Q.
I wanted to ask if you knew anything about Larson Financial….I haven't gotten involved with them yet, only went to a dinner where they spoke at and am meeting with a rep today just to get some more information. I was curious as to your knowledge of this company and any info you could provide.
A.
Before answering your question, I need to do the expected disclosure this blog is famous for. I was vaguely aware of Larson Financial from some of their marketing, but first came in contact with them when I was sent a copy of the book Doctor's Eyes Only by one of their advisors, which I reviewed on the blog. The review was actually fairly critical of the book. Although it contained a lot of good information, in my opinion there was way too much advertising included. One of the authors, Tom Martin, subsequently submitted three guest posts that were published on the blog, Lower Your Roth Conversion Rate, Locking In A Lower Capital Gains Tax and Avoiding The Alternative Minimum Tax. Tom and I have been collaborating on a project recently and he flew my wife and I out to Indiana and took us out to a nice dinner the night before we met for a few hours about the project. I learned a lot about Larson Financial in the process that I thought this blog's readers might be interested in. You should be aware that I have not been paid to write this review and that I do not get paid a dime if you choose to hire a Larson Financial advisor.
A Firm Serving Doctors
Larson is focused on serving the financial needs of physicians and dentists. They have offices in 27 states, but will work with you no matter where you live. They consider themselves the nation's largest financial planning firm exclusively for doctors. The organization is a bit of a franchise format, but with fairly heavy control exerted by the central offices both in advice rendered and in the investment portfolios. So when you hire an advisor, you get his expertise as well as that of the central management of Larson. Upon being hired, each advisor goes through a 2 year “fellowship” (their words, not mine) where he receives additional training, mostly geared toward the unique financial needs of doctors. The individual advisors keep a percentage of the fees they generate from serving clients, and then pay Larson a certain percentage toward overhead and profit. Interestingly enough, the profits at the firm-level are all donated to charity through the Larson Financial Foundation, primarily going to support entrepreneurs in poverty-stricken areas of the world, often leading to wells, orphanages, schools, and medical clinics being established. They also lead medical missions and have often included clients to provide medical expertise.
Financial Planning AND Investment Management
Although most of their clients avail themselves of both services, the company actually provides two separate services, and that separation is clear when you examine their methods and fee structure closely. On the financial planning side, clients first work with an advisor to build a comprehensive plan, then you have quick checkups on a quarterly basis, discussing different topics each quarter. In the Summer, you discuss cash flow, budgeting, employee benefits, insurance, and asset protection. In the Fall, you do tax planning and investment strategy, including your retirement accounts. In the Winter, you discuss major purchases, debt management, education savings, financial goals, and retirement planning. In the Spring you do estate planning, charitable planning, and beneficiary reviews. The financial planning fee also includes contract negotiation and review, a valuable service. If the firm is also managing your assets, you are given quarterly investment updates at the same time as these financial planning meetings. Advisors are also “on-call” between meetings to address additional issues. For additional fees they will also do contract review and negotiation, private practice analysis, and practice management activities. Their tax arm(MedTax) will also do tax preparation for you and your practice. Their law arm (Larson Law Firm) will do estate planning, corporate formation, and asset protection. In short, their goal is to be a one-stop shop for all your financial needs. But they're also willing to work with you a la carte for whatever you need help with.
They Use DFA Funds
In conjunction with the University of Chicago and DFA, they've developed 9 portfolios that they try to fit their clients into as best they can. These range from a 20/80 “Risk Averse I” portfolio to the 100/0 “Highly Aggressive” portfolio. They're really all pretty similar, just with a varying stock/bond percentage. They consider the models proprietary information that they spent a lot of time and money on, so while I've got them in front of me, I've been asked not to share the specifics. Suffice to say, they look like your typical small-and-value-tilted, Boglehead-style, Slice-N-Dice portfolios, composed almost entirely of DFA funds. Tom Martin describes the amount of small and value tilting as just as little bit more than DFA's US Equity Core 2 Portfolio. I'm convinced there isn't such a thing as a perfect portfolio, at least known in advance, but these portfolios certainly meet my requirement of being reasonable. Any reasonable buy-and-hold passive portfolio will work just fine for your retirement, as long as you stick with it over the long-term.
