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My Priority to Find Investment Advisor Now High - Can You Help?

edited August 2011 in Off-Topic
My priority in finding a fee-only investment advisor has just jumped up to the top. When the USB person who manages my Mom’s Trust fund told me Friday that the Trust portfolio which holds over 75% in equities (plus real estate, commodities) has a Standard Deviation of 11 to 14, either I completely misunderstand Standard Deviation or this figure is so far off to be frightening.

When I asked FA members last year, it was suggested that I consult with a good fee-only financial advisor and estate lawyer. I’ve wanted to do this, but kept putting it off because I don’t know even know what questions to ask to determine which of the advisors I’ve found in lists would be the best one for my situation. I did obtain a lawyer last year to handle two new trusts we were setting up, but though he seemed to do a decent job, I wasn’t very impressed overall with how he handled it.

I have gotten as far as checking out the links suggested, and finding some names of professionals who are close to my location. I received 3 referrals of financial advisors from the lawyer above, but I cannot find any of their names as members of FINRA, so I don’t how much of a negative that means, if any. I did find them all at, all showing as Certified Financial Planners on CFP Board. Then I found a few names from ACTEC (American College of Trust and Estate Counsel) for the legal side of it.

So I now have about 8 names. What would be best for me, ideally, is to find a fee-only Financial Advisor, who also has a background in trusts, estates and taxes (is that asking too much?). Is there a good way for me to find out which one on my list is the best under my circumstances?

I used another link recommended ( which helps me with “10 Questions to Ask When Choosing a Financial Planner.”
But since I’m not really looking for a Financial Planner for me right now, several of those questions will be more appropriate later.

Would it be fair if I just called each of these 8 people and gave them a brief example of my Mom’s trust situation, by saying something like “there are 21 beneficiaries of this trust, with the Primary beneficiaries in their 80’s who are dependent upon the income, and secondary beneficiaries in early 50s to late 60s. The Trust dissolves in 2021. The Portfolio still consists of over 75% equities. Do you feel this is risk allocation is appropriate for the ages of the beneficiaries? If not, what risk allocation do you feel is appropriate?”

I guess there may be several perfectly valid, but widely varied responses, depending upon the overall outlook of the advisor, but I would like to find one that is not aggressive (or overly cautious).

Are there any other questions I can ask that you think might help me end up with the right person for me?


  • Morn'in Cathy,

    My first step would be no further than to contact Bob C, here at MFO using the private mail function associated with our user names. In this age of cell phones and all things electronic, it would be an easy first step. Getting the advice "about an advisor" from a highly respected (here at MFO) advisor.

    Me 2 cents worth.

  • Reply to @catch22: Thanks for your input, Catch. I thought of contacting Bob directly, but was afraid it would be too imposing upon him to ask. I guess I felt that, if he read this, he would respond if that was something he felt comfortable with.

    I did find a fee-only advisor very close to me (in 92646) with what looks like good credentials. I liked his web site, client goals (and hobbies, similar to mine), so decided to jump right in and contact him. I left him a message to call me before initial appointment, so I do hope he follows up. I discarded two of the others (one said his activities were with Young Republicans. Sorry, any Republicans here, but that just isn't me).

    Hi Cathy. Here is a web site for an organization of fee only advisors. napfa is a reputable organization. You can enter your zip code to find advisors in your area. Then I suppose you would go through an interview process with a few you choose.

    I also like Catch's suggestion for BobC. I believe he is located in Columbus. I like face to face discussion, but I'm not sure it is really necessary.
  • edited August 2011
    cathy - try these links

    just use control F to find your state in the table to see if any advisor would match your hometown search. The Barrons list is very expensive but they could worth the price

    I also would consider going to your private institutionalized banks [Wells/BOA, Fidelity, Merrill Lynch, Smith and Barney, etc] where you most likely already have an open account, then you can talk to several different CFAs there and they'll give you the beat downs/breakdowns - w/ full services most likely for FREE; you can then decide if it's worth your risks to go w/ these CFAs - usually the fees are tied in already w/ your bank account.

    For smaller investment firms and adequate advisers the fees are ~2% which I find not worth it if you are watching the market yourselves, but IF YOU DON'T HAVE TIME TO WATCH daily basis then maybe it's best to get an adviser.

    Bob C is also a good guy, know him for about 3 yrs now and he is usually give good reasonable solid advise @ FA as well as MFO...

    At least this is what we did w/ Edward Jones and Fidelity 3.5 yrs ago, but the fees are not worth @ E.Jones so we did everything ourselves w/ the help of MFO and previously FA sites [sponsored by kiplinger]...
  • I was not presenting that if "I" spoke with Bob C.; that I would not get a check in the mail to him. He could return or not cash a check; but I sure as heck would expect him to retain his rightfully "earned" money.
    I also understand finding someone local, with whom you may have the face to face.

  • edited August 2011
    The user and all related content has been deleted.
  • Reply to @MikeM: I'll second this link.

