Author Topic: Getting rid of the financial planner?  (Read 1422 times)

ginjaninja

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Getting rid of the financial planner?
« on: July 18, 2018, 09:45:38 AM »
Has anyone on here had a financial planner for most of their lives, and then took their money management into their own hands?

My fees are 1.5%.  I realize that the math makes sense to manage my own money, but how have you gotten your emotional mind to agree?

I really like my planner and she seems to be doing a good job, is there anyone else who has some arguments to keeping one?

rubybeth

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Re: Getting rid of the financial planner?
« Reply #1 on: July 18, 2018, 09:51:19 AM »
Lots of people here have fired their financial planners after learning enough to DIY. Take emotions out of it. Liking her has nothing to do with it. It's just business, not personal. I'd just be honest and say you're ready to handle it yourself.

ysette9

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Re: Getting rid of the financial planner?
« Reply #2 on: July 18, 2018, 09:55:52 AM »
“Thank you for the service to this point. I am taking over the management of my investments. Have a great afternoon.”

Have Vanguard or whomever initiate the transfer of funds. Just keep repeating to yourself that this is just business. Calculate out how much 1.5% means in $$ to hell you stay focused.

TravelJunkyQC

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Re: Getting rid of the financial planner?
« Reply #3 on: July 18, 2018, 09:58:08 AM »
I didn't have a financial advisor until about a year and a half ago. He charges 0.9% of my portfolio, and the one and only reason I hired him is due to cross-border investment and taxation issues (dual citizen).

Without those issues, I liked doing my own investments and I learned a lot.

If you're ready, I encourage you to go for it. After 30 years, that 1.5% is going to be a lot more fun to have in your pocket :-)

ginjaninja

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Re: Getting rid of the financial planner?
« Reply #4 on: July 18, 2018, 10:01:03 AM »
I should also add that she manages most of my family's other assets (parents and sister).  Instead of taking a fire her now approach, is there an in between that could be a less nuclear option?  Something that would make the transition easier?  I was thinking about opening my own betterment account and building that with the current money I send each month without pulling all of my assets.

It could also be that it does not seem like a lot of money right now, but to be fair that is how people treat their starbucks.

Cwadda

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Re: Getting rid of the financial planner?
« Reply #5 on: July 18, 2018, 10:04:48 AM »
Just remember that as nice as financial planners are, they have no obligation to act in your interest.

Lady SA

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Re: Getting rid of the financial planner?
« Reply #6 on: July 18, 2018, 10:21:35 AM »
why does "Thank you for all your help over the years, Bob. Next week, I'm planning on taking over my own finances, I think I'm ready to try this on my own now after absorbing all of your excellent guidance. Have a great day!" feel 'nuclear' and scary?

You don't have to justify your decision to her even though she is nice and has frequent contact with your family members. Are you afraid she will whine/badmouth you to your family? Are you afraid your family will hassle you for leaving? Just don't mention your change to your family at all, and if your planner brings it up to them and then your family members ask you about it, simply tell your family member "Bob taught me a lot over the years and I was ready to go it on my own. How are your tomatoes this year, Bertha? I've had a devil of a time getting my tomatoes to grow, its this darn soil on my property. So annoying."

ysette9

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Getting rid of the financial planner?
« Reply #7 on: July 18, 2018, 10:46:41 AM »
I strongly encourage you again to calculate out how much 1.5% a year is costing you and then pull up a compound interest calculator to see how much damage that does at 7% growth a year for decades. You are talking about significant amounts of dough here. I realize how strong our instinct is to please people and not rock the boat, but is that really worth tens to hundreds of thousands of dollars?

Put another way, 1.5% is giving this lady 37% of your retirement income (based on the 4% rule ) which means significant additional years you will have to work and save to make up for that drag. That isn’t even touching on what funds she has you in, which likely are more expensive than <0.1% at Vanguard. Do you like her well enough to save twice as much as you would otherwise need to fund her lifestyle?

Catbert

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Re: Getting rid of the financial planner?
« Reply #8 on: July 18, 2018, 12:16:56 PM »
I should also add that she manages most of my family's other assets (parents and sister).  Instead of taking a fire her now approach, is there an in between that could be a less nuclear option?  Something that would make the transition easier?  I was thinking about opening my own betterment account and building that with the current money I send each month without pulling all of my assets.

