My wife and I have two Roth IRA's and Mutual Fund and a Money Market account. Our financial advisor has switched careers and now we are trying to find a new advisor. We live in a small town, and there is only one other financial advisor in our town who is associated with Edward Jones. Any advice?
Frankly, I'd start with your old advisor. Ask him two questions - 1 - why did he change careers? You're trying to find out if he had problems with the Broker Dealer he was affiliated with; and 2 - since he has switched careers, who does he recommend you use now?
Assuming you were happy with the way the B/D treated you, you can certainly stay with the B/D and use another advisor. If you were unhappy with the B/D you may want to switch, but be careful to do it correctly, otherwise you may wind up with some taxable sales as a result of the move.
Your comment was that you live in a small town with only one other financial advisor who is associated with Edward Jones. Does this mean that there is only one other advisor in town, who just happens to be with Edward Jones, Edward Jones being your current B/D? Or does it mean that there is only one other advisor working with Edward Jones in your town, and Edward Jones is your B/D and you want to stay with them?
Regardless of the size of your town, you can select to use an advisor that suits you, either with your current B/D or with another. You may have to arrange to travel to the next larger town to meet with them, unless you have a ton of money on deposit - most reps I know will make house calls if the account is large enough!
Good luck, Gene E. Utterback, EA, RFC
I am sure some of the pros here will offer detailed advice, however, I will offer a couple of comments from my own experience. It is more important to find a financial planner who meets your needs and in whom you have confidence than to find one who is geographically close. Although I live in a fairly large city I use a planner at firm in another city 100 miles away. In this age of email and cheap long distance phone rates he could just as easily be 1,000 miles away.
I have a very strong bias in favor of fee only financial planners. When you deal with someone who derives all or part of their income from a commission on the products they recommend there is a chance that they may be more interested in their own financial future than in yours. :)
Can you identify what expertise you got from your former advisor? E.g. do you think he was good at stock picking? Mutual fund picking? Allocating your portfolio among different categories (large cap stocks, bonds, international stocks, real estate investment trusts)?
Knowing what it is you expect from an advisor could help shape the answers here, and so help you more.
"schmity" wrote
Human beings, including fee-only financial planners (FOFP), are self-interested. What if the best investment for you is an immediate annuity or a cash value life insurance policy? Investing in those vehicles would reduce the amount of assets under management by your planner and thus your planner's annual fee, if (as is common) it is based on a percentage of assets managed. It is not in the planner's interest to recommend such a product unless he can earn a commission. An FOFP probably will not even be licensed to sell those products.
I am not saying that using FOFP's is bad, just that they are not free of conflicts of interest.
I agree. Picking a financial planner is a lot like designing a commission plan for a sales force. No sales person cares what is best for his/her employer. He/she is only interested in maximizing his/her commission. The art is to design a commission scheme that brings the vested interest of the company and the sales person as close together as possible.
When choosing a financial planner it is critical to understand exactly how the planner is compensated and what bearing that may have on the advice you get. You must then choose a planner whose compensation scheme is least likely to lead to bad advice and whose potential conflict of interest you understand well and can monitor. Nothing relieves you of all responsibility.
My opinion, which is based on my own experience and research, is that if you are going to invest in the stock or bond markets you are more likely to do well in the long run with a fee only planner who fully utilizes MPT to design your portfolio than with a fee-based planner or a broker.
Note that I am not a professional planner. I am just a guy who is interested in the subject expressing my own opinion for what it is worth. YMMV. :)
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