seeking advice regarding investing - currently have a fee-based account
February 16, 2019 6:10 PM   Subscribe

I inherited what was to me a lot of money at the age of 16. The money was invested on my behalf in a mix of stocks and bonds in PlanMember Securities, a fee-based system wherein I was paired with a (shitty) advisor.Is there someone I can pay for a consultation that wouldn't have anything to do with my money? Figuring out fund-allocation stuff on my own seems pretty daunting, with a heightened possibility of making some kind of mistake. Juicy financial details inside.

Some initial facts:

+I'm 26 and my wife is 37.
+With the money I inherited ten years ago, I paid for half of my mom's home (valued at ~500K), paid for my BA at a fancy liberal arts college, and bought a new car, and paid for just about every trans-related surgery there is. Oh, and I made a few other stupid but minor spending decisions, the kind you make when you grew up poor, are 18, and have a million fucking dollars.
+I make 30-38K a year as a graduate student stipend at a R1. My wife makes ~40K a year as a self-employed voice over performer. That adds up to 70-80K a year. I'll finish my PhD program in 4 years, and I'll find a better-paying job in academia or industry:
+I'm studying acoustic phonetics and will finish with some background in NLP and statistical learning - I don't have a problem continue living in the Bay working as a junior developer somewhere. Even making a combined ~120K a year would allow us to invest a lot of money a year.
+We have a budget that we stick to, but:
+We currently outspend our income by ~1,000 a month. The reasons for this have to do with illness, supporting disabled parents, etc. Nothing we can change -- we aren't out shopping up a storm. We withdraw this 1K from our aforementioned investment account. So,
+We have ~300K in that account. I forget exactly what the average yield has been over the last 10 years, but be around 5%. So in an average year we withdraw a bit less than that.

Additionally, we have a few big expenses planned over the next four years:

1) Paying off my wife's student loans: 15,000
2) Paying for a dental implant, which our insurance doesn't cover: 4,000
3) Paying tuition for my wife to finish her BA: 20,000

I am guessing then, all things being equal, that by the time I graduate we'll have ~260-250K in the investment account. I'll have my PhD, and my wife will be working on getting her LMFT. So the question is, what to do with these funds? I figure the money will be either a sizable down-payment on a home wherever we end up, or it will be the seed money for our retirement funds.

I know very little about investing. I know we don't want to stay with our current financial advisor. He's an ass: he expresses judgment whenever we withdraw funds, and when I asked him as diplomatically as possible to cut it out, he stopped responding to my emails. We want to get out of the fee-based PlanMember entirely. I know there's Vanguard, Fidelity, etc., and I imagine we'd want to keep the funds in a joint non-retirement account for the time being (i.e. the next 4-10 years), until we decide whether to invest the money in an IRA or 401k.

Ideally I'd like to pay someone $X and have them tell us exactly where to put the money, in what mix of stocks and bonds, and in what index funds, etc. Does something like this exist? I have a hatred for commission-based advising at this point. Any suggestions on where to look would be welcome. We'd like to take care of our current shitty advisor situation ASAP, and moving the funds into something that isn't fee-based but with comparable risk/reward at the same time would be great. Thanks so much.
posted by lilies.lilies to Work & Money (13 answers total) 5 users marked this as a favorite
What you're looking for is a fee-based financial advisor who specifically operates as a fiduciary. A fiduciary means they act on behalf of your best interests and not for a specific company, based on commissions, or based on how much assets are under management.

Start here:

Look for a fiduciary via

And I recommend some very easy entry reading and a helpful community at when you are looking at simple, clear investment strategies.
posted by miasma at 6:35 PM on February 16, 2019 [13 favorites]

You can go simple with robo-investing with something like Betterment or Wealthfront. Set your risk level and it'll do everything else. It's fairly low fees and performes fairly well.
posted by pyro979 at 7:17 PM on February 16, 2019 [3 favorites]

Honestly, with what you have, you could just stick it all, or all you don't want to put into a downpayment, in a Vanguard Target Retirement Fund and be fine. Lowest fees, reasonable allocation (one of the problems of investment is that there isn't a definite "right" answer, just more or less reasonable guesses).

But what you're looking for is, as already said, a fiduciary fee-only planner.
posted by praemunire at 7:53 PM on February 16, 2019 [10 favorites]

Before you decide how to invest the money, you need to have a larger plan for what you need the money to do for you. So, if you need the money in the next five years (eg for a downpayment) then everything should be very conservative. On the other hand, if you want to use this a safety net and the seed for your retirement, then you would plan very differently. So, a good financial advisor can help you think this out. Once you do, the investment can be a pretty simple plan -a mix of low cost stock and bond funds.
posted by metahawk at 10:03 PM on February 16, 2019

nthing a combination of "build a larger plan" plus "stick what you don't expect to draw upon into a Vanguard target retirement fund".

