Who here uses a financial planner/advisor?

[gmail]

...or actually is one?

DH and I met with one this morning to see if he would be a good fit for us. We are looking for someone to help us navigate retirement (I have like 4 accounts out there from past jobs), as well as college plans for DS.

After we left, DH remarked that he thought this guy would be more like a broker (his parents have one) who basically tells you where/how to invest to earn more money over time for your savings/retirement.

Isn't that kind of the same thing? A financial planner would help you look at retirement options that would best meet your needs? Or are we looking at two different things?

If you use a FP, how do you use him/her?

[cjeanette]

I think the broker is a dying breed. Anymore all advisors are going to be able to give you a holistic financial plan.

[UnderProtest]

We have one and it was a more complete financial plan. They helped us figure out how much money we would need to save for college education, for my retirement since I am a SAHM and for our future goals (bigger house, etc). They recommended products and plans that could help us reach those goals.

[ECB]

Dec 5, 2012 14:39:09 GMT -5 cjeanette said:

I think the broker is a dying breed. Anymore all advisors are going to be able to give you a holistic financial plan.

I agree. I used to work in the financial industry, and when I started, they were "brokers". By the time I left, they were "Financial Advisors".

We have an advisor and he absolutely helps us look at the big picture and where we should be putting our money, and helping us focus on what our goals should be.

[gmail]

Dec 5, 2012 14:42:45 GMT -5 UnderProtest said:

We have one and it was a more complete financial plan. They helped us figure out how much money we would need to save for college education, for my retirement since I am a SAHM and for our future goals (bigger house, etc). They recommended products and plans that could help us reach those goals.

He kept talking about "products"

WTF is a product?

[cjeanette]

Dec 5, 2012 14:44:58 GMT -5 gmail said:

Dec 5, 2012 14:42:45 GMT -5 UnderProtest said:

We have one and it was a more complete financial plan. They helped us figure out how much money we would need to save for college education, for my retirement since I am a SAHM and for our future goals (bigger house, etc). They recommended products and plans that could help us reach those goals.

He kept talking about "products"

WTF is a product?

The investments themselves. Or possible insurance policies if applicable.

[UnderProtest]

Dec 5, 2012 14:44:58 GMT -5 gmail said:

Dec 5, 2012 14:42:45 GMT -5 UnderProtest said:

We have one and it was a more complete financial plan. They helped us figure out how much money we would need to save for college education, for my retirement since I am a SAHM and for our future goals (bigger house, etc). They recommended products and plans that could help us reach those goals.

He kept talking about "products"

WTF is a product?

Hopefully I can remember this correctly, but it's a savings vehicle. For the kids college expenses, we are saving via several products....some mutual funds, some hybrid life insurance policies, etc. The financial advisor should be able to tell you the pros and cons to each product. Think of your normal banking activities, you use different products (savings account, checking account, CDs) based on your cash flow and what and when you intend to use the money.

Hope that helps a bit. I'm sure other posters (cj, especially) can explain it better. I'm in charge or everyday finances, while my husband does he long term planning.

[gmail]

That helps, thanks.

DH and I are going to talk it out tonight, as well.

[SJ]

I agree that there is a lot of confusion and overlap when it comes to titles in this industry. (Certified) Financial Planner, Investment Manager, Financial Advisor, Portfolio Manager, broker, etc. are all often used interchangeably and it causes confusion.

To me, the first question is to ask what you are looking for? Do you want someone to look at your whole picture and give general recommendations/advice? To check in with you from time to time? Or are you looking for someone to handle the nuts and bolts of your investing, making the actual allocation and buy/sell decisions for you?

Our firm does both, but in all cases we have full discretion over the accounts, which means you don't tell us what to buy, we tell you/buy for you. We get no commissions or kickbacks or incentives for putting you in certain "products"- our only aim and goal is to make the assets grow over the long-term.

No matter which type of relationship you want, it is very important that you understand how the professional gets paid and if there are any incentives/conflicts of interest for putting you in certain investments. The word "product" makes me a little leery. I don't like when investment managers also sell insurance. I believe you should buy insurance from an insurance agent and keep your investments elsewhere.

[gmail]

We have insurance through other areas, so we wouldn't use him for it.

We are looking for someone to look at the whole picture, help us consolidate retirement accounts and make smart retirement decisions. Right now, for example, I have accounts with Fidelity, TIAA, Prudential and in 2 years, I'll be fully vested in our state pension plan. So when I get paperwork about all 4 things, it might as well be in gibberish to me. Or, I'll get something from Prudential, talking about investment shifts and I have no idea what it means. We need someone to help navigate all of that.

We also want someone to help us figure out the best choice for college savings for DS. 529? Maryland plan? UPromise?

Long term goal is to sell our townhouse in 5ish years and move closer to DC. Housing market is kind of sucky in our area, so we wouldn't be able to sell for what we paid (even in 5ish years). We would also be paying much more for a home further into the other counties we're considering. We want someone to help us look at our savings and give suggestions for better options. We use ING only b/c it had great rates like 6 years ago, and we've just been to lazy to find another option.

[SJ]

OK with that additional information I think you might be fine with just a "financial planner" ie someone you pay an hourly or set fee to review everything and offer advice. This person should at least have the "CFP" (certified financial planner) designation, but it would probably still be you making the actual clicks to buy and sell.

I would make sure they aren't getting commissions or incentives to put you in certain investments.

If your (old) retirement accounts will be consolidated into an IRA and you want someone to actively manage it, then look for a full-service investment manager who will be paid on a % of AUM (assets under management). This person should be registered with the SEC.

