Finance Gourmet » financial planner

Financial Planners and Financial Advisors an Introduction

Finance Gourmet — Mon, 31 Mar 2008 18:29:14 +0000

Listen to the book authors, newspaper and magazine columnists and many web sites, and you will hear that [tag]financial advisors[/tag] or [tag]financial planners[/tag] are nothing more than glorified snake oil salesmen out to separate you from your hard earned money.

To listen to some in the finance industry and their champions, financial advisors and financial planners are bastions of righteousness steeped in knowledge about financial concepts so complex that no mere mortal could possibly hope to navigate the waters alone.

The truth of course lies in between. In real life, many financial decisions are frighteningly complex and unlike other decisions you may face many of them are irreversible once a mistake has been made. More importantly, some of the biggest financial issues, like retirement, take years to accomplish, and you get one chance. If you try the latest fad diet for a couple of months only to find out it doesn’t work for you, you start over a little wiser and with a little more experience. You could diet hundreds of times in your life. You could talk to friends and family, each of whom has hundreds of times of experience to share with you.

Retirement is a little bit different. You will only retire once (you hope). If you don’t get it right, you can’t start over. Most of your friends and family have never retired either. Those that have may have used techniques that are no longer available to you (generous company pension.)

This is where a good knowledgeable financial advisor or financial planner comes in. Over the course of a long career, he or she will have helped hundreds of people retire. They’ll see what works and what doesn’t. They’ll see what causes people to stumble and where the errors are made along the way, and they’ll guide you through.

Of course the key is “good knowledgeable” financial advisor. Unfortunately, there are way too many financial advisors and financial planners out there who are missing one or both of those key words. This primer is meant to give you some background into just exactly what a financial planner or financial advisor is. (For example, an explanation of what the difference is between those two terms as well as how they differ from a broker, financial representative, etc…)

Check out the Financial Advisors Primer

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Financial Planners and Financial Advisors an Introduction originally published at Personal Finance Blog - FinanceGourmet.com

Do You Need a Financial Planner or Financial Advisor?

Finance Gourmet — Sun, 10 Feb 2008 20:42:13 +0000

On the Finance Gourmet website, the first part of our latest article has been posted. It covers that tough topic of whether or not you need a financial advisor or financial planner. It is unbiased, and subsequent sections will give you all the details you never got so you won’t have to ask the question again.

Want the one question quiz?

1) What are you doing right now to protect your retirement portfolio from the coming recession, and what did you do last year to protect if from the falling housing market and the sub-prime mortgage crisis?

Write it down. Seriously. You are only cheating yourself if you don’t. Writing it down will help you make a fair analysis.

The answer on the next page will let you know if you need a financial advisor or financial planner.

The Answer:

Was your answer: “Nothing, because my portfolio is setup with a properly diversified allocation based on my risk tolerance and time frame, so all I have to do is re-balance it one a year.”

Yes, and I know what everything in that sentence means. Congratulations, you are a calm, rational, educated investor. There is no need to pay someone to tell you what you already know.

No? Then you need a financial advisor or financial planner. Chances are you’ve nodded your head along with a book or web site in the not too distant past as you read about how you need to build a diversified portfolio. You maybe used an Internet calculator to figure out what your allocation should be. Then, you used Morningstar or other resources to pick the best no-load mutual funds with the lowest expenses. Then, you told everyone how you didn’t need an advisor because it is dumb to pay someone for what you can do yourself online. The only thing is, when you moved your money out of your REIT fund in 2007 you sold low. When you put the money into your five-star international fund because it was doing so well, you bought high. Oops. It’s supposed to be the other way around.

If you didn’t buy the lowest performing funds in your portfolio with money you got from selling the highest performing funds in your portfolio in the last 12 months, then you didn’t re-balance your portfolio. What you did is what people always do. You tried to time the market. You didn’t call it that of course. Moving out of bonds when the Fed raises rates is smart. Getting out of REITs when the housing market goes down just makes good sense. And, now, whatever you are doing to avoid the recession (probably moving to higher quality dividend paying stocks) is just you being savvy enough to manage your own money.

Only, it isn’t. It is market timing. Just re-phrase the statements above and you’ll seed market timing, market timing, market timing.

Selling REITs because the housing market is slumping = REITs will go down, so I will sell first (too bad they are already down — if you re-balanced at the end of 2006 like you should have you would have sold before they started going down — if you sold in mid-2007 they were already down over 20%).

