r/Fire • u/EducationalReview237 • 19h ago
Financial advisor
I've been putting money in Vanguard for years now-- index funds--but have never really spoken to a financial advisor. I was fortunate that my father used to give me advice when I was younger. He advised me to save and invest as early as possible.
I see people on this sub talking about speaking to their financial advisor. Who do they mean? Someone at Vanguard or another similar place, or...? I'd like to get a third party view on what my financial picture looks like.
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u/PetrichorBySulphur 12h ago
Going against the grain here, but I just hired a financial advisor and have found her super helpful. That said, what I looked for was:
- fiduciary (she’s obligated to act in my best interest)
- fee only (no kickbacks)
- advice only (she’s not managing my accounts)
That means she’s not getting kickbacks by selling me investments or insurance. She reviews all my accounts and has helped me figure out where I can optimize for tax savings and withdrawal strategies, but I pull the trigger.
Yes, I could do all the research myself and ask the internet for advice, but tbh I’m super busy and stressed all the time, so it’s great to hop on a call and talk things through. She’s taught me a ton, which is also part of why I wanted to hire someone. I signed up for a year of services, and after that point will probably self-manage.
I interviewed like 6-7 advisors/firms before finding her. I wanted someone I clicked with personally, share an investing style with (ie Boglehead), and who doesn’t treat me like I know nothing. She’s also an independent business owner, which is a bonus.
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u/zeke_24 6h ago
dumb question but how do you go about interviewing firms?
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u/PetrichorBySulphur 2h ago
Set up consultations — they’ll talk to you for free and explain their services. I had a few questions I brought in, but left it open ended to see what their approach was, and also to let them walk into a trap. One firm I talked to emphasized that they preferred AUM (which I’d ruled out), so I asked why and judged their response, lol. The guy on the call basically mansplained tax loss harvesting like it was magical voodoo only they could do. Yeahno.
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u/Weekly_Print_3437 19h ago
Meet with a fee only financial advisor if anything, definitely not someone who charges a percent of AUM or is pushing high fee products.
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u/xzftgyhuik 19h ago
Fee-only can charge % of assets. The wording you're looking for is flat-fee advisor.
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u/Frnklfrwsr 15h ago
“Fee only” virtually always means they charge a % of AUM.
“Fee only” means they don’t get commissions from 3rd party so you the client are the only people paying them.
Advisors who can take commissions are incentivized to sell you things that pay them those commissions that may not be in your best interest.
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u/Dramatic_Watch4330 14h ago
Financial advisors have their role, but go in eyes wide open. There are three types of compensation models, and each has its advantages and disadvantages>
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Fee-based. They take a percent of assets. Gives them an incentive to see your money grow, but also gives them a cut even if you see no growth - if they have a large base, they lose the incentive to manage actively. Typically around 1% of assets under management which is a lot to give up. You can negotiate the rate down on a large portfolio.
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Commission-based. Cheap up front, but tends to push towards higher-cost investments (because that clears headroom to offer them incentives).
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Hourly or fixed rate. Most money up front, but lowest conflict of interest. They work for you, period.
In all cases, review any recommended investments and run the math on return net of costs.
I used to think "fiduciary" was a guarantee they'd look out for my interests, but there's almost no way to avoid some conflicts of interest. The solution? They send you reams of disclosures.
Most will give you a modern-portfolio theory allocation. Useful, but is it worth the cost? If you're retiring early, probably not. Do your own homework on non-correlated investments, if it appeals.
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u/Dramatic_Watch4330 14h ago
As a sample of the conflicts that can arise. My advisor wanted me to invest through a managed account in a fund's institutional shares. When I ran the math on return minus the advisor's fee of that versus buying the retail shares of the same fund, I found I'd come out ahead on the retail shares.
They of course can't tell me to do that, so the conflict of interest is unavoidable. They gave me 20 pages of disclosures that say as much, but that just describes the conflict - doesn't mitigate it.
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u/killersquirel11 9h ago
Yup. A 1% AUM fee might not sound like a lot, but when you're talking about FIRE where most people are planning on 3-4% SWR that's literally a third to a quarter of your entire retirement budget going straight to them
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u/BaaBaaTurtle 19h ago
People are saying fee only but that, nowadays, is not descriptive. A lot of fiduciary advisors who do asset management use that term so you can't find what you're looking for. You want advice only.
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u/FoxChess 18h ago
Before seeking a financial advisor, I'd recommend first reading The Simple Path to Wealth by JL Collins. I think you'll find it encouraging and you probably won't feel the need to pay a financial advisor to tell you what you already know.
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u/therealjerseytom 17h ago
I was fortunate that my father used to give me advice when I was younger
Fortunate... if it was all good advice. 😉 Sometimes it's hard to know if someone's recommendations are actually good or just something passed along to them from elsewhere.
