Since retirement is now 4.5 – 5 years away, Joe and I thought it might be time to consult with a financial advisor to find out if we are on the right track with our money.
We started the search for an advisor on Google, and found a fee only advisor in our area. Although his rate was a hefty $300/hr., he did offer a free initial consultation. We made an appointment.
Joe and I felt prepared for the meeting. Armed with a solid base of personal finance knowledge and a list of questions, we anticipated a productive meeting. As it turned out, the meeting was quite a disappointment. Most of the questions we had didn’t get answered, and several other factors led us to the conclusion that this particular advisor was not for us.
- His credentials. He was a CPA with Bear Stearns before he became a financial advisor seven years ago. He told us most of his clients were his family. Red flag No. 1.
- He was ULTRA conservative (and I don’t mean politically). We told him we had one investment that we didn’t need to withdraw from for at least 12 years. We felt confident, based on historical data, that it could average 8% as long as we left it moderately invested. He looked at us and laughed. He told us we were being way too optimistic. He believed, at best, we could earn 4%. (Hmmm, I’m not sure, but I would bet he got burned big time at Bear Stearns) We told him we had already been averaging 8-10% over the past 15 years (which included 2008), and we felt we were already investing conservatively. He told us we were the exception to the rule, and it was hard for him to believe that it would continue. (Looking at the chart below, you can see the actual returns over the last 13 years.)
NASDAQ Composite – Historical Annual Data Year Average
Year Open Year High Year Low Year Close Annual
2019 7,575.92 6,665.94 8,164.00 6,463.50 7,742.10 16.68% 2018 7,425.96 7,006.90 8,109.69 6,192.92 6,635.28 -3.88% 2017 6,235.30 5,429.08 6,994.76 5,429.08 6,903.39 28.24% 2016 4,987.79 4,903.09 5,487.44 4,266.84 5,383.12 7.50% 2015 4,945.55 4,726.81 5,218.86 4,506.49 5,007.41 5.73% 2014 4,375.10 4,143.07 4,806.91 3,996.96 4,736.05 13.40% 2013 3,541.29 3,112.26 4,176.59 3,091.81 4,176.59 38.32% 2012 2,965.74 2,648.72 3,183.95 2,648.36 3,019.51 15.91% 2011 2,677.44 2,691.52 2,873.54 2,335.83 2,605.15 -1.80% 2010 2,349.89 2,308.42 2,671.48 2,091.79 2,652.87 16.91% 2009 1,845.39 1,632.21 2,291.28 1,268.64 2,269.15 43.89% 2008 2,161.68 2,609.63 2,609.63 1,316.12 1,577.03 -40.54% 2007 2,578.47 2,423.16 2,859.12 2,340.68 2,652.28 9.81%
***We didn’t realize how conservative we were investing until 2008, when we lost -12% instead of the -40.54%. It had more than recovered one year later, and we have subsequently taken on a little more risk.
- He was upselling multiple services. Besides offering to manage our portfolio (with an upcharge of 1% to do it) he felt we needed an attorney to handle our estate. He had “partnered” with one, and would be more than happy to set up the appointment. Besides his fee of $1,000 to change all of our investments to only realize a 4% gain (3% if we use his services), we could pay another $1,500, to have the attorney ‘dot our i’s and cross our t’s’. Really?
- Lastly, he was condescending. This advisor questioned everything we have done to prepare for retirement. And not in the way one questions a person to gather information. He challenged everything we did or are planning on doing as though we have no clue. The best one? “Why would you want to retire so young??” Suffice it to say, I was having none of it, and we will not be calling him back.
Although this first advisor meeting was a bust, we will continue to meet with different advisors (as long as the initial consultation is free). But, if we can’t find one we like, we will continue to read, study and learn all about our own investments, and figure it out for ourselves. After all, you are your best advocate when it comes to your money, right?
If you use a financial advisor or have in the past, please share your experience. I’m all ears. 🙂
P.S. Thank you to all that add valuable information in the comments. Several comments have led me to change my mind on certain things that I was not aware of. If you haven’t already, go back and read some of the comments. There are golden nuggets of information there too!