Author Topic: Having a financial planner.... all it's cracked up to be?  (Read 2421 times)

TravelJunkyQC

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Having a financial planner.... all it's cracked up to be?
« on: August 04, 2017, 09:37:15 AM »
My partner and I are in the process of closing on some property (land, on which a home will be built in the next few years). We therefore met with someone regarding life/disability/etc. insurance, because neither of us is yet insured (Canadian, so health insurance is covered, of course, but nothing else). We will be hopefully having children in the next few years as well, and we'd like to get life/disability insurance while we're both younger and healthy.

However, this person (recommended by my colleague), is an overall financial planner (so insurance, investments, etc.). Currently, I do all our investing, and since our combined invested assets (not counting our condos) is less than 200k, I don't feel like it's over my head yet.

I really just want insurance for us, in case something happens. But the guy was talking about packaging everything together. In a way, it makes sense, having everything taken care of with one person, and making sure that the entire picture is balanced. However, I'm trying to think of a legitimate argument for paying someone to do my investing things.

Cons: I have to pay to have this guy do what I already do myself (if we take him for financial planning, and not just for choosing the proper insurance package).

Pro: Although a large portion of our invested assets are tax-sheltered, 2016 was the first year that I invested in non-tax sheltered accounts because they were maxed out. I'd appreciate help in making sure that I optimize this and don't pay too much tax on this account... especially since I declare taxes on both sides of the border (US-Canada dual citizen) - it would be easy for me to make an expensive mistake.

Another pro: I will be receiving a sizeable monetary gift in 2018 (equivalent to what we already have), which will all have to be reinvested into my non-tax advantaged account... or into the land/home. It might again be important for me to have some help in optimizing this.

Question: Is it best to just buy insurance from the guy, and seek out help from someone else for the non-tax sheltered investing? Is having everything managed by one person really all it's cracked up to be in terms of advantages vs. cost? Is my inclination to wait until I have a bigger portfolio before seeking out professional help a good one, or am I just being difficult?

PS. I very much appreciated the guy's candor, as well as the fact that he didn't push any products on us from the get-go. He agreed with my assessment that as big savers, whole life insurance would be ridiculous for us, and term until children are just old enough to be independent would most likely be more than enough. As I understand it, not a lot of representatives will be so forthcoming with the truth... I think?

Thanks!

gluskap

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #1 on: August 04, 2017, 11:31:55 AM »
Personally I don't believe a financial planner is worth it.  I have term life insurance and manage all my investments myself.  But then again my investment strategy is very simple...basically just buy and hold low cost index funds. I like to do a lot of financial research and I am comfortable with my strategy because I understand it.  Some people don't want to be bothered to learn even the basics so for them maybe having a financial planner to stop them from making costly mistakes is worth it.  Most financial advisors will charge on average 1% of AUM (assets under management) so the more your portfolio is worth the more you are paying them.

You have to be really comfortable that you selected the right financial planner too.  The 1% AUM fee is just the beginning.  If you have a financial advisor that recommends you buy funds with high load fees then there are all those fees as well.  I find that most financial planners are more interested in making money for themselves and maybe helping you to make money as more of an afterthought but that's me probably being a bit cynical lol.

AccidentalMiser

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #2 on: August 04, 2017, 03:21:42 PM »
I bought my life insurance through an online quote service referral.  I would NEVER buy life insurance through any kind of financial advisor.  IF I were to get an advisor, I would find a fee-only person not someone who is getting paid for selling me financial products I don't need/desire/understand.

Maybe things are different in Canada but you should be really careful about "advisors" who are really salesmen for products and services that financially literate people don't need.

Good luck!

Silverado

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #3 on: August 04, 2017, 05:25:50 PM »
Absolutely what it's cracked up to be. Intent is to take enough of your (and others) gains to make a living. Not sure why anyone would pay that from monies they should want for their future.

Buying insurance is something else, my comment is only about investing.

Mighty-Dollar

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #4 on: August 05, 2017, 03:16:05 PM »
Question: Is it best to just buy insurance from the guy, and seek out help from someone else for the non-tax sheltered investing? Is having everything managed by one person really all it's cracked up to be in terms of advantages vs. cost? Is my inclination to wait until I have a bigger portfolio before seeking out professional help a good one, or am I just being difficult?

PS. I very much appreciated the guy's candor, as well as the fact that he didn't push any products on us from the get-go. He agreed with my assessment that as big savers, whole life insurance would be ridiculous for us, and term until children are just old enough to be independent would most likely be more than enough. As I understand it, not a lot of representatives will be so forthcoming with the truth... I think?
You didn't answer the most important question. Is this "advisor" a fee-only fiduciary? Until he agrees in writing he is not. If not then he cannot be trusted no matter how nice, "candid", "truthful" and "forthcoming" he may sound. Eventually HE WILL try to sell you commission-based products like those dreaded annuities that line his pocket and cost you a lot in returns.
You invest in index funds. A total bond market index fund like BND or AGG and a total stock market index fund like ITOT or S&P 500 index fund like SPY. Investing is simple -- not complicated.

Car Jack

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #5 on: August 05, 2017, 04:24:20 PM »
You have some cross border issues that you have legitimate concern for.  My question would be: "Do you have expertise in US issues and practice this on a regular basis?".  I would expect him to say no. 

What's the best way to go?  I think the best way is to learn what you need to learn in order to determine what to do with both Canadian and US issues, then do it yourself.

