ZapBrannigan

Any of you guys ever use Leading Edge Financial Planning? Someone sent me a link to their podcast on what to do with the retro check and I’m thinking of giving them a call. I guess the guy was a SWA pilot for 15 years and took the VSP to do this full time during the pandemic. Just curious if you’ve heard good, bad, or nothing at all.

WHACKMASTER

I dropped them like a four day to a three day the second Net Zero changes. The nerve of them to tell me that ordering five Miatas with my RB was being “irresponsible”. 🙄

waterskisabersw

Ah, so you have 5 teenage daughters?

e6bpilot

Any financial planner who uses aviation jargon in their name is automatically suspect.
Also - paying someone to invest your money is a fun game to play, but their results probably aren't better than just putting it in a mix of low cost index funds. They may have something to offer in the way of end of career planning, but at our point in life, I refuse to pay someone what I could easily do myself for way less.

Noconcessions

Do what you want with it. I pre-spent some at a car auction and spending the rest on home improvements and Rock concerts.

flyguy81

I've talked to a financial planner before and they basically said I was doing everything I could possible do already with the exception of a whole life insurance policy. I do a backdoor roth and max that out every year, max out my 401k portion every year, and the company tops off their portion every year. With the MBCBP, that'll add an add'l $3450 to a retirement account. I haven't contributed any to the at risk (Top Hat type) programs yet. Going to be doing a home build over the next couple years so the excess NEC will go towards that so I don't have to finance as much when the build is complete. At 42 yo with over $1m in retirement....not sure what else I should be doing. At this rate I should have anywhere from $3-5m at 60-65 yo and that's more than enough. Wife will be inheriting some rental properties so will have passive income in the later years also. I'd do real estate investing but DEN is so damn expensive and I want nothing to do with broken furnaces, etc or having to pay someone else to deal with it.

Turbosina

I don't know if this is helpful but I can offer my personal experience to help answer the question "Is it worth it to pay an investment advisor, or should I follow the usual advice to just invest in a mix of low-cost index funds"?

TL;DR: My experience matches the common wisdom, which is that most investment advisors are not able to outperform a well-chosen mix of low-cost index funds over the long term. However, there are three caveats:

1. Who's choosing your mix? And on a broader scale, who's deciding how you should allocate your investable assets across not just market investments (equities, fixed-income, etc) but across cash and also real property investments, if you don't mind the hassles of owning investment property? Many pilots I talk to haven't a clue about this stuff, so I'd say it's worth consulting a financial planner and/or investment advisor to give you high-level guidance.

2. The more wealth you have to invest, the more it may make sense to have a professional working with you. Why? Because you may have access to nontraditional investment types such as private equity, private credit, private real estate, and so on. These opportunities require long time horizons (you usually don't see a return on a PE investment until the 7-9 year time period, which requires some patience), and they do require significant commitments of funds. But these alternative investments can often significantly outperform public markets. Without an advisory firm working with you, you generally won't have access to these opportunities. Now, for most people in their 20s through perhaps 40s, these investments don't quite make sense. But if you're pulling down a half mil or more a year, as some in this industry are, and you've got some wealth accumulated, it may be worth looking into.

3. If the professionals can't beat the market in the long run, it's highly unlikely that any of us civilians can. The human tendency to panic-sell on bad market news (thereby locking in losses and then missing the inevitable rebound) has been the ruin of many an investor. Sure, day trading can be fun, but it's not the root of a successful long-term strategy.

So do I have any data? Well, every quarter, when I check in with my advisors, I have them run a comparative calculation showing how they've performed not just vs. market indices, but vs. something more relevant: a scenario in which, instead of them managing our investments, we had simply put a significant portion of our investable net worth into a very popular target-date mutual fund (since that's what I used to do before moving to an advisory firm.) In other words: is the advisory firm earning their fees by generating higher returns?

Over the long run they have only managed to outperform the target-date fund by 0.8%, and that's after accounting for the cost of their advisory fees. However, that small outperformance ignores the future anticipated returns of the PE investments we have, which we hope to return in the 10-15% range. And last year, for example, our private credit investments outperformed the public bond markets by a substantial margin. So I fully expect that in the longer term, the effect of the private investments will significantly improve our returns.

Where I see people really need help is actually regarding taxes and tax planning. Sure, if you're 25 and your only source of income is a W2, there's not a heck of a lot you can do to improve your tax situation, other than the obvious tools of maxing out your 401(K), contributing to a Roth IRA, and moving to a low-income tax state. But as you get older, and your income and wealth grow larger and more complex, a few thousand bucks of tax planning each year can make a tremendous difference. Especially if you have any self-employment or rental property income.

And if you're wondering "this guy is just an airline pilot, WTF does he know?", well that's a very valid question

Long story short, my personal suggestions:

1. Talking to a financial planner may be a smart idea, even if you don't have them manage your investments.

2. Investment advisors generally aren't going to deliver significantly better financial performance than a mix of low-cost funds, assuming you start with a well-balanced mix of those funds. However, if you can stomach higher-risk investments with long return horizons (like private equity, private credit, etc), and you have significant funds to invest, an advisor can definitely be worth your while. The more funds you have, the more expensive the consequences of an overly concentrated or otherwise poorly-allocated portfolio.

3. If you have self-employment income (I'm not talking about OnlyFans or Uber, haha), or rental property, I strongly suggest you talk to a tax advisor. Without my tax advisors, I would never even have heard of California's PTET provisions, or the Federal QBI tax provision. The amount of tax savings generated by my tax firm was enough to recoup their fees many, many times over.

MatthewAMEL

Isn't there an income limit on a Roth? Is there a way to contribute when you are over the cap?

flyguy81

There is if you contribute directly to a Roth. You can contribute the max amount to a Teaditional IRA and then immediately roll that $ over to the Roth. You only pay taxes on earnings so if you have the traditional $ not invested into anything and roll it over as soon as the funds post, then there’s no earnings to pay taxes on. It’s called a Backdoor Roth…Congress was talking about ending it a couple years ago but it didn’t pass.

Smooth at FL450

no income limit for a Roth conversion.