can regular people run personal finances without an advisor?
 

i just had my second meeting with some guy. he talks a great game and has visions of an early retirement dancing through my head. it is just about the time i decide if i need his help or not. i dont have any financial game, and would need to defer to my SO. his fee doesnt seem that high, but i dont even know what a good fee is or not. i have a state pension, (calpers) and i max my 401. he says that isnt a good idea, and i need to diversify. honestly, he has tickled my curiosity, but i could use the fee money elsewhere. i can easily afford him, can i afford not having him? damn what do you guys do? oh, i am 41 years old, no kids. married. my wife is always reading investment books and stuff. she seems to have enough of a grasp to even understand the finance guy. i just sit there and look pretty.

thanks.
cliff

oh, this guy works for ameripris. from what i gather, they are the walmart of the investment companies? damn, all this is so confusing.

ask this advisor if he/she has any "passive" income if they dont know what that means fire them. If the answer is no they have no business being a financial advisor. Ask them how much CC debt they have, better yet ask them if they own any real estate, if hey do own real estate ask them whats the LTV ratio on the real estate they own????
You do realize anyone can hang a shingle and be a financial advisor.
These are very simple questions,

Or just ask: "If you're so smart, why ain't you rich?"

Or just ask: "If you're so smart, why ain't you rich?"

I get cold investment calls every week. That's not exactly what I've been asking them lately but it's close.
Jim

They fill their own pockets first and what they can do for you is mostly by chance. What is his fee??

I'm old school, but I hate paying anyone to do something that I can do better for free :). I would immediately question an advisor who advises against maxing out a 401K (for MOST people), as I suspect he wants you to "diversify" into something that "he" gets a piece of the action. Diversification is good, but it's hard to beat the advantages of a good 401k (that you "can" diversify). I actually do have an Ameriprise financial advisor (from a 401k I rolled over to American Express Brokerage many years ago), and other than him giving me EXTREMELY BAD advice concerning that rollover (that I ignored), I don't use him.

I use a guy, I would not call him a financial adviser his business card shows him as a Insurance Rep first. He helped me set up a strategy to get my mortgage paid off in 8 years and have no debt at all. He also set up life insurance policies and health insurance policies for me as well as IRA's.

I contacted him on the recommendation of friend that used him. Most of this stuff I could do myself but sometimes you need a little kick in the pants to make it happen. That is where he came in.

don't get involved in anything you don't understand.

With one notable exception...women :)

No one cares about your money as much as you do.

Why hire someone whose goal is to siphon off as much as your money as possible?

"Buy this (high-commission-for-me) fund. The returns are great! (For me.)"

Even if you make a few mistakes while learning, you are still probably better off than having your money nickled-and-dimed with fees for a lifetime.

Your first step is to figure out how much risk you can tolerate. Stay conservative until you know what that is.

thanks guys.

his idea about my 401k is that when it comes time to pay out i will also be collecting from my pension fund. he said, that would put me needlessly into a higher tax bracket.

he likes to see people doing 40% tax deferred, and 30/30 in after tax, and (damn i cant remember, mixed taxed?)..

his fee is $1500 and if we buy his products, he gets a commission...

i did ask about his personal situation. no debt, owns his home + rental prop, and pays all his bills from a money market account.

I see some red flags. If he gets a commission for selling you his products he is not a neutral, detached advisor giving you unbiased advice. No matter how much he tries he will have a financial incentive for you to invest in a certain way. In general I don't trust anyone with the big investment/insurance/trading firms or anyone who works for anything other than an hourly rate, especially the ones who get a commission on you purchasing his products.

American Express Financial Services used to be big in my area. They set up "investment advisors" to do what this guy does, but the catch was that he was paid a commission on selling AMEX products only. And year after year those investments lagged the market because they in turn were invested primarily in AMEX products. I think there was a suit over it eventually.

I also don't like his advice on the 401(k), but I'm not the professional, so what do I know.

I would recommend going to a real, independent, fee-only certified financial planner and have that person help you adjust your portfolio. Even if you pay $250 an hour to a real professional you can buy a lot of time for $1,500.

I won't even ask for $1500, (my advice is free, and you get what you pay for), but I too have no debt, own my home and a couple of SFH rentals but I "earned" mine in IT, and not by "skimming" other peoples's hard earned $ :). Here's my take, but it all depends upon your personal situation and YMMV:

I don't agree AT ALL with his premise about the higher tax bracket (due to your pension + 401k withdrawals) because he is conveniently ignoring your "current salary" tax rate that the 401k is avoiding (typically the highest tax bracket for many). Here's the short answer: if your income (thus tax rate) will be lower in retirement, defer what you can until then, if you will still be in the same high tax bracket, it's a moot point. That's just a generic example, but just shows how "things can be twisted" by those wanting your hard earned $$$ :).

ps: A BIG key point in my situation is that I am (and will continue to be if I can) debt free, thus I will not need the same income stream that my "career" brings to the plate.

VASH,

The advice this adviser will give you will be essentially sound BUT it will also line his pockets. Anything left after lining his pockets will go towards your retirement.

The type of advise you need is largely determined by the size of the pile you are trying to invest. Try to find someone who specializes in your size pile.

But do yourself a favor and get the basics in place first:

• Updated will reflecting your current situation
• Power of attorney (medical and financial decisions)
• Umbrella liability insurance
• Disability insurance (not through your employer)
• Life insurance (not through your employer)

Did your guy tell you to do this stuff? Probably not (well maybe he tried to sell you a life insurance annuity :rolleyes:)

Got all this in place? Good, now you can start talking about how to allocate your investments.

