OK, take a deep breath. Done? Great, now answer this question for me: what do you think of when you consider the idea of a financial advisor?
Do you think of someone who can take your order to do something for you in the stock, bond or mutual fund markets? That’s part of it, but if that’s where your thinking stops, and it does for many people, then your best bet is to find a do-it-yourself discount broker and save a little bit of money. (We’ll get to the real cost of that later).
Maybe you think of someone who can look at the big picture, put together a complete plan, put that in a box and tie a bow around it, and hand it to you for a flat fee usually somewhere in the $3,000 – $4,000 range. Armed with that information, you go off and find a do-it-yourself discount broker and pay him or her for the transaction fees after paying for the plan. When changes need to be made to the plan, which you might or might not be able to recognize on your own, you can always hire the planner again and pay them to tell you what changes to make.
If you don’t have that time or expertise, you can always work with someone who will charge you a full-service fee for access to the markets, as well as charging you an annual fee of perhaps 1.5% – 2.0% of the size of your accounts to do the planning. Pretty expensive, but at least they’re providing an integrated service, right?
Do I think any of those choices are a good idea? No, I don’t. Am I biased in my thinking? Yes, I am! The bad news there is that I’m biased for my own benefit, because I want your business. The good news is that I’m also biased on your behalf, because I want you to have the best deal at the same time!
OK, you say, I’ve read this far, so what IS that best deal?
I recommend that you choose to work with someone like me, who charges you those full-service fees for access to the markets, and who also does end-to-end planning for your entire life and your entire family. The difference? I don’t charge for any of the research, the planning, the appointments, or answering questions when you have them, even if it’s not time for your next appointment. If you really want to pay the annual fee, we can work that out, but I won’t charge you any commission, the fee will only be 1.35% and you’ll benefit even more by getting a refund on a portion of the money charged every year by the mutual fund companies to market their products for them. (Most people don’t even know about those fees, and here I am telling you about them already!)
What does working with me look like? Take a look at the chart showing how I approach the relationship we’ll have. It shows a lot of areas that, if not important to you yet, will be as time goes on. Financial Planning and Investment Strategy are important from the very beginning of your plan, but only after we’ve built a relationship and we know who each other is and how each other thinks.
Investment Policy is the rules I have to follow that fit your goals and needs, and I’ll ask you a lot of questions to establish that. Insurance is the protection that you, your family and your assets deserve. The best financial plan in the world is lacking badly if you’re not protected against losing it, and that’s true whether you’re younger with a spouse and children, or older and possibly facing the need for in-home care or even assisted living. Trust me, you don’t want to pay for that directly when there are much cheaper alternatives. Tax Planning is an important step to make sure that you’re not paying too much to the federal government that could instead be benefiting you. Estate Planning and Charitable Giving are keys to passing things on to the next generation, or the one after that, and/or to your favorite charity, all without sticking them with the taxes.
The only thing I don’t do in the accompanying chart is Tax Preparation, because I’m not a licensed CPA, but I do know competent people who can do that for you if you’re local, and I’m happy to work with your tax professional via the phone if you live somewhere else. I’m also not an attorney, so I can’t draw up your estate plan for you, but you and I can determine if one might be to your benefit, and I’ll work with your attorney as well to make sure your needs are being addressed.
You might be thinking at this point that, since you’re a pretty smart person (which I know because you’re reading a financial blog in the first place), that you can do all of this by yourself and save a bunch of money. The real question is, what’s the cost of not knowing everything and getting something wrong, or just missing a key element of what you should be doing?
All of us, including me, need objective team members to help them get to where they want to be, because there’s just no way to be unemotional and completely objective about our own finances. This way you also get to use “OPR”, otherwise known as “Other People’s Resources”, to help you get to where you want to be.
If you would like to have a conversation or just ask a question please email me at John@financialideasblog.com.
I look forward to hearing from you.
Technorati Tags: Financial Ideas, how to invest, Invest young, learning Stocks, real estate investing, What to Invest In
October 17th, 2009 |
, let’s point out that anyone can contribute to it. That is, you can be our future student’s mom and dad, or grandma and grandpa, or godparents, or just family friends wanting to give a shower gift.
