I’ve Been Dumped (By My Financial Planner)

It came in the mail a while back. I assumed it was another corporate pamphlet of investing suggestions, or my annual notice of fees. It sat in the pile of unopened mail, waiting until I finally got around to it. Inside was the dreaded letter; My financial adviser was dumping me.

I first signed on with this financial adviser in my early 20’s. I was working as the Human Resources Manager of an independent restaurant/event venue that was incredibly successful. The owner, an avid investor, was looking for more tax advantaged ways to grow his earnings. A company 401 k plan seemed like the perfect option to him, and I set out to begin doing all the research, interviews, and testing.

As it turned out, a 401 k plan was not ideal. The staff was mainly made up of 20-somethings and immigrants, and none of them showed any interest in participating. Especially given that the owner showed no interest in having the company contribute to the plan. After all, he was looking at the 401 k as a way to save himself money, and make more, not cut into company profits. With only a handful of the management staff and the owner interested in participating, the plan was deemed too “top-heavy” to meet government guidelines, and the idea was eventually scratched.

Having expressed interest in a plan, my boss wanted to encourage me to begin saving for retirement on my own. He introduced me to his financial adviser, and I immediately setup an appointment. “Rob” was a nice man, probably in his early 30’s, who worked for a well-known investment company. He was passionate about investing. Maybe a little too much so. As a single girl in her early 20’s, Rob saw me as the opportunity to correct all the wrongs made by most people early on in life. And in his excitement, he completely missed his mark.

Rob and my first meeting was a memorable one. We discussed my income and assets, and a little bit about my current lifestyle. Rob then launched into passionate plan of action for my future: “Get roommates! Eat Ramen Noodles! Live in a cardboard box if you have to! Save no less than 50% of your income, and someday when you retire, you’ll be rich!”

Looking back, Rob’s advice wasn’t necessarily bad. The problem was, he never bothered to ask about what I wanted, or get to know what made me tick. In my early 20’s, retirement at 65 seemed like a million years away. Who cares if I’d be rich then, if I spent the next 40+ years miserable? Would I even live that long?

Ah, if only I could go back! Had I known then what I know now, I’d know that had I started saving more then, and making better financial choices, I wouldn’t have to wait till 65 to retire. I could be retired now! We never discussed things like early retirement. Financial Independence. Exploring a different life! It came across as the same old “save money now, retire at 65″.

I knew enough to realize that saving for retirement was important. Especially since I didn’t have any retirement plan through work, and social security was unlikely to provide much for me when I was old. And, as off base as his advice seemed, I did like Rob’s passion. So, I opened a Roth IRA, and started putting money away.

I had saved about $3,000 in the plan, when I started working for a large retailer with a 401 k plan. The IRA got put on the back burner, earning interest but otherwise sitting idle. Two years later I left my job and (cringe) cashed out the 401 k, and the $3,000 dollars I’d invested in the IRA.

Over the years I had very little contact with Rob. I paid my annual $30 fee, and watched my statements as the interest left in my Roth IRA slowly grew. About a year and a half ago, I setup a meeting with Rob once again. I was finally in a place where I was ready to get my financial life in order. I wanted to open a 529 plan, to help pay for the costs of my Masters Degree, and also discuss my overall financial future.

Time and experience had definitely calmed Rob. At the time we met, I was still attending school, and looking for ways to save money on the cost of tuition. In my state you receive a 20% tax credit on funds deposited into an eligible 529 Saving Plan. The idea was that I would deposit the money for school into the account, earn the tax credit, then withdrawal the money the following year to pay tuition. Rob used the term”laundering” several times, which made me uncomfortable, although he agreed my plan was perfectly legal, and financially prudent. He didn’t show much interest in discussing my financial situation, and when I started asking about investments, he told me to save $5,000 first, and then come back to him.

So, I started digging into personal finance on my own. I read a lot, and eventually started this blog. I found a wonderful series by jlcollins on investing, and started to formulate a plan. I left my small amount in the Roth IRA with Rob, letting it slowly earn interest, and paying my annual $30 fee. I plan to someday move it into a Vanguard account, but I’ll need to wait until I’ve paid off my debt, and have more funds to put with it to open the account.

And then, the letter came. According to the letter, Rob’s client base has grown to such an extent that he doesn’t feel he can devote the time and attention to each of his clients that they deserve. Basically, he’s offloading his less profitable clients onto a younger adviser, at a different location. And so, I’ve been dumped.

Not that it makes a ton of difference; Like I said, I’m planning to move my Roth IRA anyways, once I’m in a financial position to do so. In the grand scheme of things, it doesn’t make much difference whether I’m paying Rob $30 a year for my plan to sit there, or this new guy $30 a year. And I can understand, from a professional side, him wanting more time to focus on his bigger clients. But still, I’ve been paying him for over a decade. And in return, I’ve taken very little of his time or efforts. If he’d spent more time with me initially, getting to know what I wanted and helping me to lay out a plan, or even followed up with me at any point over the years, I probably would have turned out to be a more valuable client.

I’m not in any way blaming Rob for my financial situation; As adults, we’re all responsible for our own finances. But, as a financial adviser, he didn’t really advise. In that sense, I guess our relationship wasn’t really worthwhile to either one of us. Parting ways was inevitable. I just figured it would be on my timeline.

– Cindy W.

Comments

  1. Why don’t you just manage it yourself? It’s not a huge amount and if you make some mistakes, it won’t be devastating. It will be a learning experience and you won’t have to depend on a financial advisor in the future. The fee will be much higher once you accumulate more.

    1. Honestly, laziness and lack of knowledge. The information on Vanguard’s website seems to imply I’d need a larger amount to open an account with them. Although, maybe not by much. I just haven’t taken the time to find out all the information I need. My concentration right now is an short-term savings and debt repayment. Investing seems like a future issue.

      Oddly enough, I’m not too worried about messing up with this money and losing it. Since I withdrew all of my initial investment, this money is all from interest. That gives me an oddly detached feeling from the money, like it’s not really mine. I’ve never physically possessed any of this money. It’s just numbers on a statement. Weird, right?

  2. I have one with fidelity. They have a 2k minimum but if you auto invest $200 a month, they will waive it. A lot of people do that till they have the 3k minimum that vanguard requires and move it then. Personally, that was my plan but then i ended up liking Fidelity i didn’t bother to move it. I stopped auto-investing at 2.5k bc i need to build up my e-fund and don’t have any charges.

    I did the initial research and put most of the money in a low-cost mutual fund and haven’t really htought about it much. it’s up %30 now and i’m glad i did it. So yea, i think it’s definitely worth it to do it yourself. You can just pick a target-date retirment mutual fund if you don’t want to think to much about investment and then revisit it when you have the time.

    1. I definitely plan to move away from having a financial adviser. After reading up a little on investing, I feel comfortable with the idea of doing index/mutual funds on my own (probably through Vanguard). For right now though I’m only investing through my 401k until I get my debt paid off, which will probably take a couple of years. I hate waiting that long, but I think being debt free is more important right now. And at least I’ll have the 401k in the mean time!

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