    Also of the people that you interview ask their ADV Part 1 and Part 2. Part 1 is about their criminal and disciplinary status. Part 2 is about their investment strategies and how they are getting paid.

    Also, check the people with the state regulators as well.
  • edited August 2011
    Reply to @Maurice: I agree STD Dev. of 14 is not something to be alarmed about. It is a moderate standard deviation. Than again, it is incomplete. It should be paired with a time period and he should have given the comparative std. dev. of a benchmark (say M* moderate allocation portfolio)
  • Reply to @catch22: Thanks, Catch. I guess that was my point. If I contacted BobC directly to ask for his professional advice, that could put him in an uncomfortable position even if I tried to send him a check for his services. I value all the input I have received from members here and would not want to put any relationship in jeopardy.

    P.S. I did make an appointment with someone local, so will cross my fingers that I chose well.
  • Reply to @MikeM: Thanks, Mike. I had noted Napfa in responses I received last year - just forgot to mention including that in my check. The guy I found is shown in NAPFA and seems to have good credentials - and it turns out he is located less than a mile from me. He called back almost immediately after receiving my email (good sign) and seemed like the type who would have a nice, calming effect on me (also badly needed). I just have to re-adjust my mindset to be completely open to what he says, even if I disagree with him, as having a qualified, professional non-partial outsider should help me get a better perspective if I'm either wrong in some areas and/or just over-reacting in others.
  • edited August 2011
    Reply to @Investor: Thanks, Investor. I'm checking the report on my Advisor now - showed no previous criminal or disciplinary status. The guy I chose (Carl Carpenter of Beacon Financial Partners LLC) is a fee-only advisor who I plan on contracting on an hourly basis for his evaluations in several specific areas. I will pay him directly.
  • Reply to @johnN: Thanks so much for your input and links, John. What I am concentrating on now, however, involves my Mom's trusts, almost all which are non-transferable to another firm. Even when I will be concentrating more on my husband and my investments, I would rather do the investing myself, using input from a fee-only financial advisor if needed. The members here have been so wonderful in helping me learn so much about investing that a good part of my understanding has come from FA and MFO that I'm hoping to continue to do most of my learning here, through the great links provided, and using my Morningstar portfolio calculations and evaluations there.

    I'll check out your financial planner links - thanks! I'm making my "goal statement", along with a question list and related materials package for the advisor now.
  • Reply to @Maurice: Thanks so much for your input, Maurice. You've hit upon what I've recently realized is one of my main problems - which is thinking I understand something based entirely upon my review of the market over the current, to last 10 year period of time. In this case, Standard Deviation. I had M* produce a 3-year ave SD, where the equities in this portfolio showed figures in the 20s up to 75 (BofA) for that period. Since I have no knowledge of previous decades, it never occurred to me that there would be extended "calm" economic periods in early decades where the SD for each of these equities would have been much lower, and could have been so much lower that using a very long period could end up with this portfolio averaging 11 to 14 (I still don't believe it, but will verify that with the advisor). I have asked USB requests for 5 follow-up statistics and information regarding this portfolio (including what period of time they used to get their SD figure), so I hopefully will have more information when they respond.
  • Reply to @CathyG:

    Hi Cathy. fwiw, standard deviation will be different based on the # of years you look at, 3, 5 or 10, not just because the market may have been more volatile recently then in the past, but because of the formula used to calculate standard deviation. The number of samples (which is probably the closing cost each day for 3 years or 5 years, ect...) is in the denominator in the std equation. So more samples smooths out the formula. You could say the std forecast is more accurate using more data - if all else has not changed.

    I would say though that the standard deviation of 11-14 for the portfolio as a whole is believable (though I don't know what's in it). But if you are just looking at individual stocks and stock funds with that std range, that does seem low. For example, below are the std for the S&P500 (SPY) and for the vanguard balanced fund (VBAIX).

    3y 21 14
    5y 18 11
    10y 16 10

    Anyway, this is pretty dry stuff (sorry). Just wanted to point out the lower std when looking back over more years is lower due to the std formula, not necessarily because of market conditions.

  • Reply to @MikeM: Thanks so much, Mike, for your explanation and examples. Very interesting - and not dry at all to me. Did you calculate the SD in your samples yourself? I am able to find M*'s SD's for 3, 5, 10 and 15 years on the mutual funds, but couldn't find SD for the stock funds there (but M* portfolio's do calculate 3 year SD for the stocks). So if I can find the closing costs for last 10-30+ years of these, would the difference in closing cost for each period be the calculation I would use to get Standard Deviation for that period - and if I then averaged those totals, I would then get ave SD for a combined period? Sorry I'm still unclear on this, but it would be nice to be able to do some calculations on my own if no site covers that long a period.

