Fiduciary commission-based financial planner?

[fallstoclimb]

Can commission-based financial planners really have fiduciary duty?  These two concepts seem a bit counter-intuitive, no?

My parents pushed me into a phone interview with their financial planner.  They love her and have used her for years, but the commission-based aspect has me nervous.  She also offers fee-only services, but said the first meeting would cost between $1200-$2500, which is steeper than I am willing to consider. 

I forgot to ask about fiduciary status in the phone call, but emailed a follow-up question and her partner said that they are in fact fiduciaries. She also said we could of course turn down any service she offers.

I don't particularly believe that we need a financial advisor, although my parents are worried about me getting all of my financial advice off the internet, I think  :)  I will admit that asset allocation is a weak point of mine - I've tried to learn about it and have basically just given up as I find it horrifically boring.  So that is one area where we could use some help.  I also am not super confident about what level of emergency fund we need, although that is something I've posted here about before.  I like the idea of hand holding from someone who has seen a lot of clients but also I don't feel that I need it.   

I think I probably just need MMMers to tell me not to do this?  I (like many people here) think it is super fun to sit down with someone and go over our finances (and be told I'm doing a good job!), so I am afraid that inclination plus my parents pressure will result in me making a bad decision here!

[MDM]

I think I probably just need MMMers to tell me not to do this?

Happy to oblige: don't do this!

Hard to say which is worse: commissions or ~$1750 for an introductory meeting.

As for asset allocation, you could do much worse than putting 100% into VTTSX.

[Ghzbani]

That's a bit extravagant for an intro meeting. Personally If I'm spending that kind of money I'd want a guarantee that the FA will pay me back by the end of the year in terms of added returns over what I would get without using her.

...but that's just me.

[curler]

Everything MDM said:  Don't do this.

[MustacheNY]

Completely agree that you should run like the wind, and if you want to actually maximize your inheritance, have your parents do the same!!!

A financial planner is 100% useless.  If you are really so terrified about asset allocation and don't want to even think about it, throw it into one of the predetermined Vanguard Life Strategy fund or a Target Retirement fund with allocations that are weighted heavily towards stock, and then just ignore it other than to keep throwing money at it.  If you want a little more help than that, and want to utilize tax managed investment strategies, go to Betterment and pay a little more for that.

The one place where some people will say you need a financial planner is if you have a significant net worth and need estate planning type of work.  In this case, you will still be 100 times better off utilizing a good CPA firm in conjunction with an attorney to do this for you, as a financial planner will simply have an attorney do this work for you anyways. 

I say this as someone who helped build up a successful financial planning and investment advisory practice early in his career, and fled because the larger and more successful the practice became the less I was able to focus on the asset management and adding value.  The entire role is about sales, and sales of a product or service that you don't need if you are willing to spend less than an hour or so a year yourself.

If you want to be told you are doing a good job and get actual suggestions for improvement, and that will cost you nothing, post your situation on this forum and it will be 10 times more useful and infinitely less expensive. :-D

[TN_Steve]

... I will admit that asset allocation is a weak point of mine - I've tried to learn about it and have basically just given up as I find it horrifically boring.  So that is one area where we could use some help.  ...

if you are in your 20s/30s, and are willing to be bored and not watch your portfolio, 100% stocks might be a nice way to go.  With Vanguard, a good "all world" choice is the VT etf.  (The mutual fund is pricier.).  Alternatively, MDM's recommendation of target fund would be good too.

Financial advisor as anything other than, maybe, a last minute fail-safe check before calling it quits is not worth the expenditure.

[Calvawt]

While I agree people are better off learning to manage their own investments, saying all financial planners are useless is a bit extreme.  That meeting fee is ridiculous, but I am sure you could find a qualified advisor for much less.

For the record, I am not in that field and have never used one.  I just think some people have other priorities and could do more damage by mismanaging their funds than by paying a fee only advisor or robo advisor a .50%.


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[MustacheNY]

My point was that if someone is not willing to learn to manage their investments, simply select a Vanguard Strategy fund or if they want a little more hand holding you have Betterment.  An advisor will do the same type of questionnaire to determine your risk tolerance, but put you in higher cost funds with a fee on top of that.  By sticking to a Vanguard LifeStrategy fund or Target Retirement fund, one will avoid doing damage to their funds.  And, I could give you many horror stories of advice that was given by advisors and the horrific financial ramifications of this advice.  The only good and useful advice of a financial planner is for more advanced tax strategies, revolving around SEP plans, defined contribution plans, etc.  And, in these cases, it will turn out to be much more advantageous to have a knowledgeable CPA.

In any situation, an individual will be better off avoiding a financial planner.

One requires absolutely no knowledge of investments to manage their investments if they put it into a preset portfolio that even a Vanguard rep will help them select and just ignore it.  Heck, if one really wants the handholding of a financial planner, Vanguard's Personal Financial planning service is .3% I believe, which is less than the 1% or so many advisors charge. 

Any way you analyze it, a financial planner is detrimental to an individuals long-term financial health.  If it makes one feel good or more comfortable to have the handholding, that is one thing, but it certainly is not helping their finances.

[Bob W]

I'll save you $1,500 and probably 50K in future expenses or more --

Put 80% of your money into Vanguard stock funds -- Choose 4 just so you think you're doing something.   Put the other 20% in bond funds or whatever else you feel like on that day.

Leave it there and never look --- not even once.   Bamm your done.

In the next 3 - 25 years read several books on smart investing and portfolio theory.   You can either use their advice or not.  It won't matter much.   

Then save and invest as much of your money as you can and leave only 50 dollar in checking with all the rest invested automatically the day you receive it. 

(read the recent thread here about dead people being the best investors)(hint, it is because the bought and never sold or traded)

For the record all "financial planners" are sales people first.  To get to the level were you will find some super sophisticated fiduciary planner you'll want a few million set aside.   

[fallstoclimb]

Don't worry friends, I have run far away from this  :)

My husband's stock allocation is what I kind of wanted input in, and balancing our allocation across our entire portfolio, but probably the financial planner's fees will more than offset any gains there.  I'll just post over in Investor Alley and see if I can get any help there. 

Thanks putting my head back on straight!

[churchill]

My parents had a 1% fee/commission based advisor, but I fired him. Very satisfying. If you decide you do want an advisor for an overview meeting, find someone here: http://www.napfa.org/  If you want help once it may be worth paying for, just not on a recurring basis.

There is nothing wrong with DIY finances, unless you're just not willing to put the time into educating yourself. There is plenty of bad advice online (even here), and in finance magazines. It'll take a lot of reading and serious deliberation to figure out whose advice is worth listening to. Doing the initial portfolio allocation can be challenging/overwhelming if it's spread around in multiple firms (one per spouse 401k, HSA brokerage, IRAs, etc.), but after that it's very simple to keep it allocated properly.