HI ZincWhiskers. If you like and trust your current advisor and want to stay with them, you should be able to negotiate a lower fee once you bring him or her the $1.1m. Many AUM advisors charge less than 1% at that level of assets. It's still a significant expense however and so you might also want to combine your willingness to manage it yourself with paying an hourly planner to help you get an appropriate portfolio set up and then just meet with them once or twice a year to rebalance. This could save you significantly on fees without losing investment expertise.
ZincWhiskers-There are multiple ways to approach this. One would be to talk to your financial adviser and see if you can negotiate a lower fee based on the larger amount of assets. Another would be to retain a portion of the assets to manage yourself, placed in low-cost index funds.
ZincWhiskers (I gotta believe there is a story behind that one): is an advisor cost a fee or an investment? If the added value provided by the advisor exceeds his/her cost I would consider it an investment. Why not place some of the additional funds with the advisor and try your hand at investing some as well...no need to make this an all or nothing proposition. Decide where you will source your research for making investment decisions and if you're confident go ahead with some portion of the total investment. Also, ask about managment fee discounts...why not?
Hi ZincWhiskers (Interesting handle - I used to date a girl named ZinkWhiskers - it didn't work out) A lot of people manage their own assets without a full time advisor. I believe that the path to financial success and investment success is avoiding big mistakes. Losing 33% during the downturn wasn't bad as long as you didn't panic and sell out. You have a lot of choices and I can see that you are already getting some good advice from advisors who have jumped on to this chat room.
ZincWhiskers: It looks like you have done a good job managing your financial affairs. I can certainly understand the reluctance to pay a fee because it will be your largest expense. So the decision to use an advisor or not depends on if you think the relationship will bring you value, not only in investment returns, but also avoiding the big mistakes.
HI Lea Ann Knight here - I'm handing over to the new batch of advisors. Great questions have been flowing in!
Thank you for your help today Lea Ann!
This is Frank Boucher. I'm jumping off now. Had a great time answereing great questions. Be back on Tuesday.
Thanks, Frank. Looking forward to it!
Readers, please bear with us as we welcome a new round of advisors to the chat
Hi everyone - this is Andy Tilp CFP(R) from Trillium Valley Financial Planning (www.trilliumvalleyfp.com), serving the Portland OR and Willamette Valley with fee-only financial planning services.
This is Helen Huntley from Holifield Huntley Financial Advisers, a fee-only adviser in St. Petersburg, FL.
Hi everyone -- This is Steve Johnson, CFP(r), Chairman of Johnson Lyman Wealth Advisors in Palo Alto, CA. We are a Fee-Only wealth management firm serving primarily high-net worth individuals, families and small business owners.
Alright Steve, Helen and Andy. Here's your first few questions from Robin
Robin-You are right to consider how your 401k is allocated when deciding what to do with your IRA. You can tilt toward bonds or stocks in the IRA, depending on what you are doing with the 401k. I would recommend a bond fund rather than another Treasury security. Interest rates are very low right now, but you are likely to do better with a bond fund than be reinvesting in Treasuries.
Robin - the key is to look at your portfolio as a whole, with all the various parts (IRAs, 401k, taxable accounts, etc) working together. For your specific question, if you are looking to move toward a more conservative approach, once it matures, I'd consider moving it to a GNMA or short to medium term bond fund. Right now with interest rates low, I'd shy away from long term bonds.
Mishka-I do not recommend sinking more cash into your underwater property unless 1. you intend to keep it for an extended period and 2. the extra cash is needed to refinance at a lower rate. or 1. and 3. You have no better way to invest the money.
We have a follow up from Mishka
Mishka-Is this your home or a rental property?
Mishka - what are the prospects for the property to generate income. Is it in a good neighborhood where rents, and eventually property value will go up? You need to weigh the prospect of being able to recoup any more money you put in, or the money you are loosing now.
Thanks, all. Here's a follow up from Mishka
Mishka: I suggest that you think of your question re paying off the 3.5% mortgage on your rental property as a straght investment decision. If you are confident that you are likely to earn more after-tax on the dollars that you could use to pay off the mortgage than the after-tax cost of the mortgage itself, than I would NOT pay it off. On the other hand, if you like the idea of a 3.5% risk-free return (and more if/when the ARM resets to a higher level...), then I would go ahead and pay it off. Does this make sense to you?
Mishka-The main thing to ask yourself is whether this investment is a good one for the future. If you were buying a rental property today, is this the one you would buy at its current market value (not what you paid for it.)? If this property is still a good investment, then you should keep it as long as it's a good investment--not just until it recovers to the price you paid for it. The second issue is whether the cash you would put into this property could be better used elsewhere. Do you have an adequate emergency fund? Are you contributing the maximum to your retirement plan if you have one? Are you diversified or is all your money tied up in real estate?
Will a lender call the loan if Mishka were to structure a lease purchase or other owner initiated action like that - Helen?
I am not a mortgage expert, but I do not think a lease-purchase agreement would be any more of a problem than a regular rental agreement. Mishka is obligated on the mortgage regardless of these agreements.
Mishka - It sounds like there are many issues around this property that may require more analysis than we can do here. Check if there NAFPA or Garrett Planning Network member in your area that has experience. They should be able to answer your question.
And advisors, when you're ready, we have a follow-up from Robin
Robin's original question was:
"Hi - I have a US Treasury Strip Maturing on 02/14/2014. The Face Value is $8,000 and the Market Value is $7,980.80. This is in a very small Deductable IRA I opened 20 years ago before I had a 401K. I do not and have not contributed to this account for about 18 years (I only contribute to my 401K). What should I reinvest this US Treasury Strip into when it matures? I want to be conservative with it. I am 52 years old. I am already moderately agressive in my 401K. Thank you."
Robin: Yes, I think it would definitely be worthwhile for you to meet with a fee-only adviser. The decision, for example, to work until 67 or until 70 may have a greater impact on your retirement than the specific asset allocation you might choose. A good adviser can not only provide answers, but help you to ask all the right questions in the first place. You can find an adviser near you by going to napfa.org and typing your ZIP into the "Find an Advisor" box on the home page
Thanks, Robin. Glad we could help!
Hi Gianluca, thanks so much! And yes, there will be transcripts available of each chat after the sessions end. We will go back through and organize by question too, so it should be a bit easier to navigate. The transcripts will be available at the same URLs as the live chats.
Thanks, all. How about you take this next question from Cindy