After 20 years as a Vanguard client, I decided to look into hiring — “partnering” is the term the company uses — an advisor to help me with the money squirreled away in my two retirement accounts and a smaller investment account gathered from recent asset sales.
My asset mix shows me with 92 percent of my portfolio in stocks, 2 percent in bonds and 3.4 percent in short-term reserves. Another 2.6 percent is “uncategorized.” Needless to say, advisors reading this piece will find me recklessly overexposed to equities.
Which is why I initiated a call with a Vanguard advisor.
I called the 800-number at Vanguard Personal Advisor Services and a “Flagship Sales Consultant” picked up the phone. She made initial attempts to qualify me with questions such as, "What do you hope to get out of managed advice?"
After answering a question or two and telling her I wasn’t interested in managing my own money and that I had no illusion about beating any market averages, she said I sounded like a good candidate for advice. She arranged to for me to speak with an advisor in Charlotte, N.C.
We set up a call for early November. But before that, I went to the Vanguard website and filled out a three- or four-page questionnaire about my goals, my investment strategy, risk tolerance levels, income and tax status, and current accounts and savings.
It was a get-to-know-you form, the kind readily available at hundreds of financial advice companies.
As part of my homework, I went a step further. I solicited input from veteran financial planners about what they thought I should be asking my would-be advisor, and what this advisor should be asking with regard to my personal financial situation.
These financial planners, whom I run into during my day-to-dealings as an insurance industry writer, schooled me in the difference between a simple “asset rebalancer” using tried-and-true rules of thumb, and a bona fide financial planner using a holistic approach to my personal financial situation.
On Nov. 7, I met by phone with my would-be advisor for the first time. He is dually-registered and, with 12 years in the business, this fellow was more than qualified to advise me about how to develop a long-term trajectory for my retirement assets.
As we went over the investor profile form I’d filled out online, I told him that my individual retirement accounts, a traditional IRA and a Roth IRA, had spent much of their lives on autopilot.
In the early years, I parked the money in growth index funds, only to move the money on rare occasions into total stock market index funds, a target date fund and even a sector fund.
Remember that as the internet took hold, the rise of do-it-yourself-investing had low-level employees like me checking their investment balances frequently.
Although I exchanged funds very infrequently and only within retirement accounts, I can only imagine the mountain of transactions executed by people who had no business moving money around without good reason – people like myself.
More recently, after asset sales of some family silver and some rare books, I opened a taxable investment account – again with no advice from anyone. I stashed the proceeds of the sales in that account to prevent my wife and I from nibbling away at it in an easily accessible bank account.
During our 45-minute conversation, this financial advisor purposely limited his view to what he had in front of him: my investor profile and my account balances.
My wife’s assets, my mother-in-law’s assets, my stepmother’s assets (also at Vanguard), my mother’s assets – part of which my wife and daughter and I stand to inherit one day – were off the table. For the purposes of this discussion, you can’t count on any of that, my advisor said.
I knew he was right, of course, but isn’t that a key part of planning?
So our discussion revolved around budgeting and spending and what kind of life I could foresee for myself upon retirement.
My answer is very easy: I’m prepared to sit in a garden, read, write and play the guitar. Perhaps I’ll travel once a year, volunteer to lock horns with other people for a good cause and with luck perhaps baby-sit future grandchildren.
Worldwide cruises, jetting off to far-flung destination, tooling around in golf carts – all of that is not for me (OK, I’ll admit to some golf once in a while).
Such a circumscribed life won’t likely sit well with my wife, however, so we have no idea what kind of expenses I would be generating in retirement, other than ballpark estimates of retirement expenses being around 75 percent of preretirement spending, I told him.
My advisor, whose employment record was easily attainable on third-party websites, had a spotless BrokerCheck history.
He reiterated that he had a fiduciary responsibility to me, said he would use only Vanguard products and mentioned that investment decisions were made by a team of advisors.
At a charge of 0.3 percent of my assets under management, Vanguard would collect about $1,050 a year for his services but the money would go to the company, not to him, a salaried employee of the mutual fund giant, the advisor said.
But then I asked him about insurance and how to integrate my insurance protection into the rest of the financial plan.
Insurance-related questions were for my insurance agent, he said.
Wait a minute, I thought. What happened to the holistic approach everyone talks so much about? I only have term insurance, but my wife has a $50,000 universal life policy with a cash value of $10,000 — although this policy isn’t my asset.
What about long-term care? How am I funding that?
Now the questions sent to me by the financial planners before my Vanguard call came back to me: Will this advisor provide me with actual financial planning advice or just guidance on asset allocation in a general way based on my "profile"?
In addition to his silence on insurance and protection, there was no discussion about assets other than what was listed on the online investment profile form.
What about our house? How about our two cars? How about my mother-in-law’s house and the contents in her bank safe-deposit box?
I suspect that much of our Nov. 7 discussion revolved around eliciting answers to satisfy asset allocation questions and in which funds to invest the money and in what proportions.
We are going to resume the discussion Dec. 5, at which time my advisor said he would have an investment plan for me. After that, I either would follow through with the plan and I would become a client, or I would say thank you and move on.
There’s no question that I came away feeling better off for having entered into discussion about my financial future with a professional advisor. But looking back at our discussion earlier this month, I found our discussion lacking from a holistic perspective. For the first time, the nuances between a mere advisor and a planner began to dawn on me.
All we talked about was me and what I owned. I didn’t want to talk about me. I wanted to talk about how my wife and daughter and I, and what we owned, fit into a broader context of family assets and holdings.
I wanted something more comprehensive. I wanted more hints that the advisor would be planning, not allocating.
My conversation sometimes felt a little like writing a story off a press release. It's adequate for a certain purpose but well short of getting at what we in journalism like to call “the whole story,” or even a good part of it.
Then again, consider the expense of $1,050 annually instead of what I gather would be several thousand dollars to engage a financial planner.
You get what you pay for, fair enough. But if my man at Vanguard is just looking at my investor profile and adjusting and allocating accordingly, I may be better off dumping everything I own into a target date or a target risk fund.
Come to think of it, I can be my own man at Vanguard.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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