How To Choose a Financial Advisor

I have met with several (Mellon Bank, Morgan Stanley, LPL) and I am wondering if there are any independent advisors and if that would be better?

They are quoting me fees 1.25 % of the total account balance, per year.

Presently, I have several accounts and wonder if I should have them under one roof, as to minimize the fees, streamline service. The total amount is around 700K. I am not tracking the S and P with my current portfolio...it's "all over the place".

Where do I start?

My advice to you would be to interview a few different advisers and see which one seems to take more time to get to know you and your personal goals/needs.

I know this isn't perhaps the best advice, but within every firm you are going to find good reps and bad reps. There is no one rule that states that all of company A's reps are good and all of company B's reps are bad. So your best bet is to interview multiple advisers.

-Joe

just because an advisor is housed with a big firm, does not mean they are not independent.

personally, i think 1.25 is a little steep, but this also has something to do with the market and where you are at. just like a car is priced differently in LA than it is in Oklahoma City. so if they are all saying 1.25 then that is what it is. i would have expected for a portfolio this size of about 1%. keep in mind this means you are still paying $7000 a year. you should be getting some excellent attention and some in depth advice throughout the year. NOT just a couple of trades here and there.

again, i dont know your situation, but NOT tracking the S&P sounds pretty good to me. being "all over the place" is fine if it is done on purpose and with understanding. in fact, these "types" of portfolios are some of the highest reward opportunities that are available.

even with financial advisors, they have to run their portfolios. there are some who simply try to get S&P500 returns and there are others who build the most complicated and convoluted portfolios. the bulk of my investments are inside 2 funds (as a portfolio) and i have it hedged against ANY downside. yet it has returned over 35% (net of expenses) for each of the last three years. i am part of the professional community that uses the simplest type of portfolio ... and i guarantee that it is NOTHING like the S&P.

so, do some research. on the company first (www.sec.gov (http://www.sec.gov/)) and then on the advisor (www.nasd.org (http://www.nasd.org/)) and then interview a couple.

my FIRST option is always to get a referral from a friend or family member. ask them what they LIKE and whay they DONT about their advisor.

1MO

A couple of advantages of having all of the money in one place would be that it's easier to keep track of and make sure you have the right allocation of stocks vs. bonds, etc. and that you could qualify for reduced fees. If you go with a full-service brokerage, they may sell mutual funds with front-end expense loads. If you get Class A shares, you pay a commission as soon as you buy, but lower annual expenses than most funds- and lower than Class B shares of the same funds. The commission can be as high as 5.75% but reduces to 2% if you have $500K or more invested. That's what I've done; there are no additional commissions if I move from one fund to another in the same fund family.

One interesting thing you might try is narrowing down your list of potential financial advisors to 2 or 3 and giving them each $100K. See what they do. Naturally, if there's a down year in stocks and Broker A's account, which was 100% in bonds, looks better than Broker B's, which was all in stocks. you can't compare. But, if they're doing roughly the same thing (equal % stocks vs. bonds, etc.) you should be able to compare them and eventually move all your assets to the one you like. Should you tell them about the rest of the money? Up to you. It might be interesting to see if they call you every week and try to push you to move the rest of the $$ into their account (in which case I'd cross them off the list). The good ones won't.

One thing you want to be careful of is how you move assets. IRA rollovers should not be written as a check to you (which would generate taxes) but as a check to the new brokerage in your name. Also, you should be able to move stocks and bonds without selling them- otherwise, again, you could have nasty tax consequences in non-IRA accounts.

Lots of decisions to make, but with this much money you need to educate yourself before you hand it over to someone else.

Edited to add: I'm not paying ANYTHING to Edward Jones other than the commission on what I buy with new money and whatever share they get of annual fund expenses. You may want to look into EJ. I started out with a $30K account and gradually moved over everything (my decision, not my advisor's). I now have over $1 million there and have been very happy in the 4 years I've been with them.

