For background, I work in the financial service industry and spent several years with our investments company before moving over to our bank.
I’ve had financial planners and I’ve done self-directed. If you have the time, education, and desire to go self-directed, you can easily do self-directed planning. If you want an advisor, you can use a fee only CFP who can give you a plan to implement, or you can use a FINRA or SEC registered advisor.
If you hire an advisor, some are flat rate, some charge based on assets under management; 1% isn’t unusual, but I’ve found trust being the hardest thing to justify the fee. What we looked for from our current advisor was someone who educated us on their recommendations not just now, but for the long run and how they helped us achieve goals while mitigating risks….the quality investment. Our current advisor brings in the CFP annually to ensure our plan still works for us and identifies other potential strategies the advisor makes and educates us on the tactical recommendations and we make the decisions.
We also had an interest in some products you can’t (or can’t easily) get over the counter in the private lending world.
I'm about a year out from retiring and finally hired a firm.
I have mostly done it myself for 30+ years. We had two advisors before (but only for about a year each) and I didn't find I got value out of them. One churned all the time, and the other had other limitations, but was very honest.
I am now with a firm and what got me to them was their approach.
1. they offer alternative investments that are less volatile for the expected return (private equity, private debt, private real estate) that we fold in along with normal low cost funds to build a, hopefully, resilient portfolio that still gets great returns.
2. for the same 1% fee (goes down to .7% when I grow to a few more bucks), they do my taxes, retirement planning, insurance reviews, retirement planning, special needs trust planning for a kid, etc.
2a. They also give me tax advice, to help me go through different scenarios like if I build another rental house, how I should structure that, etc.
3. Having them in place (if I stay happy with them), allows
Even though it's a chunk of money every year, it seems like it will be worth it. I'll certainly continue to evaluate their performance, net of their fees.
I also think about my wife if I were to pass suddenly, and having our investments and other stuff with an advisor would make the transition and management easier.
That said, yes, picking good index funds, never selling them, and just plowing a ton of money in every year from 22-> retirement is the real secret and does not require an advisor. now that I'm almost retired, I'm more interested in the perspectives of an advisor. Although paying them a minor panel upgrade worth of money a year doesn't seem fun.
EDIT:
We are using an advisor tied to our broker (in this case Fidelity), so the money stays with Fidelity, but is managed and wrapped by this other firm.
Also, in the interest of simplifying our lives, we're in the process of moving from 8 banking relationships to one primary and 2 secondary relationships. We're going to a local bank with private banking (this is all free) and trying to consolidate as many of our other deposit and credit accounts there to give us an easy view of where the money comes in and goes out. After we sell this last spec house, I think it will be nice to have less chaos and ins/outs of our accounts.