[gmail]

Dec 5, 2012 15:11:46 GMT -5 SJ said:

OK with that additional information I think you might be fine with just a "financial planner" ie someone you pay an hourly or set fee to review everything and offer advice. This person should at least have the "CFP" (certified financial planner) designation, but it would probably still be you making the actual clicks to buy and sell.

I would make sure they aren't getting commissions or incentives to put you in certain investments.

If your (old) retirement accounts will be consolidated into an IRA and you want someone to actively manage it, then look for a full-service investment manager who will be paid on a % of AUM (assets under management). This person should be registered with the SEC.

He told us that commission is part of how he gets paid. He also can actively manage a portfolio, but i think that is a higher fee? I'm not 100% sure.

[cjeanette]

Dec 5, 2012 16:09:10 GMT -5 gmail said:

Dec 5, 2012 15:11:46 GMT -5 SJ said:

OK with that additional information I think you might be fine with just a "financial planner" ie someone you pay an hourly or set fee to review everything and offer advice. This person should at least have the "CFP" (certified financial planner) designation, but it would probably still be you making the actual clicks to buy and sell.

I would make sure they aren't getting commissions or incentives to put you in certain investments.

If your (old) retirement accounts will be consolidated into an IRA and you want someone to actively manage it, then look for a full-service investment manager who will be paid on a % of AUM (assets under management). This person should be registered with the SEC.

He told us that commission is part of how he gets paid. He also can actively manage a portfolio, but i think that is a higher fee? I'm not 100% sure.

Find out what the management fee is.

With the comission portion you can ask him what he is getting paid. Depending on how little you want to be involved it can be worth it. Not always though. A lot depends on what you will invest in.

www.finra.org/Investors/ToolsCalculators/BrokerCheck/

This is where you can verify he is registered.

[M]

Dec 5, 2012 16:09:10 GMT -5 gmail said:

He told us that commission is part of how he gets paid. He also can actively manage a portfolio, but i think that is a higher fee? I'm not 100% sure.

There's nothing wrong with him getting paid commission as long as it's a small percentage of your profits. It gives him incentive to grow and profit in your account as opposed to receiving only a flat fee where he loses/gains nothing for giving you bad advice or placing you in losing investments. Commission is like a bonus. It pushes him to want to grow your account so that he can be rewarded for his work.

My firms gets 20% of only profits but we are strictly futures where the returns are much much larger. This is why I put in 60+ hours a week into research. We want our accounts to profit so that we can take home some of it. I would not work that much if I was guaranteed my income. I think for normal stocks/equities/etc, the fees are generally less though...but don't take my word for that.

I also dislike when people use the word products. It makes me feel like their main goal is to sell you something instead of explaining how they will care for you and your money. I use to work at a bank and hated when my coworkers used that term...and they wonder why I was able to open more accounts than others.

[MixedBerryJam]

Achase on the Starting Over board is a CFP, I THink. You might ask over there. I don't think I ever see here post on MM.

[Deleted]

We private bank with a large bank in the US. They manage all our assets and buy/sell without asking us.... they profit by taking 1% of our total portfolio on a quarterly basis. You must have a minimum to bank with them.

On the flip side when we were getting more life ins... the firm that helped us also managed people's money -- on a much smaller scale than our private bank. We did not tell the life ins guy that we already private bank but listened to his "talk" and it was very different than what we are used to -- he was very pushy, trying to sell his products, whole life ins as an investment vehicle, etc.... We did not click at all with that way of selling. Our private bank is not pushy, but lays out all the options you can choose.

If your gut is telling you something, stay away. Keep looking.

[Deleted]

We use a great fee-only financial planner that built a financial plan for us, which we re-evaluate every year. The plan included types of investment vehicles, recommended allocations, other strategies to more effectively manage our expenses, and plan for future car purchases, vacations, and retirement of course.

We usually adjust their recommendations slightly after we talk through them, but overall working with them has been a great investment and a good supplement to us managing our money together.

We also work with a CPA that gets deeper on the tax side, often our financial planner has recommendations and specifically tax-related recos we then partner with the CPA on to refine.

I would say, please educate yourself. Ask a lot of questions, if you are positioned something (like PP, the term "product" immediately makes me leery) that you do not understand say, "Please explain that in very simple terms.". Ask follow up questions like, "If I didnt follow that recommendation, what would the next best option be, and why?"

Money is a powerful resource, so you do not want to be confused about what your money is doing and how it is working for you. And definitely understand the commission structure. Be leery of things like whole life policies, which tend to not be a great fit for most investors but are great commission vehicles for financial advisors that act as glorified sales people.

Personally, I would only want to use either a fee-only advisor (charges by the hour in my case) or an advisor that charges a flat-fee commission. Anything else starts to introduce agency conflict, where the "advisor's" incentives are not aligned with yours.

Good luck and its great you are on here, this board is great for talking about money, something far too many of us feel uncomfortable with discussing in real life.

[Deleted]

H is an FA. He says using the word "product" is a red flag. Your FA should not be a product salesman.

H makes a percentage of the total portfolio, not commission based on selling you things. He has seen horror story after horror story of people getting screwed by those who are financially encouraged to sell their clients crap.

[Deleted]

We use an Investment Advisor who is manages all of our investments, including allocations. We pay him 1.25% of our portfolio annually.

Their office employs a financial planner who we meet with annually to ensure we are actually saving enough for retirement, etc. she goes over our budget with us but as long as we are saving for retirement, it doesn't really matter how we spend out money. This is covered by our portfolio fees.

[SJ]

For full-service investment management (where they are buying/selling for you, etc.) I would expect to pay between 1-2% of the portfolio per year.

Our fees are based on a tiered system, but start at 1.2% and go down from there.

M6 works more on a hedge fund model, taking 20% of gains, but it is a totally different strategy for sophisticated investors who are ready for more risk.