    But then I read the following in their definition:

    Standard deviation is most appropriate for measuring risk if it is for a fund that is an investor's only holding. The figure can not be combined for more than one fund because the standard deviation for a portfolio of multiple funds is a function of not only the individual standard deviations, but also of the degree of correlation among the funds' returns. If a fund's returns follow a normal distribution, then approximately 68 percent of the time they will fall within one standard deviation of the mean return for the fund, and 95 percent of the time within two standard deviations. For example, for a fund with a mean annual return of 10 percent and a standard deviation of 2 percent, you would expect the return to be between 8 and 12 percent about 68 percent of the time, and between 6 and 14 percent about 95 percent of the time."

    So now, even if I can confirm how to calculate individual investment SD, I'm unclear how to calculate the average of the Portfolio (given the above information). Perhaps this is just something I will have to let go, but it would be nice if I could get the calculations right and do it myself.
  • Cathy:

    The portfolio's standard deviation cannot be properly be determined by a weighted average of the current investment's standard deviations. If it seemed worthwhile, I believe the right way to go would be to reconstruct the daily values of the whole portfolio as it actually was managed for whatever time period you wanted to do the calculation for. Of course, the validity of the exercise would depend on a presumably false assumption of a normal distribution. In short, I do not think it is worth it.

    Could I ask you to back up a bit? I am not understanding the goal of the exercise. Perhaps in a prior post you made clear whether or not you have spoken with a lawyer specializing in trusts to tell you exactly how much of a say you can have, which I think is very much a matter of the terms of the trust.

    Is the USB person the trustee? Do you think the trustee has violated the terms of the trust by making reckless investments? Or is the trustee simply investing the money less conservatively than you think he/she should be? Is the USB person willing to provide an investment policy statement or anything of that nature that could convey the rationale with respect to capital preservation, income generation, portfolio growth, management of risk of inflation, currency loss of value etc.?

    Sorry if these questions were previously answered. They do seem more fundamental to me than the details of how you might analyze the portfolio.

  • Hi Cathy

    I have sent you some suggestions via e-mail. All of the comments from posters are germaine, and there is much more than just investment decisions to be considered. It is a unique and non uncomplicated situation.
  • Cathy,
    Thanks for starting this as I've saved some links. I've always wondered if I should pay someone to review what I've invested or just keep truckin along with what I learned from FA, this site and by reading.
  • edited September 2011
    Reply to @GregFromBoston: Thanks so much for your follow-up, Greg. The Standard Deviation USB gave me was just one of the "positives" they mentioned in their evaluation of this Portfolio. Since the 3 year avg SD of this Portfolio Morningstar shows is so much higher than that, I was hoping to be able to fairly easily reconstruct how they got their figures (I do remember they said avg over 33-34 years). However, looks like more complicated and/or time-consuming to go any further with this aspect.

    Since this is a Family Trust, Mom's percentage is only 12.5%. With USB being sole Trustee for the last several decades (when family advocate trustees died or resigned without re-assigning new ones), you are correct that we (Mom, or me as her power of attorney and advocate plus being Secondary Beneficiary) are just a part of the recipients. And no, I don't believe that USB has made reckless investments (except possibly this newest real estate) - most of their equities are high quality. My problem is what I feel is the way-too-high overall risk factor of the Portfolio given the Primary and Secondary Beneficiaries ages of 89 down to early 50s for the few youngest Secondary Beneficiaries.

    What scared me enough to even try to talk with USB about this particular trust is the 10 year avg return of this Portfolio is 1.75% or less, and Mom's quarterly income distributions from this Trust has continued to be very substantially reduced over the last 4 years. I called them in the fall of 2008 and expressed strong concern about economic conditions, but was advised to "stay the course as there are always ups and downs." After that, of course, the market crashed and all the USB portfolios lost huge amounts of money (along with everyone else who had more than a very Conservative Portfolio). So I now don't trust any advice they are giving now.

    The original trust was set up in 1911, but I was able to get a copy of the Amended Trust (1940s I think), which does include a couple paragraphs on investments allowed and restrictions. They also switched (in 2004) to UPIA (Uniform Prudent Investor Act) in their determination of what percentage of the Trust value will be distributed annually. I found quite a bit of information in an 80-page Trust Return document online, that it looks like there are some UPIA specifications on how portfolios should be invested, but am just too tired to read it right now.

    I feel really deflated after my meeting with the local fee-only Investment Advisor, so am not sure how much more time and energy I am willing to spend on this particular Trust since there seems little chance I can force them to protect the losses more during what I feel will be strong downturns if not another crash - especially since Mom and I are not the only beneficiaries.
  • Reply to @BobC: Actually, I've already replied to Bob, but I wanted the others here to know that he did very kindly take the time to respond to me regarding this.
  • edited September 2011
    Reply to @jafink63: Thanks for letting me know that you have also gained some knowledge by reading responses to my questions. I feel like I've been hogging so much of so many great members' time lately, so it helps that others are benefiting also. I find that, along with my sincere gratitude to all those who have taken so much time to help me with specific questions, I also have learned a lot reading their responses to other members questions. I Love this forum!
  • Please do kindly contribute to MFO to keep site running [whether 30-50 bucks/yr or buying stuff from amazon]
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