Wealth management can be a full-time job if you have a lot of investments. Investing family money can be stressful. At some point, you might want to hire a money manager to help you with your finances.
When I sold my rental house, I thought my stress would go down at least 80%. After all, my tenants and the maintenance issues were really bumming me out.
But what I didn't anticipate was the rise in stress from having to reinvest a sum 4X greater than I had ever invested before. The last thing I wanted to do was turn a strong performing investment since 2005 into a poor one going forward.
I went through many hours of deliberation regarding where to invest the proceeds. I wrote quarterly investment reports to track my progress. I stayed glued to the laptop during market hours for months trying to buy stocks and bonds during pullbacks.
Further, I went out to dinner with the Fundrise team twice to do more due diligence on their investment process before deciding to invest in one of their funds. I really believe real estate crowdfunding is the real estate investment wave of the future given it is passive and seeks higher returns.
As someone who worked in the finance industry, consulted with a couple digital wealth advisors, and who has been investing his own money for over 20 years, I was familiar with the entire process of managing money. However, I've finally reached an inflection point.
When To Hire A Money Manage: Too Many Investment Accounts
Because I'm actively working from home and helping take care of my little ones, my time is stretched. When you earn money, the path of least resistance is to simply hoard cash. At least by doing nothing, you won't lose money. But hoarding cash since 2009 has been a huge mistake.
What happens as you get older is that your finances tend to get more complicated. Job changes create dilemmas for whether you should rollover your 401(k) into an IRA or not. You might start a business and launch your own SEP-IRA or Solo 401(k). Or you might have some nice liquidity windfall after selling your company. The list goes on and on.
Financial Accounts Grow Over time
If I was just managing one family investment account, staying on top of our investments would be a piece of cake. Having just a 401(k) or an IRA where you max it out and that's it for one year is like a walk in the park.
But as a middle age parent who feels its important to diversify, I've had a lot of investment changes and opportunities since college. I also save and invest the large majority of my cash flow each month, so there's always something to do. Hence the thought of hiring a mont manager.
I currently manage or keep track of 17 financial accounts at multiple financial institutions. Each financial institution has something different to offer. Further, we spread out risk, partly due to the $500,000 FDIC insurance cap for money market accounts and CDs. Our net worth is complicated! Hiring a money manger would help a lot.
Financial Institution 1 – Sam
- After-tax investment account
- SEP-IRA
- Profit Sharing Keough (Solo 401k)
- Son's 529 Plan
- 20-year life insurance policy through Policygenius
Financial Institution 1 – Wife
- After-tax investment account
- SEP-IRA
- Rollover IRA
Financial Institution 2 – Sam
- Rollover IRA
- After-tax investment account
Financial Institution 2 – Wife
- After-tax investment account
- Roth IRA
Financial Institution 3 – Sam
- CD (used to have 3 CDs to track)
Financial Institution 4 – Sam
- After-tax investment account
Venture Debt – Sam
- Fund 1
- Fund 2
- Fund 3
- Fund 4
Real Estate Crowdfunding – Sam
- Private real estate fund with Fundrise
- RealtyShares DME Fund
Venture Capital
- Fund 1
- Fund 2
- Fund 3
- Fundrise Venture
Every single account requires the following:
- Keeping track of asset allocation
- Keeping track of cash balance
- Researching investments
- Selecting the right investments
- Reducing commission fees
- Meeting capital calls from private investments
- Keeping track of when capital is returned
- Redeploying capital
- Figuring out how each piece fits into a passive income target
- Optimizing for tax efficiency
As you can see, doing everything right for all accounts can take a lot of time. Further, the more money you have to manage, the more time you will naturally spend because there's simply more at stake to lose and win. As a result, hiring a money manager may make sense.
Here is the perfect example where more money does not bring financial peace of mind. When I had just $100,000 to manage, I couldn't care less if the market corrected 20%+. I had nobody to support and a job that could easily make up for any losses and then some.
With a sudden $1.8M liquidity event from selling my home on top of managing my existing investments and investing most of my cash flow every month, I was forced to dedicate a lot more brain power to money management.
My Latest Money Management Error
After the market meltdown in early February 2018, I asked my wife to cut three checks: one to my SEP-IRA, one to her SEP-IRA, and one to our son's 529 account.
As business owners, a business can contribute 25% of our salaries to our individual SEP-IRA accounts, e.g., $120,000 salary = $30,000 contribution. As I had already superfunded my son's 529 plan in 2017, only my wife and others are eligible to contribute up to $15,000 a year (for 2018).
