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re: Are financial planners full of shite? Should I trust them?
Posted on 6/19/25 at 8:40 am to Finch
Posted on 6/19/25 at 8:40 am to Finch
quote:
Mine is pretty amazing. He’s a great friend and I trust him 100%
Echoing another reply - 'trusting him' is the worst thing you can do.
From the OP: " I would like to retire without being consigned to perpetual poverty. "
In that case a Financial Advisor is probably the worst move you can make. They typically charge 1% of your nest egg. A (very) general rule-of-thumb says you can safely draw ~ 4% from your stash each year (and adjust for inflation going forward). So if that is 4% for you, PLUS 1% for him, so 5% total vs 4%. Which means your nest egg has to be 25% larger to support him. So if you saved up $2M to draw ~ $80K in retirement for yourself, you need to save up another half-million to support him. And it's going to be even tougher to save up that 1/2M when he's taking 1% away every year! Next...
A Financial Advisor has no secret-sauce. I frequent a retirement forum, mostly people who did-it-themselves. We have two common sayings:
1) The hardest thing to understand is that personal investing is very simple.
2) No one cares more or should be trusted more with your money, than YOU.
No one has a crystal ball. You put 70% into a broad passive stock index like VTI, and 30% into a broad passive bond index like BND and call it a day. That will outperform almost all FAs, because the cost/fees are so low.
These FAs almost all will put you in a complicated mix of investments, to make it look like what they are doing is so advanced and beyond your capabilities. But all they are doing is a show of smoke and mirrors and costing you money, and almost certainly under-performing the market.
Oh, one more saying "Once you know enough to be able to determine if your FA is good or not, you know enough to do it yourself". It is all very true. Take it from people who have been there and done that.
This post was edited on 6/19/25 at 8:44 am
0
Posted on 6/19/25 at 8:44 am to biglego
quote:
So I would like someone to do it for me.
I didn’t want to be retired and be having to deal with financial issues every day. I have enough.
Life is really chill this way.
However I can watch moves made almost in real time. I’ve really liked it so far.
This post was edited on 6/19/25 at 8:50 am
Posted on 6/19/25 at 8:46 am to Slippy
Hiring another man to plan your money is for cucks
Want to get more money? Buy a pressure washer
Want to get more money? Buy a pressure washer
Posted on 6/19/25 at 8:48 am to Slippy
There are some good ones out there and most of those are compensated 1% - 3% of assets under management so they have an incentive to grow your assets instead of churning to earn trade commissions or selling products that are in their best interest rather than yours.
Many purchase software that are a black box model to them. They gather your information and ask a few canned questions to find your risk tolerance and expected retirement date. The software then spits out a "customized plan" that they present to you without much independent thought or analysis. You can likely find that software yourself and be just as effective in designing a "plan".
However, you will then need access to the market and products to implement that plan, which means either going with a discount brokerage house and doing everything yourself or searching to find one of the good ones.
I'm a CPA toward the end of my career and have dealt with many of these planners across the spectrum. I was fortunate to find what I consider to be a good fee-based advisor and have referred family and clients to him as well. His business has grown such that he now has a minimum investment level. While not every move is a winner, he wins more often than not, and I need only to average a 5% return per year for the next 5 years to hit my retirement nest egg goal.
The nest egg amount is determined by me needing to draw 5% per year (while earning 5% means I seldom will touch the principle) for 30 years (from age 60 through 90) and still leave my heirs in sound financial shape upon my earthly departure.
Many purchase software that are a black box model to them. They gather your information and ask a few canned questions to find your risk tolerance and expected retirement date. The software then spits out a "customized plan" that they present to you without much independent thought or analysis. You can likely find that software yourself and be just as effective in designing a "plan".
However, you will then need access to the market and products to implement that plan, which means either going with a discount brokerage house and doing everything yourself or searching to find one of the good ones.
I'm a CPA toward the end of my career and have dealt with many of these planners across the spectrum. I was fortunate to find what I consider to be a good fee-based advisor and have referred family and clients to him as well. His business has grown such that he now has a minimum investment level. While not every move is a winner, he wins more often than not, and I need only to average a 5% return per year for the next 5 years to hit my retirement nest egg goal.
