Bloomberg ran an interesting story about financial planners and advisers. It was part advice and part personal story but the takeaway is important for all of us. If you’re not feeling like reading the 3 webpages worth of text, let me briefly summarize for you.
First, he said that like so many other Americans, he doesn’t have enough money to head off to one of the largest investment advisers who would treat him (actually his money) like royalty. Instead, he’s a normal guy with a normal financial picture.
He met with a recommended adviser and had a great experience. He felt valued and after the appointment felt like he and his finances could conquer the world. But there was one problem. The adviser wanted $5,000—roughly 2.5 percent for somebody with $200,000 in retirement funds and other investible money.
Then, around the same time he found an article about online financial planning tools. For $250, one site hooked him up with one of their advisers who collected some information about him and put together a plan—roughly the same service offered by the more traditional adviser for a fraction of the price.
That’s the story but why bring it up?
Here’s why: Because far too many people try to manage their money on their own when, in actuality, they don’t processes the skills or experience to do it in a way that will maximize their gains. They don’t seek help for two reasons.
get some advice—from somewhere—from somebody. The financial future of you and your family is too important to try to do yourself unless you have knowledge and experience in financial planning.
First, they don’t know where to go or who to ask. Second, many of the advisers who would be recommended wouldn’t take them on because they don’t meet minimum balance requirements.
The Old Adage
In the financial world, there’s a cliché that is commonly heard. It’s part good intention, part legal disclaimer, and something that everybody says. And, in large part, it’s not true. You’ll read and hear that “everybody’s financial situation is different.” While that is true to a small degree, the author argues that a middle class family has the same financial situation as most others.
They all need to save a certain amount for retirement, they all need to pay down debt if they have it, they all need to save for their children’s college, and they all need to invest in a way that lowers fees and maximizes returns. They all need a basic will, certain insurance products, and a plan written down for them.
From a financial advising standpoint, their financial matters are about as complicated as their taxes. Just as professional tax preparers use a computer program to prepare your taxes, financial planners and advisers use programs to prepare a financial plan for you. Why can’t you do that yourself?
The truth is that you can. Check out a site like Nestwise or one of the other online sites. I’m not recommending Nestwise since I’ve not used it but what I am recommending is that you get some advice—from somewhere—from somebody. The financial future of you and your family is too important to try to do yourself unless you have knowledge and experience in financial planning.
There’s nothing wrong with traditional financial advisers providing you find one that comes highly recommended and will take the time to talk with you and treat your account just as personally as the richer person’s. If you have a more complicated financial situation—large trust funds, inheritances, a sizable estate, or large investment portfolio, you need somebody watching over it. But for everybody else with a basic financial picture, an online plan for a couple hundred dollars may be all that you need.