financial planner

Are Robo-Advisors Worth It?

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robo-advisor

Are Robo-Advisors good enough at what they do? As most regular readers of this financial planning blog know, I used to be a professional Certified Financial Planner for several years. That gives me a lot of insight into just what a financial advisor does and does not do for their clients, and how much that is worth. Susie Orman is a former financial planner who decided that the whole profession was basically rubbish. Other former financial advisors are now out there saying that these professionals are indispensable. The truth, as with most things lies somewhere in between. So, how does a robo-advisor stand up to a real financial advisor? Are robo-advisors safe? And, most importantly, are robo-advisors worth it? What Is Robo-Advisor? Let’s start with getting some facts straight. First, robo-advisor is a fancy, sensational term for bold headlines. The reality is that the so-called robo-advisors are just computer programs that build an investment portfolio, usually out of mutual funds and ETFs, for you. There are no robots sitting behind desks anywhere (although that would be cool.) Second, a robo-advisor isn’t an advisor or financial planner so much as an investment manager. Robo-Advisor vs Financial Planner The reason these things …

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Do I Need a Financial Advisor?

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which 529 plan is right

To read financial advice magazines and websites, you might think that anyone who uses a financial advisor is either dumb, or very rich. These money publications all say that with a little research and education, everyone should be able to do all financial planning and investing themselves to achieve financial independence. In the real world, however, real finance doesn’t always work that way. Getting Stuck Doing Finance Theoretically, getting your finances in order and investing can be a fairly simple process. However, it turns out that in reality, there are all of these places to get stuck. Once you get stuck, you lose all of your forward progress. Eventually, enough time passes and you have to start all over. As a financial advisor, I met with dozens of potential clients who walked out of my office without signing up to work with me. The vast majority never went forward with doing anything. Chances are, they met with a different advisor years later having done nothing in between. This all occurred to me while trying to work with fellow writers to set up their own online writing businesses. No matter how straightforward the instructions seemed, folks kept getting stuck. What struck …

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What Is Fiduciary Responsibility?

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Fiduciary responsibility, sometimes referenced as fiduciary duty, is the best term in finance, with the possible exception of fungible. So, what is fiduciary responsibility, and do you need someone with a fiduciary duty to help with your finances? Fiduciary is a fancy word for the concept of doing what is in the best interest of someone, typically a client or a trustee. Most people are shocked to find out that most financial planners, financial advisors, stock brokers, and the like do not have a fiduciary duty to their clients. In other words, the guy you have managing all of your money is not required, by law, regulation, or contract to act in your best interests. Rather, they typically have a much more easier standard called suitability. Suitability means that the investments or other recommendations they make are merely suitable for someone like you, not the best for you. So, if it isn’t wildly inappropriate for you to be investing in Apple stock, then they can recommend Apple stock, even if they feel like another investment would be better. Any attempt to ever make any of these financial professionals required to be fiduciaries is met with immediate and ravenous attack from …

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Find the right financial advisor (in under 200 words)

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Once, in the USA Weekend  there was what may have been the shortest article I have ever seen on choosing the right financial advisor. 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.  Then, she suggests asking about certifications, naming specifically the CFP and the ChFC designations. 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 will be getting one.  The question is will you read it (see …

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Who Needs a Financial Planner?

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financial planner helpful

Ask any financial advisor, and they’ll tell you that everyone (with money, at least) needs a financial planner or advisor. Ask any do it yourself financial planning type and they’ll tell you that no one need a financial advisor or planner. The answer, of course, is much more complicated than that. However, there are some people who are very likely to actually need a financial advisor. Big Money Quickly People who suddenly come into large amounts of money almost always benefit from a professional financial advisor. Unlike those who slowly grow into their fortunes, people who suddenly acquire wealth don’t have time to slowly build up experience with bigger finances. Consider someone who takes 5 years to grow into a $1 million net worth. That first year, they realize there are some tax things they need to consider. During the second year they find out other things, that maybe only really impact people with more than $500,000, and so on. But, when the money comes all at once, there is no time to build up that experience, and, unfortunately, many financial mistakes are irreversible. People who sell their company, or whose stock options finally come in, or otherwise come into a …

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Financial Planners and Financial Advisors an Introduction

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Listen to the book authors, newspaper and magazine columnists and many web sites, and you will hear that financial advisors or financial planners 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 in life, 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 try different diets hundreds of times in your life while figuring out what works for you. You could also talk to friends and family, each of whom has dozens of …

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Do You Need a Financial Planner or Financial Advisor?

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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 time 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.

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

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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…