I was pleased to see they use DFA funds. If I were going to hire an investment manager (I'm not), using DFA funds would be one of my requirements. I really like Vanguard index funds, but if anyone was going to give them a run for their money, it would be DFA. DFA funds tend to match or slightly outperform Vanguard index funds over the long run and Bogleheads often debate the merits of DFA vs Vanguard. DFA funds aren't true index funds, but they are passively managed, and are done so in several ways that probably make them a little superior to a true index fund. Some smart people peg the advantage at 0.2-0.3% a year when properly adjusted for risk (remember that DFA funds in general tend to have a riskier value and small tilt). If you ask DFA, they may claim a 2-3% a year advantage. Some of their approved advisors might try to claim a 4-6% improvement, but when you pin them down they're usually comparing small and value tilted DFA funds to non-tilted Vanguard index funds. You can compare funds and come to your own conclusions. DFA's US Large Cap Fund has a 10 year return of 8.24% versus the Vanguard 500's 10 year return of 8.23%. DFA's Emerging Market Portfolio I has a 10 year return of 17.50% vs Vanguard's 16.50%. DFA's Small Cap Value Fund has a 10 year return of 13.04% vs Vanguard's 11.37% (but keep in mind that DFA's product is smaller and more valuey and thus riskier.) Unfortunately, you can't really get DFA funds unless you go through a DFA approved advisor like Larson. Many Bogleheads have concluded that it isn't worth it to them to pay an advisor 1% just to get DFA funds, but if you're going to use an advisor anyway, I think most smart folks would agree that using DFA funds would probably make up for at least part of the asset management fee.
Larson Will Manage All Your Accounts
One thing that I thought was pretty cool about Larson is that they're willing to manage and coordinate all of your various accounts, which is pretty important and can boost returns (Larson claims by 2-3%, citing Roger's Tax Aware Investment Management). Right now I have three personal Roth IRAs, a spousal Roth IRA, three 529s, two 401Ks, four taxable accounts, two HSAs, a UGMA account and I'll soon be opening a Solo 401K. I also have two empty traditional IRAs I use for Backdoor Roth contributions and a SEP-IRA I occasionally use. That's 20 accounts, and I've closed 3 others in the last year or so. It wasn't a big deal when all I had to deal with was two Roth IRAs and the TSP, but things get more and more complex as life goes on. Keeping my portfolio balanced across all these accounts becomes a more time-consuming task each year. Larson will work with each of these for you, saving you a significant amount of time, effort, and hassle. They used to email you instructions for those accounts, like your 401K, that they might not have direct control over. However, they've found it works far better to get on the phone with you, have you log on to your account, have you allow them access at the same time, and make any portfolio changes in real-time with their clients. That's a real benefit to someone who doesn't know how to or doesn't want to deal with this stuff. Another cool feature is that they can allow you to use DFA funds within your 401K (as long as it has a brokerage window such as through Fidelity or Schwab), even if they aren't normally available in the 401K.
Larson Is A Full-Service Firm, and They Charge Like It
Larson provides a lot of service, both with regards to financial planning and investment management. But they're not doing it for free (make no mistake, I'd hire them in a second if they were.) They charge fees that I would rate as average to slightly above average. Their financial planning fees start at $375 per quarter ($1500 a year) for an individual, although the fee is waived during training. They don't collect any mutual fund loads since they don't use loaded mutual funds, but they do receive commissions when they sell you a term-life or a disability policy (which is probably the main way residents compensate them for their services.) These commissions range from 40-80% of the first year's premium for most policies. Larson guarantees their financial planning fees in writing each year and expects to save its clients' time and money in an amount more than their fees, otherwise they expect to be fired and refund the fee.
