Have any of you worked with a financial planner before? My buddy from college called me asking to be my financial planner (not Northwestern Mutual although it kinda felt like that lol) and after telling him I think I can do most of what he does by myself, he said he doubts it given how much I work, plus he gets into tax efficiency, retirement planning, etc.
I guess he's got a point, but has anyone done this? Curious if these guys actually bring any value after whatever fee they take.
Your buddy might be fucking you
I am a financial planner, your buddy is trying to fuck you
if you're W2, there's no tax planning/efficiency you need. max out your Roth 401k, backdoor roth, and mega backdoor (if you have the coin), and if you have brokerage assets, don't trade all the time, that's it.
retirement planning - see above. save 20-30% of your income and you'll be financially independent, you don't need to do his monte carlo analysis yet, plus the math (if done right) on those models is more harmful than helpful on someone younger than 40
don't have time to do it - if you're only doing 401k and ETFs, it doesn't take time to do it. 401k will automatically invest, and the one time a year you do your backdoor roth just buy a diversified folio of stuff (index funds, mutual funds, 30-50 stock portfolio, whatever) and then get back to work
I'm not saying we don't add value, but your friend is lying through his teeth to get your business. I recommend EVERYbody start out DIY and then call a FA if your hands are full when you get into your 30s/40s, but you absolutely don't NEED a planner
Curious for you to expand on "the math, if done right is more harmful than helpful to someone younger than 40."
I have my own multi-year model and can see where it would probably drive me to be a lot more austere than I should so that I can hit that juicy number at the end- easy to be frugal when forecasting 20 years out, harder in practice I bet.. but I wonder if you are talking about something else.
for younger people to get a similar probability of success as you would for a retiree, your savings rate has to be higher because of the various scenarios that will inevitably fail with such a large time horizon. absent something like hyperinflation, prolonged depression, etc., this higher savings rate leads to excess wealth at death and underutilization of money and some opportunity cost for not having certain experiences while young. philosophically since I'm more aligned with a die with zero mentality (not literally) I take issue with this for young people.
in brief, I use similar mathematics, different assumptions w/different targets for younger people. if you have a decent savings rate (20%), you're probably fine
on being frugal later, this is mostly true, JPM did a study years ago that basically said from 65 to death peoples spending went down by ~1% per year (even after accounting for higher healthcare inflation), so unless you're the outlier octogenarian you shouldn't expect your lifestyle costs to inflate in perpetuity, the data show it's more like a U curve than an upward sloping line ad infinitum
What company is he with? Do some research into how he gets paid- commissions, fee only, etc. That will tell you a lot. Also- if he is pushing insurance, STAY TF AWAY. Anyone selling insurance is incentivized to scare you. Not that insurance is bad, but you need to approach it rationally. They only sell insurance if it is profitable, and it is only profitable if you are making a bad bet against yourself. It should be for tail risk only.
Secondly, and likely more importantly- tax optimization is a tricky game. True tax optimization for high earners will come from specialized CPAs and lawyers, not from some guy who just passed his series 7 and 66. I had a consultation with one of these- these guys are salesmen and they are unsophisticated. They're going to take your savings rate, multiply it by 7% compound growth for x years until you retire, and then use a withdraw rate to see if you make it until you die. "Oh, you want to tax shelter? Let me introduce you to your 401k! Ever heard of an IRA? Can I sell you an annuity?"
Your neighborhood Edward Jones rep is good for people who a) can't do or don't know about the simple math I described above, b) need an accountability partner to keep them on their savings goals, or c) just don't want to have to think about any of this. Frankly- this covers the majority of people. But not me, and likely not you. You can manage it yourself until you are at the point of needing to set up trusts and wills, and that is when you want to go somewhere serious.
Also, anecdotal, but the most personable yet lower tier performers in my finance classes were the ones who went into financial planning (most of them with Edward Jones). I could see over their shoulders they were cheating on their exams- I will trust myself with my money, TYVM.
They’re gonna sell you whole life insurance policies
Isn't the new one IUL, or FIA that are making a comeback.
Yes IUL is boomer crack
Read bogleheads and follow the advice.
Spend less than you earn, avoid taxes at all costs (max retirement accounts; avoid realizing cap gains), and put everything into low-cost index funds that track the market (and maybe some bonds if you are soft). Then don’t look at it for 40 years. Really is that simple.
Assuming you are starting off in IB or a similar role, you will become very wealthy via compounding. Any fees pulled out for advisors will meaningfully hurt over you time (think hundreds of thousands)
As others stated, he probably hasn't passed his CFP designation, meaning he is merely commission-based vs fee-based. Find a good Estate attorney that wealthy friends know. They can set you up with a great estate CPA and Financial planner.
