Do You Need a Financial Advisor?
How do you know if you need help managing your money?
If you’ve been feeling like you could use some help making decisions and researching your financial options, this episode is for you. I break down the different financial planner options so you can find what fits your lifestyle and budget.
In today's online world, there are more options than ever. You can choose to teach yourself, or go fully onboard with an advisor. I give examples of who needs an advisor and when you may be able to simply pay for a consult.
Questions answered in this episode -
How much should you pay (including how much is too much)
Services you can expect from a financial advisor
The different types of advisors (from fee-only to flat fee and hourly)
Time Stamps
00:00 Welcome to the Financial Advisor Podcast
00:18 Do You Really Need a Financial Advisor?
01:19 Understanding Financial Advisor Tiers and Services
02:52 Advice for Young Professionals: Managing Finances Simplified
06:22 When to Consider a Financial Advisor: Life's Complex Financial Stages
06:55 Choosing the Right Financial Advisor: Fees, Services, and Independence
13:47 Navigating the World of Financial Advice Online
17:17 The Importance of Paying Attention to Your Finances
19:23 Concluding Thoughts on Financial Advisory Services
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Hello and welcome to the podcast. I am Michelle Moses, your host. I'm a Certified Financial Planner and Realtor.
And today we are going to be talking about, do you need a financial advisor? And what I mean by this is, do you, how much should you pay? When should you need one? And is it really a necessity in your life?
I get this question, quite a bit. And I feel like a lot of people are looking for an advisor and they're looking for help, but they aren't real sure the tier that they need. And I feel like this brings up a lot of resentment because people tend to overpay for something that they need or you, you know, they're not getting the service that they wanted.
And I thought this would be a good discussion. Like, it's very timely for the holidays and for New Year's because I get a lot of calls in January and February, you know, just [00:01:00] people are trying to get in shape. It's the same thing with finances. People are trying to get in there and, make sure that, you know, they're on top.
They're zhuzhing their finances, I guess I should say.
So I want to go over kind of what category of planner that you need and where you need to be going. So I kind of think of this as some, you know, like there's different, you know, tears of people and where you are in your life. You know, there's the people that are the spenders and that might have some debt.
And then there are the people that are just starting out and they're just starting to save and they have a little bit. And then there are the people that are further along, um, in their financial life and they have, you know, maybe a 401k, they have, um, maybe some kids or they need life insurance and they also need some wills and trust.
So I, um, I need to close my computer because I'm getting distracted and I don't think my voice comes along. So I want to, [00:02:00] uh, I want to talk about the different tiers because I get a lot of people in my office. They come to me and they are, honestly, they're really, really frustrated with their advisor.
They feel like they're paying a lot and that the returns aren't any better than they could have gotten at like, say, Vanguard or something like that. And I do think that some of this is, you know, sometimes it could be the advisor's fault and then sometimes it also could be, um, just the way our industry is set up.
And so I'm just going to give you my opinion. Again, all of this is my opinion, uh, because of the way that I have my business set up. I have it set up this way for a reason, uh, because. I like to give advice on everything. Um, not all advisors are able to give advice on everything. And so I hope that this podcast helps you to go in with more information of questions that you can ask to make sure that you are being paired with the right people.
The right person.
So let's start out with the person that's just getting started. So let's say you're like a young professional and you are, you know, [00:03:00] 22 to maybe 30 years old. You've got a 401k, you're working, you might have a house or an apartment, and you've got a car and it's pretty simple. You're able to file your taxes on your own and.
Uh, you know, there, it's just the only advice that you really need is where should I put my emergency savings and, um, what should I invest in in my 401k? And when you need advice on that kind of stuff, uh, the 401k that you have, you should have an advisor that's with your 401k. And that is specifically what they are there for is to help you either take the quiz and make recommendations on what you should be invested in.
And my recommendation. 99 percent of the time, honestly, if you don't want to be paying attention to it, it's just go into one of the target date funds that is for your age. And then as you age, it will start to get safer and safer. Uh, the younger that you are, the more risk it will take, but that way you don't really have to pay attention to it.