The published investment management fees are:
- <$250K 1.75% AUM
- $250-500K 1.5% AUM
- $500K-$1M 1.25% AUM
- $1-2M 1% AUM
- $2-3M 0.9% AUM
- $3-4M 0.8% AUM
- $4-5M 0.7% AUM
- >$5M Negotiable
Tom Martin doesn't know of a single investor with the firm who is actually paying the 1.75% rate, however. Rates are significantly cheaper if they're managing 401K dollars for your practice. I think it is good that the rates get cheaper as your assets increase, but in my opinion, the rates start too high and they get cheaper too slowly. It obviously doesn't take 2 1/2 times as much effort to manage $3.6 Million as $900K. You have to consider what you're getting though. Keep in mind that many “DFA Advisors” simply won't take you until you get to $500K or $1M, and then just charge you 1% of AUM. At least this way you can get right into your desired portfolio even with just a few thousand dollars right out of residency. A highly-paid physician with a high savings rate won't spend that many years paying more than 1%. Fees are also generally paid “pre-tax,” either as a business expense or from tax-deferred accounts, further reducing the fee.
So, all in, a physician with his insurance in place and a $500K portfolio might be paying $2K a year in planning fees and $6250 in portfolio management fees for a total of $8250. Does that seem like a lot of money? It does to me, that's why I do both my own financial planning and investment management. But if I actually assigned my usual hourly rate to the time I spend doing this stuff, it might look like a bargain. Unlike me, most doctors don't see personal finance and investing as a hobby that is a fun way to spend their time. Although a relatively high percentage of this blog's readers are do-it-yourself investors, the truth is that most doctors desire to and probably should hire a GOOD advisor to help them. I don't have a problem with doctors paying a fair, fully-disclosed fee for good advice and good service. I'm convinced that Larson Financial is giving good advice and will leave it up to the reader as to whether they feel it is being offered at a fair price for them personally. Larson is a great solution for the busy doctor who has little time, interest, or expertise in financial matters.
WCI, I am a resident who recently started working on financial planning with Larson. In our first meeting with them, they tried to upsell us on the investment management at 1.25% fee. Our representative stated (per Vanguard data) that an investment advisor can add about 3% value per year on average. I went to the Vanguard website to learn more about this analysis and stumbled across Vanguard Personal Advisor services. They state the same 3% average value addition, but their fees are way less: 0.30%.
I wanted to get your opinion on the Vanguard investment management service. Is there anything that Larson could be doing differently to merit the additional 0.95% in fees they charge? Thanks!
Well, I have mixed feelings about all of the issues you bring up. Let me explain:
First, I think most people, including most doctors, will benefit from having a competent, low-cost advisor. Maybe 80% or even more. The reason, however, is because they lack the knowledge, sufficient interest to gain the knowledge, and discipline to be a successful do it yourself financial planner and investment manager. That said, I think it is a very reasonable option to just do it yourself. There isn’t that much to learn since you only have to learn that portion of personal finance and investing that applies to you, which is a very small chunk. I don’t find the amount of discipline required to be ridiculously high either, but obviously many people do. Your plan doesn’t have to be the perfect plan a really good advisor might get you and help you follow. It only has to be as good as that plan minus the cost of the advice, which is significant since financial advice is so darn expensive. The fact that you’re here reading and asking this question tells me there is a decent chance you’re in that 20% that can do it yourself. You’ll have to make that decision yourself. But there is no doubt your least expensive option is learning to do it yourself.
Second, I think the 3% number is probably about right for the average person who doesn’t save enough, buys high, sells low, and doesn’t know about what he needs to know and doesn’t want to learn it. I doubt your number is that high. Is it 1.25%? Is it even 0.3%? I don’t know. Only you can answer that.
Third, I think Larson is a fine firm. Yes, their scale starts at 1.25%, which I see as being on the high side, but it does come down as your assets go up. It is surprisingly hard to find a full service firm willing to work for an AUM fee of less than 1% but there are quite a few out there. Larson’s real advantages are their focus on doctors and their use of DFA funds. In defense of their 1.25% or 1.5% or whatever they start at, at least they take you with less than $500K-$1M that many good 1% advisors require.
