How to upgrade your financial advisor — at half the cost and twice the value

Sean discusses why you may be unhappy with your financial advisor and what to do in that situation. He's happy to help you navigate finding a new advisor who's a better fit for you.

Transcript

Sean 0:00

If you have a financial advisor and you're looking to make a change because you don't feel like you're getting value, or for whatever reason, you just don't think you have the right fit, it's natural to look for someone to replace your existing advisor. So I have an advisor, I need to look for another financial advisor, and how to find a financial advisor is a good place to go. But I want to propose an alternative way to approach that problem, which is if you're somewhat uh knowledgeable or willing to read and educate yourself on different uh service models and tools out there, you may be able to replace your advisor with more than one thing or person. So let me give you an example. Uh, let's say you have a million-dollar uh retirement account with a uh traditional financial advisor and a big name firm that runs a lot of commercials, and you don't feel like you're getting value or you're coming across posts or your friends are telling you that your your 1% or is$10,000 a year. Is that worth it? And you're you're not sure you would have thought of it that way because the the quarterly fee just comes out of the account, and that$2,500 a year on your statement looks pretty small compared to your million dollars. I think that's why the assets under management um system can be a problem if you're not really getting value, and so you're not thinking about that charge. It can also be a benefit to people who do feel like they're getting value because they're not focused only on the cost, they're looking at it in terms of their total wealth. Um so they're comparing that small, that that smaller number, not small, but a smaller number to a much bigger number on their statement. So, in any event, if you just are uncomfortable with the idea that you're maybe not getting what you should for$10,000 a year, uh, you're not hearing from your advisor, they're not doing anything other than uh you know sending you a statement, etc. Um, but you don't really want to do it yourself. So here's one example of how you might break apart the roles that an advisor could play. Um, number one, for about half of one year's fee, you could probably hire a very thorough, talented, um, comprehensive, fee-only financial planner to look at your whole situation, give you recommendations, uh, confirm maybe what you what seems to be working well, point out some areas you can improve on, not just on your investments, but on various types of insurance, any retirement planning, estate planning, uh, designations of beneficiaries, which is part of the estate plan. Uh, look at on the insurance part, long-term care, life insurance if necessary, um, how to think about college planning. If you have kids or grandkids, you're you're hoping to help with education. So, a very comprehensive plan for let's call it six months worth of your the fee you might be being charged in your account. So that would be five thousand dollars. So very you know, significant investment, maybe uh you know, a decent dollar amount, but that would not be an ongoing cost. You could do that and get a very thorough snapshot of of what might be you want to focus on, or if nothing else confirmed what you're doing is appropriate. And by itself, that would save you five thousand dollars year one. And then depending on the situation and depending on your comfort level, you may not need that kind of review for another three to five years. When you have life uh big inflection points, big changes, big decisions, it's good to maybe revisit that. But uh, and you might also be able to find that kind of help for less than five thousand dollars. I'm just giving you sort of that's probably on the high end for someone that has uh maybe not super amount of complexity, they don't own businesses, they don't have real estate in multiple states. Um but even for a business owner, depending on how complex it is,$5,000 might be a reasonable amount for a very, very thorough plan, including kind of a prescription for your investments. So it would be above and beyond what you're getting if you're if you're paying$10,000 a year in the advisory fee and you're getting a statement and the investments are taken care of, so to speak. That that would be a big, big improvement. And those people and those planners are out there, and I'm happy to help you find one or evaluate your search process for that. So, and let's say you don't want to have an ongoing um management or supervision or worry about your investments. Um, one, you could probably develop a strategy that doesn't require a lot of changing, um a more uh strategic approach versus tactical. But even if you want to replace sort of the the investments piece for no more than 0.3% a year, so that would be$3,000 in a year, you could uh use someone like Betterment, Wealthfront, uh, Charles Schwab's intelligent portfolios, Vanguard, Vanguard's personal advisor services. So you could go from$10,000 a year to$3,000 a year on the investments, and that would be an ongoing savings. So it probably wouldn't have the potential to customize as much as you could get with an individual advisor, especially if they're an independent advisor. But a lot of people are not getting that now. They're getting the Maryland GBS, Wells Fargo, Morgan Stanley, Edward Jones, Raymond James, LPL, cookie cutter portfolio, and they're paying the full 1% or sometimes more. So if you can get um, if you're gonna get the cookie cutter, pay the cookie cutter price, which is more like 0.3%, not 1% or more. Um so in in this hypothetical example where you break apart the the pieces of your planning of the of your financial needs, you pay five thousand dollars one time for the investments, you switch to maybe a three thousand dollar a year, 0.3% investment solution. And now year one, you're paying$8,000, year two, you're probably paying$3,000, and for several years you're staying at that$3,000. Hopefully more if your account is growing because it's based on your assets, even though it's a smaller number, the 0.3% on this million-dollar hypothetical uh account. Um, but you've cut out a lot of cost, and if you have the right planner up front, especially if you can go back to them for one-off questions, you probably have increased value. So might sound too good to be true, but so what's the downside? It'll take some time and energy to find the right person to give them the data they need. So there's there's some work to it. Um, but if you think about what Amazon does for us compared to you know what what you had to shop for 5, 10, 20 years ago, or what a cell phone in your pocket can do compared to uh a flip phone 15 years ago or nothing 20 years ago, 30 years ago, use the development of new tools and around you to consider what's possible. And as a professional advisor, this is the kind of thing that uh I keep keep tabs on because I want to make sure that I'm delivering you know a lot of value to my clients. And if you have an advisor and you feel that they are, you know, I'm biased, but I think obviously people seem to value that relationship and that trust and knowing your situation inside and out. So definitely uh don't write off the 1% a year uh advisory fee as it's the worst thing that's ever happened, even though a lot of people in the uh blogosphere will suggest that. If it works for you, keep doing it. But if you're watching this and you're thinking about is this really valuable, um, especially for a cookie cutter portfolio and no real ongoing financial advice or or access to a to your advisor from a you know non-investment questions, think about breaking apart the pieces of your advice and let me know if I can help with any specific questions on that, and happy to help. Thanks.