1% of $1 millon is some nice and easy money for a CFP to just plugging your numbers in a computer and let the computer do everything.
Instead, you can just watch some YouTube and learn financial planning yourself. Most recommend 3-4 mutual funds or ETFs. broad market fund + income dividends fund + growth fund...etc.
For a retired person a broad market fund + income dividends fund would be sufficient. Depending on your risk tolerance, you can do 30%+70%, or 40%+60% compositon. Of course you also want to keep some cash on the side: keep about 6 month worth of living expense in a high yield money market fund. You can also keep some cash in CD's.
You are making incorrect assumptions about our personal finances.
I HAVE DONE our investing during our working years and I am
more than competent at it, based on the very satisfactory results I achieved over 25 yrs of handling the portfolio. One does not use a professional firm strictly for investing or to hustle up "the next big thing". One uses a professional firm as part of a holistic approach to estate planning.
Are there bad CFPs? Certainly. There are bad attorneys, too (we've unfortunately met some of them over the last 50 yrs). The CFP designation is merely a "first round" elimination level. Finding an ethical, reliable, experienced firm requires serious research (and considerable time, especially in verifying client referrals). I was able to short-cut that process ONLY because I knew top-notch people, none of whose names will ever show up except in business or in-trade financial news.
As I stated, in retirement we chose to switch to a CFP firm for continuity: I am the only person in my family or my spouse's who has financial planning, insurance, and banking expertise. No one else is interested nor has any idea where to find holistic financial advice. They have no industry contacts nor any way to truly judging expertise on any referrals they could dig up. I have a poor opinion on the Edward Jones/Ameriprise et. al. horde with their 5,000+ made-up
faux advisor titles that are meaningless.
One uses a CFP for
managing and planning. If one wants to play with a portfolio it's easy to do that on your own. But we have better things to do in retirement than:
- harvest short and long term capital gains
- manage short and long term capital losses
- manage tax-wise portfolio distributions
- assist with tax-efficient strategies, such as our DAF and upcoming QCDs
- re-balance portfolio allocations with an eye towards coming global trends
I could do all the above, but they are not my area of personal expertise and I DO NOT ENJOY them. It's the same reason I would loathe doing the taxes now that we are in AMT territory. Using professionals for legal, taxes, and financial planning is worth saving my time and energy - and at our income level and
effective tax rate, mistakes can be very, very expensive.
Just because a consumer can write up their own RLT using Nolo Press software does not mean that it's right for someone else. Because I had worked in the FinSvc industry for so long and in several different sectors, we did our own financial planning in our early 50's (better late than never, LOL). Frankly, it takes a lot of effort for two people to cover all the scenarios of "what happens if......?"
A good financial planner can bring up questions that were overlooked and help identify what the financial goals really are short/medium/long-term. Two people NEVER have the same ideas on all three of those important issues! Most people wing it, and then regret it when they hit their 70's to find their options are limited.
Planning - with the help of professionals to execute our plans - has enabled us to enjoy an extremely comfortable retirement with a variety of options as we approach our 80's. The cost of the CFP services is modest compared to the benefits we've enjoyed (I would never have imagined us being at the donation level where a pre-funded DAF would work to our advantage so well, to name just one).
Our LTC policies cost more annually than the CFP firm does, in fact. And we certainly intend on keeping those - it's impossible to get anything comparable on today's market. As one of the younger CFPs remarked during our recent meeting (there were three firm members plus the founder at our recent mtg), our LTCi policies are "beyond platinum level" in value. Spouse and I are moderate- to high-risk disability; so as we age, we don't want care costs for one spouse impoverish the other.
