A survey in a recent online group asked early retirees if they work with a professional financial advisor. I was surprised to see that the great majority (about two-thirds) of folks did not.
While I always tell people you need to be knowledgeable enough to be your own primary financial advisor, it’s nice to have a professional financial advisor as a secondary resource. That is, you need to be able to do it yourself, but it’s valuable insurance to have someone else looking at the numbers objectively on your behalf.
Having someone else look at your financial situation offsets the confirmation bias we are all susceptible to. The pull to quit working and become a goof-off is pretty great, so it makes having a second opinion pretty valuable.
We met our financial adviser when I was in my late 30s. We had talked to a few folks before that, but didn’t find anyone that I was terribly comfortable with. A manager on my MegaCorp team recommended his ‘guy’ and we had a really good first meeting. His wife also worked at MegaCorp, so it was clear he had an inside understanding of how the short & long term compensation programs worked.
He’s a % fee-based financial advisor that doesn’t invest us in any loaded funds or things he makes a commission from. That keeps him on our team as a fiduciary-advisor that we can trust to put our investment needs first. We’ve been with him 15+ years and I can’t recall the last time we traded out one fund from another.
We weren’t rich by any means when we started working with him, so he invested a lot of time upfront until our portfolio grew with him. Even now, we don’t keep all of our wealth under his management (much is still in our MegaCorp 401ks, pension, stock options, and real estate). Still, he advises us on the total.
He’s a pure financial advisor, although he works with the rest of our team directly when needed to – our accountant/tax person and estate planner/attorney. That doesn’t happen a lot, but it’s nice to know he is thinking of the whole picture. We’ve gotten a lot more than just investment advice from him – in particular he helps us think of the tax implications of investments.
We sit down with him once a year for a 70-90 minute ‘check-up’ and I chat with him as hoc on the phone about once a quarter. Annually, he prepares a trended report for us that shows where we have been and a forecast of where we are headed.
The forecast is done with a proprietary Monte Carlo analysis that gives a range of future probabilities based not just on historical market returns, but also projections that his firm’s analysts have developed. I can access the Monte Carlo for my situation online and play with the assumptions if I want to.
The guidance we receive from him is only as good as the guidance we give him on our lifestyle and financial goals. Now that we are retired and our son is finishing college, our lifestyle is pretty set and surprisingly easy to project into the future.
One of the best things about working with him is that he has a great understanding of what other clients in our situation are doing. He brings that external context to a decision and might say “three quarters of my clients are doing this” or “most people in your situation focus on X instead of Y.” We only get to see our financial decisions up close, he has insight from being close to dozens of other clients (and hundreds of clients among his colleagues). I should note that he never shares specific information about any specific client that he has that would be confidential.
In conclusion, working with a financial planner is not inexpensive on an annual basis, but I think well worth what it costs relative to our total wealth. While I consider myself reasonably knowledgeable about personal finance topics, I am always surprised by what I learn from him each time we sit down.
Each year, I think to myself “did he earn his fee this year with the advice he gave us?” and am happy to say the answer is nearly always “Yes”. Some years aren’t that dynamic, but I still feel like dividends are compounding from decisions he helped us with earlier in our relationship.
How much do you involve a financial planner in your finances? Are you happy with what you get for what you pay?
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