Do You Have A Financial Advisor?

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?

Image Credit: Pixabay

9 thoughts on “Do You Have A Financial Advisor?

  1. I have worked with a financial advisor for more than 10 years. When I lost my husband unexpectedly he offered a soft shoulder, keen insight and very helpful financial advice. He has grown the estate while I have lived off of the earnings. I highly recommend working with an advisor, particularly if you don’t have the background or interest in finances, as I do not.

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    1. Help thru an emergency situation like that is another big benefit of using a FA. Our advisor knows my wife and son on a personal basis, too. I’m sure he would be very helpful to them to ‘figure out’ everything if an emergency suddenly arises.

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  2. Excellent post, chief. I concur. We’ve worked with our advisor for tents years. Prior to that I managed our investments. He was about 30 when we met, but began investing himself as a teenager. He focused on our goals and expectations, delivering recommendations and plans to achieve them. He’s guided us calmly and intelligently though market downs and ups. He’s gone on to become recognized as one of the top 20 advisors in the country, per Barrons rankings. His minimum account size is now vastly beyond our means. But he “grandfathered” us in, so that we still receive the expertise and service we’ve always received (even though the average family account balance he manages now exceeds $200 Million!) not only do we have access to financial tools and products beyond our personal means, he helps us deal with emotions that may beset any investor. Worth far more than what it costs us.

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    1. Wow – sounds like you got in on the ground floor with someone who has become a big success. I imagine for him to manage enormous family portfolios of that size, he must have a very large staff. I’m not sure of our advisor’s other clients, but since he is at RBC, I know they represent some NHL players. A side benefit is we get great tickets to MN Wild games from him!

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  3. Amazingly, our advisor’s support group is relatively small (2 senior managers; 2 junior managers; 1 admin). This stellar team manages only 70 family accounts – and the asset difference between the smallest (us) and the largest is mind-boggling. They always make me feel I receive the same level of attention and discipline as any of their clients. It also helps they have the full resources of Morgan Stanley at my disposal. The lessons for FIRE folks are that mutual loyalty and longevity are important traits to cultivate.

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  4. Self managing over here! I’ve tried to use a handful of managers in the past, but never felt I would get my money’s worth. Most never made it past an interview stage with me. The last one actually started calling me with his own financial questions. What’s wrong with that picture!… (Granted, his questions were mostly around real estate investing and tax optimization, but definitely confirmed my suspicions that I was doing fine on my own!)

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    1. We met with quite a few before we found one we clicked with. One challenge was that many of them didn’t see, to know their stuff very well, or were too simplistic in their approach.

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  5. I self managed until I took an early buy-out from the organization that I had 20 years with at the age of 50. I moved everything out of the organization, 401K, options (as they called them within 1 year of my employment ending) and moved everything to a self-directed IRA and started with a Financial Advisor. They were a fiduciary and I liked them, but I have since changed to Creative Planning also a fiduciary and have been with them for the last 2 years. They have moved many of our Taxable and Non-Tax $ into Index and ETF. They meet with us twice a year and I can call anytime. They have assisted with advice on my college age kids IRA’s and 401K investing at no additional charge. Have assisted with Tax Loss Harvesting (2018) of which I would not have done on my own. My combined expense for their advice and fund fees is less than what I was paying in 401K funds fees at my the former organization I worked at. We have updated our estate plan and looked at our risk (insurance) coverage all through Creative Planning. So far we are pleased. I feel better that if something were to happen to me, that my wife has a team that can assist her with making solid decisions. We are 56. Advisors say we can retire now with no issues… but I have this bad one more year syndrome and sequence of returns thing I caught and can’t seem to shake. That’s what I need help with is the psychological fortitude to say enough’s, enough, get out of the rat race and enjoy the time you have! However long that may be.

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    1. It sounds like you are being well served by your advisor. As for the fortitude to make the jump to early retirement, I find myself a sudden survivor of a severe heart attack the day after Christmas. I was in excellent health and was caught completely by surprise. I learned very quickly that all of my planning for decades of retirement can flip in an instant. It has given me a new appreciation for the autonomy, independence and freedom that I have enjoyed the last 4 years after our FIRE!

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