How to find a financial adviser and how much do they cost?

[Sabine]

FI and I were talking about what we''re going to do with the money we receive from the wedding. Our future plans are pretty up in the air right now since FI is in medical school, but also in the Navy, so we asked FI''s dad for advice since he is a CPA. His suggestion was to invest the money aggressively in the stock market. Neither FI nor I have anywhere near enough knowledge to even think of doing that ourselves, so we would like to meet with a financial adviser to work out a plan on what to do.

We could ask FI''s dad for help, but knowing him, he would probably just try to take care of the money for us, and we would both like to be more involved in what was going on.

So, how does one go about finding a financial adviser? I don''t even know where to start contacting them, through a bank, through a company like Liberty Mutual, ask FI''s dad to suggest one at the risk of hurting his feelings? And how much does a service like this cost? Sorry if I am totally clueless, but my own dad and I do not talk about this kind of thing, and I have a feeling his investment portfolio is about as empty as mine, so I really have no idea.

 

[Pandora II]

I have one who FI has used for years, he found her through personal recommendation.

She doesn''t cost us anything and gives excellent advice. She gets commission from the people we borrow off, but I haven''t found she is biased towards any particular firm. She sent us details of over 20 different mortgage deals the other month.

The only time FI has ever lost money is when he ignored or went against her advice!

I don''t know if it''s the same in the US though.

 

[laine]

Ok, from what I understand of investing, aggressive stock market investing is likely to be somewhat risky and though it carries long term gain potential, its not great for short term.

Do you have any sort of other savings, emergency fund, retirement savings, down payment savings, etc? If not, I would think you would want to save for these sorts of things first, and that this is money you might want to access in the near future (like for a down payment).

Easiest thing (and I would do this now even if you plan to do something different in a few months) is to open a high yield savings account. Look at online banks like ING, GMAC, etc, and see who is offering the best interest rate. This is nice because you can access the money in a few days (transfer to your regular bank account), but it earns a decent interest rate. If you think you might want the money in a year or so, but not right now, I'd look into CDs, though interest rates aren't great right now. I don't know much about money market accounts, but they might be a good option.

If you already have some savings, and are looking to invest this money more long term, I'd look into investment companies like Smith Barney or Vanguard. They take care of the investing for you, for a fee. My account like this is invested in mutual funds, and I pay a $50 fee per year (just sharing this for reference, I'm not sure what is standard). In general, I make more than I would in a savings account, but it occasionally drops when the market does, so you wouldn't want to treat this like a regular savings account, as it may not always be a good time to pull out money.

Another option would be retirement savings--I'd probably recommend a Roth IRA. Money goes in after tax, but is not taxed when you withdrawal it in retirement. You can also withdrawal your contributions for things like a downpayment.

Please note that I'm by no means an expert, just sharing my understanding of things and what has worked for me.

ETA: No idea how you find a financial advisor. Obviously someone is in charge of my investment account, but I don't really have any contact with them. I figure I'm ok taking care of my few assets on my own for now. In the next several years, once I start earning more money (I'm a grad student) and begin saving more aggressively for retirement and for children, I'll look into it more, but for now it doesn't make sense.

 

[saltymuffin]

Decide for yourselves what you are comforable with. One individual may find the stock market to be the ideal place to invest their money, but others simply don't have the stomach for it. I would start by going to a bank, and discussing general options with an advisor there. Don't commit to anything! Come home and talk about what you learn.

Then set up your plan, and find an advisor you are comfortable with. Remember, all advisors are somewhat biased, they generally make more $$ the higer the risk of the investment you buy.

As has been said, if you don't own a house, and plan to buy, the stock market may not be right for you at this time, as you will likely want as large of a down payment as possible.

