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Investment Strategies / Mechanical Investing
No. of Recommendations: 0
I know this has been discussed here a lot, and I also know that I lean toward ... not using one.
So, largely wondering if maybe it could still be advisable in our situation. Any comments or experience much appreciated.
My in-laws have had this particular financial planner for 20 years, and she has become very appreciated by them.
Her broker-dealer is LPL, and advisory services provided by IFG Financial.
Through interactions we've had with her over the years, she seems professional and reputable.
She has a $500K minimum, charges 1% AUM, and does not do fee-based.
FIL passed away a few years ago, and MIL is having moderate health issues.
So the financial planner has been urging my wife and I to get an estate plan with details hammered out.
We have an adult special needs daughter, so we need special needs trust, and another kid. Both in their 20's.
I also find myself 1/3 owner and COO of a growing business with around $5M annual sales that takes more than all of my time.
We are nearing conventional retirement age, although with a business that does not seem anywhere on the horizon.
Anyway, a local estate planning attorney with experience in special needs trusts has drawn things up for us.
On the one hand, I recoil at paying someone 1% AUM for what is almost certainly mediocre performance at best.
Yet, there are a couple of things I worry about. For one, my own investing results have been nothing to crow about the past few years.
Two, and more importantly, I worry about the "you don't know what you don't know" thing.
Estate planning, special needs, business issues (including potentially passing on my share of the business if something bad happens), tax issues, etc.
There is a lot to know, and frankly I find all of that very boring and while I like to think I could manage it, that's probably wishful thinking.
I'm pretty good at procrastinating, and I know there are decisions to be made about a lot of areas.
Taxes, business succession, long term care insurance or not, passing on any wealth we end up with, etc.
Those are the areas where, perhaps, good advice can be worth it.
Mark
No. of Recommendations: 0
I have never used a financial advisor, but neither do I give financial advice, so I have looked into them from time to time for family members. I never considered anything other than a fee-based service. Lawyers, accountants, dentists, plumbers -- all work on the basis of fee for services. I do not understand why financial advisors should not do the same.
Some do. And if I ended up using an unusual amount of their time, I'd expect them to charge me for it. But they don't get to charge me just because I've got money worth managing.
All that said, some of the things you're dealing with, especially the trust, are things I'd take to a lawyer, not a financial planner.
Baltassar
No. of Recommendations: 2
For what it's worth, a few questions to ponder. Given your description I'm probably close to your age.
* Could you pay said FP to keep you in a defensive posture for that 1%? (In my thinking, preservation of capital is more important than aggressive growth where you're at.)
* How risky / likely to fail is your business? (Influences first question).
* Have you looked into a single fund approach like a 50/50 or a retirement date 2030 fund at a brokerage? They are extremely low fee ( less than .2%), zero maintenance, set it and forget it.
And with that decision out of the way, you can focus your limited non-business mental cycles on getting a great estate plan set up quickly, and focus the vast majority on your business as long as that takes.
Happy for you - I wish I had a part share in a successful business to keep me busy as I ponder dropping out of the corporate IT world.
FC
No. of Recommendations: 1
One thing to consider is time management, and I'm not referring to your procrastination skills.
With a special needs child and a business to run, you're skosh on time, and managing a trust of any sort takes a fair amount of it. It may be that offloading that task to a financial planner would be worth it. Mediocre performance isn't the same as bad performance, it's just not that good.
On the other hand, setting up the estate plan takes a one-time potful of time, while running it takes up less than a potful, but more frequently. It may be that the planner is worth the cost to get things set up, then you run it, with a consult with a planner every year, or two or three, to keep things on track.
Eric Hines
No. of Recommendations: 2
We have an adult special needs daughter, so we need special needs trust, and another kid. Both in their 20's.
My wife is involved with a local group of families with special needs. Future care and estate management is a common subject amongst the parents. Amongst the group most of those financially secure have gravitated to the same lawyer, and to the same financial advisor. I have heard only favorable comments about how satisfied they are with both. Not every lawyer or financial advisor had the expertise to handle a special needs situation.
I’d contact as many other local special needs families for recommendations. You are fortunate to be in a financial situation capable of providing for your daughter.
RAM
No. of Recommendations: 3
Thanks all for your comments.
Baltassar:
I do not understand why financial advisors should not do the same.
Yep, me too, which is why I have such a tough time considering it.
FC:
Could you pay said FP to keep you in a defensive posture for that 1%? (In my thinking, preservation of capital is more important than aggressive growth where you're at.)
* How risky / likely to fail is your business? (Influences first question).
* Have you looked into a single fund approach like a 50/50 or a retirement date 2030 fund at a brokerage? They are extremely low fee ( less than .2%), zero maintenance, set it and forget it.
I still lean toward growing assets rather than preservation. Probably I should strike a balance. Maybe something like you mentioned plus some more aggressive MI.
I have quite a bit of BRK and that pretty much sits there slowly appreciating.
On the business, I think it is pretty likely to fail, at least eventually; most do. All I can say is that we try to do a good job and stay on top of things but it is daunting.
Risks abound and as an engineer I'm more focused on those than the rewards.
Bacon:
With a special needs child and a business to run, you're skosh on time, and managing a trust of any sort takes a fair amount of it. It may be that offloading that task to a financial planner would be worth it. Mediocre performance isn't the same as bad performance, it's just not that good.
That would be my basic justification. Have to swallow the 1% thing, or find a fee only planner, but it's not clear that would be much cheaper.
RAMc:
You are fortunate to be in a financial situation capable of providing for your daughter.
True. A good chunk of that I owe to mechanical investing. It would have been a much bigger chunk if I had quit in 2018.
Mark
No. of Recommendations: 1
I briefly (a couple of years) gave a portion of my investments to a local FA. I stopped it because it just annoyed me paying 1% a year. I did it originally to avoid having all my eggs in one basket (me!).
In your case it might be how much are you worth hourly and how many hours it would take for you to do the financial work and compare that to how much you are making at your job/company.