I invested some of the proceeds based on our agreed upon investment framework in all accounts when I realized about 25% of my wife's SEP-IRA had been sitting in cash for who knows how long. I was completely surprised because I try to keep all our investment accounts 100% invested. Our cash needs are met separately through various savings accounts.
Due to too much cash in my wife's SEP-IRA account, her account lost out on potentially thousands of dollars in lost paper profits in 2017. But I'm not sure exactly how much she lost because I don't remember how long the cash had been sitting there!
Related: Strong Reasons To Hire A Financial Advisor
Refocusing My Efforts On Money Management
From now on, I need to go through each account and not only check the holdings and asset allocation, but also make sure there is no excess cash sitting around doing nothing. I've got to put on my money manager hat again more often, especially now that stocks are at frothy levels.
What's also important is making sure my investments makes sense in each account. For example, I'm more inclined to invest and trade more aggressively in my pre-tax investment accounts because I know I won't be touching them until age 60 and there are no taxes to file.
For my after-tax investment accounts, they are more conservative as they are accounts that will be first accessed during a liquidity crunch or when I finally buy that Hawaiian dream home. Since I've got to pay taxes on any dividends or capital gains, my after-tax investment accounts have lower turnover and house all my tax-free municipal bonds.
Finally, I've got to do a top down asset allocation of all my accounts to make sure the overall investment asset allocation fits my risk profile and investment objectives.
I used to do this manually, but since 2012 I've linked my investment accounts to Empower's dashboard and can just click their Investment Checkup tab to get a snapshot. Below is an example:
When Is It Worth Paying A Money Manager?
I'm close to paying a money manager to manage our finances, but I am still reluctant to pull the trigger because I've always managed my money, dislike paying fees, and realize a wealth manager can only manage some of my accounts, not all.
The only accounts a wealth manager can manage are our four after-tax investment accounts. This means I would still have to manage 13 other investment accounts. As a result, I presently don't think it's worth hiring a money manager. Only if the money manager could manage the large majority of my investment accounts would I consider hiring one.
Some considerations for when you should hire a money manager:
1) When they can manage most of your investments.
2) When you have no desire to manage your money.
3) When you have no understanding of investing.
4) When investing stresses you out and keeps you up at night.
5) When your job, business, or family keep you too busy to even review your investments.
6) When you can do a much better job making money elsewhere.
7) When they've showed a fantastic long-term track record.
8) When you calculate the estimated annual fee and feel you'd happily pay the amount to not have to manage your own money.
9) When you have a significant amount of assets and would feel better if someone or some team were keeping watch every day.
Here are more strong reasons to hire a financial advisor. If I had a hybrid digital money manager like Empower managing my investments, I never would have had a 25% cash weighting in my wife's SEP-IRA for months.
They would have automatically invested my cash based on a pre-determined investment asset allocation, which I'd agreed upon. I would have had to pay a <0.89% fee, but I wouldn't have missed out on 20% gains on the cash balance in 2017.
No Longer Enjoy Managing My Money
As I conclude this post, I realize that I no longer enjoy managing our investments. Managing my family's money feels like a stressful full-time job sometimes. They give me unwanted stress, even in good times. I get bent out of shape when I don't buy at the low of the day.
When the stock market corrects 32%, like it did in March 2020, it's hard for me to think of anything else until I see stabilization. When an investment soars 50%, I don't get much pleasure either because I'm not using the profits for anything. It's somewhat sad really.
Maybe it's better to outsource my money management responsibilities and the stress it comes with after all. If I'm not happy with managing money during good times, I definitely won't be happy managing our family's money during bad times.
It's kind of sad the wealthier you get, the sometimes more stressed you will get about money. Your net worth gets more complicated and you simply have more money to lose. Hiring a money manager makes sense so you can stress less and focus your time on better things.
Leverage The Best Free Financial Tool To Track Your Wealth
If you don't hire a money manager, at least sign up for Empower. It is the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Your retirement is too important to not get right.
Less Stress Investing In Real Estate
Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties. If you like less volatility, real estate is more attractive than stocks.
To reduce stress and diversify your net worth, take a look at my two favorite real estatei investment platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and now manages over $3.2 billion for over 350,000 investors. The platform mostly invests in residential and industrial properties in the Sunbelt region.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. They potentially have higher growth due to job growth and demographic trends.
I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000 and tremendous capital distributions.
Invest In Private Growth Companies
Finally, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Fundrise venture product, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 65% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.
Here's my conversation with CEO Ben Miller about AI and the Innovation Fund. Fundrise is a long-time sponsor of Financial Samurai and Financial has invested over $280,000 with Fundrise so far.