 

[Sabine]

Thanks Pandora, laine, and saltymuffin. To give more info., FI is a med. student and in the Navy, so we may be moving around a bit in the next few years, but retirement is not something we are worrying about for him right now. I''m currently teaching, but thinking about switching professions, so retirement and IRAs probably aren''t what we need. I think that a high yield savings account or maybe CD''s would be what we are looking for. I think we want to have the money somewhat accessible since we might think about buying a house once we have a better idea of where we will be settled for any prolonged period of time. Would a person at a bank be able to help us with this? And any idea how much it would cost to meet with someone from a bank? And finally, what are online banks like ING and GMAC as laine suggested? Any more info. on these?

 

[neatfreak]

Date: 5/27/2008 5:34:56 PM
Author: Sabine
Thanks Pandora, laine, and saltymuffin. To give more info., FI is a med. student and in the Navy, so we may be moving around a bit in the next few years, but retirement is not something we are worrying about for him right now. I''m currently teaching, but thinking about switching professions, so retirement and IRAs probably aren''t what we need. I think that a high yield savings account or maybe CD''s would be what we are looking for. I think we want to have the money somewhat accessible since we might think about buying a house once we have a better idea of where we will be settled for any prolonged period of time. Would a person at a bank be able to help us with this? And any idea how much it would cost to meet with someone from a bank? And finally, what are online banks like ING and GMAC as laine suggested? Any more info. on these?

Online banks are just that. Online banks. You complete transactions usually through your own bank account at your local bank and can transfer money between, but it takes a few days. They have a lot less overhead so usually have higher rates available for their savings accounts. Ever store money in your paypal account? Works somewhat like that...

 

[laine]

You can definitely open a savings account or CDs at your local bank, and they should discuss options with you for no charge. Of course, some people will be more knowledgeable and helpful that others, so keep that in mind: they may not really be the expert they appear to be. Biggest problem with local banks is that the interest rates tend to be pretty low.

I have a checking account and savings account at my local bank, so that I can easily access some cash, but that savings account only earns about 1% interest, so I don't keep much in it.

I have more savings in an online high yield savings (HYS) account that earns 3.28%, much better, but it can take a few days to transfer the money into my checking account. I use igo banking, which has one of the better interest rates. I'm happy with it, but its a newer bank (though still FDIC insured), and I know some people are more comfortable with the more established online banks like ING. bankrate.com is a pretty good resource for looking up interest rates, and they have some reviews and ratings of banks, or you can google.

Then I have a few CDs at whatever banks were offering the highest interest rate at the time--I opened all of them up online. Local bank's rates again are a little lower than what you can find online, but not as disparate as savings accounts. With CDs, your money is locked at the interest rate for whatever the term of the CD is (a year is common), which is great if rates go down, not so good if they go up. Right now the interest rates on CDs are pretty similar to interest rates on HYS. I'm sticking with my HYS for now, and hoping CD rates go up in the near future, but we'll see. Also, if you need your money before the CD term is up, you typically forgo any interest earned or may pay a penalty. it sounds like you aren't sure when you'd be needing the money, so this might not be the best plan for you, especially since there isn't much of a advantage in terms of interest rates.

Do you have a checking and savings account at a local bank now? If not, go open one, and if so, I'd go talk to them about what they recommend (but just talk, don't do anything yet). Then come home and compare that to options from online banks, and then decide what you are comfortable with. Personally, I love being able to do everything from home on online banking, since I have all my accounts linked (very easy to do!)

 

[diamondseeker2006]

I probably wouldn''t put it all in stocks if you might want to access it in the next 3 or 4 years. Everyone needs an emergency fund. You should have at least one-three months income saved for unexpected emergencies. Since your husband is unlikely to lose his job, you probably don''t have to max that out. Money market funds at your bank are a good choice for some emergency money. Unless you expect to be getting a HUGE amount of money, I don''t think you need a financial planner. Choose one of the established mutual fund companies and open a joint account once you get married. We use Fidelity, but Vanguard is good, too. I know Fidelity has people who can help advise you, I think for free. I would suggest mutual funds that are not so aggressive since you may not invest the money long term.