You'll find on this subreddit that it is typically very anti-advisor, for a number of reasons. Or moreover, anti investment management. There are fair points to that, namely that advisory fees do add up and take away from your total investment return. With that said, people going self-directed do also shoot themselves in the foot being either under-risked or over-risked for their objectives and timelines.
I distinctly remember coworkers of mine around 2008 having their imminent retirement dreams crushed by the GFC and being needlessly over-risked with equity exposure or over-concentration in particular companies.
A financial advisor can have a time and a place for a big-picture overview of your total landscape. Even as like a one-off consultation and review. Understanding all of your different financial goals. Possible outcomes with a partner, with dependents, with aging parents. Making sure you're at the right risk level.
That's really the point and benefit - evaluating the broader landscape - if it's warranted.
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u/gabrintx 19h ago
Have you checked what resources Vanguard has? I would guess that would want to manage your account, but you might learn something from them. One of my brokerages is Fidelity, I opened an account with them to purchase high yield mutual funds. I quite happy with that choice and have always been self directed.
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u/Admirable-Goat-5087 18h ago
Be extremely extremely wary of financial advisors. I just fired mine after 10 years. I was sick of him trying to sucker me into the Permanent Life Insurance scam. After I ran the numbers it became clear as day. For my FA to "manage" my ROTH (in my 30's, mind you, where I can accept some risk), he was underperforming my self "managed" (aka: 70-20-10. VOO-VGT-VXUS) ROTH by several percentage points PLUS earning commission on my gross. Over the next 20 years I would literally miss out on millions by the time I retire.. MILLIONS just to have this guy spread my money out through a hodgepodge of index funds.
I know what I'm doing now. I have a Claude.ai project that helps give me feedback when I need it. Start there.
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u/Bryanmsi89 17h ago
If you just want to ride an index fund or two, a financial advisor is going to be limited benefit. You might gain some insight but not a lot.
Financial advisors are good to help you actually build a plan, create different buckets or scaffold investments, assist with tax planning, etc.
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u/safbutcho 17h ago
The answer to your question is yes, when they say their advisor they usually mean someone at Fidelity (or another investment house) who takes a small % of their wealth every year. That small % adds up, obviously.
For you I might suggest someone like this:
A fee based advisor that likely charges $250-$500/hr and likely has a 10 hour minimum. Note I said “likely” twice in that sentence.
If several grand once is worth your piece of mind, you may choose that path. Just don’t buy any securities or annuities they try to sell you, and respectfully decline them to take over for a small % of your wealth every year.
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u/jimbo641 17h ago
You don't need a financial advisor. Index and chill, speak w frontier model for advice given your risk profile
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u/Flat-Barracuda1268 17h ago
I'm near retirement now, but I can tell you about my journey and maybe the tidbits will allow you to figure out whether a financial advisor is warranted:
Early stage: worked my W2 jobs, stuffed money into a 401K, accelerated mortgage payoff. Bought a second home eventually sold primary home and moved to second home full time at which time our mortgage was paid off. Eventually without the load of a mortgage on our budget we started accumulating cash. Our liquid assets was around $1M.
Middle stage: Worked with an AUM CFP, he helped with getting our estate docs squared away, clued us in to Roth and HSA, helped restructure the retirement plan in a business I'm part owner of, and set us up with a brokerage account and helped the initial investing. Was costing $5K/yr at the beginning and around $10K/yr when we separated. I used him about 6 years. It was absolutely worth the money, but my financial picture is more complex than someone working a W2 job. Liquid was around 2.5M and financials were mostly on autopilot.
Late stage: The last 5 years or so I've been going it alone. During my time with the CFP I did a bunch of research, got set up with my own tools to do financial picture analysis, simplified my investments a little bit, played with equity ratio to where I'm comfortable with it, and in general feel really good about retiring in a couple months.
Was the CFP worth it when we started working with them? Absolutely. Is it worth it now? No, probably not. The big stuff is taken care of, and our investments are mostly on auto pilot. During our draw down years I will use modelling software to get the tax strategy right. That's really the only thing I'm even slightly worried about and I can always use a fee only advisor to take a look at that.
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u/ohboyoh-oy 16h ago
We talked to one before Firing just to get a third set of eyes on it before pulling the trigger. Went with an outfit that a lot of people on the Bogleheads OG forum had used.
Vanguard and Fidelity both offered me a free portfolio review when our assets crossed some threshold. I didn’t take them up on it but I know people who did and found it helpful to have an external review.
There’s places like hellonectarine but when I looked into that I felt like it would be very basic and I’m likely to know more than they do (but I’ve been at this a long time).
There’s bonafide one-time fee planners. Cost seems to run $5-8k for a plan.
