Regular poster but given the topic, decided to "sock up"

Wife and I had two windfalls in late 2017 that pushed us into millionaire status and are now sitting on roughly $2m cash. I'm in my mid 30's, and my wife is in her late 30's. We have 2 kids and no debt.

I would say I'm fairly savvy when it comes to markets/investments, but don't want the pressure of managing our own money. We've spoken to a number of prospective financial advisors, but we were both left uninspired. The people we spoke to either a.) try to sell us front end loaded funds or b.) tell us to buy index ETFs and charge an absurd management fee.

It does look like we hit the minimum wealth requirements for some private banks. From my limited research, it looks like one of the perks of private banks are the advisory services you receive. Would advisors through a private bank be a good direction? or should I continue trying to find someone independent?

How did you come to receive these two windfalls?

First one was inheritance, other was acquisition of a company that my wife had a piece of equity in. Both roughly equivalent in value.

Seriously though I think your best bet is to find a CFP that you feel has your best interest at heart that can help you manage your taxes and risk tolerance and will be your partner for a lifetime while you work towards your long term and short term goals.

Just curious what an absurd management fee is in your mind?

Also with that amount of money any front end loaded fund would or should be at NAV. Typically there's no load above 1MM. Downside is you have to stay with the same fund family

millionaire sock said:

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Regular poster but given the topic, decided to "sock up"

Wife and I had two windfalls in late 2017 that pushed us into millionaire status and are now sitting on roughly $2m cash. I'm in my mid 30's, and my wife is in her late 30's. We have 2 kids and no debt.

I would say I'm fairly savvy when it comes to markets/investments, but don't want the pressure of managing our own money. We've spoken to a number of prospective financial advisors, but we were both left uninspired. The people we spoke to either a.) try to sell us front end loaded funds or b.) tell us to buy index ETFs and charge an absurd management fee.

It does look like we hit the minimum wealth requirements for some private banks. From my limited research, it looks like one of the perks of private banks are the advisory services you receive. Would advisors through a private bank be a good direction? or should I continue trying to find someone independent?

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You want real planning? Find an independent. Expect an annual planning fee. Expect wrap asset fees in the .45 to .75 range. And pass on loaded funds. Mutual funds aren't created for that asset level.

I'm not sure why you have to be independent to be a real planner. I suppose that on average maybe a higher percentage hold a CFP but to me that is the bar.

nactownag said:

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I'm not sure why you have to be independent to be a real planner. I suppose that on average maybe a higher percentage hold a CFP but to me that is the bar.

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Im not saying you have to be independent to be a CFP. Im saying he's interviewed 'asset gatherers' so far and not planners. There are plenty of CFP's who don't do planning and just gather assets. Some people are ok with that...it doesn't sound like they are.

The people we spoke to either a.) try to sell us front end loaded funds or b.) tell us to buy index ETFs and charge an absurd management fee.

Gotcha. Yeah I see. I'm in total agreement.

I'm curious to know if he's interviewed "financial advisors" or CFPs.

It's really important that we distinguish between the two. Not saying that there are no bad CFPs or that you have to have it to be legitimate but it's a widely accepted standard for the industry these days.

My thought is that if you are getting value from a financial plan then the investments that are used is a small fraction of the discussion. Any reasonable person is going to invest the money prudently. Whether it's in vanguard or I shares or T Rowe Price etc you should expect that it will be reasonable for your goals and risk tolerance.

So the question is really more so about what did you spend the other 80% of the meeting talking about?

Im assuming you have a few good attorneys on you hands, but if not, I would strongly recommend that you find a good tax attorney that can share some different estate planning of more wealthy clients to you. I think that would be a better route than a CFP (at least initially), to have tax planning in your future. Some CFPs may have these connections, but I'm cautious of their referrals until a better relationship is established.

Outside of that, I would stage that money into the market over the next 2-3 years, with maybe even considering some rental properties to help diversify (unless it's already invested).

I know of a high yield debt real estate fund that could help with a portion of that.

Where are you located?

Quote:

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CFP that you feel has your best interest at heart

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Please don't be naive. CFP's still have to make a living and recommend plans that benefit both the client's and planner's long term strategy,

Private banks usually charge a MUCH higher fee than an independent, fiduciary adviser would and offer very little, if anything, extra in the way of services, experience level or credentials.

nactownag said:

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Gotcha. Yeah I see. I'm in total agreement.

