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Fee only advisor help

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  • Avatar Bdoc 
    Participant
    Status: Physician
    Posts: 3
    Joined: 01/10/2019

    Hello WCI community. I recently finished residency and have been reading these forums almost daily for over a year and proud to say I’m on my way to net zero thanks to you all.

    This post is on behalf of my father: A brief background: He is also a doctor who has been making about 250,000 his whole life and living paycheck to paycheck thanks to too much house, car etc but does max out his 401k every year. He has whole life insurance which he “loves” and has had it for >30 years and wont even talk to me about it. I finally got him to consider selling the house and stop renting 400$/month cars. He is almost 70 and loves working and never wants to retire. He has about 1.5 m all in tax deferred with none in taxable and only a minimal amount in roth. It is currently all at TDameritrade and managed by Edelman Financial who charges 1.39% AUM. I finally convinced him that it is a bad idea but he insists on having someone manage his finances as he realizes he does not know what to do. I do not want that to be me for multiple reasons so I have found a few recommendations on this site that he is now looking over.

     

    My question: Do fee only advisors get access to the account and make the trades on his behalf like Edelman or does he have to physically click the buttons to make the trades himself? Is there any downside to using out of state advisors or should we try and find someone in his state?(NYC area). On average, how many times a year do these advisors make changes? I assumed it would be around 4 times year for a few hours each time which would be significantly less than Edelmans 1.39% AUM. The more information I have the better chance I will have to convince him.

     

    Thanks again for sharing all your knowledge

    #180171 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 1606
    Joined: 01/03/2017

    This is a great example of how physicians can still set themselves for retirement despite making horrible financial decisions their entire investing life. I think the answer to your questions is going to be what he prefers. Does he feel more comfortable sitting down in person or is he ok with telephone, e-mail, Skype? Depending on his plan and goals, they may only need to make changes once a year. He’ll have to invest more time up front to talk about goals and specifics. I’d get him the Bogleheads Guide To Investing and see if he would feel comfortable doing it himself after reading that. Maybe his eyes will open up when he sees how much money he is likely wasting.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #180184 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3002
    Joined: 01/08/2016

    Vanguard will do it for 0.3%….

    #180187 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6901
    Joined: 01/09/2016
    I’ll tell you how we do it to give you at least some context:
    Do fee only advisors get access to the account and make the trades on his behalf like Edelman or does he have to physically click the buttons to make the trades himself?

    If the account is not held with an employer, the advisor typically makes the changes. We can screen-share with clients who need more help, though.

    Is there any downside to using out of state advisors or should we try and find someone in his state?(NYC area).

    Click to expand…

    The downside to an OOS advisor is that all communication is via the computer. For example, all of our meetings are via video-conference and not all older clients are comfortable with that. However, I’ll be 62 in a couple of days so age is definitely not a limiting factor. We have worked with clients who have 3-way meetings with the child logging in from a separate location and basically implementing our recommendations. But your dad may be far more comfortable sitting across a table. The downside of local is that you are limited to what’s available in his vicinity, which may be limited.

    On average, how many times a year do these advisors make changes?

    Click to expand…

    We rebalance 1x yr. and/or when there is a significant infusion or withdrawal of funds. Other advisors will use a different schedule or make trades based on secret information, techniques, and timing. (You might be able imagine what my opinion is of those methods.)

    Honestly, given what you’ve shared about your dad, what he most needs is the financial planning component. This situation is a little concerning.

    Welcome to the forum – nice to meet a former lurker?! And a tip of the hat to anyone who doesn’t need an explanation of the difference between “fee-only” and “fee-based”.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #180192 Reply
    Avatar Bdoc 
    Participant
    Status: Physician
    Posts: 3
    Joined: 01/10/2019

    Thank you so much. The above answers are exactly what I was looking for. Just an FYI, these are the funds Edelman has my father in. Now I will have to go through them but it looks like they are actively managing different index funds(is that considered active investing?). It appears they trade funds multiple times a week and my father thinks he cannot do that. I told him it is their tactic to confuse him. I would have to imagine there is serious overlap of stock ownership with all these different funds but I will have to look closer to see what they individually consist of.

     

    VANGUARD INDEX FUNDS GROWTH ETF VUG

    DFA US LARGE CAP VALUE I DFLVX

    ISHARES TRUST RUS 1000 VAL ETF IWD

    ISHARES TRUST EXPONENTIAL TECH ETF XT

    DFA FIVE-YEAR GLOBAL FIXED PTF DFGBX

    ISHARES TRUST IBOXX INV CP ETF LQD

    FEDERATED INVESTMENTS FEDERATED TREASURY OBLIG FUND ZFI03

    VANGUARD SHORT TERM TREASURY ADMIRAL VFIRX

    ISHARES TRUST 3 7 YR TREAS BD ETF IEI

    DFA US SMALL CAP VALUE PORT. DFSVX

    DFA INTERM GOVT FIXED INCOME I DFIGX

    ISHARES TRUST S&P MC 400VL ETF IJJ

    DFA SHORT TERM EXT QUALITY PTF DFEQX

    DFA US MICRO CAP FD DFSCX

    ISHARES TRUST MSCI EAFE ETF EFA

    DFA INTERNATIONAL VALUE I DFIVX

    ISHARES TRUST RUS 2000 GRW ETF IWO

    SPDR INDEX SHARES FUNDS S&P NORTH AMER ETF NANR

    ISHARES TRUST S&P MC 400GR ETF IJK

    DFA TWO-YEAR GLOBAL FIXED PTF DFGFX

    DFA EMERGING MARKETS CORE EQUITY I DFCEX

    DFA INTL SM CAP VAL PORT DISVX

    DFA INTL REAL ESTATE SEC PTF DFITX

    VANGUARD INDEX FUNDS REAL ESTATE ETF

    #180208 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3002
    Joined: 01/08/2016
    It appears they trade funds multiple times a week

    Click to expand…

    !!!!!!!!