You mentioned that at only $200k, it's not over your head yet.  I'm older with ten times what you have invested and do it myself with no plans to give my money to some clown for him to just screw things up.  If someday, I have 20 million dollars, I'll still do it myself.

tj

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #6 on: August 05, 2017, 07:28:44 PM »
Quote
I would NEVER buy life insurance through any kind of financial advisor.

You can ONLY buy life insurance through a licensed life insurance agent. Some of them have additional financial certifications. Some of them don't.

TravelJunkyQC

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #7 on: August 15, 2017, 11:12:27 AM »
Thank-you for your insights! Indeed, I can't buy insurance without a representative of some sort, so we're working on getting some estimates from him regarding the types of insurance we need. We have a second meeting with him this afternoon to determine how his pay/commission works with regards to financial planning other than insurance, but most likely we're gonna keep plugging along by ourselves for the time being.

Le Barbu

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #8 on: August 15, 2017, 04:07:42 PM »
You can wait to buy a term life insurance! I got mine when kids were close to be born. 500k$ each cost 250$/year and we will not need it a near future. Look for insurances who request a lot of tests (blood, weight, mesurement, urine, etc) because they reject the drug adict and other risky habits.

Building a house! Really? In the actual real estate market, it's like throwing 25% away. I did it once and never do again. There is no way you can get ahead building. The best spots are already built anyway and many of them are for sale...

TravelJunkyQC

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #9 on: August 16, 2017, 09:50:24 AM »
You can wait to buy a term life insurance! I got mine when kids were close to be born. 500k$ each cost 250$/year and we will not need it a near future. Look for insurances who request a lot of tests (blood, weight, mesurement, urine, etc) because they reject the drug adict and other risky habits.

Building a house! Really? In the actual real estate market, it's like throwing 25% away. I did it once and never do again. There is no way you can get ahead building. The best spots are already built anyway and many of them are for sale...

The reason we wanted life insurance right now, is that we're closing on our property, and although either of us has enough to pay our half of the mortgage if we were to die, as a non-married couple, technically, I wouldn't get his money if he were to pass away, so I would be saddled with the mortgage on my own. We're going with a bare minimum of life insurance at the moment (150k each), and enough disability to cover a minimum as well, but no more. We might bump them up once the children are born, but not extravagantly.

Another reason is that I'm 30 years old right now, and I know rates tend to jump up a little after 30 - so if I can lock in a lower rate for the next 20 years, that's cool. There's also the issue of my partner's existing condition, that currently doesn't cause real issues... However, he's already been rejected for life insurance once, and since his issue is around the procreation part of the body, I don't want something to pop-up during a medical test when we're trying for kids that could cause him to be rejected forever. I'd rather we get his insurance now and then don't have to worry about it.

As for building, we actually looked around for almost 2 years, both empty plots of land as well as already existing homes. The inverse seems to be true here - mostly because we wanted a lot of land. Large plots of land tended to have either a) enormous houses that cost 500k and are way too much house to deal with anyway, or b) a hunting shack that would need to be teared down and rebuilt... even though we would still be paying for land with a house on it. Taking the time to build exactly what we want, on 60 acres of land, 20 minutes from the city, is actually a pretty good deal for us.

Thank you for your suggestions though!

Le Barbu

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #10 on: August 16, 2017, 11:24:48 AM »
Sounds good for the insurance thing!

I disagree for the real eatate part...being 45 now, I remember how I tougth 15 years ago! Back then, I use to think a big land means a lot of place for kids, no problems with neighbors etc. So, we did it, spending every once of energy on that property. Today, I live in a mid-sized town (Lévis) on a 7,500sq.ft. lot (way to much!) and everything we need within 5km and wish to get closer to downtown some day! I wish 90% of places I got to go (excluding family & travels) is <20 minutes walking distance. Get Happy City book wich MMM talked about few months ago and have a good read!

TravelJunkyQC

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #11 on: August 16, 2017, 11:33:45 AM »
Sounds good for the insurance thing!

I disagree for the real eatate part...being 45 now, I remember how I tougth 15 years ago! Back then, I use to think a big land means a lot of place for kids, no problems with neighbors etc. So, we did it, spending every once of energy on that property. Today, I live in a mid-sized town (Lévis) on a 7,500sq.ft. lot (way to much!) and everything we need within 5km and wish to get closer to downtown some day! I wish 90% of places I got to go (excluding family & travels) is <20 minutes walking distance. Get Happy City book wich MMM talked about few months ago and have a good read!

I don't want to derail from the initial reason for my post, which was gathering opinions on financial planners and their overall practicality.

However, I totally understand what you mean, and currently we live downtown (Limoilou) in a loft, and it's very practical. But we're outdoor people, and would much rather be in the woods than anywhere else in the world. We shall agree to disagree, as it were, although I appreciate your opinion!

Goldielocks

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Re: Having a financial planner.... all it's cracked up to be?
« Reply #12 on: August 16, 2017, 05:40:37 PM »
I have also had cross border questions from time to time.   If this person can look at the whole picture and give advice, it can be valuable to you.  Most FA will be able to talk estate planning cross border, but not income tax questions cross border. (based on the content that is in the professional planner exams).  There is a lot of savings to be had with cross border tax questions!

I don't like advisors that charge based on total asset value.  Charging a flat rate fee and / or a fee based on added value is preferred.
 Would they work on a fee only basis, e.g., a review and advice session every 6 months (and you continue to manage / do the financial investing work yourself)?

Although with $200k, it may be cheaper to go the percent fee route for you for now...