I've been interviewing financial planners the last couple of weeks, working on different strategies to fund my children's 529 fund shortfalls.

I've continued discussions with one of the CFPs and they took a look at my retirement savings and had recommendations for changes. I've got a big bucket in a time targeted 401K thru work that has been performing ok, but the CFP thinks he and his team can do better. The proposal is to move the majority of value out of the 401K into an IRA and actively manage it for .86%.

I am not particularly adept in managing money, my best strategy has been automating savings (401k, 529, automatic transfers to savings accounts). I am not particularly knowledgable about markets or trading in general, so I've always gravitated towards funds that were more hands off. It is very appealing to me to have my accounts managed by someone with a vested interest in my success, but I don't really know what that's worth. Is .86% a fair ask? Should I ask for a discount? Are there more questions I should be asking when considering this proposal?

My goal is retirement in 2031 for both my wife and I at 62, bridging to social security until 67.

If they have a good track record and recommendations, and they are making you money, you will never notice the fee. It is up front, rather than all the bullshit hidden fees of mutual funds with free financial advisors.  

I have a fund manager and all ETFs, 5 separate accounts.  I don't notice the commission.

I agree with this.  Find a true fiduciary money manager and then you set your goals. This should be a team, rather than an individual. Communicate often.

Thank you both for the input and opinions, they are valued. My biggest fear is to come this far and dork up retirement somehow. As a professional programmer, I know the difference between amateur effort and someone who knows what they are doing. I am not a financial professional and honestly I don't have the interest or aptitude to up my game to a point where I would be comfortable self-managing. Again, our family's future is literally in the balance (I apologize for the terrible pun). A professional (team) in my corner gives me a big sense of relief the more I think about it.

I'm already convinced that the date targeted 401K is not a good idea  and I am very open to change, I just need to justify the fees (which I already pay but are hidden) to feel like I'm making a good decision. Should I ask for a discount on the fees? Reading various investopedia articles fees often go down as assets under management increase, so maybe just revisit the fee structure in a year to see how things go?

I appreciate the replies so far!

First elephant in the room question is how are you going to get your money out of your current 401k?  If it's your current job you can't roll the money over and any other withdrawals will have serious tax implications as far as I know?  

0.86% is high but not unheard of.  
Lots of threads here, but are you paying them anything other than the 0.86%?  I would recommend a fiduciary that you pay directly rather than a planner that relies on management fees.  
If you found these guys in the phone book I'd think twice, but if they were recommended by people you trust then they might be worth the cost.  

For 7+ years out I'd consider doing it myself - low fee index funds and leave it alone.  

See other threads in here about tax implications - if you won't have much income from 62-67 that opens a lot of options for things you can do to reduce taxes.  A good planner should be all over those choices.  

The bulk of the funds in my current 401k were the result of a rollover from a 401k at a previous employer. The CFP has indicated that those funds are eligible to be rolled over into an IRA without a taxable event. Why they are eligible, I don't know. Good question.

i think the first bold part satisfies the second bold part.

Excellently spotted!  Sometimes the answer is so simple it plumb evades me (even when I wrote it).

Testing my understanding here, a "true fiduciary" money manager is someone who is required to put my best interests ahead of their own? How would you verify their status independently as I've found claiming something doesn't necessarily make it true.  And when you say communicate "often" what drives the frequency of contact and what does often mean to you?

Yes.  You "verify their status independently" by paying them a flat fee (per hour, per month, or whatever you two agree on) and nothing else.  He doesn't get commissions or fees from your investments and thus has no vested interest other than to keep you satisfied with his advice.

I recently went this route and what I found to be the most valuable was the tax planning for the future.  I knew tax planning was important, but until my money guy put all my info into his fancy software that shows your finances for the rest of your life I didn't appreciate just how much of a difference planning for taxes could make.  
I would expect a good planner to meet with you a few times quickly up front to get information from you, find out what your goals are, enter your info into whatever systems he uses, etc.  Then once he has your "life" planned out as it is, you might meet a few times to discuss changes you can make to better meet your goals.  You go off and implement those changes and then maybe you meet him once every month or three so he can update your info and verify whether your progress is adequate to achieve your goals.  

If you plan to quit working at 62 and wait until at least 67 for SS that's 4-5 years you'll spend in a low tax bracket and there are things you can do to take advantage of that.  
You could do things like make taxable investments now and then liquidate them during those low income years to take advantage of 0% long term capital gains tax.  
You could do roth conversions during those low income years and the converted amounts would be in a lower tax bracket.  This would also help you reduce RMDs down the road to save even more taxes.  

The guy I use charges $1-7k/year depending on how complex your situation is.  He will manage your investments if you want him to for 0.35%.  He also will tell you what he would recommend you invest in so you can do the exact same investing yourself for free.