    #180211 Reply
    Liked by snowcanyon
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6901
    Joined: 01/09/2016

    I got tired of reading through the list?. This is so unnecessary.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #180220 Reply
    Liked by snowcanyon
    Avatar fakedoc 
    Participant
    Status: Dentist
    Posts: 3
    Joined: 07/23/2018

    Your dad is paying over 20k a year in AUM, not even counting all the loaded BS mutual funds I’m sure are in that list. That financial adviser is going to be pissed when you take this over and set him straight. Your dad is probably one of his best cash cows.

    #180237 Reply
    Avatar jm129 
    Participant
    Status: Physician
    Posts: 8
    Joined: 12/29/2018

    I agree with fakedoc. This is little saddening. DIY with simple 3 funds portfolio or fee-only advisor is a way to go in his case.

    Perhaps you can use portfolio analysis and graphs to show him the impact of the fees on the investment returns.

    This is where I again appreciate the work of bloggers like white coat investor, POF to improve the financial literacy among physicians and empowering them.

     

    #180250 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 1390
    Joined: 09/18/2018

    DISVX   Foreign Small/Mid Value

    DFCEX  Diversified Emerging Mkts

    Johanna got tired. I think i figured it out.Pick a box (9) x foreign and domestic (2) = 18 + 6 bonds and reits for flavor = 24 holdings.

    Just about any type of investment choice you want is included. Yes sir, foreign small cap value stocks, right there, it’s in DISVX. The question is why?

    What are the target allocations and why?

    1) Stock/Bond allocations= appropriate for his risk perception and capability.

    2) Total world or us market = two funds or four funds?

    3) The hardest part of this is to untangle the mess and have a withdrawal strategy that lasts and is tax efficient.

    I would recommend moving to Vanguard with the advisor.

    I got tired of reading through the list?. This is so unnecessary.

    Click to expand…
    Vanguard will do it for 0.3%….

    Click to expand…

    The tilt or exposure does not add value to the total portfolio. At his age, he does not need to tilt significantly to any value/growth, large/small, us/foreign/emerging.

    Honestly, given what you’ve shared about your dad, what he most needs is the financial planning component. This situation is a little concerning.

    Click to expand…

    This on you because it is your father. Going on 70 he has alot coming down the road. RMD’s are coming soon, social security if he hasn’t claimed it and I would assume dwindling income if not going away completely. He definately needs a handle on his expenses and incomes. What is his withdrawl strategy?

    He has about 1.5 m all in tax deferred

    Click to expand…

    Any type of illness requiring home care or long term care can easily disrupt his retirement plans. A 4% withdrawal rate is really 3% because of taxes. Any large expense like a roof or car, will be taxed and reduce the future withdrawals. If you are like most, any shortfall will fall to you to figure out in the future. He can easily eat through $1.5mm in 10-15 years with spending and taxes.

    #180253 Reply
    Liked by snowcanyon
    Avatar snowcanyon 
    Participant
    Status: Physician
    Posts: 318
    Joined: 10/22/2018

    Does he have LTC insurance? I hope so- he has too much for Medicaid and not enough to fully self insure. If he doesn’t, he needs an elder care attorney to discuss asset protection.

    What specialty/how much longer can he work?

    How much is his house worth, and would he be willing to sell?

    If he has any military service (so many older men do) then he needs to register with the VA. They offer more than you realize.

    Agreed Vanguard might be an option, or a fee only FA in his area. Remember “fiduciary” means little as of last year.

    I feel your pain- my parents won’t nix the life insurance, and they won’t fire their “friend” who manages their money for some obscene fee. That generation had it so good they could just toss money away and never really had to think about it, I guess.

     

    #180262 Reply
    Liked by Tim
    Avatar Bdoc 
    Participant
    Status: Physician
    Posts: 3
    Joined: 01/10/2019

    Again thank you for the wonderful advice. I will have to sit down with him again this week and hopefully make some progress.

    Does he have LTC insurance?

    Click to expand…

    He thankfully does have LTC insurance.

    How much is his house worth, and would he be willing to sell?

    Click to expand…

    Hoping to get 2m for his house but he just refinanced for the 3rd time I think(I think he still owes around 800,000 at 3%). And just yesterday he told me he is going to invest 30grand into redoing the bathrooms(I have no idea where he is going to get the 30k or if it will even increase the value of the house).

    What specialty/how much longer can he work?

    Click to expand…

    He is a pediatrician and only does outpatient so he can feasibly continue working but who knows what the future holds.

     

    I think after reading all of the advice I will try and find a Fee only Financial advisor that can sit down with him in person and physically make the changes for him.

    #180470 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 6901
    Joined: 01/09/2016
    I think after reading all of the advice I will try and find a Fee only Financial advisor that can sit down with him in person and physically make the changes for him.

    Click to expand…

    Suggest you check out Garrett Planning Network for someone near your dad. All fee-only advisors and all charge by the hour.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #180501 Reply

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