Fourth, I like Vanguard and I like the low price of their financial advisors. You’re getting a live phone advisor for the price of a roboadvisor. A great combination. But I don’t expect them to know nearly as much (if anything) about the doctor specific financial planning stuff (loan management, retirement accounts, asset protection etc) as a Larson advisor. Whether that is worth another 0.7-1.2% a year or not really depends on how much of that you can figure out on your own.
If you need Larson service, then the 1.25% is probably a good value for you. If all you need is Vanguard service, then it would be silly to pay 1.25% when you can get it for 0.3%. If you don’t need either (as I feel I don’t) then 0.3% is a rip-off. I see no reason to pay Vanguard $3-6K a year to do something I can do myself in a few minutes.
I don’t think the DFA access is worth 0.95% a year. There are certainly much cheaper ways to get that, no matter what it is worth. More details on that here: https://www.whitecoatinvestor.com/dfa-vs-vanguard/
More thoughts on advisors here: https://www.whitecoatinvestor.com/the-perfect-financial-advisor/
And my list of recommended advisors (all of which are advertisers I’ve done at least a little bit of vetting on) here: https://www.whitecoatinvestor.com/financial-advisors/ By the way, putting that list together is the hardest thing I do with this site since there are so many conflicts of interest and mixed feelings about any advisor.
But if you think you want to try out Larson, the best way in my view is to email me asking for a referral and engage them for financial planning at an hourly rate. Of course they’ll try to upsell you to full service/investment management at an AUM fee, but you can always say no. The financial planning is where the big bang for your buck is on the doctor stuff anyway. If you find you’re in the 20%, you can quit getting advice and move on. If you’re in the 80%, well, Larson is a pretty fine firm. There might be cheaper, there might be better, but you’re certainly going to do well enough if you follow their advice.
WCI: after reading many of these posts and researching the topic more fully I also feel that I have been deceived by Larson Financial regarding VUL policies. My wife and I have both been sold policies. I specific question regards how to best get out without loosing too much money. I have been paying into ours for approximately 5 years. The policy has value I just don’t know the best way of doing this. Any advice would be appreciated
Why do you feel deceived? I’m running a post on VULs in a few weeks. They can certainly work well for the right person. I have no idea if you’re that person though.
If you’ve maxed out all available retirement accounts, are investing a significant sum in taxable for retirement, don’t give much to charity and expect to be in the top bracket in retirement, then a good VUL can make a lot of sense.
Did they just double the price to 3k?
What price?
Their financial planning fee to 750 per quarter
You can do the hourly rate planning I’ve negotiated with them.
[Comment edited in 6 of the 7 places it was placed on my website. The original was left up on the Larson Review post. Christopher- I’m sorry you had a terrible experience and obviously feel a need to warn other doctors about your bad experience. I would caution you on two points:
#1- Don’t spam my website or I’ll just block your IP address. Don’t place the comment on a half dozen different posts nor in multiple places on the same post.
#2- Keep things factual. If you stick to the facts and clearly identify your opinions and feelings, you’ll keep both of us out of trouble with regards to libel laws. Larson in particular takes these sorts of comments very seriously.]
I unfortunately came into contact with a Larson financial advisor Colin Weins in Lakeland Florida. At first I thought I hit the Jackpot with someone who was so nice seemed to care about my finances. I was a new attending and did not have much experience in personal finance. [Rude comment edited, see note below-ed] He advised me to not participate in maximizing my pretax space by not participating with my companies profit sharing elective deferal which would have given me another $32,000 in pretax space. He advised me that I “needed money now” and couldn’t afford to commit to a program that. He instead of course placed me in a VUL which I didnt really understand but since I trusted him I allowed it. It wasn’t until my partners became aware of me missing my election window for the elective deferral did I start to realize that I was sold this product and that Larson Financial did not have my best interest in mind. I also found out how much My Adviser collected on me signing up for the VUL. Outrageous. They call it the “one and done” sell for insurance.