Generally speaking, if your pile is less than a million? You can do it yourself. read teh intarwebs (Fidelity, CNN Money, etc) and the general advise is good enough.

More than a million, go see a fee only adviser with a high net worth clientele.

My .02

PM me if you want to discuss this in detail. (No, I don't make my money selling products or services related to this thread)

yea, he did mention that stuff. he states his pet peeve is folks not having disability insurance.

thanks to everyone!

Don't know about this guy, but I wouldn't take advice from a commissioned saleman making $35K a year who drives his 6 year old Honda to the office from his apartment every day (i.e., most "financial advisors").

Would you rather take advice from one who is making $100k a year and drives a new Lexus? ;)

A HUGE +1!

And yes, a "regular guy" CAN manage his finances without an advisor. Or, as in my case, his wife can. Cindy is a former bank loan officer. Money management is her hobby. Yes, she runs things, but we talk over any moves before they are made. Tax ramifications, risk/reward, etc.

Unless your 401K is in one stock only, you probably are "diversified"...do some digging, figure out where the money is invested.

Save your money, educate yourself. Fees DO matter...so do commissions.

BUY THIS BOOK:

The Bogleheads guide to investing
by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf

Dittos on MRM's "fee based" comment. But only if you're too lazy to self educate and do it yourself.

Like you, I hold the belief that nobody cares about your money more than yourself. Yet so many people seem to hate discussing the subject, don't want to learn. Their loss, because they then end up buying that Lexus for the sharks who inhabit the financial world.

I agree with that.

But if I did take financial advice from someone, that person would have to have a demonstrated success in such affairs. I.e., I'd listen to Warren Buffett, not so much to a 25 year old who doesn't have 2 nickels to rub together.

Vash.
Look for an Independant advisor. Not someone who works for a Major corp with their own products. Best to find a fee-only planner/advisor. At a minimum they should hold the CFP certification.(Certified financial Planner)

http://www.napfa.org/

Also see

http://www.cfp.net/search/

Questions to ask.
http://www.cfp.net/Upload/Publications/185.pdf

Seek financial advice from someone who has made over a million dollars a year for the last 10 or 15 years, and whom has retained significant net worth and assets to show for it.

Emulate that guy's best practices.

Failing that, while I agree, emulate sound financial practices that have been benchmarks forever:

- Save 15% of your gross income. Mix your portfolio based on risk, number of kids, age, etc. The data for managing a portfolio is everywhere on the net.

- Don't borrow money for anything other than a house or car. Your debt ratio is key.

- Pay credit card bills off every month.

- Never get divorced.:)

RUN FROM THIS PATICULAR GUY. Anybody who is promising Candy Cane & early retirement right now is not for real. The reality in today's market is that things don't look good and knowledgeable professionals are spooked.

The old axiom applies..would you do brain surgery on yourself? Or would you get an expert in brain surgery to do the operation? So professional help to help guide U through this stuff is a must.

If you have a pot to pi$$ in you HAVE to become versed in the financial markets. Even if it is not to get gypped.

The question is who to trust. there are so many out there that don't know their a$$es from a hole in the ground. All they know is the party or corporate line of what is being touted as the flavor of the day.

One thing to consider you are not likely to get the 1st string money manager as a walk in, your going to get a salesman. . Those 1st string professionals are usually gotten by referral, they already have a client roster.

If you are interested in learning, listen to CNBC, it is a good primer. Now to CMA on this, there are caveats to CNBC it does have its shortcomings. But to help get up to speed for beginners and know the tenor of the day it does fulfill that goal. Professional money mangers do listen to CNBC to see which way the spin is blowing.

Ohhh...CALIPERS.....guess what they invest your retirement money in....the Stock Market...so what is good for the stock market is good for your CALIPERS retirement. So if a disaster should befall the Stock Market...CALIPERS might NOT BE SOLVANT anymore..meaning NO RETIREMENT INCOME. EVERYTHING IS INTERRELATED IN TODAYS FINANCIAL WORLD. Welcome to reality.

BTW: The gal who runs my money knows the financial manager of the CALIPERS Trust account among other people.

Vash,

Be sure to speak to someone who can provide a realistic financial plan, does not have propietary product, manages your money in your best interest, and can help structure your portfolio taking the least amount of risk possible in achieving your goals.
I personally manage The Metropolitan Group at Smith Barney- a boutique wealth advisory group and will gladly help you or direct you to a trusted local professional. Do your homework on your advisor of choice... #of clients, total assets managed, aprox income, etc....
We might not be the right fit for you, but you can google kenneth christman smith barney, or the Metropolitan Group at Smith Barney, to get an idea.
There are several links to workbooks that can assist you to begin the planning process, along with articles on the economy and underlying markets.
Ken

Reading the comments of others. Lets have a reality check. The average FA can handle aprox 150 households, and service them properly. Some smaller, some larger, but averaging $1MM each, gives them a client book of $150MM. If they all pay 1% mgmt fee thats $1,500,000 in production. Some pay more of a fee some less dependant on service needs. The FA keeps about 40% of the production, aka $600,000 income. There are many that over charge, over promise, and under deliver. If your FA makes $300-500k, charges respectable fees and puts the client first, you will be just fine.

My wife and I handle our own money. I am comfortable in making my own decisions, and I have been very successful at it.

But thats me.

If you are going to use an advisior, keep in mind that they are keeping a percentage of your $$$. That $$$ never seemed worth while to me.

I suggest finding someone on the recommondation of a long term customer. Ask an elder who has been with someone long term. So much of the 'financial planning' industry is just retail driven drivel.

PS The two stocks I am holding VWO, and BRK.B are up 21% and 15%, respectively, this year.