Three steps to make your financial planner honest

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Don't pay $ 27,000 a year for cookie-cutter advice.

Think of all lobbying and litigation over whether A stockbroker is a fiduciary. Think of the proclamations of "just-fee" financial planners as their compensation makes them act in your best interest. Think of the time you've spent crusading journalists hunting for criminal planners (yikes! child masters!) writing and breathing articles.

Everything next to it

Two things matter when you search for an advisor What do you pay? What expertise do you buy?

I have a three-step plan to focus your attention on what matters Rule # 1[ads1] deals with Madoff-proofing your money Rules # 2 and # 3 deal with payment and expertise.

# 1. Park your assets in a big place. [19659005] Managing your securities should be a company with a trillion dollars. $ B in A, Fidelity, JP Mo rgan Chase, Schwab and Vanguard are all great choices.

What about a $ 500 billion institution? Well maybe. Joe's Planning of South Succotash, Indiana? Absolutely not.

Custody and advice are separate. Your financial planning may come (probably coming) from a small outfit, and you will pay for it. Storage should be free. The custodians earn their money from investing idle cash.

# 2. Pay 0% for portfolio management.

In ancient times, portfolio managers would get 1%. It doesn't work anymore. Competition has reduced the rate to 0%.

Fidelity has index fund with 0% annual fee. BlackRock's iShares range includes a portfolio of 3,583 shares that charges a small amount, but earns it back by lending your securities. (Ticker: ITOT; details here .) Vanguard has not come down to 0% yet, but is close enough.

Don't want to settle for an index fund? Some stock pickers are winners, you say. Let's take a collection of stock pickers today, and come back in ten years and see how they did.

Half of them have hit the market before fees. Half will have made it worse, before fees.

I can't identify the good guys beforehand. Looking at who did well from 2009 to 2019 gives only the weakest hints about the winners 2019-2029.

This is what I can tell you: Overall, the stock pickers will do just as well as the index funds. Before fees. After fees, they will do worse than the market, by the amount of the fees.

# 3. Pay for skills. After the class.

In the furious battle over the fiduciary rule, supposedly the "fee-only" planner, who collects an annual fee, but no sales commissions, is on the side of the angels. I'm not sure.

The annual percentage charge is a relic of old times when advisers could profit from continuing to manage portfolios. Typical: 1% per year.

Surgeons get well paid. But do they get a percentage of net worth? Ridiculous.

Why should a financial advisor get a percentage of net worth to tell you if you should pay off your mortgage or how much to put into your grandchild's 529s?

Sometimes the percentage scheme is unfair to the planner. Say that an obstetrician has just finished their place of residence and opens a practice. Her income is high, her need for financial advice is high and her net worth is $ 0. Why does the planner have to put her down and hope to make it up later?

Usually, injustice goes the other way.

I just heard from a reader in North Carolina who is 59 and thinking about retiring in three years. He and his wife will have saved $ 2.7 million, which they will deduct 4% from each year. No children. No complications.

He has paid advisers 1% to put him in index funds and send him quarterly comments he has not read. Why, he asks me, should he give up a quarter of his pension income to get a list of index funds?

Why. For a list of mutual funds, with bonds, US equities and foreign equities, I have one, my 4-3-2-1 plan, here . It is free. Suitable for anyone with $ 100,000 to $ 10 million.

If you don't trust it, you can go to Vanguard and look up the Target Data Fund for your age. It will have allotments to bonds, US equities and foreign equities. Since the assignment of Vanguard is not copyrighted, you can turn it off using cheap ETFs like the BlackRock zero cost. I have a directory of cheap index funds here . It is also free.

Portfolio allocation is cookies. Don't pay for it. But you should pay for non-cookie expertise.

Would it make sense to sell valued securities to pay off a mortgage? It's not a simple question. Is there a way to help the grandchildren without turning up the study aid? The counselor needs to know a lot about Fafsa.

Pay after the hour if you can, or maybe off the job, as you pay a lawyer or CPA. If you only need mortgage advice, or when you can retire, maybe $ 250 an hour. If you recapitalize a small business under IRS Reg. 25-2701 with cumulative preferred stock, $ 900 an hour is more like it.

Planners for hour agencies are scarce, but I expect people like that North Carolina investors will pay $ 27,000 a year for not much, and they will be more plentiful.

I have a directory of schedulers here . I want to expand the list, and especially want to see more $ 900 advisors on it. If you are a planner and want your name added, follow the instructions.