 

[swingirl]

You can open a Schwab (or other investment company) account and invest in a portfolio specific to the amount of risk you are comfortable with. You can educate yourselves and make your own choices, invest passively or have some one there give you advice.

All financial advisors make money somehow, whether it''s a cut off the top of your account or through a percentage of the sales. They aren''t working for free.

 

[Dancing Fire]

Date: 5/28/2008 1:30:13 AM
Author: swingirl
You can open a Schwab (or other investment company) account and invest in a portfolio specific to the amount of risk you are comfortable with. You can educate yourselves and make your own choices, invest passively or have some one there give you advice.

All financial advisors make money somehow, whether it''s a cut off the top of your account or through a percentage of the sales. They aren''t working for free.

yep,and....most of them aren''t any better than you or i.

 

[Dancing Fire]

Sabine
if you need the money within the next couple of yrs....my advise is to put your money into Cd''s and forget about talking to a financial adviser,most of them will give you advise on how to put your $$$''s into their pockets.

if you''re thinking about a long term investment just open up an account with one of thee online brokers like (TD Ameritrade, Schwab,E-trade,etc...) you can invest in mutual funds and/or any individual stock of your choice.

 

[Pandora II]

The main thing to remember when investing in anything is whether you can afford to lose.

I opened my private pension late as I was abroad for so long, so when I discussed my investments with my pension advisor and told him I wanted to put the whole lot into high risk investments he agreed that this was sensible because I had so little to lose and the more I could gain as fast as possible the better. So far the ones I chose have done very well, but I weighed up my potential losses and was happy to gamble.

On our share portfolio, we lost several thousand GBP in a day on one investment - confidence in that particular commodity dropped (and so did the price

), but the company is very successful and pays a nice dividend every year.

We can afford to sit on the shares for the forseeable future which means we may well come up well on top in 10 years + time. However if we had needed to liquidate fast, we would have been stuffed!

So, if you need to use the money in the next couple of years, invest in low to medium risk.

We''re releasing some equity in our house at the moment to use in 6 months or so as a downpayment on a new property. I''m sticking my half into Premium Bonds - government bonds that don''t pay interest, but you have a chance of winning one of over a million prizes every month tax free including 2 prizes of £1 million GBP

Obviously the chance of winning a lot is slim, but the chance of not covering the potential interest I might have made is negligable if I buy the maximum amount. FI was very dubious about my plan, but our advisor backed me to the hilt!

Oh, and be very wary of ''top tips'' from people. Do your own research on any company you plan to invest in.

 

[violet02]

My FI and I hired a financial planner a couple of months ago. I found him via a recommendation on yelp.com. He works for this company http://www.waddell.com/ which is a financial investment firm. You can probably look for firms in your area. Anwyays the key thing to keep in mind about a financial planner is this. They mainly make their money off of investing your money for you and taking a 1% or whatever cut off of what you make on that money. If you have money that you just want invested then this may be the thing for you. I feel that this applies to people with large sums of money as well. My friends upstairs neighbor is a financial planner and that''s ALL he does, invest people''s money for them.

Anyways, this wasn''t exactly what we wanted. We hired one to help us get me out of debt and manage some money we had coming in and help us look really good on paper to buy a house. We also wanted him to tell us what the long term implications were if we were to borrow from our 401k for the down on a house... stuff like that. He took a look at my FI''s 401k portfolio and said he had it invested too conservatively for a man his age, that it should be a bit more agressive. He also put us in touch with a fantastic mortgage broker, they all seem to work hand in hand. So for what we wanted done for us we paid about $1900 for six months of service. So we can meet wtih him as little or as much as we need to, we can email, talk on the phone etc. He does a lot of number crunching for us etc.

THere are financial investment firms out there that you can go to, and I''d advise you at least do the free one hour consultation portion to see if it''s the right thing for you. No offense to anyone else''s advice on here but I''m pretty cluless about what to do with my money investment-wise and it''s easy to read a lot of ''try this, do that, this works'' but it was nice to meet with a professional and talk it over. In our situation with wanting to buy a house it definitely makes a difference in what we''re going to do with the money.

