Advice from a pro?
Posted on July 6th, 2007 – 10:24 AMBy Kara McGuire
I recently went to a friend’s house for dinner who told me she and her husband now have a financial adviser.
She said it’s been great to have someone to sit down with and develop a plan for life insurance, college savings– even a better idea of where their money goes.
I’ve never worked with an adviser, partly because I believe it’s my job to muddle through my own finances and share what I learn with you. But also because I am comfortable at this stage in my family’s finances that we are saving as much as we can, disciplined in doing so, and don’t have a complex enough situation (or enough money saved) for many advisers to want us as clients. Plus, I don’t want to pay for one.
That said, I’m not weighing out working with a planner in the future. Good ones can do wonders for people’s cash flow situation and savings accounts.
Do you use an adviser? How did you find him, or her (intern Cari Tuna had a story today about the lack of female advisers in the industry)? Are you happy with the service? Do you think they do a good job? If so, how do you know?
Tell all!
18 Responses to "Advice from a pro?"
Kara-
You raise a number of points in your blog that prevent many people from seeking out an advisor: thinking they are saving enough (or as much as they can), feeling like they have to muddle through their personal finances on their own, thinking your situation is not complex enough or that you don’t have enough net worth for an advisor to want to work with you and your family. The key is to find an advisor (or team of advisors) that is willing to grow with you and your family over time. Those kind of advisors are out there, so ask for some recommendations from friends who are using advisors, and then do some “interviews” for an advisor until you find the right fit. I am in my second year as a financial advisor, and I love my work because I feel like it is incredibly helpful to people of all levels of wealth. I’m building the kind of relationships that Cari refers to in her article, and I truly believe the best approach is to grow with your clients over time. Good luck on your search!
I have not used an advisor for similar reasons as you. But I know from consulting that companies frequently higher consultant to improve what is working not just to fix what is broken. Probably a good idea for personal finances as well. I did notice a while back that USAA offered a couple financial advisors that from the picture looked like young women. If I were to choose an advisor I think I would want someone around my age that has expertise and experience.
My husband and I went in to work with a financial advisor and were rather disappointed. We did the financial workup for where our money goes and what we are saving and the result that they came up with was that we were doing a great job and they didn’t have any recommendations on insurance, assest allocation, debt to income ratio, retirement savings, college savings, and so on except maybe saving some more in an IRA. At the price for the service, $500, it seemed rather steep for that level of information. The only helpful thing about it was we got a referal for a lawyer to write a will, which we needed to do.
I would advise doing some research on your own. Pick up a copy of Money magazine. Basically the advice you’ll pay $500 to financial advisor for will the same as the info you find for yourself in a $5 magazine.
1. Contribute as much to your 401k to get the company match.
2. Anything left over should be contributed to a Roth IRA.
3. Get an online savings account that pays 5% and save 3-6 months living expenses.
4. Anything left over after all this contribute into a non qualifed index fund.
Pretty basic universal advice.
With encouragement from my Dad, I met with a financial advisor he recommended when I was one year out of college and wanted to learn more about mutual fund investing. Nine years later a strong relationship has evolved. I’ve received advice on saving, investing, insurance, house buying decisions, and job offer decisions, as well as access to his network. The only fee I’ve paid are commisions on mutual funds or insurance. In the first few years it probably wasn’t financially worth his time to meet with me annually, but now it certainly is and the relationship will continue to be mutually beneficial.
My boss recommended my advisor. I guess I could do my investing on my own, but I am more comfortable with him guiding me in the right direction. He’s the unemotional link that I need. I was almost in shock when he wanted me to invest my 401k in the agressive plan… logical since I was only 25, but if he hadn’t told me to do so, I would have picked the safest choice out there.
Right now I’m probably not making him any money, but as I continue to invest more and more, he will be glad he took the time to take me in.
My fiance and I have a financial advisor. He is a friend from our work in the theatre who does financial advising as his day job (which affords him time to do theatre and music as a hobby). He has been great with us even though we’re still just sorting things out balancing debt and savings. Anything I have questions about he has been there to answer and help which I find invaluable. (from rolling over an old 401k, to what should we do with this 4k we have for our wedding that we’re not spending for a few months, to what should my 401k be comprised of.) He’s great!
