full discretion financial advisor

[feh]

Has anybody here ever used a financial advisor w/ full discretion (they have control over your funds; make trades without your prior approval)?

I will provide more details as to why I'm asking in a later post. For the time being, I'm just wondering if anybody here has such experience.

Thanks!

[jIM_Ohio]

I know one, and am working at becoming one

what you describe might be a broker, salesman or financial planner. It depends on what you need done and how much education you need vs how much you want someone to just make decisions for you.

[feh]

Thanks for the replies. Let me explain the situation.

My wife and I are both 44. We've done a good job of managing our finances and saving, and might have the funds to retire in about 10 years (IMO). To this point, we've handled all investing decisions ourselves.

I have a decent amount of investing knowledge, but I'm far from an expert. I understand asset allocation, diversification, etc. But, the finer points of investing are beyond me (in particular, tax planning/strategy).

Now that we are approaching the "end game", I feel like I need help getting to the finish line. I don't want to screw up 20 years worth of savings at this point. To that end, I started looking for a financial planner that could help us w/ a plan. The initial plan was that we would pay somebody for their advice (hourly rate), and implement the plan ourselves.

During this process, a full discretion advisor came to our attention. We met with him yesterday at our home, and he let us know about his background and services. He is highly recommended by the CEO of my company, somebody I've known for 10 years and have great respect for; he's an excellent businessman. He himself has a background in the world of investments and used to work w/ the prospective financial planner. In fact, the financial planner manages his (the CEO) portfolio.

I really don't have any doubts about the financial planner or his abilities. My reservations are 1) I wouldn't have daily control of our investments any longer and 2) the fees for such a service are substantial, in my opinion. On an annual basis, the fee is 1% of the portfolio value.

Our net worth is currently around $1.2M. About $350K of that is our home, which we own outright. So, we'd be putting him in charge of something in the neighborhood of $800K.

Doing things myself, our returns have pretty much mirrored the S&P 500. The question is - will having a financial planner save/make us more money than the annual fee for the service?

[jIM_Ohio]

The 1% management fee is typical, with a higher asset base that percentage drops down.

It is more profitable to sell account management than advice. The advice is a one time $1000-$10,000 transaction, the account management fee is ongoing - 1% per year.

Depending on the firm, the commission on the $10,000 financial plan could be all 10k to the planner or a smaller portion of that to the planner.

[disneysteve]

The question is - will having a financial planner save/make us more money than the annual fee for the service?

IMHO I doubt it. (But that's just me.)

Me, too.

I highly doubt that the planner can do anything that you can't do yourself. I would not have any problem with paying an adviser to review your portfolio and suggest tweaks to your plan. In fact, I plan to do just that in about 5 years when I'm 10 or so years from retirement. But I would never, under any circumstances, hand over control of my money to someone else.

[jIM_Ohio]

This is why "un biased" advice is tough to come by.

If a planner only sells financial plans, think of how many plans need to be sold to make a living (think $2500 per plan times number of clients for livable wage). That is at least 24 clients per year, then how many of those clients need help the next year? That is a lot of work.

As best I can tell every advisor, whether they have a CFP or not, will be selling something in addition to advice. If you need advice, remind the advisor what you need, tell them the 2-3 problems you forsee, and ask them for their advice on those issues.

That advice will have a premium fee on it (like $1000-$5000) with a printed plan to go with the advice.

[Slug]

Could never do it. Been trying for years just to get the gumption to pay someone to do a portfolio review. It's just not in me to spend that kind of money on advice when I feel like I'm getting it 90% right. Maybe one day when I have more to lose.