I like what you said about spreading your money to reduce risk. My sister has been telling me about how she wants to make sure that her money is managed properly in the coming weeks. I’ll share this information with her so that she can look into her options for professionals who can help her with wealth management.
It’s interesting to know that a money manager will be able to help you if you don’t have the time or patience to manage your finances. My father has been struggling to manage his finances, and one of his friends recommended to hire a money manager. I will let him know about the benefits of a money manager to help him decide.
I didn’t see it mentioned in the comments but I was in your shoes. Many accounts all over the place.
The ONE thing that drove me to an advisor? My death. I have a family. What if I died? Could my wife stay on top of managing the investment accounts in addition to her normal stay-at-home duties?
I wouldn’t want her to.
We hired a fee-only advisory firm. No looking back. I am happy to pay the fees. I rest easy at night.
I hope that everyone takes this into consideration.
So you’re considering a money manager…
After you select one, how do you plan to grade their performance? Will you have a system in place to determine when to fire your money manager?
We used a manager for a few years. They cleaned up our portfolio a bit and made a bit of money. The final year, they lost 6% while we gained 6% on what we managed ourselves. We pulled everything back and now manage it ourselves.
I am bothered that your WIFE did not notice that HER SEP-IRA was not in alignment with your agreed-upon investment framework! Perhaps the solution, instead of hiring an outside money manager, is to let your wife, the one person in your life that you can trust 100% and who has nothing but the best interest of your family at heart, take a greater role in managing your investments. Not only would that reduce your burden, it would give you peace of mind knowing that your financially hands-on wife and mother of your child would be ready and able to keep everything on track financially if the day ever comes when you aren’t able to.
Don’t be too bothered. It’s my fault. I have always been the one to manage our finances and her finances and provide guidance ever since she graduated from college. Sometimes when you have a child, everything else becomes secondary.
If you or your wife never made a financial mistake before?
Here’s a list of her main responsibilities: https://www.financialsamurai.com/day-life-work-home-stay-home-parent-who-also-work/
I am in agreement that both partners should be involved in financial matters in order to be able to help with plans and decisions and to take over if required. On the other hand, “mistakes” like leaving some cash sitting around are not serious. There will be other places where you make more than expected to more than offset the places where you make less than expected. What matters is total return and constantly increasing net worth (so you made 20% return instead of 20.01% that year. You can’t always optimize everything and simplifying is probably going to make optimizing easier so you don’t miss anything serious. Family matters and health sometimes take more of a priority.
I have been enjoy reading your blog! I totally feel your agony in this article. I recently (Dec, 2017) had to convert my 401K to an IRA account, (now looking back what a terrible timing!) I sat on the cash for a while in my Vanguard IRA account and when I finally deploy the cash to buy some international mutual funds at the end of Jan. Then came Feb 5th the market dropped! It’s nerve-wracking. Oh well, hopefully one day, perhaps not in a while, my IRA account will change from red to green. I am glad to hear you were able to take advantage of the market correction! Will you tell us which Money Manager you decided to go if you decide to use one!
Hi Sam, I’m in a similar position although not quite at the same level. I have 10 investment accounts and 4 bank accounts between my wife, son, and myself. I’m looking to roll my wife’s old 403b into her IRA just for the sake of consolidation. She has some decent investment choices in her 403b but tracking a separate account which is not receiving contributions anymore is just an unnecessary headache. Unfortunately, nothing else can really be combined.
How much are you manually classifying holdings in Personal Capital? I assume your venture debt fund and the realty shares are in your “Alternatives” grouping but do you have more than that? One of my largest accounts is with a hedge fund which would technically be listed as “Alternatives” but I know the fund is only invested in European small-cap stocks. So I manually classify it as EU stocks, otherwise it looks like I don’t have much non-US equity exposure. Most of my Asian exposure is via a separate long/short fund which is listed just as Alternatives. Maybe I’m too OCD about trying to have my allocations specifically identified and nobody else is bothered by this.
Sam, caught my eye that you use the IVV ETF instead of the SPY ETF to invest in the S&P 500. I’ve always used the SPY, did a little research and looks like the IVV has a slightly lower expense ratio (but both are very low) and the IVV more quickly reinvests dividends (which should generally be advantageous). Just wondering if there’s anything else worthwhile that I may be missing? I’ve been investing in the SPY in a taxable account for years, so wouldn’t be worth paying capital gains tax to convert but wondering if it makes sense to buy IVV going forward. Thanks!
