Financial Advisors?

[jrdavid68]

I have a friend who just took early retirement from his company. He will be receiving a lump sum payout and is struggling with what to do with it - it needs to be safe. A money market IRA at his bank is only paying 2.25% at this time.

I have encouraged him to seek out financial advisors, and so far he doesn't really trust the ones he has met with.

Are there any financial advisors here that might have some advice? Anyone have a good recommendation for a Financial Advisor in the San Francisco area?

Thanks,

[turbo6bar]

There are few hot short-term investments. Is this short-term or long-term?

I can't help you with financial advisors. I think the best manager of your money is you.

[jrdavid68]

This would be long term - he is in his late 50's and wants to stay retired.

For any "hot" investments, they would need to be very low risk.

[Moses]

If the sum is great enough, I'd have a split potfolio of indexed funds and laddered bonds maturing every year. The less risk I wanted, the fewer indexed funds I'd own.

[turbo6bar]

Stay away from hot, then.

Does he have any current debt load that can reduced? If you have a mortgage at 6%, you could pay off or reduce the balance and in essence give yourself a secured 6% return on your investment.

Also, I would seriously consider a quality dividend stock. Some stocks are paying up 7% dividend, but blue chips are paying less (on order of 3-5%). Dividends have favorable tax treatment, and the dividend yield increases if you reinvest.

Yet another opportunity lies in municipal bonds, but if your friend's income is lower (due to retirement), you might not reap enough tax benefits.

My preference is removing debt. If your montly debt decreases, you don't need as much income to maintain a lifestyle.

It all comes down to managing risk vs. reward. There are other creative investing methods (yielding higher percentages), but he would need to be proactive.

[pwd72s]

I agree with the concept that nobody should care more about your money than you. While there are many good financial advisors out there, there are also "sharks" calling themselves financial advisors. One good place to begin learning, and it sounds like your friend needs a crash course? I would advise him to stay in the money market until he learns more. One good place to start learning more is with a money talk radio show. You can pick up the stations and schedule from the website:
www.bobbrinker.com The whole thrust of the show is money management by the individual...

['89cab]

In the past few years I’ve done a fair amount of reading on the subject and can recommend the following two sites. I’m following the Ultimate Buy and Hold Strategy (although light on bonds) with the hopes that I will live through retirement with just the state teachers’ retirement my wife and I will receive. The funds in the Buy and Hold will be used to help kids buy houses and/or start businesses or pass on when we do.

http://www.fundadvice.com/FEhtml/BHStrategies/0108/0108a.html

http://zenmillionaire.com/ (particularly Lazy Investing)

Also just finished reading *The Four Pillars of Investing* that I also recommend. Don’t hire an advisor. The time spent learning how to invest wisely will likely return more than any other activity you could choose.

[Bill Verburg]

Knowledge is power!

Try spending some time at Morningstar

[tabs]

U always have to do your due dilligence when it comes to your money....Nobody will take care of your money like you will.

To a number of people I have NO credibility whatsoever about anything let alone financial ones...It has been my experience that about 90% of all Brokers, Financial Advisor types are nothing more than salesmen who only know what the Brokerage/Insurance outfit they are working for tells them.

So what the fk do U do....you have to realize that a successfull Broker is in a sense running his own small business based upon the clients he sells investments to...sounds like a car saleman huh?

[tabs]

Next Chapter..

I WILL SAY THIS PWD'S ADVICE ON FINANCIAL MATTERS IS SOUND...

However there is more to it than that.....My position is....if you need and operation...do you operate on yourself or do you hire the most experinced surgeon in his field that you can find to do the operation....so what makes you think that you can invest your money on a daily basis anymore succfessfully than you could operate on yourself?

Most people don't have the time to become an expert practioner of the art of investing money succesffully, if you did then you'd be in the business of doing it and wouldn't be neednig to ask questions.

[Moneyguy1]

Moses approach has merit. Even though I am a financial advisor, I do not "manage" or do I sell. I make recommendations monitor periodically but the individual has the ultimate decision as to whether my recommendations have merit. One of the primary criteria is risk tolerance. That is an individual thing, varying from one individual to another, and also changes with time.

Turbo6 also adds some interesting ideas to the mix. Making 2.25% on an investment while paying out 6+% on a mortgage (or worse, credit card debt) is not the most effective use of money.

As for advisors, be certain the one you pick has some credentials like RFC or CFP behind their name; at least this means there has been some training. In addition, I would suggest a fee only planner rather than one that works on commissions.

Free advice and worth every penny.

[jrdavid68]

Thanks for all the comments guys - keep them coming.

To answer the debt question, little is owed on the house and will be paid off shortly, otherwise, there is no debt.

I also agree that one should control their own money, in this case however, he seems to be more comfortable with someone telling him what to do. The problem is finding that person that he can trust.

[tabs]

Money that "some training"...usually is so they can pass the licensing exams....fee only yea....

[tabs]

So how would I approach the problem of finding someone....I think I would ask the Branch Manager of a reputable company...who is the most profitable investment Broker in his Branch, and make it clear if he puts you unto a hack, you will never do business with his company again. I would also tell him about the rough amount of money your dealing with and your risk tolerance...

I would then interview said recommended Broker...to see how comfortable you were with that person.

What you are really looking for here is a Broker that only takes on clients BY REFERAL.

Hopefully you can find a Portfolio Manager who works on a 1.5% of total assets basis....that means all trades no matter how many or how few are based on that asset level.