It could also be that it does not seem like a lot of money right now, but to be fair that is how people treat their starbucks.

Yes, stopping new investments with her would be an inbetween step.  Do you have automatic deposits to her?  Stop those.  Use Betterment, Fidelity, Vanguard, whatever.  It's a chicken move, but...

MsSindy

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Re: Getting rid of the financial planner?
« Reply #9 on: July 18, 2018, 12:29:29 PM »
Are you really ready to handle your own investments?  I'm a bit concerned that you don't have the fortitude/courage to make a decision about your own financial well-being without calling into concern how the agent's going to FEEL, or how your family is going to react.  Is this how you make all your decisions?  You avoid the courageous decisions because you don't want people to be upset with you.  Either decide NOW is the time to change that and make the decision.  Or admit that you really don't have the courage to handle your own investments and be content with that decision. 

A little tough love here!  Either decision is okay, but make it from a position of strength and purposefulness, not because you're afraid of what others may think/feel/react.

ysette9

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Re: Getting rid of the financial planner?
« Reply #10 on: July 18, 2018, 12:56:07 PM »
Even if you need a financial planner that is fine, but for heaven’s sake, please use Vanguard for 0.3% and not someone robbing you blind. You can call them up and have them do all of the transfers for you so you don’t even need to speak to your advisor yourself.

starguru

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Re: Getting rid of the financial planner?
« Reply #11 on: July 18, 2018, 01:07:51 PM »
Yeah that 1.5% is holy hell high.   You should really do this on your own but if you don’t ask her politely to reduce her fee or you’ll be forced to look elsewhere.  1.5% is insane.


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frugaliknowit

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Re: Getting rid of the financial planner?
« Reply #12 on: July 18, 2018, 01:09:31 PM »
Even if you need a financial planner that is fine, but for heaven’s sake, please use Vanguard for 0.3% and not someone robbing you blind. You can call them up and have them do all of the transfers for you so you don’t even need to speak to your advisor yourself.

Better, yet, 0.00%:  http://paulmerriman.com/vanguard/

ginjaninja

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Re: Getting rid of the financial planner?
« Reply #13 on: July 18, 2018, 01:16:44 PM »
Thank you all for your feedback. 

I do not make all of my decisions based off of emotions.  This is just an idea that is new to me and I want to make sure that I make an informed decision.  I have had the financial planner since I turned 21 when I started my IRA.  There are many of changes that I have made to my life since binge reading MMM, and most of them were much easier logistically than changing to managing my own finances. 

MsSindy, the point that you made is exactly why I have concerns managing my own money, I don't know if I am really ready to handle my own investments.  I frankly don't care how the financial planner or family feels, it is just business.  I do care about failing to make proper decisions with regards to my finance that will end up costing more than the 1.5% rate in the end.

ysette9, I will calculate how much it will cost me in the long run.  I use mint and a good budget category would be fees.  I have looked at all of the prospective fees and with being in institutional shares of my mutual funds the fees are closer to the index funds.  Secondary point: look at total fee structure not just their fee and not just the mutual fund fee.

Lady Sa and ysette9 putting it in those terms does sound ridiculous.
 
Cwadda my current planner has a fiduciary requirement but I also realize that there are incentives to the funds they choose. 

I would also like to add that my parents, aunts and uncles, and grandparents have all used a financial planner for their money management.  Currently from the trusted individuals in my life this is all I have known, and I am challenging the assumption that it is worth it.  There is not a risk of family blowback (only the risk that their rate with the planner would change because we get a family rate).

I currently do not have a good role model of someone who has gone without a planner and told their story about why it was so much better.  That was my main point of starting this thread, to hear stories of individuals who have switched to managing their own money.  I should have been more clear about that.

JRA64

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Re: Getting rid of the financial planner?
« Reply #14 on: July 18, 2018, 01:39:12 PM »
I've never had a financial planner. I do have a friend who did move all of her funds to Vanguard after we read JL Collins book Simple Path to Wealth as part of a book club. She bought me dinner, she was thrilled with how much she was saving. It's also a great read for a simple philosophy on how to invest.

