Leaving Wealth Management Advisor - Best Scenarios?

[austion06]

We’ve been with a wealth management firm for almost 3 years that takes 1%. We didn’t consider all options at the time we sold private stock as we were in a huge move, changes etc. I don’t like the advisor and never have. It kills me what we are paying them. We speak once a year via phone as they are in another state for 30 minutes about a simple projected plan they put together in their software. Their focus seems to be on us taking out as little $$ as possible.

We both are fairly financially knowledgeable. Retired and 65 (husband) and 61 not drawing SS until 70. My husband has always been a big advocate of passive investing.

Assets (nothing is in 401k or ira)
$2.5 M in a mix of funds including some DFA funds (1% fee is on this acct). Managed in Schwab. Took a good hit 2022. **Part of this was an inheritance and we already paid the taxes in 2022.

Other
$330,000 low cost funds mixed + some cash
$1M home value (no mortgage- just updated)

We have no children and no heirs - we will be leaving anything remaining to charity.

Monthly draw is $7000 (.28 of portfolio). Monthly expenses are basic utilities, insurance, etc.

Biggest costs right now is health insurance. Husband just started medicare. No health issues.

Biggest considerations: (1) We have no one who can step in and take care of things if one or both  of us cannot handle finances at any point in the future. We do have an attorney and are looking for a good cpa. We also plan to put the bulk of the assets in a trust (2) We need to simplify this account into a few low cost etfs with Vanguard, etc. There are lots of funds in the acct right now and although I have read a bunch of the JL Collins stuff, I want to make sure we don’t take a big tax hit or screw things up.

Scenarios I have come up with so far. Any input on them and other suggestions is greatly appreciated.

(1) Spoke with a local wealth management co - small, experienced and we like the people. They do vanguard low cost etfs. They charge .8% so not much less. They would handle the distribution into etf funds to minimize impact. Thought - We could use them for the first year then cancel services and manage on our own.
(2) Use a service like Betterment. .25% or Vanguard personal advisor (.36%)
(3) Use a cpa / cfp locally who comes recommended (have not met) to handle the simplifying of the account as well as perhaps give us input yearly as a cfp for flat fee.
(4) Other options…?



Again, we are kind of “on our own” down the road but it really bothers me to be paying someone that 1% for something we could do ourselves + taking a bigger draw now up to 4%.

Thanks in advance. If this should go in case studies I’ll move it.

[secondcor521]

It sounds like you want to do option 1.

I would suggest you consider option 4:  do it yourself.  For several reasons:  you said you're both knowledgeable, and your husband likes passive investing, and you don't like paying the fees.  Considering that you're paying $20K to $25K per year to the wealth managers, you could consider doing it yourself to be a part time job that pays you $20K to $25K per year tax free risk free.  Another thing you can do is compare the $20K to $25K you're sending to them compared to the $84K you spend.

Getting out of the ETFs over time is not rocket science.  You sell them and buy what you want.  You can rip off the bandaid and do it all in one year, possibly with significant tax consequences.  Or you can spread it out over a number of years, probably with lower tax consequences.  Given no retirement accounts and no SS and no mortgage, your tax return should be pretty simple.  You can use the Case Study Spreadsheet by @MDM to figure out how much in capital gains you'll pay - just mock up your existing tax return then add various amounts of capital gains to see the effects.

As far as someone helping out with your finances, you have nobody younger in your family?  A niece or nephew or younger cousin?  Perhaps a younger friend who you trust?  If there is really nobody, I'm not sure what to suggest - perhaps if you find a good CPA they can make suggestions.  At the very least you can simplify to the minimal number of accounts and automate as much as you can (bills, the $7K monthly draw, SS deposits eventually, etc.) so there is less work for you and whoever eventually takes over.  AARP Foundation Tax Aide and similar organizations will do your taxes for you for free most likely (no need to be an AARP member).

[austion06]

Thank you. Yes. The 25k a year or $2k a month is ridiculous and if I'm very sensitive to the fact that a good chunk of what could be more monthly income goes to them.

No. We both lost a lot of family over the past few years and we live far away from a niece and nephews and don't have close relationships anyway. We recently moved to a new area as well. We have a number of close friends and it's more likely that at one point one of their children or child might be willing to step in to help. But they live in another state as well. That said, I'm not sure any of them are very knowledgable about finances.

I've done fairly complex taxes and do plan to hire a good accountant just to build a local "team" along with an attorney. I'm the least concerned about that as as you say our situation is pretty simple.

It's not just etfs, dfa funds and other funds as well. The capital gains is what I'd really like to minimize especially after the drop in assets in 2021 and the already huge tax bill we paid that year. I'll use the spreadsheet and look at that.

[MDM]

The capital gains is what I'd really like to minimize especially after the drop in assets in 2021 and the already huge tax bill we paid that year. I'll use the spreadsheet and look at that.

What might help there is a spreadsheet (or your brokerage might already have a tool) to list all your lots in rank order from largest percent loss to largest percent gain (divided into short term and long term if needed).

Do you have / can you develop this?

[Zamboni]

switch to flat fee fiduciary financial advisor in your local area. Interview 3 and pick the one with the best people skills.

[Hadilly]

I would find a good attorney in your shoes who does wills and trusts. One of my parents is such an attorney. She has helped a lot of clients as they have aged and needed help. If you don’t have younger family who could step in, then an attorney could fill their shoes. I would suggest asking around and find someone through word of mouth.

Your plan to build a good team is solid.

[austion06]

The capital gains is what I'd really like to minimize especially after the drop in assets in 2021 and the already huge tax bill we paid that year. I'll use the spreadsheet and look at that.

What might help there is a spreadsheet (or your brokerage might already have a tool) to list all your lots in rank order from largest percent loss to largest percent gain (divided into short term and long term if needed).

Do you have / can you develop this?

Thank you. It's all with Schwab. I'm going to be digging into the site to see.

[austion06]

switch to flat fee fiduciary financial advisor in your local area. Interview 3 and pick the one with the best people skills.

Thank you. I think this is the best route coupled with a "team". I'll be talking to the CPA/CFP I found and try to find a few others. Haven't seen many local who do flat fee but still looking.

[austion06]

I would find a good attorney in your shoes who does wills and trusts. One of my parents is such an attorney. She has helped a lot of clients as they have aged and needed help. If you don’t have younger family who could step in, then an attorney could fill their shoes. I would suggest asking around and find someone through word of mouth.

Your plan to build a good team is solid.

Thanks. Our neighbor across the street who we really like is an attorney and gave us two names. We have wills and poas but need to do them over as we moved (and too many changes now to wills). Plus the trust would add a layer of protection.

Having helped three parents in the final stages of aging over a period of a decade I'd prefer to have a trusted attorney, cpa and cfp in place when needed rather than burden a niece or nephew. I know how quickly things can change but also my mom and mil handled all their finances well into their mid 80s. I want the peace of mind for us to have someone who can handle things later. We plan to live long, active, lives but I know you never know what can happen.

[Sandi_k]

switch to flat fee fiduciary financial advisor in your local area. Interview 3 and pick the one with the best people skills.

Thank you. I think this is the best route coupled with a "team". I'll be talking to the CPA/CFP I found and try to find a few others. Haven't seen many local who do flat fee but still looking.

Check out these flat fee resources:

XYplanningnetwork.com/consumer

https://www.garrettplanningnetwork.com/