And you can [00:04:00] just. Save and save and save. And a lot of amassing wealth is just kind of controlling your spending so that you can save it. A lot of people come to me and they're like, okay, I have a savings and I want to make the most of it. But honestly, the best part of that you can do to build your wealth is has more to do with, I think, just saving consistently and being focused on how you can make more money or save more money or cut your costs.
And, you know, all of your monthly spending. So I think that is probably like the most important piece. That's where like the tire meets the road and that's how you're going to, uh, accumulate wealth. So for these people, I don't necessarily think you need an advisor, but if you did have something that was, you know, at Vanguard, you know, again, you could call those advisors and they'll be able to help you.
The problem with that is that you don't know, necessarily know them and you don't know if they're giving you great advice and anything. You know, it's. It's better to know it [00:05:00] yourself, or at least to read up on things. I, and then that way you kind of know, but if you don't, then just put it in the target date fund and focus on just saving because the people that just focus on saving and putting it in these target date funds and keeping it easy, they also amass wealth.
You don't have to be in there like messing with your investments and doing stock picks and, you know, listening to everything that money magazine or whatever's on Twitter. You don't need to. You don't need to be doing that all the time. I have seen some people that are very, very wealthy and they have literally just not paid attention.
Even when it's gone down, they're like, we just kept putting money in there. And then they come to me right before they're about to retire and they have been okay, but they have also saved. Um, you know, probably 10 to 15 percent of their income the whole time that they have been working. So for those people, I feel like it's pretty simple and I don't think that you need an advisor.
So the people that come to me that have that and they're like, [00:06:00] Hey, I have this 401k or have this, you know, emergency savings. I am too much for them. I would cost too much and my level of service, you know, it wouldn't be equal. They would feel like they were paying too much for the service that they were getting because I wouldn't really be able to help them with, you know, like a will or a trust and, um, life insurance.
So, obviously, then the next category. goes into people that have, um, amassed some things and they, you know, this kind of runs the gamut, but it's usually when you're a little bit older and you're starting to have kids and you have a house and you got wills and trusts that you need and you need life insurance and you're not sure what kind of life insurance, and it just gets too overwhelming.
Like you, it's not like you're going to get a job. Be able to read books and read the internet and figure out what you're supposed to be doing because there's all these different moving parts. And that is where I think that you do need an advisor. And the way I look at our world is [00:07:00] that there are advisors that work for some of the big companies.
Um, I'm not going to name them because I don't want to get, uh. sued or anything like that, but they are required to only give advice on the assets that they're managing. There are many, many advisors like that. And so when you go in to talk to an advisor that you trust, or you got a referral for, I would recommend asking what can they give advice on?
Because most people that I have come across, and this just might be who I, uh, who I attract, but most people, they want advice on everything. They want advice on how to buy a car, what to do with their emergency savings. They want to know, um, you know, just what's going on in the news. And maybe some of the, um, new laws would affect their Roth IRA or should they start a 529 or is there another option of a 529, you know, those types of things, it just really gets overwhelming.
And that is when you're going to need somebody that is like me.
But again, it does [00:08:00] split. There are people that are only going to give advice on things that, um, Um, they can manage. So like a 529 or basically anything that's in the stock market versus if you go to, uh, I think more independent investment advisor and that person.
Um, so I have a registered investment advisor. So if you see RIA, a lot of times when you see wealth management, Um, in the title of the company, they are independent. That means that they probably offer a lot of other different products. They are interested in not only managing your things in the stock market, but having other investments outside of the stock market.
And so things that we can give advice on, I've already mentioned a lot of these, but you know, the five 29s, the alternative investments that I've talked about and other podcasts. Some of them do that. So if you're interested in doing, in, um, investing in that, the, um, the real estate, you know, some of these, uh, [00:09:00] independent advisors, um, that I group myself with, we are either fee only or fee based.
And that means that we don't make any commissions on things. So even like the life insurance that you're going to buy, uh, is. a lot of times fee based, um, annuities would be, would be for a fee. So that means that you could actually see the fee that you are paying us on your statement. You will actually see it.