Here's an in-between option. How much would you like to pay her? Let's say you decide $500 per year. That's 1.5% of $33,333; several years of IRA contributions and enough to do some asset allocation with. Keep that amount with her. Move the rest to Vanguard. Lean a few basic funds like VTSAX and VBTLX. Let her advise you on the funds you keep with her. Provided you are happy with her recommendations, mirror those in the Vanguard funds.

PS. Most planners I've heard of charge only 1%. Maybe it's higher because you are just starting out and have a smaller portfolio?

PPS. I estimate $500 per year invested at 7% would be worth over $7200 at the end of 10 years.

MsSindy

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Re: Getting rid of the financial planner?
« Reply #15 on: July 18, 2018, 01:49:31 PM »
Glad you added more context to your situation.  Taking the leap can be scary, especially if you don't have anyone to show you the ropes.  Plus, honestly, you may not be sure how you're going to respond should the market take a correction (and it will!).  It may be helpful to start your own account and start managing a smaller portion of your portfolio yourself.  Build your confidence, then make the jump.

I've never used a FP, but if what others are saying is true about 1.5% being ridiculously high, then that may be worth a conversation right there.  Plus it kind of puts them on notice that you're more informed/aware than they give you credit for.  It will also be interesting to see their reaction - do they condescend or respect your concern.  Do they want to earn/keep your business?

KeyserSoze

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Re: Getting rid of the financial planner?
« Reply #16 on: July 18, 2018, 01:49:44 PM »
Just remember that as nice as financial planners are, they have no obligation to act in your interest.
Except CFPs are fiduciaries...so technically they do have an obligation

mjr

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Re: Getting rid of the financial planner?
« Reply #17 on: July 18, 2018, 01:52:47 PM »
The decision to leave was much easier after selling myself on index funds.

I always had a planner because I was never confident that I knew what stocks to be, it seemed a big gamble.  Hey, so pay the financial planner and their research department and now I don't have to worry, they'll do a better job than I could.

Well, guess what ?  When my eyes were opened I could see exactly how much he was taking for doing bugger all for me. 

Next question for you is whether or not said financial planner has you invested in their preferred funds, which usually have high expense ratios as well.   You may be paying well more than 1.5% in total expenses.

Your trusted financial planner is either knowingly taking you to the cleaners or is so unaware of the numbers that driver her industry that she genuinely believes she's helping you.  Granted, for the 2nd case, she *is* helping people who don't know any better.  You do know better.  Give her the flick.

erutio

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Re: Getting rid of the financial planner?
« Reply #18 on: July 18, 2018, 02:22:00 PM »
Instead of taking a fire her now approach, is there an in between that could be a less nuclear option?  Something that would make the transition easier?
For 1% one-time fee, I will call up your FP and fire them for you, and help start the transfer of all your funds to a new broker of your choice.

Joking, of course.  But your thread did give me the idea for a George Clooney/Up in the Air-esque side gig of firing financial planners for people who don't want to go through the awkward phone call themselves. 
I could extend the service for other things too, like firing cleaning persons, nannies, lawn services, etc, for a one time fee.   We hear of enough stories of people having a hard time leaving these type of financial arrangements, I wonder if this is even a viable gig.

bisimpson

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Re: Getting rid of the financial planner?
« Reply #19 on: July 18, 2018, 03:11:33 PM »
We just dropped our financial advisor from Raymond James. I had put off letting him go because I feared a difficult discussion. I emailed him to let him know we were rolling everything to Vanguard. He replied with a "Sorry we lost your business email—we hate to see clients go." To be honest the whole exchange was pretty anti-climatic.

In hindsight, I realized that his client base probably had larger accounts than what we had. He helped us think about investing as we got started thinking about retirement, so we're grateful for that. But his lack of fight to keep us as clients communicated to me his lack of investment in our financial future.

ysette9

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Re: Getting rid of the financial planner?
« Reply #20 on: July 18, 2018, 03:21:49 PM »
We just dropped our financial advisor from Raymond James. I had put off letting him go because I feared a difficult discussion. I emailed him to let him know we were rolling everything to Vanguard. He replied with a "Sorry we lost your business email—we hate to see clients go." To be honest the whole exchange was pretty anti-climatic.

