Tuesday, April 28, 2015

Is a Financial Adviser Worth the Cost?

Is a Financial Adviser Worth the Cost

We hired a financial adviser because we wanted some unemotional professional advice on whether we were on-track to meet our retirement and other financial goals, and, if we were not, how we could go about getting there.  We also were not happy with the performance of our stock portfolio and wanted some help picking new funds and thought it would be nice to have someone who knew what they were doing watching the funds and deciding when it was time to move the money elsewhere.  We hired a CPA we knew who has done our taxes a few times over the years when I thought I needed professional advice.  He offers financial advising services and sells life insurance and mutual funds.  He charges financial advising clients a percent of assets under management.  I really wanted someone who billed by the hour who would give us a plan and let us implement it, but I wasn't able to find such a person.  The CPA is an old friend and so we decided to give it a try. Still, I wondered "Is a financial Adviser Worth the Cost"?

We have been with him since July.  He interviewed us about our goals and about our risk tolerance.  He gathered the paperwork necessary to switch our IRAs and other funds to the firm with which he works (HD Vest), and gave us a pep talk about sticking with the program even in down markets (which we've been doing for twenty-five years).  I get that he gets paid for getting our money invested and keeping it there, so I was willing to forego the "advice" part of the equation until he got everything set up.  However, when we met recently, the phrase that came to mind was GIGO--garbage in, garbage out.  He had a nice chart drawn up showing how we were doing fine, how we were in the optimal zone to reach retirement on our schedule, with half our current pay (that would be possible but awfully tight) and he was only showing about 80% of our assets.  I asked him to redo the chart but he said it took a while to put it together.  We meet every three months and before our next meeting I will make sure I get him a full list of all our assets.  I really want to know how much money we are going to need, given our situation and lifestyle and how much we need to save every month to get there.  I know there are a lot of variables, but the information I got from him was information I could have gotten from any number of web calculators.  If what I am paying for is personalized advice, so far, I'm not impressed.

As far as the mutual fund portfolio, it has tracked the market, which is no great surprise.  On the other hand, I can really see the fees he is charging eating into our returns.  

So, is a financial adviser worth the cost? I'm going to watch things for another year or so, but I'm leaning toward going it alone again.  

3 comments:

  1. My findings as well with the three or four Financial planners we have used over the years. I have been running the stock section of our portfolio for the last 30 years. I ask the kids what is popular and put our money there! We have made some money off the market, but plan to sell in the next few months to wait out the next election.
    The thing that surprised us the most in retirement was property tax. In ten years our property tax has increased a great deal. Not a tax one can "get around", this and health care could torpedo our nest egg.
    Still, I'm not really worried and not willing to go back to work to save more. We have a pretty good life, have always been frugal, and have children who seem willing to pitch in if there is a pinch. We have it much better then many!

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    1. I hear you on the property taxes--though ours aren't particularly high. What is killing us is homeowner's and flood insurance. Our house is paid for but our monthy expenditure for taxes and insurance is as much as our house payment was on our first house. While this house is bigger than that one, it is your basic suburban 1900 sq ft 3 bed 2 bath house, not a mansion by any means.

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