Whereas commissions, a lot of times are hidden commissions are in all kinds of financial products. And this is why it gets so confusing is because It really depends on the company that you go to. It depends on the advisor that you go to, and there are so many different options. But I think what you should stay concerned about is what do you want advice on?
You know, where are you going? And most of the time when it's a perfect fit is either when someone Someone is just getting out of what I call the young professional phase and they can't do their taxes themselves and they're starting to have extra [00:10:00] cash and they want to know, you know, what the retirement is going to look like.
And then the people that are, you know, starting to plan, really plan for retirement and they know they need to get serious. Those tend to be kind of the sweet spot of where it's worth it. And I want to reiterate that you are going to be paying a fee and Most people charge 1 percent on the assets as depending, I guess, on how much assets you have, um, and then once you hit, you know, like a million or 2, 2, a million or 2 million in assets, then you'll start to see a break in the fee and that fee, the way I describe it, and this is the way my firm works, and I know that there's many others that do this, but you, you're paying a fee out of the stock market.
Uh, assets, but you're getting the advice on the wills and trusts and on the life insurance and on the 529s and how to buy a car and [00:11:00] what to do with your, uh, 529 and what to do with your cash and what to do, um, with your rental and how to get an Airbnb, maybe how to finance that, um, you know, it goes into all kinds of things.
There's so many different alternative investments that That are like oil and gas based or just residential or commercial real estate. So if that's the kind of thing that you were really interested in, then I would recommend that you do get an advisor. I, you know, there now with the internet, I think we have all kinds of options, which I think is great.
It can be information overload. And so if you want to pay someone so that you're basically paying for the knowledge and the education. then it might be worth it. But if you are really, really into learning about your finances online, you don't want to pay somebody else to go through all of that research because I mean, really what you're paying, what people are paying me for [00:12:00] is my education.
I mean, I have had years of education and so I can just spout this stuff off where you might have to go and research for weeks on end and read a couple books in order to understand it. And then I could just be able to have a phone call and be able to explain it to you very easily. So if that's something that appeals to you, then yeah, an advisor might be worth it.
But if you're really interested in finance, you know, like there's people that have come to me that they are super interested in the stock market. They love it. They watch it every day. They watch their accounts every day. You know, they don't need somebody like me. They're already managing their money.
They could come to me and just pay me an hourly fee. So I don't, you know, that's, they don't need a long term. Cause I'm not going to sit there and do stock trading every single day on their account, because that costs a lot to have a person, you know, watching that every day, that's more like a day trader.
Um, and so that kind of brings me to another.
topic is the fees. [00:13:00] I have seen advisors charge as much as one and a half percent on an account. I think that is completely egregious. And if you are paying that amount, I really urge you to move to like Vanguard or Fidelity and then just call one of the advisors there.
You know, there's all kinds of different websites out there right now. There's smart asset, there's WealthForge. I, uh, And, you know, I think if you just searched for like CFPs online that you could, you can go through some of these and maybe interview some of the CFPs so that they can help you, I'm sorry, by CFP, I mean Certified Financial Planner, they might be able to help you to make some decisions and give you, you know, give you the two roads that you can go down or the three roads that you could go down.
I do think that that would be worth it. So if you're just coming out as a young professional and you're not wanting the full fledged, you know, advisor experience, then maybe something like smartasset. com is good for you, or WealthForge is good for you, or one of these [00:14:00] automatic investing where they are balancing your portfolio with AI based upon what you, you know, what you say.
But again, The less you pay, the more involved you're going to kind of have to be. And the more you're going to need to just do a little bit of research and make sure that the fees are okay. And I just think with anything with, you know, it's, it's so much just, your money is so much about just paying attention to it.
And by hiring an advisor, you're not going to take away all of your responsibility because when I work with people, there is a lot of homework, you know, I mean, there's lots of questions you need to equate it. Like if you went to go get a will or a trust, there's a laundry list of questions, right? I mean, what if so and so dies or what if so and so doesn't want to be a trustee?