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Don't pay $ 27,000 a year for cookie advice.

Think of all lobbying and litigation about whether a stockbroker is a fiduciary. Think of the proclamations from "just charge" financial planners whose compensation makes them act in your best interest. (child molester!) and write breathtaking articles.

Everything next to it.

Two things matter when you search for a counselor. What expertise do you buy?

I have a three-step plan to focus your attention on what matters. Rule # 1 has to do with Madoff-proofing your money. Rule # 2 and # 3 deal with payment and expertise.

# 1. Park your assets in a big place.

The manager of your securities should be a company of $ 1 trillion. B of A, Fidelity, JP Morgan Chase, Schwab and Vanguard are all fine choices.

What with an institution with only $ 500 billion? Well maybe. Joe's Planning of South Succotash, Indiana? Absolutely not.

Custody and advice are separate. Your financial planning may come (probably coming) from a small outfit, and you will pay for it. Storage should be free. The custodians earn their money from investing idle cash.

# 2. Pay 0% for portfolio management.

In ancient times, portfolio managers would get 1%. It doesn't work anymore. Competition has reduced the rate to 0%.

Fidelity has index fund with 0% annual fee. BlackRock's iShares range includes a portfolio of 3,583 shares that charges a small amount, but earns it back by lending your securities. (Ticker: ITOT; details here .) Vanguard has not come down to 0% yet, but is close enough.

Don't want to settle for an index fund? Some stock pickers are winners, you say. Let's take a collection of stock pickers today, and come back in ten years and see how they did.

Half of them have hit the market before fees. Half will have made it worse, before fees.

I can't identify the good guys beforehand. Looking at who did well from 2009 to 2019 gives only the weakest hints about the winners 2019-2029.

This is what I can tell you: Overall, the stock pickers will do just as well as the index funds. Before fees. After fees, they will do worse than the market, by the amount of the fees.

# 3. Pay for skills. After the class.

In the furious battle over the fiduciary rule, supposedly the "fee-only" planner, who collects an annual fee, but no sales commissions, is on the side of the angels. I'm not sure.

The annual percentage charge is a relic of old times when advisers could profit from continuing to manage portfolios. Typical: 1% per year.

Surgeons get well paid. But do they get a percentage of net worth? Ridiculous.

Why should a financial advisor get a percentage of net worth to tell you if you should pay off your mortgage or how much to put into your grandchild's 529s?

Sometimes the percentage scheme is unfair to the planner. Say that an obstetrician has just finished their place of residence and opens a practice. Her income is high, her need for financial advice is high and her net worth is $ 0. Why does the planner have to put her down and hope to make it up later?

Usually, injustice goes the other way.

I just heard from a reader in North Carolina who is 59 and thinking about retiring in three years. He and his wife will have saved $ 2.7 million, which they will deduct 4% from each year. No children. No complications.

He has paid advisers 1% to put him in index funds and send him quarterly comments he has not read. Why, he asks me, should he give up a quarter of his pension income to get a list of index funds?

Why. If you want a list of funds, with allotments to bonds, US stocks and foreign stocks, I have one, my 4-3-2-1 plan, here . It is free. Suitable for anyone with $ 100,000 to $ 10 million.

If you don't trust it, you can go to Vanguard and look up the Target Data Fund for your age. It will have allotments to bonds, US equities and foreign equities. Since the assignment of Vanguard is not copyrighted, you can turn it off using cheap ETFs like the BlackRock zero cost. I have a directory of cheap index funds here . It is also free.

Portfolio allocation is cookies. Don't pay for it. But you should pay for non-cookie expertise.

Would it make sense to sell valued securities to pay off a mortgage? It's not a simple question. Is there a way to help the grandchildren without turning up the study aid? The counselor needs to know a lot about Fafsa.

Pay per hour if you can, or maybe off the job, as you pay a lawyer or CPA. If you only need mortgage advice, or when you can retire, maybe $ 250 an hour. If you recapitalize a small business under IRS Reg. 25-2701 with cumulative preferred stock, $ 900 an hour is more like it.

Planners with hourly agencies are scarce, but I expect people, like the investors in North Carolina, to pay $ 27,000 a year for not much. more abundant.

I have a directory of schedulers here . I want to expand the list, and especially want to see more $ 900 advisors on it. If you are a planner and want your name added, follow the instructions.