I have an elderly bridge lady in her early '80s who suddenly needs a financial advisor. I think she has plenty of money and is just looking to find a reasonable low-cost advisor to do everything for her. My parents were always loyal to Ameriprise and I know they were putting the money in high cost funds and I’m just wondering if you would recommend a place to her. Do you know if vanguard is cheaper but sufficient or somewhere else?
Cheeky popcorn meme goes here.
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What’s everything? Financial Planning, investment management, tax planning, estate planning,…?
I personally think going with a fee only advisor that is a fiduciary should generally be the way to go for most people. If you like that idea, you could start here: https://www.napfa.org/
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Just financial planning, not a fee only advisor though.
I think she has plenty of money
Then don’t start with ‘cheap’ probably. At a certain level, tax advice becomes just as, if not more important than investment returns. She should likely have a high end advisor that charges low fees on investments, and use their tax planning knowledge as a free add on. That’s typically how it’s done with HNW clients.
Finding a combination of knowledge of taxes, and investments, that’ll provide advice for a cheap fee is going to be a lot harder to find than a really good financial advisor that does high end financial planning.
Oh, plus you’ve got estate planning thrown in there. Same thing.
If she only wants financial planning, to me that sounds like a great time to go with a fee only fiduciary advisor.
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I have a feeling she doesn’t know what she wants and/or doesn’t realize how much it will cost her in the long run to “establish” a relationship with a financial advisor
I assume her husband is dead
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Under the circumstances I would try Vanguard. 30 basis points sounds like a better deal than 100. If it turns out not to be a fit she can switch and spend more later.
Here’s a perspective on advisor fees from Rob Berger:
How Should We Evaluate Financial Planning Fees? – Rob Berger
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It is hard to go wrong with one of the big low cost brokers, and Vanguard is always a good choice. Fidelity and Schwab are also good. One thing that could be a hindrance to some is the limited number of Vanguard physical locations. Fidelity has a bit more, and Schwab has quite a few.
I’m sure all of the 3 would steer her to low cost advisor options, or perhaps even free/included if she’d have enough assets with them.
The article on AUM fees you shared was a good one. I’ll add one more pitfall for a person like this in their 80’s. Depending on details, it’s likely that she’ll be guided towards low risk income investments. A 1% AUM fee could eat a meaningful percentage of future income annually.
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Vanguard claims their fees are around 0.3% which seemed a lot better.
My own parents were always loyal to Ameriprise. When I had access to my mom’s accounts this year I noticed the average expense fee of the mutual funds was 1.3%.
I would think that you really, really need to help her define her scope.
Setting up an asset allocation may cost 1% per year.
Tax planning could cost many hundreds, or even thousands.
Wills, trusts, estates, etc would definitely be thousands.
Vanguard has been good to me but I don’t need a lot of hand holding. I just like that they have very expense efficient ETFs, and that’s what I use.
The answers she needs could vary depending on her assets & income. Different answers if she’s a thousandaire or a millionaire or a 10-millionaire.
High cost funds are 
I have money in all 3 of Schwab, Fidelity, and Vanguard. I will say that Schwab pushes their advisors to upsell you on services that are more expensive than they are worth.
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This hasn’t happened to me once with Schwab FWIW, and I opened my account there about 25 years ago.
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I made the decision at one time to utilize one of their portfolio models. I have complained herein about this a few times, but the short version is that I got out of their portfolio model and just balance my asset classes manually myself merely by directing my regularly budgeted monthly savings allocation. Perhaps being a once-upon-a-time fee payer makes me more regularly targeted for “offers.”
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I know the lady well, every Thursday eight of us go out to dinner and she is my bridge partner once every month. But she won’t say if she has $500K or $5M. I know she already has trust stuff set up for kids/grandkids. I think it’s really just a question of setting up an asset allocation that matches her risk tolerance and goals. She was part-owner in her son’s company and got nice big dividend checks to live off of but suddenly the company was sold so now she has cash and doesn’t know what to do with it. How she should invest it and also have it pay for her needs.
She could consider Schwab Intelligent Portfolios for that. Answer a few questions about your risk tolerance, goals, age, and situation and it manages your asset allocation. It’s one of the few robo advisors that is zero fee if you have a big enough balance. Lots of big brokers have a robo advisor, but most have an associated management fee (although it’s a relatively small % cut for the good ones)
I understand that those exist, but I imagine she would want the “assurance” that a person is involved. I think if I used the word “roboadvisor” she would say “Yeah, right.”
They offer to add some financial planning plus some handholding for a modest fee. She might get that thrown in as an included service if she has enough AUM.
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Investment advisory services are what most people think they need. Ironically this is the aspect of a financial advisor’s services where they provide the least value. At the end of the day almost everyone will do better with a 60/40 stock/bond portfolio in index funds than they will with an advisor.
The ways that advisors provide real value for most people.
- Get you to save more. Most people don’t save enough and don’t have a good plan telling them how much they should save.
- Talk you out of selling in market crashes. A lot of people are inclined to sell at exactly the wrong time.
- Create a comprehensive plan to make sure all your bases are covered (a map of your financial life and things like insurance, a will, etc.)
People are scared of making their own investing decisions. This is understandable but with a little reading and introspection making your own investment choices is well within reach for almost everyone.
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I’m surprised she doesn’t ask her son
Seeing as he probably has the most vested interest in her wellbeing (health and financial wellbeing) - I would probably go with him
Unless he’s a great businessman but a terrible financial advisor
Best advice yet. I will expand a bit.
First step: get a handle on your risk tolerance. So if you have sufficient assets to provide for your current and foreseeable needs, then take as little risk as possible. If you do not have sufficient assets, then you will have to take more risk. There is no value in a strategy that leads to insolvency.
Next, pick two index funds.an equity and a fixed income. Now get the split dictated by your risk appetite. Let’s say 60/40 equity:fixed income. Then rebalance the portfolio regularly. If equities rally and go up 10% while fixed income is unchanged, then the rebalance will move funds from equities to fixed income. If equities fall, you buy more.
What will emerge is a trading strategy that is simple: you buy low and sell high. You may not be bragging about the killing you made in some oil stock or tech stock, but it is simple to execute and hard to beat. Try modeling it yourself never stupendous - but rarely disastrous. Boring is good for folks unable to dedicate hours per day to research. Cuz if you are trading in individual stocks or credits, be aware that those you are competing against are most definitely spending endless hours doing analysis and digging up non public info.