What are your thoughts on using a financial advisor?

Discussion in 'Archived Threads 2001-2004' started by Wade, Apr 12, 2002.

  1. Wade

    Wade Stunt Coordinator

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    What can my wife and I expect or what should we look out for when using a financial advisor? Do they all try to push the same products (mutual funds, life insurance, etc...)?

    Any comments would be greatly appreciated.
     
  2. Bill Balcziak

    Bill Balcziak Supporting Actor

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    They will push:
    • Annuities
    • Insurance
    • Front- or back-end loaded funds
    • High-commission bonds
    • Overpriced "planning" services
    In most cases I think you're better off using Fidelity online. Their phone advisors have been super--smart, friendly, fast and they never try and sell me anything. I have never had a question go unanswered and my investing is at my own pace.
     
  3. Scott Merryfield

    Scott Merryfield Executive Producer

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    Bill's negative comments are not valid with regards to all types of financial planners. I would recommend using a planner who provides a "fee for service" type of payment method versus many planners who make their money off commissions.

    We have used a "fee for service" financial planner for 8 years now, and I am extremely pleased with the services provided. Our annual fee is based on a percentage of our income, and includes tax planning, financial planning, tax preparation and some financial legal services. Since they make no commission off any securities bought or sold, there is no hidden agenda regarding what they are recommending. We use a discount brokerage account for all securities transactions, including IRA's. The planner makes absolutely no money off any transaction, and they steer their clients away from such poor investment options as insurance annuities.

    Our financial situation has become increasingly more complicated over the years, and our planners save us much more money in taxes each year than their fee. Based on this, I almost consider the financial planning advice as free after all the tax savings.

    There are a lot of disreputable planning providers, so make sure you understand how the planner makes his/her money and also get customer references.
     
  4. MarcVH

    MarcVH Second Unit

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    Agree with what has been said. In general, whenever dealing with somebody who is providing you with financial advise, your first question should be: How do you get paid? If the answer is "commisions" or some variations thereof (loads, marketing fees, etc.) then arguably you are not talking to an advisor, but a salesman.
     
  5. Bill Balcziak

    Bill Balcziak Supporting Actor

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  6. Shayne Lebrun

    Shayne Lebrun Screenwriter

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    Most important tip: Find out what kind of car they drive, and how new it is. After all, if they're not filthy stinking rich, how good of a financial advisor can they really be? :)

    On the other hand, they say a lawyer is his own worst client, and a doctor is his own worst patient, so maybe you should be scared of rich financial advisors.....
     
  7. Scott Merryfield

    Scott Merryfield Executive Producer

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  8. Bill Kane

    Bill Kane Screenwriter

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    I met my original financial planner, years later, at Alcoholics Anonymous, where he wore fatigues and a ponytail.

    Today I belong to A.E.Edwards which handles my mutual funds and IRA accts, checking and debit/VISA account, pays mortgage and utility bills automatically, and I have a personal broker.

    I dont churn my holdings (broker fees) and pay
     
  9. Evan S

    Evan S Cinematographer

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    When asking around...find out if the guy you are dealing with is a CFA (Chartered Financial Analyst) or a CFP (Certified Financial Planner)...both of these designations require the individual to put the best interests of the client first and not to recommend anything that would not fit the client's risk profile and portfolio goals.

    Decide what your risk profile is before going to meet with anyone..what are your time horizons, how much risk are you willing to take, etc. Decide how you want to invest (IRA, Stocks, Funds, Money Markets, etc).

    When dealing with the planner, it is advised to go with the type of arrangement Scott has. I have done the same thing. Usually the advice is more unbiased and more suited to you as an individual.

    My best advice? Ask your friends and family. Finding a good financial planner is like finding a good doctor or lawyer. The best ones always come from word of mouth via referrals. Ask your family doctor and lawyer who THEY use to help them with their finances. You would be surprised. These types of professionals almost 100% of the time have somebody ELSE do these things for them...for that's not their specialty. They keep their time free by having other people do these things for them so they can concentrate on what THEY do well...which is provide medical and legal services.

    Good luck!
     
  10. Wade

    Wade Stunt Coordinator

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    Thanks for the replies.

    The more I talk to the guy we've been talking to the more I don't want to use a financial advisor. He's a nice guy and all but he is on commission and I feel his recommendations aren't fully in our best interests. I think I would feel this way about any advisor not just this one. There is this uncomfortable feeling that I don't think would pass if we were to use an advisor.

    I believe my wife and I should just try to educate ourselves the best we can and go from there. After all, If we have to research their recommendations to know if it's good for us then why shouldn't we be able to do this for ourselves. I know it's probably not that simple but isn't there some validity to that?

    Wade
     
  11. Scott Merryfield

    Scott Merryfield Executive Producer

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    Wade,

    Like any professional services, you can certainly do all the research, educate yourself and do it yourself. Some people feel up to this task, others look for professional advice. Would you rather build your own home or hire a professional (i.e. a contractor) to do it for you? There is no one right or wrong answer to this question.

    In any case, you should feel comfortable with whoever you enter a professional services contract with. If you do not trust the person/company or have confidence that they have your best interests at heart, then you should not enter into the business relationship.

    Learning enough to cover all aspects of your financial and tax situation can sometimes be a daunting task, depending on the complexity of your particular situation.
     
  12. Jeffrey_Jones

    Jeffrey_Jones Second Unit

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    I think that financial advisors are like personal trainers. There is nothing that they can do for you that you cannot already to for yourself. The difference being the amount of education and self discipline it takes to handle these issues by alone.