In hindsight, I realized that his client base probably had larger accounts than what we had. He helped us think about investing as we got started thinking about retirement, so we're grateful for that. But his lack of fight to keep us as clients communicated to me his lack of investment in our financial future.
Congratulations! Raymond James is notorious for being expensive, like 1.5% AUM expensive. :)

Patrick584

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Re: Getting rid of the financial planner?
« Reply #21 on: July 18, 2018, 07:35:36 PM »
I had a financial planner for many years and I plunged into DIY 4 years ago and I am so happy I did. I was originally setup with the planner when I inherited money as a young adult and had no idea what I was up to. He was such a nice guy and so friendly. We went to the same school and had lots of non- financial things to chat about. He made me feel that I was doing the right thing, even though I new deep down that it wasn’t a valuable service.

One day I sat done and calculated the historical difference between the simple DIY portfolio and my actual return and was shocked to find a 40,000$ difference over 10 years. In addition to charging a fee and picking high fee funds, the FP made tax efficient strategies really difficult. Once I came to the realization that this was such a bad deal I wrote him a really hard email.  My wife had to read the response because I was so worried he’d be mad.

I was able to do, and I am amazed at how much more attentive I am to my finances. I’m frequently planning how to move money to different accounts and I’ve really gotten into saving and budgeting. I even had the gumption to do my own taxes last year.

My advice is to take ownership of your own finances. It will be fulfilling and will help you reach your financial goals. FPs have a business model of deception in which they convince clients that they are best. It is very hard to overcome this dilution, but you will be glad you made the move.

bogart

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Re: Getting rid of the financial planner?
« Reply #22 on: July 19, 2018, 09:27:42 AM »
I am planning to start working with a FP (a CFP) in the next decade, meaning, before I turn 60.  I worry that as I grow older, I may become less (mentally) competent, and figure it will be good to have a CFP who knows me and is familiar with my goals, values, etc.  I look at my mom who is approaching 80 and am grateful she works with a CFP.  She does not want to manage her own finances and I feel confident she is working with a professional (I know him) who is competent and ethical.

It sounds like you are a good bit younger than me, and 1.5% seems like a high rate -- I'm under the impression 1% is more typical.  Honestly, if your CFP is good, she should be able to talk with you intelligently and calmly about the pros/cons of continuing to employ her services or not.  If she can't do that, my feeling is you should bail.  If she can, then why not have that conversation?

ysette9

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Re: Getting rid of the financial planner?
« Reply #23 on: July 19, 2018, 11:31:43 AM »
There is a time and a place for financial planners. Your aging mother is a wonderful example. My emotional and impulsive aunt is another. That is why she and my uncle are signed up for Vanguard’s advising/investment management service. I don’t think the right answer for everyone is to do it themselves. While it doesn’t have to be complicated, some people won’t have the time or interest to do it.

That said. YOU SHOUID NOT BE PAYING MORE THAN 0.3% ever. Hourly basis to set up a plan and check in occasionally is fine. 1% is way too much to pay and 1.5% is highway robbery.

If you are paying too much, look for alternatives

https://www.xyplanningnetwork.com

https://www.garrettplanningnetwork.com

https://investor.vanguard.com/financial-advisor/financial-advice

Car Jack

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Re: Getting rid of the financial planner?
« Reply #24 on: July 19, 2018, 12:03:26 PM »
Boy, lots of people letting themselves be screwed over because they can't escape the emotions of it.  Well, I'm a heartless bastard.  Onto the Fidelity site.  Upload my last statement.  Insert all the info in their form.  Print out the signature pages.  Sign them, scan them to PDF, upload them.  Hit go.  Fidelity goes off and drains everything from the old, ripoff place and that nice FA who takes $10k a year and in return gives me a coffee and a stapled folder of nice charts that are meaningless.  I've done this a bunch of times, once I've seen the light.  My overall portfolio for a 2 comma amount is under 0.04%.  And that's with 50% in bonds because I'm just about ready to retire and am not playing the game anymore.

ginjaninja

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Re: Getting rid of the financial planner?
« Reply #25 on: July 20, 2018, 11:11:37 AM »
This is why I love this community.  Most of the people in the 3D world would think I am crazy, yet on here there is a lot of defense for taking it into my own hands.