Do it yourself until your income matches the fees these three charge. Ask if he is considered a fiduciary.
Agree with the above. I’m a FA as well and unless you have serious wealth coming in, have some big carried interest checks coming your way and need some real tax and estate planning help, you are good. OR work with someone just for some extra deal flow. Have a few clients who dont need me for planning, just want to get into some alternatives they wouldn’t be able to get into otherwise / need me to just tax loss harvest for them and help them with their cap gains every year.
Working in WM at a BB, unless you need to set up a trust fund or are currently a trustee in a trust fund or any complicated legal docs, your buddy’s fucking you. If your financially literate, (I’d imagine you are) then you don’t need financial planning any time soon. It’s pretty simple, max your 401lk and don’t spend more than you make and you’re fine
So he’s got presumably minimal experience and is saying something to the effect of given the complexity of investing you can’t dedicate enough time to it? That’s a hard pass.
Given that most people, including investment bankers like us, won’t accumulate $20mm+ in our investment accounts, financial advisors just don’t make much sense.
For 90% of people, maxing out your 401k and Roth IRA, fully funding each kid’s 529 plan, buying a house and an investment property or two and throwing an excess money into a vanguard mutual fund will beat anything a basic advisor can do.
If you truly are worried, you can research and meet a fee-only financial planner. But basic investing is quite easy, especially for people who work in finance all day.
Even if it bores you, learning about mutual funds and passive investing is easy.
The only people who need a financial advisor are the 20 million and above club. They need estate planning, charity loop holes and have the buffer to take shots in investing in random crap that could crash and not affect their health.
When someone becomes a financial advisor they are taught to reach out to friends and family first to start building out their book.
I’m not saying your friend is a scammer, he’s just following the play book, since it’s easier to convince friends and family to give you money to invest than a total stranger.
I agree with some of your points, however, most individuals truly have no idea what they're doing when it comes to personal wealth management. Given that this is a finance forum, I think a good portion of members would be fine without during the accumulation phase of their career. We're in a small minority, though, and it's kind of scary how little SOME very successful people actually know.
For example, I can make up whatever fee I charge by simply getting a younger individual out of a target-date fund and into 100% equities. Or, if I convince a big law partner to save an extra $10k/ month instead of letting his wife spend it, I've dramatically altered their trajectory. In the retirement/ distribution phase, I can make a case that everyone should be working with an advisor - we have retiring partners that won't be self-directing after 30+ years of experience. It's a 3 legged stool, you need to have the expertise, time, and desire.
Unfortunately, there are still bad actors out there with bad incentives, but that trend continues to improve. After all, it's not an all or nothing proposition, you can try it out for a year or so - fire them if there is no value add.
Since this board is finance professionals, it mostly underestimates just how clueless well paid professionals that lack finance backgrounds are. My friends, family, and peers that are in medicine, law, engineering, and hell even similar profesions like accounting are generally clueless. In reality though, you really need to just read 1-2 good books on the subject to be able to confidently handle your own finance.
Things that these people have no idea anything about:
- compound interest
- stock market
- index funds
- % savings goals
- retirement planning
I know doctors in their 30s who dont invest because 'the stock market is gambling', and other professionals who want to sell everything based on war in ukraine/war in gaza/trump winning/biden winning/etc.
I got the CFP for the time off. it was a joke. (yes, i could have sped through the classes thanks to my CFA charter, but EY was paying me $500 per class then OFI gave me three days off.)the most challenging thing was the mandatory hour off. I was back before the lunch special at the local bar ended
Former wealth management professional here...unless you're a person with some really complex needs/circumstances, or just older in general, I'd say you're more than likely ok to DIY.
The Vanguard method/bogleheads is a good place to start. Passive investing in things like your retirement and even your taxable account beats overcomplicated strategies in the long run.
Your friend most likely cannot provide you any real value. You noted in a comment he's not even a CFP yet.
I’ve worked with a financial planner before, and it can be a valuable experience depending on your specific financial goals and the complexity of your situation. If your finances are straightforward—maxing out your 401k, contributing to IRAs, and sticking with a diversified investment portfolio—then a DIY approach might be enough for now. However, when it comes to more intricate needs like advanced tax planning, estate planning, or managing a larger portfolio, a financial planner can definitely add value.
I know this is an older thread, but curious where you ended up? I was in the exact same boat - thought I could DIY it, but between work and life, I was totally dropping the ball on tax efficiency. I finally caved and started using Harvest Wealth Partners. Honestly, just having someone else handle the optimization so I can actually focus on my job has been worth whatever fee they take. Did you end up going with your college buddy or sticking to DIY?
Your buddy will produce no value whatsoever
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