I mean, there is 800 different scenarios that you're going through. And so there is a lot of homework with that. There is homework, you know, with working with me too, because it [00:15:00] is your money. I can only do so much. You know, I'm the job of an advisor, in my opinion, is that we are listening to you to see what you want to achieve in your life.
And then we are picking and choosing all of these little tools in the toolbox to see how they can fit together with the money that you have. And I try to do that. in a way that is economical. Also, uh, I'm pretty frugal, I guess, when it comes to paying fees, because anytime you're going to buy a product, you're paying a fee to someone.
So just like when you're getting a mortgage, you're paying a fee to somebody. Every time you get life insurance or an annuity, or you're buying some sort of product like that, you are paying someone. So if you just invest on your own with you know, at Fidelity and some cheap ETFs, that is the most economical way.
But if you need advice and you need help, then the next tier up would be doing the target date [00:16:00] funds because you're going to pay more for those mutual funds. And then the next step would be maybe going to one of those online, um, financial advice websites. I'm doing a terrible job explaining that, but you know what I mean?
Like smartasset. com is a good one. And, uh, I've never used it before, but I have seen it. I have researched it and it seems to be a good platform. So something like that might be a good in between, but if you want someone that is constantly brainstorming for you and thinking of ideas and might call you, then maybe you are ready for the wealth management path.
And that is where you would want to get a financial advisor. Uh, so I don't think there's any, you know, there's no wrong answer. It's just like, what is good for you? Okay. What I don't think that we are good for, and I actually get a lot of questions about this, is people asking me, you know, like, how do I restructure my credit card debt?
Or do you know a bankruptcy [00:17:00] attorney? That kind of stuff I really don't know about. I mean, you know, I had to learn about it on my test. Uh, what all the different, you know, chapter 11, chapter 13, all that kind of stuff, but I really don't know any nuances to it. It would be a straight referral. So a financial advisor is not for that.
If you have issues with your debt, um, Or spending, you know, somebody listening to podcasts and reading books, or just really just paying attention to your, to your spending.
Honestly, uh, without guilt, I, I am all about looking at it without guilt because once you start to pay attention to your finances.
Things are going to start to happen. You are going to start canceling subscriptions. You are going to start seeing that you had a double charge. You are going to start shopping around for some of your insurance so that you can save a couple hundred dollars just by paying attention. And that's what all of this is, is that you start paying attention.
And as your life goes up in complexity, you are going to start to learn. I mean, cause [00:18:00] you don't really learn about buying a house until you've bought a house. Right. Until you've gone through the process, then you really understand what it's like and you understand the fees. But before that, it's kind of just talk so that, you know, as your financial life goes on, you're going to start paying attention because you have to, and you're going to learn more.
And I urge you to just pay attention. And as you do that, obviously it's going to get better and better. Learn English for free www. engvid. com Obviously, I'm a little biased. I love the model that I have. I think it is, uh, the best model for people with money because I think as long as you can find an honest advisor and someone that knows their stuff, I, but you know, to have somebody brainstorming for you and to be thinking of things, I You know, it's fun.
It's, it's a good time to be doing all of that. You know, people get into these investments that they love and they're excited about and they love reading the newsletters about them. Um, whereas when you're first getting started and it's just a 401k, [00:19:00] it's kind of like, and if you're not into finance, it's like, okay, this is like super boring, you know, but I just kind of look at the 401k.
your stock market investments. It's kind of like the necessary evil that we all need. You know, it's that like base layer that we all have. Uh, and then you can like extrapolate out more as you get more and more assets and you have more stuff going on. So, um, I hope that this has helped to explain the industry a little bit, because it is.
Gigantic. There are so many service providers. I mean, once you start thinking about life insurance and annuities and you know, college planning, I mean, it really is a lot. So I hope that you can find a person that will be able to give you the correct advice. For your particular situation.
Um, and if you have any questions, I mean feel free to comment, um, on Instagram.
I am getting on more and more platforms as we speak. And, uh, write to me, [00:20:00] uh, text me if you have my phone number 'cause I know a lot of my friends listen. Uh, I am happy to help and point you in the right direction. So I hope that, um, this brings you some more clarity and freedom in your financial life.
Thank you so much for listening.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.