05 Sep Firing The Financial Planner; The JL Collins & Pathfinders Post

I’ve really wanted to write this post from day one when I mapped out my first twenty-five weeks or so worth of written blog content but decided to stick to writing in order and let this one be a bit of a reward for writing the first fourteen posts prior to it.  Firing our financial planner was a huge decision and spoiler alert, was a massive weight off of my shoulders when we made the decision to move forward.  I’d experienced some frustrations with our financial plan, and at the end of the day our CFP was doing his job in most ways and while his role certainly has a place in this world it wasn’t going to work for us any longer.

Back in late 2010 or 2011, I remember pulling into Home Depot to buy something and my phone rang with a random phone number.  I answered it and the individual identified themselves and the name sounded familiar, but I couldn’t place who it was or how I knew them.  It was actually kind of funny as I thought he was two different people and finally I got there and realized who I was talking to.  He was a friend of a close friend that I had known probably ten years prior and he’d started up his own broker business through a large Insurance and Financial Planning Company and had been referred to give me a call by someone else.  I was hesitant to meet with him and expressed that was the result of a prior representative from the same firm I had met with being a let-down and didn’t follow the rules we’d laid out.  Rule number one was that I would meet with him as long as he followed the rest of the rules.  The rules were first and foremost that we were focused on getting out of debt first and not planning on investing in the immediate future, rule number two was don’t even consider talking to me about cash value life insurance.  He agreed to the two rules, we met, and he got me setup with something I needed which were term life insurance and disability insurance policies that I had needed but not gotten done because the reps I’d tried to work with didn’t follow through and then I got lazy frankly.

He gave us an overview of our financial plan from his perspective including net worth (we were negative at the time), income, savings, insured level and more.  It was nice to see a road map put in front of us and for us to understand the power of “the cost of waiting” to invest but we still stayed on our path to being debt free first and he respected that agreeing to check in with us every three to six months on our plan.  From there over the next few years we ended up investing in the following places.

• 401k from wife’s employer
• Pension rollover from wife’s employer
• ROTH IRAs filled
• S.A. vastly underfunded
• Cash value life insurance policy 1 $200/mo
• Cash value policy 2 $400/mo
• Rental house 1
• Rental house 2

Our Fee Structure Was:

• 5% Front loaded fee on all contributions to ROTH or other IRA rollovers
• 4% assets under management fee
• Mutual fund fees ranging from .45%-1.15%
• Index fund ETFs fees from .05-.1% (yes, my advisor had some of our money in index funds)
• S.A. $2.00 monthly fee, .09% fee on index funds.

I’d been getting an incredible amount of value from the BiggerPockets platform via their Real Estate Podcast and they had added a Money Podcast.  Through the Bigger Pockets Money Podcast I learned about index funds in greater detail and was led to read JL Collins’ The Simple Path to Wealth.  I had heard about index funds before in various FIRE Community posts but never gave full consideration and thought we had a good thing going.  After reading that book, I don’t know why I thought I needed more information, but I dove even deeper and kept reading and understanding.  Eventually I asked my planner about index funds and while I don’t remember the response it was a balance of, “Yeah I can understand why you’d be intrigued by them but here’s the real story” and then went along to paint a picture that kept us on his game plan.  I’d like to state again while I don’t think their method of financial planning is necessarily doing anything wrong, I was just starting to recognize it was an expensive and slower path to wealth.

Once I got my mind wrapped around the 4% Rule or 25x annual expenses concept, I called my planner to ask one simple question, “If I were to retire today, how many dollars would I need in my retirement account or asset allocation to survive in my current lifestyle?”  His response was about oddly about twenty times my annual income, this made sense to me because they build their plans upon income versus expenses. So then I asked another question, “How much would I need in the account if I only wanted to live on $80k a year post tax?”  He was confused by the question, why would anyone want to live on anything less than what they were currently earning? He pushed some buttons on the computer and landed on a number that was about twenty-five to twenty-eight times that number, remarkable.  I now knew the 25x expenses rule was relatively legit so I revealed my knowledge about the 4% rule and safe withdrawal rate, and he was happy to hear that I was a client that “got it” and could have a different level of conversations than he could with some clients.  Unfortunately, for him I wasn’t far from no longer being a client.

A few more months went by and I watched my investments and the market and the two didn’t align well enough for my liking, so my wife and I came to the conclusion we were likely done and going to manage our own money moving forward.  We’d had enough of the heavy fees inside of mutual funds and watching our investments lag behind a roaring market we’d been investing in.  I made a phone call and got my advisors voicemail and left him a message that I’m sure he could hear the sound in my voice wasn’t going to be a great call.  I wasn’t calling to fire him but to tell him I was 70% of the way to a decision to make a change and wanted to give him a shot to defend his position one more time before we made what might seem like a hasty decision. I had a really hard time getting a hold of him which wasn’t normal, normally I could send a text or call and get a response rapidly.  It took two days before I even heard back, and he claimed he had been busy but could talk at a really specific time.  I think the voicemail was what did it, I didn’t say I was calling to fire him or consider firing him, I just said something along the lines of, “We need to talk through something, it’s going to take some time but need to connect” and my voice was probably flat where normally my calls are upbeat and he can tell I’m ready to move on something.  It sounds bad to think the worst, but I genuinely believe he was dodging me knowing what was coming, and I was forced to record an mp4 voice memo and text it to him basically telling him our plan in a short four-minute recording.