There’s really nothing you’re missing. There about the same. I buy IVV instead of SPY because it is a commission free ETF on Fidelity. Since I like to dice up my buys and sells in at least 3 to 5 tranches, commission free ETFs are important to me.
Thanks Sam, great tip. I’ve been using Fidelity for years and didn’t know that. Not going to break the bank for me but hate paying commissions when I don’t have to. IVV it will be!
They’ve got around 70 commission free ETFs. It’s a good benefit for sure.
Sam, great post as always.
I’m struggling with different options of protecting my income via a Long Term Disability policy (on top of 55% taxable policy from my employer). I’ve read your posts on life insurance and PolicyGenius, but I haven’t stumbled across any disability insurance articles. Do you carry enough disability insurance to provide for medical needs and your family in the event you become disabled? (back injury, car accident, illness, etc.). I’d like to understand your perspective and thought process!
I do. Although, perhaps the best disability insurance is my passive income followed by my online business.
When I had a salaried job with benefits that included disability, I was okay. I counted on that until my pension kicked in. I looked at disability insurance once I was freelancing but decided it is too expensive. I am self-insured anyway. Rental income from units in my house covers all mortgages, housing, transportation, and basic living expenses. Taking all my pensions early set up another small but certain income stream. At this point, I am healthy but I could scale back or cut out travel, and my investment income could instead provide for more hiring of assistance for me. Worst case, sell the house and buy a condo. The house is my insurance now if I become too old/incapacitated to live on my own. Living in Canada, I will never have to worry about medical costs, just the extras. But I might have to pay for assisted living or nursing home eventually. I don’t think disability insurance covers retirement anyway.
Thanks for the comments Sam and dunny. I’m a 26 y/o engineer with not much passive income. Disability insurance protects my income but also takes away from funds that would otherwise be used to build passive income. Risk management can be frustrating.
Yes, things we never thought about years ago and were not even available are now thought of as necessary.
I try to avoid any insurance or warranties that I can possibly self-insure on which is almost everything. Also, have high deductibles.
I have good coverage on my house. I have vehicle insurance. No life or disability insurance except covered by employer (now retiree benefits).
I am not worried about medical insurance because medical is cheap in most countries (exception US) and in Canada, it is all free. There is also a government disability pension if you are permanently disabled but it is not very much.
I now get earthquake insurance but it is horribly expensive and I always deliberate on keeping it. I skimp on a little on liability insurance which is a little risky. I could afford to lose my vehicle but not a lawsuit for huge long-term care.
Some of the insurance costs are deductible if you have a home business or rental part of the house.
Why do you need disability insurance — dependents? mortgage payments? If you have a partner could they support you while you recover. Do you have savings/investments that can support you for a year or two? I use my investments and a line of credit as an emergency fund rather than have money sitting and not earning much.
I have always owned a house, and have some part of it I rent or could rent or even move into a cheaper rental if I had to. Then saving and investing goes faster.
As for building passive income, I have always focussed on building net worth — equity in good quality real estate and investments with steady growth (not dividend focussed). Going for passive income with investments really suppresses building net worth quickly I have found.
This is all too familiar…
My credit union alone has
-Savings
-Checking
-Money Market
-CDs
-Business Account
-Kids Saving
-Kids Checking
-HSA
ETrade Account From ESPP for work (near zero balance now)
TIAA – Worked for a University Research Project
PentFed CDs
Fidelity
– 529
– Joint
– Rollover 401K
– Roth
– Traditional
– Wife Roth
– Wife Traditional
College Foundation of North Carolina
17 different 1st position rehab loan notes
Rental Properties (not an account but needs to be considered)
Savings Bonds that are hitting 20 years (4%)
I don’t think I am diligent enough about managing the smaller accounts that have been in the same stock mix for-ever. These are first world problems, truly blessed to have the opportunity to manage this much. Thanks for making me think I need to look at these a little more.
I too have a difficult time giving up control. This may be why I choose to invest primarily in real estate notes in my area.
Hope you’re keeping some cash around for the cap gains and depreciation recapture on your 1.6M gain.
You should follow your heart and do what truly makes you feel happy Sam.
I went through a whole presentation that was personalized to my situation and in the end still didn’t pull the trigger to have my money managed.
The fact is I just enjoy doing it for now and when that stops I’ll give outsourcing serious thought. It’s all about what makes us happy right?
Sam,
I’ve seen a lot of valuable comments.
