Financial Adivsor

[Angio333]

I finally have my finances in order to the point where its time to meet with a financial advisor. I know I can do it all myself, but I do want someone with more knowlege than myself to help me. A mistake made now can have major consequences thirty years from now.

If you see a financial advisor, which type do you prefer:

Commissioned - Makes money when he sales you products
Percentage - Makes a percentage off of the growth of your accounts
Fee based: Charges a set fee for advice and his time. No commssion or % fee

If you use a fee based financial advisor, how much do you pay and how often do you meet with him?

Thanks.

[littleroc02us]

If you see a financial advisor, which type do you prefer:

Commissioned - Makes money when he sales you products
Percentage - Makes a percentage off of the growth of your accounts
Fee based: Charges a set fee for advice and his time. No commssion or % fee

None of those. I would chose an advisor who is a teacher that can explain what things mean to you, then based on that I would consider his fees.

[Scanner]

Well, the above is just a given to me - you always want someone with good communication skills to serve in any kind of advisory capacity for you.

That being said, I think the percentage arrangement is the best compromise. I mean, fee-for-service is probably the best in the longrun but it's hard to shell out all that money at the beginning for advice (people have a hard time paying for advice) and honestly, at the beginning not much work needs to be done on your portfolio - maybe some life insurance/disability ins. recs.

Designing a portfolio isn't rocket science.

The worst is commissioned IMO...which unfortunately is the most common out there.

[Robert742]

I would avoid all of them. Fee-based planners get paid fees AND commissions. If you must go with a planner, go fee only at an hourly rate.

Unless you already have a large amount to invest, or have tax issues, I would not bother with a planner. If you want to avoid mistakes in investing, you need to understand the basics of investing. Even if you use a planner, you need to know enough to make sure you are getting sound advice. Most planners don't know more than the basics, anyway.

I know some people have no interest, or are intimidated about investing. But one of the biggest mistakes you can make is to blindly trust a planner. To take a phrase from the Reagan era, you need to trust -- but verify! After you know the basics, you will realize you probably don't need an advisor.

[disneysteve]

If you see a financial advisor, which type do you prefer:

Commissioned - Makes money when he sales you products
Percentage - Makes a percentage off of the growth of your accounts
Fee based: Charges a set fee for advice and his time. No commssion or % fee

If I were going to see an advisor, I would only ever consider the 3rd option.
The 1st option isn't really an advisor - it is a salesperson. Stay away.
The 2nd option only applies if you are turning over your portfolio to this person to manage, which is something I would never do.

If I'm going to an advisor, it is because I'm seeking advice and advice is all that I would be willing to pay for.

Fee-based planners get paid fees AND commissions..

Why do you say that? If I have an advisor review my portfolio and make comments or suggestions about things I could be doing better, there wouldn't be any commissions involved. I wouldn't be investing with/through this person. I would just be getting their input and then going out and making my own investment decisions and transactions.

[jpg7n16]

Robert was making the distinction between a fee-based planner, and a fee-only planner.

Fee-based planners, charge a fee for the plan - and may also earn comissions if you purchase those products through their firm.

Fee-only planners, only charge a fee for the plan - and do not usually sell the products recommended in the plan.

[Robert742]

Robert was making the distinction between a fee-based planner, and a fee-only planner.

Fee-based planners, charge a fee for the plan - and may also earn comissions if you purchase those products through their firm.

Fee-only planners, only charge a fee for the plan - and do not usually sell the products recommended in the plan.

Thanks for making the distinction clear, JPG. I have a relative that once paid a fee to meet with an Ameriprise advisor only to receive a sales pitch for a Universal Life insurance policy as a college savings plan, and sold a target-date retirement fund with a front load, composed of index funds with high annual expenses. Needless to say, I was upset when I found out about the situation.

[dczech09]

You do not NEED a financial advisor. A lot of financial advisors out there possess many conflicts of interest as just has been pointed out about the Amerprise advisor. On a side note, Ameriprise has a horrible BBB reputation so I'm not surprised.

With proper education, you can EASILY handled your investments. By proper education, I mean some basic knowledge on how money and investing works. Its just terrible that the public school has failed most of us on this topic. You do not need a Bachelors in Finance (which myself and a lot of peeps on here have).

The investment community has made it easier and safer for normal everyday people to handle their own investments. If you are seeking a second opinion or an affirmation, you can ask us for free or go with a advisor/planner.

If I cannot talk you out of the advisor/planner route, then find someone who is fee-only and is someone you trust. Trust is the most key when hiring a professional. Also know that the commissioned guy will only meet with you if you are seeking to buy.

[Robert742]

If I cannot talk you out of the advisor/planner route, then find someone who is fee-only and is someone you trust. Trust is the most key when hiring a professional. Also know that the commissioned guy will only meet with you if you are seeking to buy.

LOL, I agree with what you say, but in my time knocking around various personal finance boards, I wish I had a nickel for every time someone working in financial services said the most important thing is to work with someone whom you trust. I would be a lot closer to my retirement goals.

