Ask Liz Weston

Get smart with your money

Financial Advisors

Q&A: Be patient! Find an expert!

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Dear Liz: I have a quick question and would like a personal response. What email address can I use?

Answer: You can use the email address of the financial planner you hire to advise you.

Just because a question is quick doesn’t mean the answer will be. Answers to financial planning questions take time and effort to craft, plus the appropriate response may vary depending on the details of the questioner’s circumstances. This column answers a few questions of general interest for educational and entertainment purposes. A hired advisor can answer an array of queries and provide truly personalized guidance to help you get the most from your money.

Q&A: Update on that CPA search engine

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Dear Liz: I am trying to find a CPA personal financial specialist per your column. Using the link you provided, I was told that there are zero people who fit that description in my area, which is hard to believe. Can you help?

Answer: A spokesperson for the American Institute of CPAs, which provided the link, notes that the directory’s “search by Zip code” function isn’t working properly and suggested searching by state or city instead.

Q&A: Need help with your IRA? Call a CPA, or maybe a PFS

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Dear Liz: My husband and I have substantial pre-tax savings in our workplace retirement plans and IRAs. Based on where those balances would be in retirement, we would definitely be paying more in taxes than now, and face the potential of running out of money if forced to withdraw it all. You often refer people to the Garrett Planning Network for fiduciary financial planners. Is there a similar organization for tax planners who can provide a strategy for rolling over our pre-tax accounts in order to take part of the hit now, and reduce taxes later? The financial planners we’ve found through Garrett have some tax knowledge, but refer us to tax professionals for more in-depth tax analysis.

Answer: Many fee-only financial planners work with tax professionals such as certified public accountants — CPAs — to craft Roth conversion plans that can reduce future taxes. If you want an all-in-one pro, though, you could consider hiring a CPA who is a personal financial specialist, or PFS. The PFS credential is similar to the certified financial planner credential, but is granted only to CPAs. To find one in your area, you can use the American Institute of CPAs’ directory at https://www.aicpa-cima.com/directories. Click the plus sign next to “Find a credential/designation holder,” select “PFS” in the box titled “Credential/designation name” and then input your location.

Q&A: Should this reluctant retiree pay an advisor?

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Dear Liz: I’m about to retire. A friend’s money manager has done well by her, doubling her portfolio in five years. This manager would charge a 1.5% fee to take control of my money, invest it, and generate income to supplement my Social Security. My heart is truly uncomfortable turning over control of my life savings to professional management, even though my head tells me it makes sense. Would a fair compromise between my heart and head be to pay a financial advisor to tell me what to do, but allow me to retain control of my hard earned savings?

Answer: Yes. You may have to search a little harder to find such an advisor, but you could be better off.

First, don’t be too impressed by a manager who doubled a portfolio in the last five years. An investment in a plain vanilla S&P 500 index fund would have performed about as well, at a much lower cost.

Speaking of cost, a 1.5% fee is relatively high for asset management. A 1% fee is much more common. If instead of a money manager you hired a fiduciary, fee-only financial planner — one committed to putting your best interests first — you typically would get comprehensive financial planning advice as well as investment management for that 1%. Such planning could include a tax-smart, sustainable plan for tapping your retirement funds, advice on Social Security claiming strategies, help picking the right Medicare coverage and a review of your estate plan, among other services.

If you’d rather not have someone else manage your portfolio, though, you have other options. The Alliance for Comprehensive Planning (www.acplanners.org) and the XY Planning Network (/www.xyplanningnetwork.com) represent fiduciary, fee-only planners who charge retainer fees. You can find fiduciary, fee-only financial planners who charge by the hour at Garrett Planning Network (www.garrettplanningnetwork.com).

Q&A: Finding a fiduciary advisor

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Dear Liz: I am having difficulty finding a fiduciary, fee-only financial advisor. I have inherited considerable investments from my parents’ trust and now that their house is sold, there will be a payout in excess of $1 million. I believe that my parents’ money manager has done an excellent job of investing and managing their money, so I want to stay with him. My IRA is with another money manager. Without any personal recommendations, I do not know how to go about selecting a financial advisor from a list of advisors on the internet. Interviewing and selecting one based on likability makes me uneasy.

Answer: If anything makes you uneasy, it should be that an advisor isn’t required to look after your best interests.

A fiduciary is someone who is committed to putting their clients’ interests ahead of their own. Most financial professionals are not fiduciaries and are typically held to a lower “suitability” standard. That means they’re allowed to recommend investments that are more expensive or that perform worse than available alternatives, simply because the recommended investments pay the advisor more.

You can start your search for fiduciary, fee-only advisors by getting referrals from the National Assn. of Personal Financial Advisors, the Alliance of Comprehensive Planners, the XY Planning Network or the Garrett Planning Network. LetsMakeAPlan.org has a list of questions to ask.

Q&A: So you’ve got a friend spewing investment advice from social media. Here are some grains of salt

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Dear Liz: I am in my early 60s and have a friend the same age who keeps telling me to invest in companies which she has found from looking at YouTube videos. She says that she picks stocks by seeing which companies are repeated over and over again in different videos. She claims she is making a 400% return. She tells me I am losing money by investing in safer products, such as certificates of deposit. First of all, is this a good idea to invest everything in stocks, when one is in their mid-60s to 70s, when retirement is on the horizon? Also, neither she nor I are working full time at the moment, so, the risk is great if the market goes up and down and the value of a portfolio changes. I’ve seen my retirement funds drop the last few years, even though they are ever so slowly creeping back up. Finally, what is your opinion on getting financial advice or stock picks from social media platforms?

Answer: Perhaps your friend is the next Warren Buffett. More likely she’s exaggerating her results or simply hasn’t dealt with a down market yet. Few investors can consistently produce outsize returns over time, especially when they’re essentially picking stocks at random.

In answer to your first question: It’s rarely smart to invest everything in any one thing, whether it’s stocks, bonds, real estate, certificates of deposit or alpaca farms. Diversification helps investors reduce risk. If one type of investment is performing poorly, another may be doing better.

Having some money in “safe” investments may be prudent, but you’re typically losing ground to inflation with low-return CDs or Treasurys. Most people will need to have at least some portion of their portfolios in stocks, before and after retirement, if they want to outpace inflation.