Finding and preparing for financial advising

[ysette9]

Hello all! I am fired up about FIRE (har-har) and have recently gotten my husband on board. Thankfully I married someone who is naturally more frugal than me and he completely bought into the idea that we could retire in 10 years or less by cutting our spending a little bit. He is actually glad to see me finally interested in cutting expenses now that I have a concrete goal.

That said, to feel really comfortable with this, we want to do something more in-depth than read http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/. I have two questions:
1) How do you recommend looking for a helpful financial adviser to guide us on early retirement planning?
2) What materials did you prepare before meeting with one?

I am considering both USAA and Vanguard, though I have some reservations about both. For Vanguard, they really offer active management with advising thrown in (I don't want active management), but they are fiduciary. For USAA, the advising is included free in our membership but they are not fiduciary and in our experience they recommend USAA funds with some pretty high fees.

As for preparation, I have put together a spreadsheet summarizing our spending over the past three years, cash flow, current invested assets, and my estimates of how much we need to retire based upon a) 25x rule and b) cFIREsim. What else would you pull together if you were in our shoes? How did you approach this?

[dandarc]

Why do you think you need an advisor?

[Rezdent]

Commenting to follow.
Our situation is quite complicated and we will need help too.

[ysette9]

Mainly for my husband to feel 100% comfortable and on board with our plans. He has not spent the hours on MMM or reading other financial publications so this idea of retiring in 10 years vs. 30 is novel and requires verification. We are both engineers so we both need to get down into the numbers, and appreciate advice on things outside our areas of expertise. His main concern is that we are overlooking something big in our (my) analysis. The unknown unknowns, you know?

[RexualChocolate]

Send him to the boglehead wiki, particularly the asset allocation pages and sub pages.

All a financial adviser is going to do is pick an asset allocation you're happy with and make it more complicated with actively managed funds. You're paying someone to do the minimal investing for you and letting them extract 1.5% + high expense ratio funds that don't beat the indexes.

My experience with my parents and friend's financial advisers is that you'll understand the numbers better than them. The only value add they can have is they keep you staying the course and not panic selling. As engineers, this should not be a problem.

You dump everything into a Vanguard mutual fund account. Depending on your risk tolerance, x% into total stock, 100-x% into total bond. Ignore it until allocation gets more than 5% off of that. Stay the course forever and go on living your life. The fancier stuff (tilting, problems with certain indexes that are market cap weighted, fun money into special stocks) can be done as you learn more, but by and large you'll beat 90% of 'investors' out there.

[ken]

The step to take now is reducing your spend and investing the savings in efficient vehicles to grow your stache. The retirement is still several years away so your husband has time to analyse and get comfortable. As engineers, you can understand that paying fees to an adviser for similar returns will only move your retirement date out.

[dandarc]

Send him to the boglehead wiki, particularly the asset allocation pages and sub pages.

All a financial adviser is going to do is pick an asset allocation you're happy with and make it more complicated with actively managed funds. You're paying someone to do the minimal investing for you and letting them extract 1.5% + high expense ratio funds that don't beat the indexes.

My experience with my parents and friend's financial advisers is that you'll understand the numbers better than them. The only value add they can have is they keep you staying the course and not panic selling. As engineers, this should not be a problem.

You dump everything into a Vanguard mutual fund account. Depending on your risk tolerance, x% into total stock, 100-x% into total bond. Ignore it until allocation gets more than 5% off of that. Stay the course forever and go on living your life. The fancier stuff (tilting, problems with certain indexes that are market cap weighted, fun money into special stocks) can be done as you learn more, but by and large you'll beat 90% of 'investors' out there.

This - an advisor is not really doing anything you can't do on your own.  You'll be more confident doing your own research in any case.

[gimp]

A lot of folks here are engineers, so we understand your needs. Here's the skinny. The numbers are available from direct sources. The numbers an advisor will give you, unless you pay the advisor a fee, are most likely going to be obfuscated. If they live off commission, they will push their plans.

The two numbers to keep in mind are: average returns over long periods of times (based on historical data, yes future data may be different), and how much of your dollars you're putting in and want to withdraw. Question of risk applies broadly to asset classes; generally, the more growth potential, the more risk.

[MDM]

Mainly for my husband to feel 100% comfortable and on board with our plans. He has not spent the hours on MMM or reading other financial publications so this idea of retiring in 10 years vs. 30 is novel and requires verification. We are both engineers so we both need to get down into the numbers, and appreciate advice on things outside our areas of expertise. His main concern is that we are overlooking something big in our (my) analysis. The unknown unknowns, you know?

Certainly understand the "but am I missing something?" concern.

As you are both engineers, and have the luxury of observing for the next 10 years, you could start projecting your income, expenses, and net worth for the next 10 years.  You will be wrong, because inflation, market returns, etc. are not completely predictable - but any financial adviser will also be wrong about those.

The exercise should be useful, however, because you will get more comfortable about analyzing your own situation. 

But, having said all that, it's "do as I say, not as we did" advice.  We did have a fee-based FA take a one-shot look at our investments, pension options, and do projections for us.  Also a different firm did a more cursory free look.  See http://forum.mrmoneymustache.com/ask-a-mustachian/finding-a-financial-planner/ for our and other experiences.

[ysette9]

I really like the idea of a fee-based in-depth look by someone qualified to double check my numbers. That really is what I am getting at, not someone to sell me products or actively manage my assets. We likely will go with USAA at some point just because it is easy and free and then if that doesn't satisfy (they are known to be quite conservative), continue looking elsewhere. My husband does recognize he needs to take the time to educate himself more on all of this. However, he definitely operates serially and we have other irons in the fire at the same time, so I expect it will take him a little while to get to it.

In the meantime, I will continue educating myself. I'll also contemplate baring my soul to see if the wise people here in this forum can check my numbers for me. :) Thank you, all, for the input.

[Riff]

I am considering both USAA and Vanguard, though I have some reservations about both. For Vanguard, they really offer active management with advising thrown in (I don't want active management), but they are fiduciary. For USAA, the advising is included free in our membership but they are not fiduciary and in our experience they recommend USAA funds with some pretty high fees.

We likely will go with USAA at some point just because it is easy and free

Vanguard is kind of the king of passive investing.  You don't have to purchase active management if you don't want it.

Why would you choose USAA when you know they'll recommend "funds with some pretty high fees?"

[Emg03063]

First of all, do you want investment advice, or do you want financial planning?  These are two different services, and tho many providers offer both, it's good to know what you want and how you will be paying for it.  For investment advice, I would recommend a KISS approach like vanguard index DIY or betterment, if you want to be really fancy.  For financial planning, if you really feel you want to pay for one, find a fee ONLY (not fee based) CFP certified planner who will develop a plan for you for about $400.  (Google for them or check your yellow pages).  It's the only way you're going to know the advice you're getting is truly independent.  They'll recommend annual planning, but the truth is, unless you are experiencing major life changes (marriage, divorce, adding kids, changing jobs or moving), once every 5-10 years is plenty, IMO.  The "how to write a case study guide" is a good starting point for meeting prep work, but your prospective planner should provide you with a meeting prep guide.  They will probably also want to see wills and powers of attorney if you have them.