Yeah I agree with josephdegroff when it comes to looking for financial advisors. Its always best to inteview a few of them in order to see which is a right. (advertisement deleted by Dingobiscuit) is in the business of doing just that! They match qualified advisors with clients who are looking to meet with an advisor. That might be your best bet as (advertisement deleted by Dingobiscuit) can match you up with numerous advisor in order to see what kind of financial advisor is best for you.

thanks so much everyone. Those were some of the best explanations I have heard, I appreciate the time it took.

I keep hearing nice things about EJ.

I considered giving about 90K to someone new...the current guy has had this cash just parked there for almost a year at 5% and I don't think he is "on it" at all. All I get are tablets and BS in the mail.
The two brokers I have spoke with have been pretty scary. Mellon, LPL
I just don't know enough to choose my own stocks.
I still am unclear on the relationship (fiscal) if they are at a brokerage house. They can be independant?
Anybody have a safe conservative place to park some while I learn?

Stupid question: are certain mutual funds insured to any extent at all?

Can I just throw it in a Vanguard mutual fund account?

"to see what kind of financial advisor is best for you."

well, I want to make at least 14% rather safely,but I won't need the money for 25 years hopefully. Is that reasonable?

The bad news: you can't make 14% safely on a consistent basis. Anyone who tells you that is a crook. Investments that return that much are risky and you may get 14% in a given year (or 4 years out of 10) but you'll have down years, too.

The guy with the cash parked at 5% may be a good safe bet till you figure out what you want to do with your money. You'll barely keep pace with inflation after taxes so it's not good for the long run, but at least it won't go down in a bad stock market.

Mutual funds are not insured.

I don't recommend buying individual stocks unless you do it with just a little of the money (maybe $10,000) as you learn how it works. I don't have time to monitor my investments that much so I'm nearly 100% in bonds and mutual funds. My parents had a lot of their retirement funds dissipated by aggressive trading in a discretionary account at Bank of America during the dot-com bust. (A discretionary account lets the broker trade whenever and whatever he/she wants with your money. Very rare and they can't do it unless you sign piles of papers agreeing to it.)

I'm not sure what you mean in your question about whether the brokerage houses are "independent". Anyone who sells you an investment is making money off of it one way or the other. That's not evil- it's how they make a living. The good ones will sell what's appropriate for you, not what makes the best commission. Be wary of any pitches for annuities and/or life insurance (and read the discussions on them here). They may be right for some of your assets, but ask a LOT of questions. They're lucrative products for the sellers. (My EJ rep's one sentence on annuities: "If you want an annuity, I can sell you one". That's the last I heard from him on annuities!)

Finally, you could just put some money in Vanguard funds and that might be a good thing to do with, say, $100,000 of the money. You'll need to do research on which ones to buy, but there's a lot on the Web about that.

catherine, here are a couple of resources for you in your search for an advisor:

NAPFA, the National Association of Personal Financial Advisors - www.napfa.org
Garrett Planning Network - www.garrettplanningnetwork.com

Each of these websites has a "find-a-planner" option to help you locate an advisor near you, plus the NAPFA website has some tools to help you interview potential advisors.

Hope this helps -

Independent doesn't always mean better. In fact, the LPL advisor you're speaking with may be independent as many people simply use LPL to "clear" through. It's going to depend on what you like, every firm has good and bad.

1.25% may be high, but it depends on your area. The other poster is right, if they are all quoting that, then it may be in line. Keep in mind that everything is negotiable. I've reduced my fees or commissions in order to land an account. Also, look into whether the 1.25% covers the investment expenses also.

If you do not like to pay fees, then ask if you they will work on a commission basis. Almost everyone will except for some smaller independent boutique advisors who are fee only. It may be cheaper if your accounts don't show much activity. I work at a major wirehouse, and it is the client's choice whether or not they like fee based or commission based. If one is clearly cheaper for the client, then obviously I recommend that one. I have a couple of larger accounts where the client does little trading, so their total costs are maybe .4% of the entire account value total. There is no way I could do that in a fee based account. But it only works because there is minimal activity.

