
Since you already said your exposure was limited, how many advisors have you been exposed to?
Sorry, been in the industry a long, long time and overwhelmingly this is true
That $25,000 per year overhead per client must be a real killer.
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