So here is my path forward that I think will be the easiest for me: 
Step 1: ask to lower the fee

Step 2: I am planning on buying a house late this year/early next year.  I have been investing with her to save for my down payment.  When I buy the house I will withdraw all of my funds outside of my IRA to purchase.  Whatever I have left from the down payment I will put into my own investments and contribute to that monthly instead of her.  I will leave my IRA with her because the total fees will not be that high, while most of my wealth can be in a lower cost option. 

Step 3: go back to normal and set and forget my investments because over the long run that is my plan anyways.

@JRA64: I really like your suggestions, I think I will take this into my own plan listed above.  I don't think it is about having a small portfolio because my entire family has money invested with her.  I am realizing that this fee structure is ridiculous.

@MsSindy: I think as long as I keep the money that I want for immediate use (6-12 months) in a safer account (CapitalOne has 1.75% interest) I will be able to keep investments on autopilot.  Obviously I cannot predict my emotions with a market correction, but I can have a plan in place for when it happens.  I will see how they react to me challenging the rate, that should be really telling.

@mjr:  I have looked at the prospectus for each of the funds I am in and because the shares are institutional the fees are really low.  So it is more than 1.5% but not by much.

@erutio:  This is actually something that I was hearing about in a podcast.  It was about negotiation and how often times it is easier to bring along someone without emotional attachment to the deal (example, buying a car).  I think you may have stumbled onto a gem of an idea, emotions are weird especially when you are first hand involved.

@bisimpson: I would expect this to be a similar response.  I imagine that I am a drop in the bucket for them compared to larger clients.

@Patrick584: I am starting to view financial planners as the same type of person as a car sales man.  Because in the long run they really are salesman/women.  Thank you for sharing your story, I am in a similar situation (not inheritance but that is where I put my IRA).  During our last conversation I did ask about tax loss harvesting and she said it would be really difficult to do with my account.  I still don't understand why it would be difficult to do this.  You have opened my eyes too, I have control of my finances everywhere else (budgeting, taxes, etc) why couldn't I add this in as well.

@bogart: I can see that situation for getting a CFP to be very valuable.  Also with outsourcing other services too, sometimes it makes sense for your situation.  I think that FPs can also help with estate planning which could be very beneficial. 

@ysette9: I agree, when I first looked I thought "1.5% thats not too bad" but after looking into some of the examples you have provided you are correct and I need an alternative option.

@Car Jack: You definitely have a good point.  I am an engineer and have always thought very logically.  I asked this question to find examples of people who are doing it differently than I currently am to try and get the emotions of being scared out of it.  I find my emotions are only illogical when I do not have all of the facts.

TheWifeHalf

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Re: Getting rid of the financial planner?
« Reply #26 on: July 20, 2018, 12:38:39 PM »
Boy, lots of people letting themselves be screwed over because they can't escape the emotions of it.  Well, I'm a heartless bastard.  Onto the Fidelity site.  Upload my last statement.  Insert all the info in their form.  Print out the signature pages.  Sign them, scan them to PDF, upload them.  Hit go.  Fidelity goes off and drains everything from the old, ripoff place and that nice FA who takes $10k a year and in return gives me a coffee and a stapled folder of nice charts that are meaningless.  I've done this a bunch of times, once I've seen the light.  My overall portfolio for a 2 comma amount is under 0.04%.  And that's with 50% in bonds because I'm just about ready to retire and am not playing the game anymore.

Thank you for this post. There was quite an uproar in another post when I said we did not handle our own money, but rather let Fidelity do it. Our situation was the same as yours, except I really don't know about the % of bonds (or anything else for that matter). It got to the point where I felt our blue collar life was looked down on, but I don't care, we are very confident in what we accomplished and how we did it.
Your post was a breath of fresh air.