I use an advisor who charges by the hour (he also will take a commission for investing if you’d like to work that way too). I visit him once a year for a financial “check-up” but we both agree that this is a long-term relationship. I know he’ll prove invaluable at major turning points in my life.
The key to any good financial planner is to allow the clients themselves to dictate where the relationship is going to go. My wife and I use one that we are very comfortable with and have a long standing relationship with. They have discretion over our accounts to some degree but we make recommendations as well. I too sell mutual funds, insurance(life/health) (home/auto), but not individual stocks. I don’t work on a fee or a percentage of asssets, I work on commission. My belief is that if you do a good job, do what is the best interest of the client, even if it means less money, etc now. The long-term benefits far outweigh the short-term financial gains of “pushing” a product that doesn’t meet the needs the person, or family across from you.
When working with someone it is important to ask “them” what they want from the relationship before helping “them” determine the appropriate course of action. Nothing is done in one meeting and then set in stone, it has to evolve over time as the clients and your needs change. Your future, your plans are just that, YOURS! Advisors or Reps should be there to guide you and give you all the information necessary to make the right decisions. My advice, always attempt to find someone who puts your intrests ahead of theirs from the first conversation. If you figure out that they are just trying to “SELL” you something that is, “IN YOUR BEST INTREST”, move on!
Interesting comments that people including the author don’t feel as though you have “enough” resources or are “ready” yet to contact someone who might be able to guide you. Don’t worry about how much you have or how little you have. Think about this, Long-time Advisors/Planners/Registered Reps. got a start with someone, didn’t they?
Recently, I have parted ways with my (now) former financial advisory. I found having someone in the role of “advisor” allowed me to be lazy and ignorant about my investments. I did not know or understand where my money was being invested.
I’ve decided that the greatest financial risk is in not understanding. I now do all my own financial planning, and only invest in products I understand.
It’s too early to tell if this is a fiscally sound idea…but, I do know more about my investments that I ever have before.
I have met with two seperate “financial advisors”. Both of these gentlemen, although with different companies, gave my wife and I almost the exact same presentaion. The recommendation from both of them was the same, we need to buy some “whole life” life insurance to start saving for the middle term (not short term, or long term).
I really just do not belive in the benefits of a whole life policy so we ended up purchasing some a couple of term policies from one of the gentlemen. The funny part is that when I started to ask some hard qustions about why we should by a whloe life policy, both of thier answers were essentially that we should trust them and it would pay off in the end.
Needless to say, my experience of working with a “financial advisor” (aka insurance salesman) has been very poor. I really do think it is just about as simple as N Thompson said above, follow those rules and for 99% of people out there, things will work out well.
I agree N Thompson’s approach is well grounded and will work for most. I do think there are (at least) two reasons to use a financial advisor in addition to the self help approach. First -Many individuals do not understand their financial biases and cannot see blind spots or gaps in their own plans. A financial planner can add value and/or validation. My experience with a brokerage planner was good in identifying gaps, but recommended solutions were all fee based fund recommendations. I was able to follow the advice and choose my own mix of investments. The brokerage planner also did not look at insurance, wills, or other aspects of financial planning. Second - My wife and I are now going to “hire” a fee based planner as we transition from the asset acummulation our of lives to retirement. I believe that this important transition is a time when an independent set of eyes will be worth the expense.
I totally disagree with N Thompson’s easy solution of merely buying a $5 magazine in leu of professional advice.
True, there are many here among us who can hold the fort down as their own ‘financial advisor’. However, not everyone shares our interest on this topic, or has the background or experience to make smart decisions. The fact is most people can’t or won’t spend the time necessary to do the proper research to put themselves in the position they want to be in the future. Most people know the value of professional advice.
For the majority of the population hiring a Financial Advisor is a very smart decision. Simply relying on the media (a newspaper, magazine or TV show) is not a suitable substitute to an experienced and knowlegable professional. Delegate these important decisions to a trusted professional who is in your corner is never a bad idea.
My husband and I have used Karen Palm in Mpls a few times and now refer to her exclusively. She is a CPA and has other financial credentials. Does not sell us product but gives us advice on our big picture and what the best options are. We like her no nonsense approach.
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