It is hard to know who is trustworthy and who is not worthy of trust. I remember an article in the NY Times not too long ago from a personal finance writer -- someone with expertise in things like choosing a financial advisor -- who was surprised to find out his own advisor was stealing from the advisor's other clients. The writer took great pains to vet a qualified advisor with a great education. The advisor looked great on paper and seemed to be worthy of trust, except he was skimming from some of his client"s accounts.

This is why I say trust, but verify. Get 2nd or 3rd opinions on important financial decisions, and be aware of any conflict of interest or bias.

Always check your statements for accuracy. This helped me this weekend when I "discovered" my Discover account did not credit my 5% quarterly rewards properly. I wonder how much money Discover saved by this computer "error" in their favor. Trust, but verify? Maybe I should change that to trust no one and verify everything -- but I would hate to be that cynical.

[troyw]

I finally have my finances in order to the point where its time to meet with a financial advisor. I know I can do it all myself, but I do want someone with more knowlege than myself to help me. A mistake made now can have major consequences thirty years from now.

If you see a financial advisor, which type do you prefer:

Commissioned - Makes money when he sales you products
Percentage - Makes a percentage off of the growth of your accounts
Fee based: Charges a set fee for advice and his time. No commssion or % fee

If you use a fee only financial advisor, how much do you pay and how often do you meet with him?

Thanks.

We use a fee based planner. He charges $150 per hour but, after the initial year, he only bills us for ~2 hours. That's $300 - $400 per year to not have to "stress" over our investments...well worth it to us!

[disneysteve]

We use a fee based planner. He charges $150 per hour but, after the initial year, he only bills us for ~2 hours. That's $300 - $400 per year to not have to "stress" over our investments...well worth it to us!

After the initial visit when a full review gets done and a plan gets designed, what happens at the annual visits that is worth $300-400 to you? That's a lot of money if all he is doing is looking things over and saying, "Everything looks good. Keep it up." Even if he makes a couple of suggestions for you to rebalance, I can't see paying hundreds of dollars for that. So for those of us who have never worked with an advisor, please tell us what service he provides that you feel are worth the cost.

[troyw]

After the initial visit when a full review gets done and a plan gets designed, what happens at the annual visits that is worth $300-400 to you? That's a lot of money if all he is doing is looking things over and saying, "Everything looks good. Keep it up." Even if he makes a couple of suggestions for you to rebalance, I can't see paying hundreds of dollars for that. So for those of us who have never worked with an advisor, please tell us what service he provides that you feel are worth the cost.

A typical meeting goes as follows...

Two hours of in person meeting to discuss current state of accounts and any changes necessary.
Review life insurance.
Discuss any family changes like pregnancy, etc.
Debts are addressed to ensure we are still on track.
Investments are discussed / reviewed to ensure our allocation is correct.
Advisor recommends any necessary changes but we make the changes and purchases ourselves.

The $400 we pay annually represents less that 0.5% of our portfolio which is an acceptable amount for us in our current situation. I guess we consider it "piece of mind" to not have to pick our investments across all our accounts.

I will say this, our advisor was great when we took out our long term disability policies last year. He spent a lot time calling the insurance agent to ensure that our policies were up to par and that we being covered appropriately. Also, phone calls and email during the year are not billed because they are included in his $400 annual fee.

Hope this helps...

[JoshuaHeckathorn]

I've met with 3 different advisors over the past few years just to see if one of them could sell me on why I should pay them for their advice. I'm no investing guru, but I do have a BS and MBA in finance, so I consider myself a tough sell.

I've walked out of their offices every time thinking "you've got to be kidding me"! Most of these guys don't know much more than the basics, even the ones that claim to only work with high net worth individuals.

If I ever did choose one, I would definitely choose a fee-only advisor.

[dczech09]

I've met with 3 different advisors over the past few years just to see if one of them could sell me on why I should pay them for their advice. I'm no investing guru, but I do have a BS and MBA in finance, so I consider myself a tough sell.

I've walked out of their offices every time thinking "you've got to be kidding me"! Most of these guys don't know much more than the basics, even the ones that claim to only work with high net worth individuals.

If I ever did choose one, I would definitely choose a fee-only advisor.

I concur. After I graduated with my BS back in May of 2009, I landed a job as a financial advisor with a firm in the Twin Cities. My "training" consisted of these guys trying to sell me on selling their whole life and annuity products. I crunched the numbers a realized something was amiss; there was no way their "projections" would bear fruit.

Half of the people in the firm had some high profile clients, made good money, and were dressed in good fashion. However, when it came to math and any concrete knowledge, they knew next to nothing.

These people are salesmen. Don't get me wrong; we need salesperson in our society and ppl who can process transactions. However I think calling them "advisors" is misleading. Only about 10% of these people deserve the title.

[dczech09]

Just a quick FYI, no I do not work for this firm anymore and am no longer a licensed and registered rep.