A good way to think about it would be to divide things up into "what gets me to 40", "what gets me to [retirement date]", and "what gets me to dead". This will obviously depend upon whether you want to add to your family. But at least some of "what gets me to dead" portion can be carved off now and put in a fund that is designed to become increasingly conservative over time. (And I suppose there'll be another inheritance eventually, but ideally not any time soon.)
posted by holgate at 10:45 PM on February 16, 2019

Thirding the Vanguard Retirement Fund. The fees are minimal, and the funds consistently perform better than market average.
posted by DarlingBri at 12:49 AM on February 17, 2019

the funds consistently perform better than market average

Just to be clear, the funds (considering the performance of each component) consistently perform at market average. That's the point and definition of a true index fund (and the Target Retirement funds are nothing but collections of index funds). To the extent that an investor nets a bit more than average, it's because of the low fees. It's an important conceptual distinction.
posted by praemunire at 1:04 AM on February 17, 2019 [5 favorites]

Target plans broadly suck, even Vanguard's. They assume a one size fits all risk tolerance.

But also a target fund is a bad place to put the down payment on a house. Do the math on how much you think you need for the house plus your savings cushion you feel comfortable with and keep that in something super low risk like a high rate savings account.

Then with the rest given your young age just drop it into an S&P 500 index fund, which ever is cheapest.

Honestly a planner isn't worth the money on that level of assets and at your age. Just keep it cheap and Vanilla. You also should make sure you have estate planning in order given you are married. Wills, powers of attorney, Healthcare Proxies.
posted by JPD at 4:48 AM on February 17, 2019

Also any of the low cost providers will walk you through how to effect the asset transfer.
posted by JPD at 4:51 AM on February 17, 2019 [1 favorite]

This article, The Best Investment Advice You'll Never Get, is pretty great. Read this before you decide anything.
posted by Bella Donna at 1:39 PM on February 17, 2019 [2 favorites]

If you like Bella Donnas link you should read " Capital Returns" by Peter Bernstein.
posted by JPD at 3:31 PM on February 17, 2019 [1 favorite]

Before you decide how to invest the money, you need to have a larger plan for what you need the money to do for you.

This is the primary thing you need to do first, while you also open an account with & transfer the money to Vanguard or Fidelity, to take charge of it yourself.

Here's a couple of ideas (IANAFP, IANYFP)

It sounds like you want ~$100k to stay "safe" (hold its value, not take risks) for the short term. The usual recommendation for that money is something like a CD ladder, or a set of 10 CDs that are set to mature at $10k/year over 10 years. You can tailor this to your mapped-out needs. And/or use a straight-up savings account where you can get ~2% interest. But, this money should not go in a stock fund, which could lose 10% (or 20%) of its value easily in a year.

That would leave ~$200k that you either want to use for a down payment in medium term, or as retirement funds. This much you should immediately transfer to a Vanguard brokerage account. If it's a down payment, again you'll want to be more conservative with it, with maybe Vanguard Balanced fund (60% stocks, 40% bonds). You will want to pay attention to tax efficiency here (briefly, a S&P500 index throws off the least taxable dividends, while a bond fund will cost you more in taxes). I would NOT recommend a target-date fund for you here; at your age, a target-date fund will be close to 90% stocks, and that's too risky for what you have described as your goals. Vanguard has a Personal Advisory Service that is low-cost and may be helpful for you here in deciding on specific funds for investment, since you're not -very- complicated in this sense, just not target-date.

Let's talk about retirement funding:

You and your wife should be contributing to IRAs ($12k/year for you both) now. You can still make a 2018 contribution until April. In your income range, I think a Roth (where you fund it with already-taxed) money is likely better than a traditional IRA (where you fund it with money that you deduct from your taxes later), because you're probably in a pretty low bracket now.

If you decide that the $200k (or a part of it) will go to retirement, you should then max out whatever 401k/403b is available to you and wife (again, probably as a Roth contribution for the tax reasons), and then make up any difference you need in take-home income out of the $200k. That effectively transfers the $200k to a tax-sheltered (but much less accessible, note) space.
posted by Dashy at 9:07 AM on February 18, 2019 [1 favorite]

Sorry, hit post too soon, if you decide that $200k is retirement, then I agree with JPD, just throw it in an S&P500 fund wherever it is, and maybe change that in 10 years or so once you've read up on it a bit more.

Also, has a wonderful wiki where a smart person in a statistics PhD program will be easily able to soak up a lot -- on IRA types, on fund choices, on 401ks, on CD ladders, on risk tolerance, on asset allocation. No one will look after your money better than you.
posted by Dashy at 9:18 AM on February 18, 2019

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