We still work–husband has a business with his name on it and I run the money, so I have to visit my computer and focus on money and such about 10-12 hours a week on a “normal” week. Some things I review almost daily (spending, bank balances) and some things twice a month (payroll, employee benefits, reconciling) and some things when needed (cash flow during the cycles when it varies from expenses, tax evaluation). My annual salary is $1 (except in years it is to our advantage to fund my 401k). (Some folks don’t understand that, but our family agreement is that I get ALL the money, he gets an allowance.) A long time ago I had to assign value to what I do. If I miss a utility bill (we have multiples) and pay a 3.00 late fee, am I worth it? YES. (Did I kick myself–then, yes, and found a way to fix going forward) I remember forgetting to move money once and had an NSF. (yes, what I do is worth a $38 dollar mistake once in a while). The same goes for missing your wife’s uninvested cash. If you had left it there waiting for a better opportunity, you would have given yourself grace. Even when you worked for a paycheck you had days where you didn’t hit employee of the month every moment. You were still successful in your eyes- and your company management’s eyes.
Some of my strategy when they were young was to allow for the flexibility I needed. Never was interested in frequent trading because with 4 kids at any time a broken arm would have kept me away from protecting our assets in a market drop.
Our 4 kids are just now all adults, and it is nice to have what I do for the family and the business being an area of expertise they can learn from. Teaching them to do their taxes, leverage airline miles, navigate buying a house…for now.
Even Buffet doesn’t expect his run of money management to be duplicated. In an interview I heard him say he recommended to his wife she just put it all in Vanguard when he’s gone. Money management isn’t her thing. The value of paying the management fee/losing a higher return will be there for her. I’ve got it set up with my CPA to step in if I’m not able to do this. Yea, it will cost. But when I need it (or my husband does) it will be worth it. Look at it like you are putting that fee you aren’t paying back into what you can invest for now.
Give yourself grace. Make a plan for when you are done managing this stuff yourself, and then the big questions are: do I like doing it? am I doing a good job? is my time/energy worth it?
Peace. And enjoy your family. The days are long but the years are short.
For me it’s definitely worth the time I spend on finances. With just a few minutes most week days, I make an excellent return. I focus on total return, not losing money, beating my benchmark (DOW and TSX), minimizing taxes, not paying fees, constantly increasing net worth, and spending for optimal joy. I have no or minimal concern about dividends, asset allocation, rebalancing, staying totally invested, buying at the lowest price or selling at the highest, or too much diversifying. One institution where all financial assets are held and one credit union for chequing, line of credit, and mortgages. Spreadsheet to keep track of it all and make trial projections. It’s enjoyable and easy to do better than any advisor.
Three general comments:
– I believe Financial Management is a skill set. It takes effort and deliberate practice.
– Owing to your work history, that experience and practice your probably better at handling your cash better than an advisor.
– You will likely have to manage the manager. I’m presuming that they will still have to run stuff by you and you’ll be involved anyhow, with the frustration of dealing with someone who isn’t as adept at handling you PF as yourself.
Yes, managing the manager has always been my worry.
The other thing that bothers me is the cost. Spending $10,000 for $1M sounds digestable. Spending $50,000 to manage $5M sounds painful. Spending $100,000 to manage $10M sounds downright outrageous, even though the percentages are all the same.
Especially every year — compounding. Not that much work to deal with a plain stock portfolio, and I do better than any advisor I have used or tracked including all the model portfolios, etc. I keep taxes simple enough too, although with the business you have I might consider a tax accountant. I prefer to do my own taxes because I think I do a better job. When I have paid for special advice on complex issues, I was not that impressed. Definitely not impressed with financial advisors. They also have to conform to regulations on diversity, risk, etc. that I do not.
Sam,
I download everything, all my investment accounts, credit cards, bank accounts, etc, to Quicken. So I can see it all. I also felt like I lost a bit in the Feb 2018 meltdown, and now created a report that shows me my cash positions in the 19 investments accounts between my wife and I and our two young children. But now that I’ve seen that, I don’t think we missed that much in Feb 2018 since I dollar cost everything every month, and the markets didn’t go down that much….it’s gone down again now here on March 2, but not enough that I may risk not having a lot of cash. And I still hope to go back to Florida one day by having enough cash to buy a house if the real estate markets drop (unlikely).
Sam, this is a great article. We hired a wealth / investment manager about 10 years ago. We’re in our mid 50s now. Prior to that, I managed our accounts. I did the best I could with keeping up on our investments, etc. But, hard as I might try, I always procrastinated when it came to rebalancing every year. In fact, it happened far less frequently that I would like to admit. I also invested in some individual stocks along the way, some did well, some now so much.