Please do not use Larson Financial and especially Colin Weis. These guys are only in it for themselves. NOw I have missed my opportunity to invest another $32,000 a year pretax forever. Think about how big of a blow that is to a physician. [Libelous portion of comment dedacted (see note below)-ed]
[Editor’s Note: This comment was placed in 7 different places on the website. I have edited it out in 6 of those 7 and given this advice to Christopher.
Christopher- I’m sorry you had a terrible experience and obviously feel a need to warn other doctors about your bad experience. I would caution you on two points:
#1- Don’t spam my website or I’ll just block your IP address. Don’t place the comment on a half dozen different posts nor in multiple places on the same post.
#2- Keep things factual. If you stick to the facts and clearly identify your opinions and feelings, you’ll keep both of us out of trouble with regards to libel laws. Larson in particular takes these sorts of comments very seriously.]
[Update 4/2018: Mr. Wiens communicated again with me and asked me to remove this comment as he felt it was libelous. Here is a portion of his recent communication to me:
After nearly two years, I wanted to reach out to you with a formal request to remove the libelous comment posted by Christopher Vu (this was the one he posted 7 different places on your website, in which you responded with a stern word of advice to not spam and to keep things factual). Not long after he posted this comment, I wrote you an email detailing the facts and how his perspective (while seemingly real in his eyes) is certainly distorted. His intention was to damage my reputation as he veered into jaded opinions: “these guys are crooks.”
I request the removal now for two reasons:
Since the comment was posted, there was an internal review all documentations, email traffic, meeting notes, etc. and the Larson Financial compliance department determined the complaint was unfounded. Unfortunately, as you know I am still required to report his complaint to FINRA to be posted on BrokerCheck.
More importantly, an independent arbiter assigned by FINRA recently reviewed the complaint on my BrokerCheck and all the aforementioned documentation and also found it to be without merit. A district court judge confirmed the decision and now Dr. Vu’s dispute has been removed entirely from my BrokerCheck profile.
If you agree, then I request you remove the comment and you can stop reading. If you’re on the fence, then I encourage you to look at other individual feedback about me on the comments and forums from clients/professionals I still work with:
“Colin has spent more time with me than any financial advisor I know (when I really needed it!). He’s done great financial analysis of prospective jobs, house purchase, and has given good advice on several professional fronts.”
“As a health care attorney, I have worked alongside various Larson Financial advisors (including Colin Wiens”…”At the end of the day, when detailed and immediate action is necessary they are quick to gather a “team” of advisors for their clients, and they help to efficiently guide the process.”
“I contacted Larson and spoke to Colin Wiens and Jacob Fisher. We discussed two main topics: My personal finances and partnership.” … “For my specific needs, Larson has been wonderful and extremely helpful.”
“Upon meeting Tom and Colin, we could immediately sense that they were good, honest, educated individuals. They are extremely professional, yet personable, and always able to get the ball rolling. As procrastinators, we appreciate the gentle, consistent task-masters they are.”
Thanks for the consideration. I know it’s important you provided an accurate perspective of the industry, but you’ve never been one to use salacious stories and comments to drive clicks. I believe due to the libelous and untrue nature of the comment, your readers don’t get any positive feedback to help their search for financial advice (and occasionally financial advisors), and it’d be best to remove it.
As such I have further edited Dr. Vu’s comment (see above). Readers/commenters are again warned to stick to the facts when discussing their experiences with financial firms and advisors lest they find themselves in legal hot water. There are serious legal and financial ramifications behind public allegations naming firms and advisors, just like websites reviewing physicians where patients can post whatever they want.]
Christopher-
I’d recommend calling up Tom Martin (one of the Larson partners) and talking to him personally about what happened to you. While he obviously can’t give back tax-protected space, he takes great pride in “making things right” in situations like this.
https://larsonfinancial.com/doctor-financial-advisors/tom-martin/
I know Tom agrees with my general recommendation against buying a VUL before maxing out all your tax-deferred space. Permanent life insurance has a few tax benefits (tax-deferred growth, tax-free death benefit), but they pale in comparison to those available in retirement accounts.