Your best be is to keep looking and interview some more people. if you're not comfortable with anyone yet, then keep looking.

Also, 14% is totally unrealistic for anything resembling a safe account. If anyone promises you that, they are lying, flat out.

I have met with several (Mellon Bank, Morgan Stanley, LPL) and I am wondering if there are any independent advisors and if that would be better?

They are quoting me fees 1.25 % of the total account balance, per year.

Presently, I have several accounts and wonder if I should have them under one roof, as to minimize the fees, streamline service. The total amount is around 700K. I am not tracking the S and P with my current portfolio...it's "all over the place".

Where do I start?

Before you choose a financial consultant, you may want to get up to speed on a recent court ruling regarding the "Merrill Rule." It's important information for anyone looking for objective advice.

See an article here: www.webfinancialplanner.com

Actually, investment advisors have been held to these standards for years. The removal of the Merrill rule now means that it applies to securities brokers as well.

Hi

Before choosing a financial advisor you must check his credentials

Find out the advisor’s professional designation. If he is a Registered Financial Consultant (RFC), Chartered Financial Consultant (ChFC), or Certified Financial Planner (CFP), you may rely upon him. These credentials give you an idea of how qualified the professional, which will help you to determine whether he will be deliver quality services. Also check how many years of professional experience does the advisor have; ideally choose an advisor who has at least five years of working experience with good clients. Find out his record of accomplishment from the industry sources and hire him only when he has a proven track record of wealth creation and management.

Stella
Auto Loans (http://www.theloanbazaar.com/autoloans/)

i have to disagree with what stella said ... though i think she didnt really mean what she said. in all fairness she is comparing a level of standardized tests to both qualifications and ethics that does not perfectly correlate.

in other words, i would not hire someone because they had a CFP when another did not. nor would i remove from consideration a planner who did not have a CFP.

while it is true that the CFP Board will take administrative action against an advisor who violates their standards of conduct, plenty of CFPs have been caught lying, cheating, or stealing.

furthermore, there are advisors who work very specialized areas of finance that have no certifications like you mentioned .... but are head and shoulders above those who have said certifications. for them, the experience of their practice exceeds anything they may acquire from a certification exam.

now, since you read all this way ... i will tell you the SURE-FIRE way to really tell if you are working with a highly educated, highly knowledgeable, and highly experienced financial advisor: look on thier desk, if you see that their calculator is an HP-12c then you need to hire them on the spot. if just seeing it on their desk isnt enough for you, have them tell you the average days in a month for a standard year (365/12). i know you are thinking that any calculator will tell you it is 30.41 days per month ... but you need to be a rocket scientist to know how to get an HP12c to give you that simple answer.

Do you check to see if they are licensed to sell insurance :eek: ?

Even a Supreme Court Justice can't sell life insurnace without a license. If he did, it would be Calss 3 Felony!!!!

I think I'm havin' a flashback! Charlie's comin' through the wire...ahhhhgghh!

Do you check to see if they are licensed to sell insurance :eek: ?

You don't have to check. All financial professionals are insurance agents. period. I don't think you've been paying attention. Have you been watching the required rasslin' videos?

now, since you read all this way ... i will tell you the SURE-FIRE way to really tell if you are working with a highly educated, highly knowledgeable, and highly experienced financial advisor: look on thier desk, if you see that their calculator is an HP-12c then you need to hire them on the spot. if just seeing it on their desk isnt enough for you, have them tell you the average days in a month for a standard year (365/12). i know you are thinking that any calculator will tell you it is 30.41 days per month ... but you need to be a rocket scientist to know how to get an HP12c to give you that simple answer.

Ah, nothing like the HP 12C Calculator! You will find me using one of these catchy machines!

-Joe

Indeed! (My 12c sits next to the TV remote.)