Thank you, that is very helpful to me!

What about that strategy, makes them a poor investment?

If your goal is to have a decent asset allocation associated to your planned retirement age - that is *exactly* what they do.  Often times using indexes that you might have chosen on your own, in similar percentages in a Lazy Portfolio.

I'm not clear on why you would define that as a poor investment?

One thing to consider is do you do a Roth IRA along with your current 401K?  If not, why not?  You and your spouse could be putting an additional $16K away tax free for you and your heirs.  If you do a self directed IRA in lieu of a 401k this will make you subject to the pro-rata rule and make this strategy much more difficult.  

Good luck on your journey.

The person/team of people who actively manage my retirement savings have pretty consistently delivered better returns than an S&P500 index fund + their fees, so I’m ok paying them.

You can always let them manage your IRA for a year or two. If they don’t perform to your expectations, move your money elsewhere.

This. Returns alone aren't the point this close to retirement.

Over what time frame?  How did they perform during the last bear market?

In my field I work with some CFP’s and their fees and performances can vary wildly.  From minimum fees on AUM for steady gains over time, to outrageous commissions/fees on AUM for basically running accounts into the ground.  As another poster mentioned above, many times an advisor will just throw your stats into a spreadsheet that spits out an asset allocation and they consider things done while charging management fees — something you can do yourself through many of the online BDs like a Schwab or Fidelity (without the management fees).  And (again as previously stated), just dropping into a broad market S&P500 ETF will outperform a lot of alleged professionals.

If these guys performed as well as they claim, would they be desperately trying to sell you on why you should go with them? Or would they be running their own self-funded accounts and trading for themselves?

If considering a “pro” to manage your funds I’d highly recommend interviewing/checking out like 4-5 or so and asking to see their track record over the past few years along with a breakdown of any fees and commissions they’d plan to charge.

Thank you for all the questions, opinions and comments. It has been very helpful to me. The link to the boglehead wiki in particular led me to "The Boglehead's Guide to Retirement Planning" preview  which I am working my way through and sharing with my kids. Haven't made a commitment one way or another but I feel more confident than before starting this thread.

anything a Financial Planner/Advisor can do, you can do.

there is something to be said about being in control of your money, as well as saving your money to invest more of it.

Reviews, track record, holdings, etc.  You can't hide these things.  My dudes are also politically conservative.  They understand how the Biden cabal is going to really fuck financial things up with another term.


You make more money, they make more money.  

I had been self-managed for years, because I was obsessed with low fees. I also hated dealing with it and was overly conservative...resulting in a lot of money being left on the table.

Maybe 4 years ago we moved everything to a financial advisor that was well known to my wife's family.  I had met they guy and my recently passed FIL trusted him (he turned the savings of two .gov worker salaries into an upper 7 figure portfolio).  Less than a year after we made the move, the advisor switched firms to a  different frim (which caused me a little concern) and talked us into following him.

My concerns were not founded and the last three years have been GREAT. Based upon my 2023 closing statement, our total fees are right  0.8%.  To say it has been worth it would be an understatement.

For the first two years, I maintain an estimate of the performance I would have had, if I was still investing with my prior rate of engagement, frequency of making adjustments, and my prior risk level.  Growth under the manager was more than double what my on-paper only strategy would have yielded...so after fees, he is making us 3 - 4 times what he cost us.  Disclaimer: YMMV, I did not sleep in a Holiday Inn last night, and every financial manager likely makes slightly different decisions.

I think the biggest impact is how frequently he adjusts investments.  Being on top of it every day is huge.   I will get notices of a trade and wonder wtf he is doing, then a day or two later, the Fox Business or Kramer is talking about some market shift that happened.  Every time I have looked into the trades, they have been right on target and a day ahead of the rest of the market.

Edit:  Forgot to mention, The 0.8% is total fees, including those from any funds in the portfolio.  The firm our guy works typically stays away from Funds and develop their own portfolios. There senior guys are former fund managers.

then you found a Unicorn.
just curious, what did your portfolio do compared to the SP500? if you could give us some numbers I would love to see them.

I have not tracked the S&P vs my actual investments.  I know in '22 my actuals were down about 1/2% and not -15% like many other folks. He moved us out of stocks before it got ugly.   Checking right now, for Q1 2024 I'm a little over 1% above the S&P average.  For the last 2 years, I not paying much attention. After watching it the first two years with him, I was convinced and now I don't loose sleep over it. That in itself is worth what I am paying them.

BTW, it takes mid-7 figures to open an account with these guys, which we are not at.  Our account and my wife's sister's account were opened because my FIL was already a qualifying customer.