Calling for Backup
WHEN I RETIRED, I was surprised by how many of my friends and former colleagues had a financial advisor. My thought: Why would folks pay someone else to manage their money when they could easily do it themselves?
But I found out early in retirement that hiring an advisor was a good idea. There���s a big difference between investing while drawing a paycheck and investing without one. When I retired, I realized that the money I was investing was all the money I���d ever have, except for Social Security���and Social Security replaces just 40% of the average worker���s salary. With the stakes so high, I was hesitant to manage my own money.
When I turned age 67, I decided it was time to hire an advisor. I felt someone else could do a better job than me, not because the advisor would select better investments, but because he or she would be a more patient and less emotional investor.
I wasn���t looking to hire a full-service financial planner who would advise me on topics like estate planning and insurance. I���m pretty well set in those areas and I already have professionals helping me. Instead, I wanted an advisor who would create a plan for meeting my financial goals and help me manage my investments. Here are some things that were important to me when looking for a financial advisor:
After one advisor failed to turn up for our appointment, I realized how important it was to have someone who was dependable and trustworthy.
I wanted someone with reputable credentials, such as the Chartered Financial Analyst or Certified Financial Planner designation. In addition, the advisor couldn���t work on commission because that creates an incentive to push high-cost financial products.
I wanted my own dedicated financial advisor, with the ability to schedule an appointment when needed. I wasn���t willing to leave my investment portfolio in the hands of a robo-advisor, with no human interaction.
I wanted a portfolio designed specifically for my circumstances, needs and goals.
I wanted my portfolio built primarily with low-cost, broad-based index funds.
I wanted transparency, with the ability to go online and see up-to-date information on the total management fees incurred, my portfolio���s performance and the likelihood of meeting my financial goals.
I wanted excellent customer support not just from my financial advisor, but from the whole organization.
I didn���t want to pay for the initial investment plan. If I didn���t like the plan, I wanted to be able to walk away without incurring a fee.
Finally, I wasn���t willing to pay someone 1% of assets per year to manage my investments. It would have to be considerably less.
I decided to go with Vanguard Personal Advisor Services. I���ve been a Vanguard Group client for more than 35 years and felt comfortable with the people there managing my money. Since I already had most of my money with the firm, it was easy to swap over to the advisory service.
After three years, I���m happy with my portfolio���s performance and with the customer service. But in the back of my mind, I keep wondering whether I���d be better off in a Vanguard Target Retirement Fund that meets my desired asset allocation.
These funds offer a diversified, professionally managed portfolio���and the cost is just 0.12% to 0.15% a year. That���s less than half the cost of the advisory service, which is typically 0.3% a year plus the expenses of the underlying funds. Each target fund is made up of low-cost, broad-based index funds, similar to what my advisor-managed portfolio owns. It���s a type of fund you can literally forget about because it makes all the investment decisions. You don���t even have to keep tabs on your asset allocation because it rebalances for you.
How important is access to a financial advisor and having a personalized financial plan? Is it worth the added expense? So far, the answer is, ���yes.��� But those target retirement funds sure look tempting.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier��articles��and follow him on Twitter @DMFrie.
But I found out early in retirement that hiring an advisor was a good idea. There���s a big difference between investing while drawing a paycheck and investing without one. When I retired, I realized that the money I was investing was all the money I���d ever have, except for Social Security���and Social Security replaces just 40% of the average worker���s salary. With the stakes so high, I was hesitant to manage my own money.
When I turned age 67, I decided it was time to hire an advisor. I felt someone else could do a better job than me, not because the advisor would select better investments, but because he or she would be a more patient and less emotional investor.
I wasn���t looking to hire a full-service financial planner who would advise me on topics like estate planning and insurance. I���m pretty well set in those areas and I already have professionals helping me. Instead, I wanted an advisor who would create a plan for meeting my financial goals and help me manage my investments. Here are some things that were important to me when looking for a financial advisor:
After one advisor failed to turn up for our appointment, I realized how important it was to have someone who was dependable and trustworthy.
I wanted someone with reputable credentials, such as the Chartered Financial Analyst or Certified Financial Planner designation. In addition, the advisor couldn���t work on commission because that creates an incentive to push high-cost financial products.
I wanted my own dedicated financial advisor, with the ability to schedule an appointment when needed. I wasn���t willing to leave my investment portfolio in the hands of a robo-advisor, with no human interaction.
I wanted a portfolio designed specifically for my circumstances, needs and goals.
I wanted my portfolio built primarily with low-cost, broad-based index funds.
I wanted transparency, with the ability to go online and see up-to-date information on the total management fees incurred, my portfolio���s performance and the likelihood of meeting my financial goals.
I wanted excellent customer support not just from my financial advisor, but from the whole organization.
I didn���t want to pay for the initial investment plan. If I didn���t like the plan, I wanted to be able to walk away without incurring a fee.
Finally, I wasn���t willing to pay someone 1% of assets per year to manage my investments. It would have to be considerably less.
I decided to go with Vanguard Personal Advisor Services. I���ve been a Vanguard Group client for more than 35 years and felt comfortable with the people there managing my money. Since I already had most of my money with the firm, it was easy to swap over to the advisory service.
After three years, I���m happy with my portfolio���s performance and with the customer service. But in the back of my mind, I keep wondering whether I���d be better off in a Vanguard Target Retirement Fund that meets my desired asset allocation.
These funds offer a diversified, professionally managed portfolio���and the cost is just 0.12% to 0.15% a year. That���s less than half the cost of the advisory service, which is typically 0.3% a year plus the expenses of the underlying funds. Each target fund is made up of low-cost, broad-based index funds, similar to what my advisor-managed portfolio owns. It���s a type of fund you can literally forget about because it makes all the investment decisions. You don���t even have to keep tabs on your asset allocation because it rebalances for you.
How important is access to a financial advisor and having a personalized financial plan? Is it worth the added expense? So far, the answer is, ���yes.��� But those target retirement funds sure look tempting.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier��articles��and follow him on Twitter @DMFrie.The post Calling for Backup appeared first on HumbleDollar.
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