I eventually realized that maybe hiring someone else would be a net gain, so we did exactly that. Here are some of the reasons I’m willing to give up that 1% fee (less on larger accounts).
1. If something happens to me, my wife, who has little interest in all this geeky money stuff, has someone to call and advise her about what to do next. Stress relief for us both!
2. I know our accounts (6 or so) are all managed with an overall portfolio balance, currently 60/40. The best investments within each account (401ks for example) are used to get the right overall ‘total portfolio’ balance.
3. Our management firm has access to funds that I cannot buy on the retail market. DFA funds and some Stone Ridge funds for example. It’s not unusual for those funds to perform better than their Vanguard counterparts. Often, it’s enough to cover the fees we pay our management firm.
4. Our financial manager can look at our investments without all the emotion that I typically have when making a decision to buy this or sell that. He is much more objective. He also makes more money if our accounts grow, so our interests are aligned.
5. He has knowledge that I simple don’t have the time, or inclination at this point in my life, to obtain. I feel I’m fairly well versed in personal finance, having been a student of it for 30 years. But, I still learn from our advisor frequently.
6. My wife plans to retire at the end of this year, age 58. I do not have the skills to know how best to withdraw our living expenses from our various taxable, tax managed, and 401k accounts. Our advisor does. He also has helped us figure out the best time to start taking some social security and how that might impact our lifetime portfolio. He has also offered to help us find health insurance that we’ll need for the next 7 years before we can use medicare. He has also advised me on how best to manage my mother-in-laws portfolio – her account isn’t large enough to hire someone.
7. Our advisor is also current on the new tax laws and how we can best manage our portfolio to take advantage of the changes. (He is also a CPA)
Could I do most this myself? Perhaps, if I had the desire and wanted to spend the time doing so. I’d rather spend that time traveling with my wife in our RV to be honest. I’ll admit, I’m keeping about 5% of our total portfolio for my personal stock purchases (can’t help myself after all these years) but I can also see a day when I won’t want to do that either. I have to know that if I’m going to do that, I have to do better than our advisor in overall returns or I may as well just let them manage that money.
I’d highly recommend turning the management over to a trusted advisor. You’re a much smarter guy than me, but I think you’ll feel better just enjoying life and reducing the stress. (I can offer a suggestion on a good advisor too too if you’re interested – they offer a free consultation).
Thanks for sharing your thoughts. #1 might be the most important. Contingency planning.
I have this problem… and that is… I feel like all the advisors I talk to won’t work as hard as me. I need someone to amaze me with their work ethic and their deep understanding of retirement planning, taxes, and portfolio construction. So many I’ve met are simply salespeople, which is fine, but not what I want.
Sam,
You deserve some credit; it was YOU who inspired me to investigate what R.E. Crowdfunding was all about. You mentioned Fundrise in a past article. I invested on one of the private, non-REIT deals (now closed) that’ll actually mature in 4 more months and it’s IRR is 16%!
Since that investment I heartily placed bets on realtyshares.com and crowdstreet.com platforms.
I recently blogged about them here: firechecklist.net/2018/03/02/real-estate-crowdfunding/
Very impressive returns. Now let me suggest limiting your exposure at your current level. It’s easy to want to go all-in on a particular investment, but I would slow the roll.
When I saw the title of the post, my immediate reaction was ‘Never!’ – especially for you Sam.
By the end, my thoughts were very different – you should definitely hire someone. I was surprised that you didn’t enjoy managing it all as first, but now can understand, especially with your little one in your life now.
I’d rather simplify the type and number of holdings, but I don’t think you want to do that as you’ve been following a pretty clear plan for a while now. Finding someone you like and trust is the hard part, but Michael @ Financially Alert seems pretty happy with his decision.
Don’t go burning yourself out again like last year – keep taking steps to enjoy your life more today!
Cheers, Frankie
Hmmm, somehow I feel like I can convince myself and others of going either direction!
I’m going to close two accounts by this summer. Step in the right direction.
I hired one last year and the biggest benefit so far has been the organizational side of things. All my accounts are now with TDa and nice and tidy. Not sure why you wouldn’t be able to do your others though, I have my solo, after tax, Roth, etc all being managed.
Sam,
I agree with what David said above “When you got your MBA and went on to making this successful site you crossed over a line into the “too smart about money to hand it off” section.”
Sounds like your problem is that you are making too much income! Not a bad problem to have but it does take time and work to reinvest it. Just remember your stress from your prior job and appreciate what you have. So many people have SO MUCH LESS.