I live in the vicinity of Dr Vu. When reading your review of the book, I found the Larson franchise near me as I was considering going in for a check up. One of the first things that come up is a link to a job placement site where employees can anonymously review their employer.
The reviews were mixed but do support Dr Vu’s contention.
https://www.glassdoor.com/Reviews/Larson-Financial-Group-Reviews-E776725.htm
I have also had experience with Colin Weins from Larson financial. I [am not happy with my experience].
[Remainder of potentially libelous statement removed.]
Dr. Dahle,
I just met with this group recently and I am not sure what to think. They had clearly done their homework on me (via a google search), which on one hand seemed like good prep-work and on the other hand was somewhat creepy. My biggest concern was that they specifically mentioned your name after I reported that I have been recently frequenting your site and had read your WCI book. They had great things to say about you of course, but also seemed to imply that you both endorsed them and were affiliated in some way with their “board of directors.” I researched their staff and board, but saw no mention of your name.
This thread has been open for quite some time and I wanted to know if any of your previous opinions had changed over time. Is it appropriate to attempt to negotiate their fees? Should I realistically expect them to change their fee structure? I have the impression that FA’s in general will just refuse. I also do not want to potentially insult someone who could be taking care of my finances in the future.
Can you weigh in on what a “fiduciary” means in the context of a FA? Does this designation mean anything? How is it obtained? Is it binding?
Thanks in advance for any insight or advice
Hi WCI: I recently heard something similar. Maybe this is what the post above is referring to: https://www.doctorsonly.com/advisory. It looks like a website for the larson companies. Are you really on their advisory board or is it a sham? Looks like they also settled their recent lawsuit for $250,000. Do you have any thoughts on the lawsuit that you can share with us?
I am on a physician advisory board for doctor’s only, which is the overarching organization over the “Larson companies.” It’s not a sham.
Yes, the lawsuit was recently settled. I am reasonable privy to the details being on the board and plan to write a post about the whole thing soon. Larson was planning to release a public statement on it and I’m waiting on that before writing. If I’m lucky, I’ll get a statement from the plaintiffs and/or their attorney too. Like any settlement, I don’t think anyone is really happy about it.
Yes, I serve on an advisory board for them along with some of their physician clients.I have heard from a number of prospective clients that my name gets dropped if they mention my site, which is fine as long as they’re being truthful.
They are a paid advertiser on this site, which means I do endorse them (I turn down most advisory firms who apply to advertise with me), but like every other financial advisor on my list: https://www.whitecoatinvestor.com/financial-advisors/ I don’t consider them to be a perfect advisor.
Yes, it is appropriate to attempt to negotiate their fees. Remember the best negotiating position comes from being willing to walk away and go with your next best option. If you have no other option, you don’t have much of a negotiating position. If want them to change their fee structure, you’d better give them a reason to do so, like you’ll be using someone else if they don’t. Just make sure you’re happy with that other option in case they don’t make a change. I wouldn’t worry about “insulting” someone. While you’re not used to being in the business world where negotiation takes place with almost every deal, your advisor is. Just be pleasant about it. Remember that financial advice is expensive stuff. If you don’t want to learn to do this well yourself, you’re going to pay thousands a year to get someone else, anyone else, to do it.
The term fiduciary means to do what’s right for you no matter whether or not it is best for them. Yes, you need an advisor that is a fiduciary. There is a fair amount of variation between what fiduciary means to various advisors unfortunately. It is binding. Larson, like the other advsiors on my list, does function as a fiduciary.
On a personal note, I know the partners of the company well, and their reputation and doing the right thing for their clients are both extremely important to them. They will have read both your comment and mine within a few hours, although they generally avoid commenting themselves due to compliance issues.