When we finally connected four days later, he claimed he hadn’t even listened to it, maybe he did or maybe he didn’t, but I gave him the run-down of what we were considering doing and that we were 70% of the way there.  I told him how appreciative we were that he helped us get started and that I actually had not planned to cancel my cash value policies but wanted my assets under my own management to save fees and track the market.  His response was very long and drawn out but the first part will always stick with me, “If you want to go chase returns in index funds, I suppose be my guest but my fiduciary can’t allow me to tell you I think it’s a good idea or fit for you.”  Chase index fund returns, chase returns.

Interesting, I remembered telling him respectfully that my understanding is index funds simply track the market and the market has done roughly 7-8% over history and yes it dives deep and yes it rides high, but they track the market, there is no chasing.  The mutual fund investing and moving my money in and out of funds was the definition of chasing in my opinion, and they had not at any point during our relationship consistently beat the markets performance BEFORE their fees let alone after fees.  We exited the call with an agree to disagree sentiment and I told him I’d make my final decision within a couple weeks, he wanted to schedule a call with me a few days later.  I reflected on the call, slept on it, woke up and laughed at the absolute absurdity I’d experienced the day prior and the decision was made to terminate the relationship.

I waited until the weekend and crafted probably one of the world’s best break-up emails, yes I did it via email because I tried to do my part by calling and he left me hanging for two days, I sent him a voice message recording to listen to and he claimed he didn’t listen to it, and then tried to claim I was chasing returns which implies I thought I could well outperform some benchmark when in reality I was trying to get the most basic of return, 7%, nothing sexy about it.  The email was simple, expressed appreciation, cancelled the meeting we were supposed to have a couple days later and mentioned I had no intentions of cancelling my insurance policies.

He never responded.  It has been three years and he’s never responded, he did unfried me on Facebook though.

After a week went by and no response, then another week went by and I made the rollover to Vanguard I still received no response, I was more and more frustrated, and it was becoming clear to me the level of relationship I’d thought we had was completely different.  The cash value policies that I had no intentions of cancelling, I ran some math on how I could repurpose the dollars into my H.S.A, and while I was going to have sunk something like $6,000 into lost premiums that I wouldn’t get back I didn’t care because I knew long term it was going to be the right move.  I hadn’t heard back from this guy after a professional courtesy opportunity to salvage the relationship, a break up email that was respectful and I was still a client to the tune of $1,100 a month in insurance premiums!  It didn’t take me long to call the 1-800 number and surrender the policies, I thought it would be much harder and they’d have to schedule a call with the advisor but nope, they did it over the phone in a matter of minutes.  I’m guessing he got an email ping that he had just lost two policies, still no call or email.  I’m still a client to the tune of $275 a month in term insurance, plus I hold two small cash value policies on my son and mom at this point (I still own those to the day and won’t cancel them).  I was just no longer a GOOD client because you don’t make money on these policies and the relationship wasn’t going to grow with my growing income and net worth anymore.

At the time of writing, I’mthree years removed from the breakup and never heard anything from my advisor.  Oddly at one point I logged in to get a statement on my life insurance policy and saw I’d been handed off to a junior advisor and was no longer a direct client of my high-powered advisor.  My net worth has grown by $750k in the last 3 years (we took advantage of March 2020), and I saved more money in actual dollars and more money from a percentage of income standpoint without the help of an advisor.  Novel concept.  In full transparency a large portion of the net worth growth is the real estate appreciation, and my income has grown, we spend less, and our investments went up especially with the transactions we made in late March 2020 and the market working on rebounding (man it’s a rollercoaster ride).

This break up was a tremendous weight off my shoulders, the math said something was wrong and my gut said something was wrong and there was always a lack of transparency that left me feeling “off.”  That feeling is gone, and I love it.

I hope this article makes someone’s stomach drop, someone that knows they need to break up with their advisor but it’s a friend, family member, or someone they’ve worked with a long time and they are scared to do it for any number of reasons.  Do it if you are prepared to manage your own wealth, do it if you are prepared to watch your investments plummet 35% like mine did and you can sleep at night then wake up and buy more, do it if you are prepared to ride it out and stick with logic and the plan.  If you need someone to hold your hand to stay on your path, then find a CFP that is a fee only advisor that you can pay by the hour for advice and planning sessions as needed.  This break up was exactly what we needed, and I’ll always look back and smile.