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About A Financial Advisor...

Rosedala
Rosedala   |     |   38 posts since 2010

Hi, while I read of horror cases with financial advisors, I wonder if anyone here knows of a competent and conscientious advisor? Or any advisor from my institution suffice? Or am I deluding myself? lol! Thanks ever so much for any ideas. :)



Answers
Over6T
Over6T   |     |   12 posts since 2012
Over the years I've had many kinds of accounts and had relationships with a host of advisors, brokers, and money managers. Among all these folks I found one thing in common... they were really nice folks knew very little about investing. They were really good as schmoozing people into trusting what they recommended, more than anything they want to be your friend so you will trust what they say. Many are retired from another career (teachers, military, etc.) and looking for a side hustle or simply filling in time - and many were just simply incompetent. So, I suggest you inquire about the background of any advisor and find out what he was trained to do. Few retail advisors, brokers or money managers are trained in stock investment or finance - most don't know a quick ratio from a discounted cash flow. The smart investment / finance guys are working for big firms and are not fooling around with small retail accounts. Most information you get from one of the advisors, brokers or money managers will be a "party line" flow of information from their firm, recommending the hot new deal that offers them the best under the table kick back (oh darn, I mean "commission"). Example - American Funds.
Further, if you choose to use a Money Manager - someone who manages your portfolio and buys/sells at their discretion - you'll pay a fixed fee on your total assets placed with them. That's a business model that the retail financial guys have adopted that is so perverse that it's hard to imagine. They simply get paid 1-3% of your total portfolio whether you gain or loose money. These guys won't participate in your gain or loss, thus they don't represent your interests. I suggest that "fee only" advisors have much the same position. They may offer somewhat more objective advice, but they certainly don' have any skin in the game.
Here's an acid test: Ask any advisor, broker, money manager if he will base his fee on how well your investments perform, either up or down?
Bozo
Bozo   |     |   1,319 posts since 2011
Over6T, you've clearly had more interaction with financial advisors than I, so your comments are appreciated. That said, our recent experiences with two financial planners were disheartening, for the reasons you noted. As I joked to my wife, the ideal prospect for a financial planner is a person who walks in with a shoebox. As in, all his or her statements are in same. Even better if he or she is a "whale".
paoli2
paoli2   |     |   2,544 posts since 2011
I have been searching for someone to advise my daughter after I am gone but unfortunately it's been a hopeless search. One thing I found out which may help you is to be careful of using these so called financial advisors working with our banks. They seem partial to Annuities and other insurance products which I would not use. At my bank, I was told we have to give them control of decisions about where to put any money and CDs would not be something they use. They seem to prefere the riskier investments which they feel can earn more money on the investment (and don't forget they get paid commissions for selling certain products).

Frankly, I personally get more financial advice from reading DA daily and learning what our members are using for their best investment choices and the pros and cons of using those choices. It all depends upon what risk you are willing to take or can take and at what age you are in your planning choices. If a financial advisor starts off "downing" CDs without taking the above into consideration, I would not use that person. If you are young with many more years to work and replace any money lost by risky choices, that is another consideration as to what you use. Best of luck and if you find that "special" advisor, I would love to hear about them.
Bozo
Bozo   |     |   1,319 posts since 2011
Paoli2, "amen". I found it somewhat ironic that one financial advisor with whom we met (who worked for our bank) thought my IRA CD ladder was  "too complicated". Mind you, this guy was a banker.

Or so he claimed.

Aargh.
Ally6770
Ally6770   |     |   2,652 posts since 2010
The people that work in banks and credit unions are paid by a commission. They get paid by the amount of money you invest with them, the amount of the annuities etc. Go to an hourly planner and they will tell you the type of accounts you should be in vesting in after you tell them your complete situation. You do the investing.
Bozo
Bozo   |     |   1,319 posts since 2011
Over the course of the past few weeks, my wife and I met with two "financial planners". The first seemed a tad too eager to separate us from our cash, the second basically waived his hand over my summary and said, in effect, "you're doing a good job saving for your heirs".

It's really hard to tweak a conservative portfolio. When you're already heavily tilted to Vanguard's low-cost index funds and IRA CDs, financial planners just seem to lose interest.

For starters, if you want to educate yourself, visit the Bogleheads site. The Wiki is extremely comprehensive. For fixed-income options, well, you're here at DA. You can slice it, or dice it, even stir it up in a blender, but two principles stand out: (1) keep your asset allocation roughly "age in fixed-income", and (2) keep those fees to a minimum. For the equity side of your asset allocation, low-cost index funds are ideal. Any prudent financial planner could boil it down just that simply.
Bozo
Bozo   |     |   1,319 posts since 2011
Oh, one other thing. Sort of principle (3): maximize your tax-deferred contributions while working.
Ally6770
Ally6770   |     |   2,652 posts since 2010
Do not use a financial advisor in a bank or credit union. Use a fee only advisor. They will take the information about your complete situation and advise you what to invest in. They will not charge you a yearly fee, get a commission or do the actual investing for you. Do a computer search for the questions you should ask the advisor before you make an appointment with them.
Beao40
Beao40   |     |   9 posts since 2015
Ally: If these "fee only " advisors are best and they don't charge yearly fee, get commissions etc, why are they called "fee only" advisors? How do they make their money? As Vanguard rep once told me when I insisted they made their fees from the lower interest rates they offered "Lady, we have to make a living, don't we?" Do you have any idea what these "fee only" advisors charge and does it go by a percentage of the amount they are handling for a customer? Thanks.
Ally6770
Ally6770   |     |   2,652 posts since 2010
Fee only advisers do not handle the money. They only take into account your situation and finances and advise you where to put your money. They charge only for the appointment and advise. A financial advisor provides financial advice or guidance to customers for compensation. Financial advisors, or advisers, can provide many different services, such as investment management advise, income tax preparation and estate planning.

Investment advisors registered with the SEC or a state securities regulator are fiduciaries, subject to the duty of loyalty and due care with their clients. They are typically compensated by asset management fees and are expected to act in the best interests of their clients. But rules on these investment advisors as far as fiduciary duties may be changing. Make sure you have the list of questions to ask before making any appointments.
Rosedala
Rosedala   |     |   38 posts since 2010
My dear dear friends:

I'm so filled with admiration for your incredible knowledge, common sense and generosity. You all write well and intelligently THANK YOU SO MUCH FOR THE GIFT YOU'RE GIVING ME!!!

But I forgot to explain that I'm not seeking a money handler, just hoping for someone (a professional) to help with a candid opinion on a rather personal money matter (not for investing for which they may refuse the service). And yes, I'm way way way past the 3rd age lol! Paoli said something very truthful in that reading the members' own personal decisions on this magnificent website can help a lot more than any professionals many of whom might be, as you all well said and I always felt, far from honest!

I read very carefully the valuable advice from all of you and will keep it in my own email to remind myself of all the crucial points on this matter.

Again, my deep thanks to all, you've been so kind and helpful! :o) Rosedala


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