I had an overall positive (positives >> negatives) experience with Larson a few years ago. Tom Martin spent a lot of time discussing the equity/small value premium, and gave specific instructions on how he builds a diversified portfolio with rebalancing bands using DFA funds, not to mention time spent answering questions about asset protection. I took away a lot from this. This part was highly excellent, and he is far more knowledgeable than any other advisor I have ever met.
I didn’t use him, as he preferred an AUM fee schedule to adequately compensate him for his time, which was too expensive for my personal situation. Tom was actually pretty ethical in that he acknowledged that I was one of the more financially inclined and disciplined savers he had met compared to most other physicians, and that I could do just as well on my own, and he directed me to find a low cost DFA advisor just to get onto the platform (I used FPL capital for $1000/year.) For those who do need portfolio management, I’m sure Tom does a really great job from what I was able to judge. At current I am not using any advisor, and am completely DIY like most of y’all.
I will admit that there was an effort to sell me a VUL, and I did feel some pressure, but I had enough people helping me figure out that it was not for most physicians’ circumstances, including me, so I am glad that I didn’t buy it. But I don’t begrudge him this, as what I remember from my experience with Tom is the education I got (for free!)
I am a radiation oncologist and have been in practice approximately 5 years. It pains me to write this review, because I genuinely like Derrick Yohe of Larson Financial as a person. But unfortunately, I feel he really misled me and I hope that by sharing my experience, others might learn as I nearly made what for me would have been a HUGE financial mistake.
As a bit of background, I first met Derrick in 2013 when I was only 1 year out of residency and saddled with a very heavy student debt as well as consumer debt. I had met with a financial adviser who was very pushy and wanted to sign me up for whole life insurance and other products that were clearly with a vested interest. It was through that experience that I learned about the management fee structure for the first time. So as I shopped around for a new financial adviser, my first question was whether I could hire them for a flat fee. I don’t actually remember how I found Derrick – I think it was Google. But after talking with him on the phone, we met in person and both my wife and I really liked him. I made it very clear that I was only interested in a flat fee adviser and he made it clear that this was possible with a $375 per quarter arrangement.
Derrick’s sessions primarily gave us accountability for our debt payoff goals. During the first couple of years out of residency, that was my wife and I’s biggest priority. While Derrick recommended we start saving for the future (and in hindsight I wish I would have followed some of that advice), he supported our eagerness to first pay off every dollar of debt and helped us develop strategies to do so.
We were on and off again with Derrick’s services. Because our strategy became relatively simple – pay every spare dollar to student loans, I took a hiatus of a few years from Derrick as the flat fee counseling during that time period was really not needed.
Just last week, I re-engaged Derrick, now with a plan to utilize his services to take us to the next level. We had a two hour meeting and I left invigorated, excited and ready to start investing in a whole host of services including a 529 plan for my kids, back door Roth IRA’s for my wife and I, a SEP IRA, etc etc. Even better, Derrick would be able to manage my employer-backed 401k and has a platform which can consolidate all of my investments into one easily viewable platform.
I gave Derrick my credit card number, my login information for my retirement accounts and we scheduled direct debits from my checking account on the order of tens of thousands of dollars during the month of December to take advantage of tax savings before the year is up.
I signed a new contract with him for our same $375/quarter arrangement. Rather naiively, I understood that his services to help me get the 529, IRA and 401k accounts open were inclusive of this fee. In a two hour conversation, he never mentioned otherwise and from the very beginning, he knew how I felt about managed fee structures. Again, we were literally to the point of him having debit instructions from my checking account..
Well, unfortunately, I was completely misled. While talking with my accountant about how much money I could put into a 401k for my wife (she has a small amount of 1099 income) he inquired about management fees for setting up the 401k. I told him there weren’t any. That I had a flat-fee financial adviser. My accountant was very surprised and really disbelieving. “It might be worth specifically asking your adviser about his fees again,” he told me.
