I moved here from India in 2000, about four years after completing my graduate studies. At first I was unsure whether I would stay in the USA. Because of this, I felt I had to be careful about investing in long-term investments where the money was tied up. With a 401(k), for example, if I withdrew the money early, I would have to pay a penalty.
The situation changed for me about 10 or 12 years ago. At that point I decided to stay in this country for the long term. So I started contributing to my 401(k). I still didn’t have a financial advisor, probably due to my lack of knowledge in this area. But culturally, we were raised not to overspend. That helped us to make the right decisions. We had a reasonable income/expense ratio and savings for our children’s education, our mortgage, and retirement. I never thought about needing a financial plan.
Around 2015 I realized I had multiple 401(ks) from previous jobs and they were all over the place. So I consolidated her and some IRAs with a big brokerage firm. But I wasn’t able to make wise allocation decisions. It sat there in a very safe, conservative portfolio for four or five years. Compliance with the principle was most important to me, but I realized that my options were limited to certain products.
In 2020 I finally decided to work with an independent financial advisor. Many of my friends kept telling me it was worth the fee. I received a recommendation from a good friend who worked with a consultant from an independent firm. He had also recommended the same person to a few other friends. In 2021 I finally turned to the consultant.
I also met with another consultant so I could compare. He was someone in a big company that I found through my employer. Employees can attend workshops with consultants from time to time and one of them has reached out to me. But I found again that I was limited to certain products.
After a series of interviews with my friend’s recommended advisor, he suggested we create a financial plan. It was a robust process of almost 40 hours of work. I could see the level of detail. At that point I thought, This is someone who is actually working to take care of us. It also struck me that the number of clients he worked with was much smaller than the institutional advisor’s client base. I transferred my accounts to him.
There are funds that he has direct control over through a platform he uses, and there are funds, like my 401(k), that he manages but doesn’t control. Its main added value is its allocation recommendations. There are many options and he recommends the right ones for me. We review them quarterly.
At our first quarterly meeting, we had a session of just over two hours where he walked us through his reports. Now we get a report at the end of each quarter and if I have any questions I email or text him. I’ll get an answer in a few hours. I could call, but it’s never been necessary. And we have a comprehensive, annual overview of the financial plan, the current situation of the portfolio and where we need to make changes.
He sends us so much personalized information. I definitely see a difference between working with an independent advisor and a more institutional advisor. If I were advising my kids, I would tell them to start planning before I do.