    If you educate yourself on the basic issues involved, pay attention and learn as you go, and have the discipline to save and invest money, I believe you can successfully act as your own financial advisor.

    Thanks,

    Jeff

    PS - My comments are directed at the average investor. If you have a ton of cash, hire a money manager and start to play more golf.
     
  13. Justin Doring

    Justin Doring Screenwriter

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    "Most important tip: Find out what kind of car they drive, and how new it is. After all, if they're not filthy stinking rich, how good of a financial advisor can they really be?"

    This is NOT a good indicator! Contrary to popular belief, what you drive does not necessarily reflect your financial position. In fact, it's often the opposite. For example, an employee at a Jack in the Box I sometimes frequent drives a 2002 $50,000 Mercedes CLK320, while a number of family friends who are multi-millionaires drive $20,000 Ford F-150s that are several years old.

    I agree with Jeffrey. There is no "magic" method to increasing your net worth. Here are my suggestions:

    1. Weigh every purchase decision in terms of value, not just dollars. Value rarely has anything to do with what is cheapest.

    2. Be disciplined in saving. A couple hundred bucks here and a few hundred bucks there might not seem like much money, but if done regularly, it can add up fast. Also, if you have credit card debt, get rid of it before you even think about saving or investing.

    3. Research various investments yourself. Time is money, of course, but I'd rather spend a couple hours a week gathering information online and talking with knowledgeable friends and co-workers than paying somebody hundreds or thousands of dollars to hock whatever they're pushing at the moment. Also, if an investment seems almost too good to be true, it is.

    To expand upon Jeffrey's personal trainer analogy, a financial planner is like a personal shopper. I don't need somebody to tell me how to decorate my house, what suit looks good on me, or what automobile to buy.

    On the other hand, a good accountant is priceless!

    I'll also echo the proviso that I'm speaking only of the "average" investor. If you have a net worth of eight figures or more, have somebody you trust manage it for you, as you'll never have anything to worry about.
     
  14. Todd Hochard

    Todd Hochard Cinematographer

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    Here's my plan:
    1. No revolving credit card debt.
    2. One car payment.
    3. 20 year level Term life insurance.
    4. Max out 401(k).
    5. Max out IRA (or Roth, if you can't deduct the regular one)
    6. Set aside some cash for whatever.
    7. College fund for the kid(s).
    We set aside about 24% of our total income, which is a struggle on my single modest income. But, doable. We forgo the two-expensive car, eat out every night, live in a cookie cutter 3500sq. ft McMansion, vacation in Europe lifestyle that some of our friends lead, but we manage. Plus, knowing that I could live for couple of years (with a wife and baby) without employment, if necessary, is comforting.
    If you feel you must get some money into stocks (and you should feel this way), park it in an S&P500 Index fund (with low fee- like Vanguard 500), until you figure out what you're doing. After several years of investing, I still have no idea what I'm doing (according to my investment returns).[​IMG]
    I'm not big on the 3-6 months cash for emergencies thing. That's what I keep a credit card around for. If you work in a highly unstable job, you may want some more cash around.
    My highly amateur advice.
    Todd
     
  15. Justin Doring

    Justin Doring Screenwriter

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    Todd: 24% of your total income is very impressive (unless you make a lot of money)! Did you know that the average American spends about 102% of his or her total income? Certainly something to think about.

    Also, it's not necessarily what what you make, but what you save. I know a lot of highly-paid people (doctors, lawyers, businessmen, etc.) who are in major debt! People wonder how somebody who makes a half a million dollars a year could be in debt, and yet its very common. On the other hand, I know people with very modest salaries ($30,000-$50,000) who have a nice nest egg.

    I personally only advocate funds in your IRA, as the taxes will kill you, even when the fund goes down!
     
  16. Todd Hochard

    Todd Hochard Cinematographer

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  17. DarrinH

    DarrinH Second Unit

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    I am really into this, think about my retirement all the time. My wife and I plan on hanging it up at 55.

    Want to know facts about what rich people do?

    Read The Millionaire Next Door. Great book!

    Roth IRA's are almost too good to pass up!

    Time and a little money can make you a millionaire!
     
  18. Wade

    Wade Stunt Coordinator

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    Thanks again for the replies.

    After some weekend research I have come to the conclusion that we are not going to use a financial advisor. Now I just have to tell the dude who's been so persistent in getting our money. He's probably expecting us to purchase his products tomorrow but I've got to put my foot down now and tell him his plan is not what are looking for. I shouldn't have gone this far with the guy considering I've been uncomfortable from the start.

    Our current situation or plan is similar to Todd's above except we don't have a home, no car payment and no kids. And because we don't have those three things we have been able to save a little cash.

    Let me throw this scenario out just see what you guys would do.

    If you have a nice nest egg and were wanting to use this money for a good down payment on a home, furniture, lawn mower, pool table, HT, etc.... (basically anything home related), How would guys invest the money right now? Or would you invest at all? The time frame for purchasing the home is less than two years.

    I've got my thoughts and I know what the one financial advisor would do. I've been trying to find some kind of financial timeline online that offers some guidelines as to what particular investments should be made regarding life events. I have been unable to find a good resource. Once I resolve this one issue I believe my wife and I can make some good sound decisions for at least the next few years.

    Thanks,

    Wade
     
  19. Todd Hochard

    Todd Hochard Cinematographer

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  20. Wade

    Wade Stunt Coordinator

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    Thanks Todd,
    I am feeling that those are our best bets for now as well. I'm with you on the Lucent thing [​IMG]
     

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