Well, long story short, thanks to my accountant AND THIS WEBSITE, I escaped just in time. I was SHOCKED when Derrick told me that he would be hitting me with 1.25% annually in addition to my $375 quarterly fee. I realize, only a week later, how naiive I was. But at the same time, this is someone who I have had years of experience with and he knew all along my feelings on this subject. I am stunned and saddened.
I had to put the breaks on everything and in a very uncomfortable way, fire Derrick (because really, I have considered him a friend). Then there was the issue of my $1,500 annual contract ($375 per quarter) that I had just signed. Derrick suggested that I be responsible for the first quarter of payment and he would cancel the rest. From my vantage point, my time was completely wasted. I blocked my clinic schedule for an entire morning (valuable time for me) only to then find out, and only after my accountant did the detective work, and only after specifically pressing him about it, that I was completely misled. I told Derrick that I would not quibble about $375 but that I was against him charging it. Yes, he had invested time too – but it is in my mind his fault that he wasted his time, not mine. I told Derrick strongly that I felt misled and that I really did not think I owed him anything.
This morning, while reviewing my credit card statement, there it is, a $375 fee.
I do not mean this as a rant against Larson Financial or even really against Derrick himself. For some people, the management fees honestly are probably worth it. The accountability alone might ensure that you invest more than you otherwise would on your own. In my case, it is not a good fit. Just be absolutely certain you know what you are getting. I am very deflated by this experience as I feel a good friend totally misled me and nearly took huge advantage of my trust. At the same time, I want to give him the benefit of the doubt that somehow he felt there was just a big miscommunication. He conceded that he had not told me about the fees, but that these were “coming” in the paperwork his team was preparing for me. Not ok when I was on the verge of investing such a large sum of money and spent so much time with him going over details. I’m still just in shock.
All of this is kind of sad. I found a simple place for my conservative $ and was able to lock in 8.50% for 5 years….no fees or expenses…similar to a bank CD. Tired of paying for the roller coaster..
“Simple place for conservative dollars guaranteeing 8.5% for 5 years?” Forgive my skepticism.
I do know of investments that pay that, such as hard money loans, but not sure I’d call those “conservative” investments. I suppose compared to bitcoin that they would be.
If you could guarantee me 8.5% every year for the rest of my career, I’d buy as much as I could.
I don’t mind your skepticism at all. I guess there are varying “barometers” for what constitutes “conservative”. My comment was intended more as a legitimate expression of maybe not “sadness” but perhaps, compassion and empathy, for both parties to the above conversation. I feel for the Dr. who feels taken advantage of, and I feel for what certainly must be the well intentioned “adviser” here who must also support a family. It seems there are no winners here. Its interesting when one compares the volatility of the “managed money” world (even with so called diversification) and the range of “conservative” alternatives available that aren’t as sexy, but perform consistently and predictably because of their contractual guarantees, but in the final analysis result in overall similar returns….kind of like the tortoise and the hare, and avoid the inevitable “no win” scenario described above. I said 8.50% for 5 years…not every year, but a proverbial “bird in the hand, worth two in the bush”..Merry Christmas.
Sounds like you’re talking about an insurance based investment now. I know of none of those that can be purchased today that guarantee 8.5% returns. If you’re aware of one, I’d be more than willing to take a look.
No, not a MYGA. I was just replying to the comment thread about Larson. I guess I must have subscribed a few years back? I respect what you have done here FBO of your colleagues, and have no desire or intent to debate the merits of one strategy or product over another. What I’m now comfortable with, and consider “conservative” might differ entirely from what you might have a tolerance for. I do wish you well in this public service.
So you’re not going to tell readers what your 8.5% guaranteed investment is?
I really don’t think it would be appropriate and apologize for mentioning it Dr. Its not important whether you believe me or not, and I mean no disrespect. Thanks. Have a nice weekend!
You too.
Dr. Dahle,
May I have your email address for a confidential query?
Thanks, Happy New Year
Yes. Go up to that little “About” on the menu at the top and click on “Contact.” Or subscribe to the blog and you’ll also get my email address that way. Or just email me at editor (at) whitecoatinvestor.com