Financial Advisor
Hi Terry! How should a person determine whether or not a financial advisor is worth the money? I am 71 and my wife is 70. Between our Social Security checks and a pension, we gross about $5000 a month in fixed income. On top of that we gross about $1850 a month from a variable annuity. Because of excessive fees in that annuity, we wish to close it (there is no surrender charge). We are considering taking the money from that account, lumping it together with money currently in a stand alone IRA, investing it, and then begin drawing income from it. The total amount of money to invest would be about $625,000.
We have done our homework and identified a fee-only fiduciary financial advisor, whom we have met with and who seems competent and trustworthy. His fee is 1% of the account balance. My wife is advocating that we forego hiring a financial advisor, invest the money ourselves, and make our own decisions regarding withdrawals. She doesn’t believe the $6000 plus annual fee to an advisor is worth it. I am reasonably familiar with basic investing strategies but am by no means an expert. I am of the mind that a capable financial advisor will likely make better investment choices in the long run and thus make up for the annual fee. But my wife is skeptical, arguing that investing is basically a guessing game. What do you think?
Terry Says
I think you need a one-time consultation with a financial advisor who can look at your overview — not only investments, but income plan, tax situation and a quick review of your estate plan. That doesn’t have to involve ongoing advice about investments once you are set up.
I don’t know how you “did your homework and identified” this advisor. I would suggest you read this article and get matched with someone who will just charge you for a review. That could be a one-time fee — or an ongoing annual meeting, that wouldn’t cost as much as 1% of your assets.
https://www.terrysavage.com/pam-krueger-wealthramp/
But please don’t suddenly start moving money from your existing annuity. Even if there are no surrender charges, if the annuity is not already inside an IRA, you’ll wind up paying taxes on the gains. And that could impact your Medicare Part B and D premiums substantially.
And if the annuity IS inside an IRA, you need to a direct rollover — to make sure this doesn’t become a taxable event.
You didn’t say how the money in your existing IRA is invested, and what fees and commissions you are paying on that IRA. A consultation would help you identify those issues.
Bottom line: You gave me two alternatives. I gave you a third. I hope you’ll take that path — and let me know what happens.