I'm curious to know if he's interviewed "financial advisors" or CFPs.

It's really important that we distinguish between the two. Not saying that there are no bad CFPs or that you have to have it to be legitimate but it's a widely accepted standard for the industry these days.

My thought is that if you are getting value from a financial plan then the investments that are used is a small fraction of the discussion. Any reasonable person is going to invest the money prudently. Whether it's in vanguard or I shares or T Rowe Price etc you should expect that it will be reasonable for your goals and risk tolerance.

So the question is really more so about what did you spend the other 80% of the meeting talking about?

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Are there any CFP's on this thread other than nactownag and myself?

Agree there is a fairly wide dispersion in how Certified Financial Planner's operate. The push from the CFP Board is for all CFP's to consider themselves a fiduciary, when generally that term is limited to fee-only firms or those who are not compensated by other means (insurance, annuities, referrals, loads, etc.) However, this is changing as firms have found ways to manipulate the system and still call themselves fee-only...some set up separate entities to sell the insurance, and there are now new 'fiduciary-compliant' insurance products out there. Not my cup of tea, but I honestly haven't done my homework on them as it's not something I would buy for myself (which is the test of a true fiduciary).

The OP has a nice head-start with his windfall, but realize that $2M is probably average AUM for the typical SEC registered firm. At that level you can expect a competent CFP to of course manage the assets (which as nactownag said is actually not the majority of what we do) but also serve as the quarterback between your CPA and estate planning attorney and any related parties. You should be paying less than 1% of AUM for this.

Not sure what a private bank offers than an established RIA does not, and I'd agree in general that the financial planning we do far exceeds that of the broker dealers. Our firm is shifting towards ultra high net worth, which is in the $10-$20M range and what we do for that type of client is vastly different than a $1-$2M client. If you are seeking more of a family office to handle all of your financial affairs you will certainly pay for this service.

Most private banks charge 1-1.5% AUM and from what I've gathered unless you have large, complicated interests is a waste of money.

I met with a few and unless you are north of $10MM and multiple interests (real estate, private business ownership, raw land etc.) you would be better off finding a good estate attorney who could recommend a good accountant. I'm not sure this is worth 50 bps on a $2MM asset into perpetuity. However, I'm more hands on and understand people may have limits of time or other items which make a third-party more palpable.

The only interesting aspect of the relationship would be the ability to create liquidity with illiquid investments.

I am.

Stagecoach is as well.

Thanks for all the advice so far.

Our situation is a little more complicated than most as we live overseas and my wife is not a US citizen. It sounds like we need to find an international tax attorney to start the process. We initially tried searching for financial planners who are well versed both countries laws but were unsuccessful.

millionaire sock said:

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Thanks for all the advice so far.

Our situation is a little more complicated than most as we live overseas and my wife is not a US citizen. It sounds like we need to find an international tax attorney to start the process. We initially tried searching for financial planners who are well versed both countries laws but were unsuccessful.

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I would start with accounting firms, just outside the big 4. I've worked with CliftonLarsenAllen where one spouse was dual citizen and the other was a resident alien. Was very impressed with the international practice's ability to handle their issues. I've had discussions with a partner at RSM regarding their international capabilities. Both have wealth mgmt arms, so you could probably have them handle all your financial needs. They won't be cheap, but you likely have some serious need to do things right. I'm sure BDO and other similar sized firms would be the same.

What is your spouse's citizenship? Residency for each of you? Immigration status for your wife? Do you file joint or separate U.S. tax return? Did you file a 2017 foreign income tax return? 2018? Do you have liquid assets domiciled outside the U.S.? If so, where? Can't possibly comment without more details. Feel free to PM if you want my opinion and prefer to keep it off the board.

Private Bank models are a different animal. Some are very good for a particular clientele; some are marketing gimmicks. Independent RIAs have little to no compliance oversight and this is where the majority of investor fraud occurs. There are some very good ones, but I wouldn't begin to consider one with less than $2B in assets under management, which eliminates a good 95% of that space.

Congrats on the good fortune.

@stage - can I get your email?

@stage - PM sent