I like what you wrote about stop digging and stop creating more accounts. Let investments return its funds and then close those accounts.
The first post I read on your site was your passive income. I was blown away with numerous streams of income and wondered how you managed so many accounts and rentals. Several times I mentioned to simplify your life but you have a catch 22. Meaning you need to keep this site going by investing in different products and writing on different topics. You also have a case of FOMO, Fear of Missing Out. This keeps you running on hamster wheel. You have enough assets to live several lifetimes but now you want to accumulate up to 22M in assets due to estate taxes. You will need to decide When enough is enough.
I am extremely happy for you that you sold your rental recently which reduced some stress but you also wrote that you will regret it in the future. You seem to be causing your own stress with FOMO and growing your NW but at least you are VERY prosperous. I know that you worry about your wife and son so I understand your drive to accumulate more. Not a bad thing unless it affects your health.
At one point, my parents had 4 houses and 2 one story buildings (6 mortgages) and a garment factory. It caused them a lot of stress dealing with tenants and constant lack of money issues. They were forced to sell many of their properties and broke even. There are two 3 families houses left now with 5 rental units that provides income to my mom and brother. I managed my mom’s finances and I helped her buy muni bonds that generates 10K tax free a year. My brother deals with the tenants and the rental properties issues.
Just before my father was very ill, he listed all of his financial accounts on LONG piece of paper with over 36 accounts. It wasn’t a lot of money. My father was like a squirrel having so many brokerage, savings and IRAs. It was so depressing that I had to close these accounts and consolidated the assets into new accounts with my mom. After he passed, it took me 3 years because I procrastinated to clean up his accounts and to figure out the cost basis for his decades of stock purchases. Every time I closed an account, it seem that I was erasing his memory. I managed to reduce their 36+ accounts to 18. Many of these accounts now are ladder CDs and IRAs. I set up my mom’s IRAs with RMD so she gets money once a year from each account. Set it and forget it.
What I learned from my father’s passing is that I don’t want whoever I leave behind to go thru what I went thru. It is a major pain in the ass to close, combine numerous accounts and to open new ones. I spoke with my wife and I told her that I want a minimal number of accounts and simple investments in case I go first. That is another reason my wife does not want a vacation place in Hawaii when we live in NY. She does not want to deal with selling a property on her own.
Consider simplifying your accounts and investments so that your family won’t be inundated in case something happens.
We have 9 accounts.
2-company 401Ks (all in fixed dollar investments)
2-checking
1-savings
4-brokerages (all individual muni bonds)
3 of the brokerage accounts are in Citi, HSBC and LPL and they charge 1-2% more for individual muni bonds than Fidelity. When all of those bonds are called, then I will transfer the money into Fidelity reducing the number of accounts from 9 to 6. But then I read your comment about financial institutions may go out of business. I doubt if Fidelity will go out of business. I will first get rid of my HSBC’s brokerage acct since the Financial Advisor there is slow to respond and then my LPL account.
We don’t need a money manager since we have very simple investments. We only invest in NY individual muni bonds earning 3.5 to 4% tax free. We have a small home, no money in the stock money and no rentals so we sleep well at night. Our 401Ks are invested in fixed dollar 4.35% like a savings account. The interest rates changes each year so there is no need to move the money around. All these fixed interest investments are stress free and are basically “set it and forget it”. When bonds are called then I look for another bond around PAR. I enjoy searching and buying muni bonds.
My good family friend that introduced us to muni bonds has someone at UBS to manage his assets. He pays 1% of total assets. He is a doctor and does not have time to manage his money. He only invest in munis and corporate bonds.
I will never use anyone to manage my money again. I used financial advisor once to open a wealth managed account of 100K (1% fee) with stocks and he suggested another 100K with a muni bond fund (3% load) at LPL. He also helped us buy our first muni bonds. He left for another company and wanted me to transfer the assets to his new company. No thanks. No one watched my wealth acct for over 8 months. In 2013, these 200K accounts lost 7K. It caused me stress and I cashed out. I took the lost instead of waiting for the muni & stock market to stabilize. It was like trying to catch a falling knife. I DON’T LIKE IT! Now, I only buy my individual muni bonds via Fidelity.
It was stressful managing a financial advisor with just 100K. This week on Monday, I called a financial advisor at HSBC to help my mom buy 75K of individual muni bonds. The first thing out of his mouth, the rates for annuities are higher. Are you interested? Ah, NO and I just want munis! It is now Friday and I have not recieved a call from the Advisor yet with a list of muni bonds. I am annoyed and don’t like waiting when I can buy my own munis in less than 2 mins in Fidelity. I will create a Fidelity account with my mom and transfer some money to buy bonds. This will relieve my stress by taking control. I don’t like to depend on people for my finances and I don’t trust most people.
