I'm trying to imagine being 84 and being told by my kids that it's time to hire a financial planner. I may not be so sharp when the time comes. Maybe I should put a tick in this column.
I took over the management of my mother's finances towards the end of her life. He seemed hesitant, but he knew it was time. I think he still saw me as his little boy even though thousands of clients and students looked to me for advice he was hesitant to take.
Managing your investments to save on fees
If you expect to pay $35,000 a year in mutual investment fees, Laasya, I'm guessing here, but you probably have an investment between $1.5 million and $2 million. Mutual fund management expense ratios (MERs) are the aggregate amount paid in fund returns each year. They are about 2% on average but can range from less than 0.5% for cheap, passive index funds to 3% or more for diversified funds from insurance companies.
If you have $1 million or more to invest, there are discretionary portfolio managers using stocks and bonds or mutual funds that may charge 1% or less of your portfolio value. (Discretionary means that the portfolio manager makes buying and selling decisions on your behalf.)
You can actually invest in exchange-traded funds (ETFs), and now there are dozens of simple asset allocation ETFs (also known as general ETFs) that can be a one-stop shop for investors. Fees are at 0.25%.
Why self-directed investing may not be the answer
The problem with buying an ETF, Laasya, is that your children are worried that you are investing yourself. And if they wanted to be self-directed investors, they would probably offer to help you manage your investments. They didn't. Therefore, if you withdraw your funds to manage yourself again, you may be putting your children in an uncomfortable situation, as they may have to become DIY investors at some point if you cannot manage your finances.
Investing on your own may seem easy to people who are comfortable doing it. But I am always convinced that some people will not be able to manage their personal finances, no matter how easy it is.
Have you thought about a robo advisor?
I often joke with my wife that I'm pretty good at a short list of things in the area of financial planning, but not much else. There are many things I could learn to do in my house or in other aspects of life that I am not interested in learning. I would like to pay a professional.
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