Considering the services of a CFP

Mark

So, an inheritance from my parents is coming down the pipe and the party who managed for them has offered his services to me. He is employed by Morgan Stanley, been at it for about 15-20 years and from all the evidence I can see did reasonably well by and for them. What was most interesting to me was that his 1% management fee was inclusive of all brokerage transaction fees and all mutual fund transactions would be in the institutional share class sans the loads, 12b-1 fees etc., etc.. That was new to my thinking and kind of a breath of fresh air.

I've always been a lone wolf in terms of portfolio management for all the reasons participants to this discussion board know all to well but I'm considering giving this guy a handful and see where it takes me. Any thoughts?

Ted

@Mark: Don't let him sell you any unit trusts.
Regards,
Ted

slick

This is likely to be a long response, so here goes. I was in a similar situation 18 months ago when I inherited a portfolio from my spouse. In my situation it was at Fideility and it had an assigned high net worth manager, but this person did not impress me after meeting with him a few times. It seems I knew more about the funds and stocks in the portfolio then he did. Given that it was a much larger amount than I had before, I sought out a cfp at Merrill Lynch that I had known for over 5 years, and like at Morgan Stanley, an annual assets under management fee included all trading fees on stocks, funds and etfs. Before I signed up, she created an allocation plan for me, a Monte Carlo study to see how long the money would last at given withdrawal rates, talked with me at length on risk tolerance and how I had invested in the past etc. I , in turn interviewed her on her investing style, success with her other clients and her background. I learned that she started out as a commodity trader in the 80s, was well versed in the technical side of trading, not just looking at how a stock or fund is rated. So she always looked at the technical and fundamental sides. I liked that. What I am saying is it is not as important which firm they represent, but who they are, their history, success in good times and bad, and types of clients they have. Interview THEM. If they dodge the answers, thank them for their time and leave.

The good part about using a cfp: If you are used to managing your own money, its another set of eyes overseeing what you are doing and providing you guidance. You are paying them to advise you, you have final say. You will now have access to load funds without paying the load , institutional shares of funds, this brings the cost of your funds down. Many closed funds you will be able to buy. You also can negotiate the management fee, I did. I pay less than 1%.

The down side, besides watching those fees getting deducted each quarter (you do get used to it as long as you feel you are getting your money’s worth) is that these are not brokerages that sell all mutual funds. You may have funds now that will not transfer in or cannot buy through them . For example, I could not add to VDIGX or VPCCX or buy other Vanguard Vanguard funds, had to sell MAPOX because they did not carry it, etc. You can keep some of these funds at your exisiting brokerage, but they will pressure you to sell them. They also will likely suggest some of your holdings in favor of some of their favorites. If you truly like what you have, stand firm.
If you like the concept of having a cfp, I would interview a few at different firms, even pay them an hourly fee if needed and compare. Hope this helps. By the way, I am very pleased with my choice to go with a cfp.

Mark

Ted - you should know me better than that.

Slick - thank you for your thorough, generous and helpful counsel. You reminded me of a few things that I intend to bring up at my next meeting.

BobC

As Slick so eloquently put, the MOST important thing is the advisor's willingness to disclose everything and the investor's ability to say no and have that be respected. In the end, however, understand that when push comes to shove, the Merrill Lynch, Morgan Stanley, or other brokers employed by their wirehouse or other broker-dealer are employees bound by the restraints put on them by their company. You may get absolutely wonderful and appropriate service and advice, but you should know these advisors are limited by their inability to be a fiduciary to you. They are bound by the 'suitability' rule that FINRA uses, not what is 'always in the best interest of the client', the fidiciuary rule the SEC uses for Registered Investment Advisers. And understand that the brokerage companies are fighting to keep it that way by spending enormous amounts of political clout and millions of dollars to stop the SEC from requiring them to act as fiduciaries. Think about that for a moment.

I am not trying to throw cold water on anyone's good experience, just pointing out what is a very big difference. Your investment results might be better or not as good with a truly independent, fee-only RIA person/company, but you will at least know going in where the advisor's ultimate loyalty lies...with you, not with a large sales organization.

Charles

Say no to CFPs.

scott

I think there are some very good financial planners, but you really have to interview multiple and try to find one you're in sync with in terms of goals, plans, risk tolerance, etc etc.

davidrmoran

I too do it all myself but have family who use broker adviser types and have done well and are very happy with them and the historical performance. Not cfps, not independent, not fiduciary responsibility per se. One is ML and the other is UBS, I think. Reasonable fees, solid advice, prudent management, little or no selling, no churning, longterm analytics. Correct, you are not going to be buying Vanguard funds. You could go all-Vanguard, and they have I think an advisory fee service too. I am very surprised to hear that weak Fidelity story; my experience with their adviser 'experts' has been of savviness and experience, well-trained and more.