We will be 53/54 this year and we are ultra financially conservative. Our stress free passive incomes are from munis, pensions and 401K interest earned which will cover 3+ times expenses. We will have 3 separate streams of passive income to cover expenses separately so that we will be OK even if we lose one or two streams of income.
Adam
Thanks for sharing Adam. Yes, I blame Trump for raising the estate tax limit to $22M, causing me to continue to focus on wealth accumulation!
The thing is, if you are focused on FIRE, then you will always be a prodigious saver, no matter how much you make. I’ll have to run my numbers, but I think we are still saving around 70%-80% of our after tax income. Therefore, each month, we have money to put to work. I’m assuming this income will eventually fade, so I want to use it to make as much passive income as possible. Fortunately, the income has only continued to grow.
So I finally said enough for 2018 and am taking things down about 20%. I will be closing a couple accounts by this summer that’s for sure. Bit by bit I will simplify.
I think consolidating financial institutions make sense but I think for you – it makes sense to hire a wealth manager. I use Chase’s chase private client service which I am a big fan of. Bank of America and Citi have similar programs.
Chase’s program is essentially a large fee waiver for bringing assets to them – 250k minimums generally. With that you get a very generous almost no fee checking account. I value that quite a bit for international travel and being able to withdraw from any ATM without worrying about a fee (there maybe limits here)
It doesn’t cost anything to consolidate your accounts in one place. The advantage is you get a dedicated broker to assist you in rolling over the accounts but they will leave your retirement accounts as self directed due to the fiduciary rules from the department of labor. This counts towards the 250k at chase minimum but you can invest all this in vanguard etfs or single stocks online for a competitive fee (not the lowest day trader online rate but not a rip-off rate per trade)
They do want you to invest in a manages account where they take a 1% ish fee. You don’t need to invest a lot in here 50-100k min, but for certain parts its worth it. At 100k this is 1,000-1,500 a year for your broker. What this buys you is a thematic fund of mutual funds – but you get the mutual funds at the institutional rate vs the retail rate. So you pay a portfolio fee but save on the fees of the individual mutual fund. The value of a mutual fund vs a index in my opinion the most valuable for fixed income portfolios or international equity portfolios.
You also get access to some research and commentary.
I think this makes sense at a 1mm+ net worth where you have $250k to invest in a non employer run 401k. There are some fees but also some offsets.
Your comment reminds me that I have a similar thing w/ Citi, but he really isn’t doing much for me. He’s actually slacking and not sending me a monthly structured notes and municipal bonds new issue list. Gotta ping him!
So if this is the type of service I’m going to get paying a fee, then forget it. I think I’ll be pissed off not getting my money’s worth.
I spend a significant amount of time managing my money. It is a part time job. Its an enjoyable part time job. Smart phones and apps have made the part time job much easier. Thus far this year, I’m doing pretty well which makes the part time job seem worthwhile. The more money one has under management shouldn’t change much. The long term strategy should remain the same even with extra zeroes. The math is the same with one thousand dollars or ten million dollars. At this time external money management isn’t for me. In this day and age, one could just set up an account somewhere and just automatically buy index funds every month and save on the fees.
The amount of money is not so much in question as the amount of accounts I need to manage.
How many accounts do you manage?
Not terrible.
8 across 5 institutions.
401k
IRA
2 after tax
Peer 2 Peer lending
Alternative
Crowdfunding Investments
Crypto Investment
Manage each on my phone, rarely ever on a laptop.
Gosh, reading this was stressful!
Sam – I trust you to make the right decision and report back to us readers. When you got your MBA and went on to making this successful site you crossed over a line into the “too smart about money to hand it off” section. That all said there will come a day when your mind is less sharp and then you truly need a money manager. Till then you’re an inspiration!
Cheers
Hey Sam-
I am currently struggling with this. I’ve done it myself for 6 years and it’s been pretty simple (bull market). Now we actually have a decent amount of $$ and I’m not sure if I should just continue investing in stocks. The thought of paying someone thousands of dollars just doesn’t seem worth it. I’m relatively young and have this naive thought that I can continue investing in 100% stocks and in 20 years I’ll be rich…I know it won’t be that simple.
Not sure if you can link all of your pre tax accounts but have you heard of Blooom? I was doing some reading when I came across them and their reviews were pretty good. Maybe you could check them out.