Moving out of bonds when the Fed raises rates (prices of bonds move in the opposite direction of rates) = bond prices are going down, I’m going to sell first. Heard of the inverted yield curve? Bond prices are at all-time lows. Know any successful investors who sell low?

Today, moving to high quality dividend paying stocks because they won’t be hurt as much in the recession = non-dividend paying stocks are going to go down so sell before they do.

(Yes, you get a pass on the question if you have less than 5 years to retirement, because this doesn’t apply to you as much, but read the full article to see about your needs.)

There is more to it of course. Go read the first installment now. Subscribe to our feeds and read the next section.

Do You Need a Financial Planner or Financial Advisor? originally published at Personal Finance Blog - FinanceGourmet.com

Part 4 and Part 5 of Financial Advisor and Financial Planner Primer is up!

Finance Gourmet — Fri, 08 Feb 2008 16:38:43 +0000

Part 4 and Part 5 of the Primer about [tag]Financial Advisors[/tag] and [tag]Financial Planners[/tag] is now up. Find out about what certifications you need to understand, and why they matter. Don’t worry, it’s a way shorter list than you might think.

Also, keep an eye out for TONS of new content once I get a chance to do final edits this weekend.

Here is a sneak preview:

Why You Need at Least TWO Credit Cards for a Good [tag]Credit Score[/tag]
How to Choose A Financial Advisor- Finally the Details to All Those One Line Requirements You’ve Read Before
Financial Advisor vs. Financial Planner – More Than Po-ta-to Po-tah-to
The [tag]Stock Market[/tag] – It’s Is DUMBER Than You Think
And More…

Part 4 and Part 5 of Financial Advisor and Financial Planner Primer is up! originally published at Personal Finance Blog - FinanceGourmet.com

Find the right financial advisor (in under 200 words)

Finance Gourmet — Mon, 04 Feb 2008 14:07:21 +0000

In the USA Weekend that came in the Sunday (02/03/08) paper there was what may have been the shortest article I have ever seen on choosing the right [tag]financial advisor[/tag]. This article is the perfect example of why I started the Finance Gourmet.

The article is by Sharon Epperson who is the author of a book called The Big Payoff which I haven’t come across yet. Every word is true and accurate. But can you use it to find a financial advisor?

Ms. Epperson offers three big steps to finding the right financial advisor. The first is to gather recommendations, for which she lists four places to look. The second big step is to dig deeper than websites and brochures. Brilliant! Then, she suggests asking about certifications, naming specifically the [tag]CFP[/tag] and the ChFC. She points out that firms should be registered with the SEC (and then throws in the confusing and/or state securities regulator), and even suggests requesting the firms’s full Form ADV. I’ll point out here that the Form ADV is one of the documents a firm is required to give you and have you sign it, so you can rest assured you be getting one. The question is will you read it (see below)? Lastly, she says you should meet in person and interview more than one advisor.

Again, all good advice, and all true. But, when you go to try it, you are going to hit some snags. For example, is an advisor who is listed on both the CFP website and the FPA website a better advisor than one who is listed on just one? If the advisor is just on one which is better? Here at the [tag]Finance Gourmet[/tag], we will give you that kind of information. For example, it might matter to you that the CFP website lists all CFPs for free. The FPA website has free listing too, but what about those bigger listings? Those cost extra. So, the guy at the top of the list with the nice logo listing isn’t better, he just was willing to spring for an ad.

Likewise, which is better a CFP or a ChFC? And then, if someone is a ChFC but not a CFP then they won’t be on the CFP website. Is that ok? What about CFAs? Are they O.K.?

Finally, I’ll also tell you that the Form ADV is a great way to get information on the firm you will be dealing with, but it is at least a twenty-page document which is filled with 80% to 90% boiler plate language. In other words reading the whole thing for each firm you are dealing with will be a big time waster. If you read Ms. Epperson’s article, you would confidentially ask for a Form ADV, only to get one and then never read it.

So, here is how to use the Finance Gourmet. Read these other articles in newspapers and magazines whenever you get a chance. They are good as a useful starting point. Then, come here to fill in the details. As you read this article notice the terms and buzzwords (CFP, ChFC, SEC, Form ADV, and so on.) Jot them down and get the details here. Then, read our in depth articles and postings.

Look for Part 4 of the [tag]Financial Advisor Primer[/tag]. It will explain those certifications all those writers keep throwing around in their articles in much more useful detail.
The Finance Gourmet

Find the right financial advisor (in under 200 words) originally published at Personal Finance Blog - FinanceGourmet.com