The nest egg amount is determined by me needing to draw 5% per year (while earning 5% means I seldom will touch the principle) for 30 years (from age 60 through 90) and still leave my heirs in sound financial shape upon my earthly departure.
Posted on 6/19/25 at 9:01 am to SoDakHawk
quote:
How do I say this nicely? Most responses on this topic have no clue what a real financial planner does. It's not about picking the best fund or stock that gives a good return.
A real financial planner provides consultation on managing life events, taxes, tax implications, different investment vehicles, i.e. qualified vs. non-qualified funds, managing those different pots of money, business succession planning, etc.
But the general FA that people like OP are talking about, isn't at that level. They are salesmen, charging 1% annually or more of your nest egg for poor investments.
For what you are talking about - find a fiduciary, and pay a one time fee (by the hour or an agreed amount for services) for a plan. Don't pay X% every year for poor advice.
Posted on 6/19/25 at 9:11 am to AwgustaDawg
quote:
... dude is living the dream for most of us....and he swears the financial planner was integral to it.
IME, most people have no idea how to evaluate the performance of their FA. Has he done a spreadsheet to compare what he would have done with a 70/30 blend in two passive index stock/bond funds and left it alone (just adding each year in the same balance)? That's easy-peasy, and odds are very high he would outperform the FA because he wouldn't be dragged down by fees and would probably avoid a bunch of investments with fees that are used to make things look impressive.
Show me the numbers. I'm sure he doesn't have them, just believes and 'trusts'. Not a good way to go through life, son.
Posted on 6/19/25 at 10:06 am to ATL_Tigerfan
quote:
You can likely find that software yourself and be just as effective in designing a "plan".
However, you will then need access to the market and products to implement that plan, which means either going with a discount brokerage house and doing everything yourself or searching to find one of the good ones.
Not at all. Just use a couple passive index funds. No secret sauce required.
Even your Asset Allocation (AA) isn't a challenge. Studies show that the portfolio success is not very sensitive to AA - anything from ~ 35/65 blend to 95/5 works. Historically, the lower stock blends have a smoother ride but leave less to heirs (but all succeed with ~ 3.5% inflation adjusted withdraw).
Posted on 6/19/25 at 1:34 pm to Slippy
quote:
Thinking about giving him the keys to the car.
In many cases, you’re giving him the keys to his car.
Posted on 6/19/25 at 2:15 pm to Slippy
I got a guy who I like but tbh after their fee or whatever you might as well just stick all your money in a S&P500 index fund and drip into it for as long as possible. Prob same results
Posted on 6/19/25 at 2:21 pm to lsuoilengr
quote:
I got a guy who I like but tbh after their fee or whatever you might as well just stick all your money in a S&P500 index fund and drip into it for as long as possible. Prob same results
You absolutely do not need one during the accumulation stage unless you are UHNW with a complicated situation.
You could start at 22, throw whatever you can in to VT or VTI/VXUS blend, maybe a small amount of bonds or treasuries, and you won't have to change a thing until you are near retirement. Once you are close, it might be worth consulting one depending on your situation and needs.
Posted on 6/19/25 at 2:27 pm to Dawgfanman
quote:
Hopefully you are over 59 1/2 and didn’t pay the 10% penalty as well
I am. That was a bridge too far LOL.
The money I took was spread out over 6 different accounts and was only about 8% of my total retirement savings and about 5% of our total retirement savings. All of its going to eventually be taxed at about what the last 1/3 or so of income will be in retirement or now....I could have borrowed the money but that would mean getting a construction loan and dealing with the bank every month. It will probably cost me about $10K all in but I won't have to be pushed to finish up and will save $70k on contractors. One of the houses is going to be our principal residence in a few years for a few years and without a serious market collapse it will provide a couple of hundred thousand in tax free cash when we sell it. Not the wisest decision but by far not the worst one I ever made...I have owned a boat since I wa 9 years old....gotta really make some bad financial decisions to beat owning a boat....
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