[Moneyguy1]

I should have known......

Tabby...I may be a pessimist, and I may be conservative, but I do try to give everyone their due. There are excellent financial planners out there just as there are excellent doctors and attorneys. All it takes is a little effort to find one.

Do you know why fee only? So they won't churn your account and make excess commissions. Is that so difficult a concept to grasp?

Sheesh......

[turbo6bar]

Is the management fee 1.5% per year? If your bonds are making 4%, and you lose 1.5% per year, is it really worth it? Or, do these gurus have magic dust to generate really nice returns?

[Moneyguy1]

AHA. Rate of return:

It all depends on (1) the market, (2) the expertise of the counselor and (3) the amount of risk one is willing to take. I know one Edward Jones rep who consistently recommends GE to new clients. No risk and relatively consistent performance. And for this, he gets a commission?

And, I do agree with tabs that the better ones are found by referral. Most of my new clients came that way. I must have been doing something right!! But, be advised that those who work strictly on commission (I was fee only) have a vested interest in making an account turn over on a regular basis to generate those commissions. Remember the old joke: How can I make a small fortune? Simple. Start with a big one. As for fee only planners: Fee only can vary from advisor to advisor. Mine varied with the client, generally based upon a mutual agreement. Since I am now semi retired, I only have a few that pay (average less than 1%) but I also do a fair amount of pro bono work as well. My way of giving something back.

As for accreditation, there are a number of schools now teaching financial planning both at the Bachelors and Masters level. The American College is just one. The courses there can be home study, tests given through the Sylvan Center. They are tough and thorough. Other home study courses as well as University courses prepare the individual for series 6 and other broker ratings, but cannot be taken without a sponsoring agency. One problem with financial advisors is the insurance companies and banks who throw that designation around without any real formal training, many times advising only insurance based products such as life, modified whole life, annuities, etc.

There are a number of organizations demanding that their members obtain the required training before they can carry a trademarked professional designation. These include CFP, AFC, ChFC, RFC. All these require extensive coursework. In addition, independent advisors generally carry, like doctors and other professionals, a form of errors and omissions insurance. Many financial advisors also have a background in accounting, some are even CPAs. In order to keep my accreditation, I have to have 40 credits worth of study every year, verifiable upon annual renewal. On top of that, I was also a real estate broker, in the business since I was 18 until just a few years ago when I relocated.

For self education, I recommend joining the American Association of Independent Investors (AAII). They have regular chapter meetings in most large cities, giving you the opportunity to listen to the successes/failures of other investors. I am also in favor of the beginner subscribing to the Motley Fool website for additional insight. And, if you so choose, mutual funds can be an excellent way to get some degree of expert management at a very low cost. Find those funds that not only have a good track record, but also have the lowest annual management fee and no 12b-1 fee.

Hope that helps.

Good luck!!

[tabs]

Turbo....1.5% of total assets under management....thus 100K would be $1500 a year....for unlimited trades on an account...thus NO CHURNING of the account...it al;so means the Manager has incentive to grow the account....thus 200K would be 3K a year.

Portfolio Manager = Fee Only

One thing I absolutely hate are Mutual Bond Funds....there is no guarntee of principle nor of interest rate.... It is MUCH BETTER to buy the indivdual bonds themselves....When the Bonds are called your priciple is returned and your iinterest rate is fixed thus guarnteed....and if your Ladder the call dates you can keep abreast of the current interest rates....also thge key is to stay with Investment Grade Paper....

Another option is Prefered Stocks...which pay a quartely dividend...they act much the same as corporate bonds and pay a fixed percentage rate and have a call date..but if the co BK's you have second call after Bond holders....Again the key is Invewstment Grade Stocks.... Years ago I bought an Aetnea 10% prefered which was an A+ rated Prefered.... I shoulda backed the truck up on that one....

Really the only way to play the game is to buy a bond when it is trading for less than its par value....collect your income and when called collect the capital gain....the difference between what you paid and par value....I did that with a B of A prefered and made out nicely.....

As for Stocks I have a Portfolio Manager...that I was refered to by a man who had been involved in the Stock Market for 50 years...he said of her that she was the smartest and most honest Broker he had ever met....Her family has been in banking for 3 generations, she herself has been in financial services for over 30 years and is the only Portfolio manager that is Bank Trust Certified with Wacovia...She is well enough thought of to be consulted by the Repblican National Commitee, she counts Alan Greenspan as one of her friends....and is an aquaintence of Paul Volcker among others...

Just ONE of the crieteria she watches on a daily basis with any stock she is interested in is it's daily volume....she watches for big blocks of shares being bought or sold....she watches whether the blocks are being bought on the upside or being sold on the downside...this indicates Institutional Investing....and she never lays off big blocks of shares at once....but in a gradual fashion so as not to stir the markets and tip her hand....

Another key is...Every stock trades in a range....low to high...Obviously the best place to buy is when a stock has come off of it's low and is climbing again in it's range....you take it up and sell.....and when it falls again you buy again....MOT has been very very good to me over the past 2 years....I had 5000 shares under $10 took it to the $20 range and sold most of it, bought back in around $15, took it to $18 and sold, and am now back in at $15..... you tend to do this with smaller and smaller blocks of shares as a stock will tend to reach a state of equlibrium...

Right now the stock market seems to be building a base of higher lows.....

Ohhh Well...thats enough for now, Tabbys adled brain has been taxed enough for on mornining...