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Financial Advisors for Young Attorneys

Post by Anonymous User » Wed Jan 02, 2019 4:46 pm

I've read the Personal Finance 101 post that I assume everyone will direct me to once they see this posting, but I am busy and do not want to manage my investments personally if I do not have to, for a number of other reasons as well.

I know I want an advisor who is a fiduciary but how do I actually find the right person/firm aside from word of mouth? I'm a newly minted Biglaw associate and significant money is sitting in my savings account that I'd like to put to work somehow, I just don't trust myself to do so. Should I try to find someone experienced with young attorneys or something along those lines? Obviously want someone familiar with back door Roth process and other strategies, but what else should I look for?

Any tips/advice on finding the right advisor would be greatly appreciated!

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nealric

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Re: Financial Advisors for Young Attorneys

Post by nealric » Wed Jan 02, 2019 5:07 pm

Anonymous User wrote:I've read the Personal Finance 101 post that I assume everyone will direct me to once they see this posting, but I am busy and do not want to manage my investments personally if I do not have to, for a number of other reasons as well.

I know I want an advisor who is a fiduciary but how do I actually find the right person/firm aside from word of mouth? I'm a newly minted Biglaw associate and significant money is sitting in my savings account that I'd like to put to work somehow, I just don't trust myself to do so. Should I try to find someone experienced with young attorneys or something along those lines? Obviously want someone familiar with back door Roth process and other strategies, but what else should I look for?

Any tips/advice on finding the right advisor would be greatly appreciated!
Managing your own investments is a LOT easier than you think.

First, build an emergency fund of 3-6 months expenses. Stick it in a high-yield savings acount. Ally or Goldman Sachs (Marcus) offer a bit over 2% these days. Then...

As a young professional, you want the majority if your money in a low fee-index fund that tracks the broad stock market as much as possible. Most people recommend 70-80%. The Vanguard total stock market ETF (ticker symbol VTI) is an excellent foundation. For the rest, you want a low-fee broad market bond fund such as VBTLX. Since you will probably start with your firm/company 401k, the best options will depend on what it offers, but good plans will offer at least an S&P 500 index fund and a broad bond fund. Keep an eye out on fees- there's no reason to pay an expense ratio higher than .05%.

Then...

Do nothing. Contribute each month. That's it- there's almost no managing to be done. Re balance once a year to keep your allocation where you intend it (i.e. so you stay at 80/20)

The only wrinkle to this simplicity is tax optimization, which involves several different accounts (many of whihc may already be created by your employer). Once you've maxed out your 401k, you also want to max out your Roth IRA. Since you are in biglaw, you will need to contribute to a taxable IRA and then convert it (fairly painless with any of the major brokerages like Vanguard or Fidelity). You also want to max out your HSA as it can be used like an additional retirement account. If you have a kid that you plan on bankrolling college for, consider adding a 529 after everything else. THEN, you can start a regular taxable brokerage account. That gets a little more complex if you are looking at things like tax loss harvesting (selling lots a loss and then buying similar (but not identical) funds immediately after in order to take a tax benefit from the loss).

The reason why you shouldn't get an adviser: the fees. Even a fiduciary adviser is usually going to be expensive. 1% of portfolio is pretty common. That doesn't sound like much, but think of it as paying 25% of your income over to that adviser in retirement (an annual drawdown of 4% is a commonly recommended rule of thumb). That said, if you want to hire someone just to walk you though getting everything setup, there are hourly-fee only advisers who will be willing to do this- but even a fiduciary will often push relatively expensive funds they have relationships with. If you MUST hire an adviser to manage (rather than just advise), Vanguard offers this service about as cheaply as anyone at around .3% of your portfolio.

I highly recommend the site boggleheads.com if you want to read more about this. They have a great wikipage talking about the advantages of the approach I've outlined above.

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