The portfolio is set and forget. If anyone here can understand how to buy index funds, why not someone else?
Most people here who have kids do hire nannies, by the way.
Our situation is typical of many NYC professional people, other than savings rate, perhaps.
Anyway, my goal is to construct a self sustainable, low maintenance portfolio that I can manage with almost zero time, and that someone else can also. The purpose is to produce a stable supply of earnings for basic financial security, not to live a lavish lifestyle. It is like growing a garden of fruit trees slowly, and eventually consume the fruit, not the trees themselves. Many of the issues you asked about become not important or are addressed under this approach.
First, I don’t plan to move outside of Texas, because 1. that’s where all my family and her family is, and 2. I have no expertise in any other state. (Trust & Estate code, income tax code, Secretary of State operations, how to open business, intestacy laws, etc.)
Second, I know I need to settle down. Yes, I have bad job history. That’s why I’m hoping I can go the independent contractor route and make a transition from tax compliance to multidisciplinary financial planning, all while still being able to pay the bills. That way I can never “quit” or get fired again.
The best option would be to buy Partner #1 out and separate the practices. I’ve already put a bug in his ear. We’ll see how it pans out.
I’m not trying to be a negative Nancy and I want you to win, but there are two ways to deal with difficult situations. I’ll just use one as an example. When this guy says he doesn’t trust you, there are really two options. One is externalize the issue and point out how the partner is an idiot or whatever. The second way is to ask yourself well why doesn’t he trust me and how can I fix this? We all default to response one naturally, but response two is really the most effective way to improve and make progress. Reason I bring up jocko is he has been made this point of view more common. But there is also similar wisdom in Buddhism and stoicism
i have a spreadsheet of all this stuff. i gave it to my momma and sister. i dont think i would ever give to wife even if i married her. they can always divorce. and blood is thicker than water!
Greenman, have you ever considered that you might be more valuable as an accountant than as a financial advisor? From my perspective, you know a lot about accounting things that I don’t know, and presumably other also don’t know.
^Could you elaborate? Because TBH, I don’t feel like I’m a very good “accountant”. I don’t sweat pennies and I hate reconciling accounts. I like to look at “big picture” stuff.
you seem like a really good trust guy. estate tax planning. is that what you mean by big picture. anyways there is nothing wrong with a specialty on minimizing taxes. its like one of the biggest costs that directly affects your return and net worth.
From my perspective, you have a lot of accounting knowledge that would be useful for people who have complex situations. However, on the other hand, this financial advice seems pretty off the shelf, generally speaking. I can read a few books and be confident in a simple and effective investing approach. However, I don’t think I can become equally knowledgeable in tax, which is inherently complicated and often non intuitive. Maybe that nitty gritty is not fun, but it seems that people will pay for it if it adds value. If you are effective as an accountant or as any other professional, maybe it is better to just embrace that.
Your investments are just one part of your overall plan. Your biggest asset right now is your ability to earn an income. When was the last time you sat down with your insurance advisor for an insurance review. If something happens, and you can no longer work, then what happens ? Now you don’t have enough seed capital to generate sufficient income to support your basic lifestyle. So are you going to be forced to encroach on capital then? You can’t really cut discretionary expenses because, as you pointed out don’t live lavishly.
As Greenie pointed out, there can be a lot of other opportunities one can consider to save on tax bills now, and in the future. The only way to achieve that is to go through a complete financial plan.
Just to note–I didn’t mean this to be a referendum on Ohai’s lifestyle and investment portfolio. As I was thinking of estate tax problems, I just thought I’d bring that up to the crowd, since there seem to be a lot of high earners here. He’s just easy to single out, because he seems to be the highest of the high earners (other than IHIHM, who makes $100m per year in muni bond interest).
medical insurance: you never know if u get cancer. and that shit can cost hundred of gs to millions. you really want to make sure you have 1 that covers everything after deductible. not that pay 20% of treatment shit.
disability insurance. im iffy about this. but i would not want to live life a cripple and a poor. might just be a waste to pay premium since if i was disabled , high chance i’ll take my life cuz im not about it. most jobs pay for long term insurance even though there is a low chance u’ll get hurt. short term is kind of a waste. if ur a chick thinking of getting preggers short term is pretty good though.
auto insurance. must protect assets. if u get into an accident that kills someone or make them disabled, it can easily cost over a million bucks. drive safe my boys and never be at fault!
life insurance. to reward my family if i die prematurely. but as i get richer, the merits for it go down. people do use life insurance to bypass estate taxes though!
I think you’re conflating “financial advisory” with “investment management”. As noted by Mike, investments are just a small part of an overall plan. And TBH, I don’t even manage investments. I use a TAMP for it, but the clients don’t know that. As far as they know, I’m managing all these investments myself.
I don’t consider myself a real “accountant”, because those guys are just one step shy of actuaries on the nerd scale. They will spend hours doing stupid stuff like trying to tie down expenses to the penny, reconciling bank accounts, creating massive depletion schedules, and arguing about whether a bank CD is “cash” or “other current assets”. (Who cares? Put it on the return and go on about your business.)
However, I do consider myself a good “tax planner”, because rather than quibble over nonsensical details, I can focus on the stuff that actually makes a difference in somebody’s life. In your example, I would discuss things like whether or not you need to put your portfolio in an Family LP or a trust, whether your beneficiary designations were correct, and whether your portfolio was TIC or JTWROS (for example). These are things that don’t pertain to investments, and most “tax compliance” accountants don’t care about. Who then can you trust to help you with these kinds of questions?
And @Ohai, I’ll take that as a compliment. I don’t want to spend the rest of my life debating on whether this expense belongs on Page 1, Schedule A, Schedule M, or Form 8829. Clients don’t care about that crap, and neither do I.
I guess I don’t get the AUM aspect of it. Like, after you put together the trust and it’s outside of the estate (say for oil and gas royalties, business interest), do they have to continue paying 1% fees on what’s in there? It seems like a number of one time events where a retainer and billable hours would make more sense.
You can hire a fee for service planner who will put together a comprehensive plan for you, and then you have to go and implement yourself. Most all clients don’t have ability to manage their investments like all the BSD finance guys here on this forum.
Part of the issue (I feel) is that the planning advice service has always been bundled with the managing of the assets. Unless a clients situation is really complex, they just aren’t going to pay an additional fee for the plan, in addition to the investment management fee.
It would be interesting to see the stats on the number of advisors who work on an hourly fee and retainer model. My guess, very very small.
AUM fees are on assets that are managed by me. I don’t charge AUM fees on oil and gas royalties and the like. However, if I help with the titling and structuring of the (non-managed) assets, I will charge a financial planning fee. That’s where the retainer/hourly fee comes in.
True story - an older client just sold his office building. Because his business had taken off with the recent oil boom, and he needed a bigger building. So he sold his $5m building and bought an $8m building. To note–he had $1m of basis in his building.
Two questions: 1. How much did he pay in tax? and 2.) How much would he have saved had he talked to me first? (Hint–it’s the same amount.
A: $800,000, or 20% of $4m. He could have done a reverse 1031 exchange, whereby he rolls the proceeds from Bldg 1 into Bldg 2, and doesn’t have to pay tax on the exchange. He’s still in the same economic place he was before (out of the $5m building and into the $8m one) but he’s $800k richer, because he didn’t pay the tax on the sale.
This guy didn’t even know that 1031’s were an option for him. And he will go to his grave $800k poorer (unecessarily), and he’ll tell himself, “Well, that’s just the tax code for ya. You can’t make a dollar without the gubmint taxing your ass.”
Or, as Mike says, “You don’t even know what questions to ask.”