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u/Low-Kaleidoscope-803 15h ago
Currently FIREd. Have never met with or paid a financial advisor. Did consider a one time planning session pre-FIRE focused specifically on tax planning and withdrawal methodology, but instead did what I’ve always done with questions in the past: consulted Bogleheads (both forum and wiki), and modeled various options myself using several tools including a free trial of ProjectionLab, and eventually incorporated the parts I thought were important to my situation into my spreadsheet-of-truth.
I don’t think paying a fee-only advisor a one-time fee for a consult is unreasonable, despite the fact that I haven’t done so. I would caution against anyone, fee-only or not, who charges by percentage of AUM, unless your goal is really not to have to think about your finances and completely outsource both the thinking and the execution. Otherwise, there’s simply not enough that changes on an ongoing basis for that arrangement to be worth it.
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u/skunimatrix 15h ago
Once you have Flagship at vanguard you technically have one. I’ve never talked to mine.
I do have an advisor at JPM. Had him set up a 10 year muni bond ladder in our taxable brokerage there. Had him reinvest the last two quarters interest into 30 year treasuries @ >5%. But we also have a SBLOC with JPM.
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u/angrynirritable 15h ago
In my experience, a financial advisor tells you how to invest your money and they want a cut of it. A financial planner tells you how to manage your money, and they just want to get paid for their time. If you don't need investment advice I'd recommend a planner, not an advisor. It's typically a few thousand to get set up with them and they can give you a clearer picture of your overall financial situation.
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u/Most_Nebula9655 15h ago
I have an advisor at Vanguard. I would start there. They will do an initial plan for free to identify goals and understand probability of success. Costs nothing but time on a call. Whether it is worth having them take over management is a decision you can make later.
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u/smamsone 10h ago
I just need an advisor to help me reallocate my portfolio. I just transferred my brokerage (357 separate stocks), Roth (47 separate stocks) and some other minor accounts. My (then) advisor was charging 1.25% and doing the whole tax loss harvesting thing which overcomplicated everything.
Hence, I need to talk to someone about selling off these stocks, covering my positions with accumulated losses, and move into 1-2 index funds (my best guess).
Who should I talk to??
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u/Powerful-Bridge-1472 4h ago
One thing I will say is as you get into retirement. You should definitely have a back up plan if one spouse takes care of all the finances and that spouse becomes cognitively, impaired or passes away having a plan makes a lot of sense
For me, one percentage is completely outrageous. There are definitely fee based people even talking with Vanguard advisors they come off is very sales. He don’t really ask a ton of questions. I haven’t been impressed.
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u/Flux_Inverter 3h ago
I would recommend meeting with an independent CFP. They offer financial advising as a service, they do not sell products, and are a Fiduciary. They will give you a financial health check up. It will involve taxes, retirement planning (some specialize in FIRE), estate planning, and potentially some feedback on your investments. Since they are professionals in the field, they may know of things you do not (expense reduction, less known indexes, tax planning tactics, etc). You can pay a flat advisory fee ($1,000-$3,000) for an annual checkup and financial plan, like visiting a doctor for an annual physical.
Do not have to go every year if your situation is simple. There are Robo-Advisors available at some financial firms that are lower cost and may be adequate if you have a simple situation (single with no kids).
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u/Awkward_Passion4004 14h ago
Those of us fortunate enough to have been raised in financial/investment literate households generally have little need for "financial advisors."
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u/thatnumberafternine 19h ago
When looking for a financial advisor, this sub would say find one that is fee only and a fiduciary. This means they do not charge an AUM fee.
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u/xzftgyhuik 19h ago
Fee-only can charge % of assets. The wording you're looking for is flat-fee advisor.
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u/Quirky_Professor8628 18h ago
You can do all you need using the brokers tools.
Once you reach $5M or so, then it might make sense to hire a private FA.
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u/thatguywithtentoes 19h ago
If you are looking for someone to bounce ideas off of, you get complimentary financial planning and guidance from Citibank as a Citigold client. This requires at least $200k in accounts with Citibank which should be doable if you transfer some brokerage assets over.
I know that other brokers and banks have similar free advisory available for self directed investors so you can look into that.
Otherwise, if you want to get paid advice, take the other suggestions and get a flat fee fiduciary advisor.
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u/Ok_Meringue_9086 19h ago
You think this is unbiased advice? From a bank? No way
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u/thatguywithtentoes 17h ago
Seems like a cheap/easy way to get get a 3rd party view if you use self directed investing. If they will offer the for-pay advisory products then you just decline and state that you are comfortable using self directed. Honestly, I find it to be a useful way to get another POV. ¯_(ツ)_/¯
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u/Dos-Commas 19h ago
I don't see the value of a financial advisor for an index fund only portfolio.