 

[Dancing Fire]

Date: 6/2/2008 9:22:31 AM
Author: violet02

Anyways, this wasn''t exactly what we wanted. We hired one to help us get me out of debt and manage some money we had coming in and help us look really good on paper to buy a house. We also wanted him to tell us what the long term implications were if we were to borrow from our 401k for the down on a house... stuff like that. He took a look at my FI''s 401k portfolio and said he had it invested too conservatively for a man his age, that it should be a bit more agressive. He also put us in touch with a fantastic mortgage broker, they all seem to work hand in hand. So for what we wanted done for us we paid about $1900 for six months of service. So we can meet wtih him as little or as much as we need to, we can email, talk on the phone etc. He does a lot of number crunching for us etc.

that would be a big NO,NO !!

i''ll bill you $200 for that advise

 

[Efe]

Get Susie Orman''s book Women and Money (I think that''s the right title). She also has a good website. Having a foundational understanding of the market and various investment options will help you understand who you can trust. There are plenty of people out there who know very little and charge a lot.

 

[violet02]

Date: 6/3/2008 6:07:07 AM
Author: Dancing Fire

Date: 6/2/2008 9:22:31 AM
Author: violet02

Anyways, this wasn''t exactly what we wanted. We hired one to help us get me out of debt and manage some money we had coming in and help us look really good on paper to buy a house. We also wanted him to tell us what the long term implications were if we were to borrow from our 401k for the down on a house... stuff like that. He took a look at my FI''s 401k portfolio and said he had it invested too conservatively for a man his age, that it should be a bit more agressive. He also put us in touch with a fantastic mortgage broker, they all seem to work hand in hand. So for what we wanted done for us we paid about $1900 for six months of service. So we can meet wtih him as little or as much as we need to, we can email, talk on the phone etc. He does a lot of number crunching for us etc.

that would be a big NO,NO !!

i''ll bill you $200 for that advise

Actually the question really was how much would we LOSE on the 401k if we borrowed from it and if the loss wasnt'' going to be that big then maybe it would be worth it IF we paid it back within 5 years. It turns out that it would be do-able with a quick payback schedule. We wouldn''t have been borrowing a lot though.

 

[Dancing Fire]

Date: 6/3/2008 1:30:05 PM
Author: violet02

Date: 6/3/2008 6:07:07 AM
Author: Dancing Fire

Date: 6/2/2008 9:22:31 AM
Author: violet02

Anyways, this wasn''t exactly what we wanted. We hired one to help us get me out of debt and manage some money we had coming in and help us look really good on paper to buy a house. We also wanted him to tell us what the long term implications were if we were to borrow from our 401k for the down on a house... stuff like that. He took a look at my FI''s 401k portfolio and said he had it invested too conservatively for a man his age, that it should be a bit more agressive. He also put us in touch with a fantastic mortgage broker, they all seem to work hand in hand. So for what we wanted done for us we paid about $1900 for six months of service. So we can meet wtih him as little or as much as we need to, we can email, talk on the phone etc. He does a lot of number crunching for us etc.

that would be a big NO,NO !!

i''ll bill you $200 for that advise

Actually the question really was how much would we LOSE on the 401k if we borrowed from it and if the loss wasnt'' going to be that big then maybe it would be worth it IF we paid it back within 5 years. It turns out that it would be do-able with a quick payback schedule. We wouldn''t have been borrowing a lot though.

violet
couple of Q''s....
do you need to pay income tax on the amount withdrawal?
are there any penalty for early withdrawal?

 

[shel]

You can probably get by without an investment advisor if you read a couple of good books. Suze Orman''s "Women and Money" has pretty good advice, but if you want a more concise book that gets right to the heart of investment advice (including practical tips on how to implement that advice), read "The Coffeehouse Investor" by Bill Schultheis. For those who are a little more advanced, read "The Random Walk Guide To Investing" by Burton G. Malkiel. For really advanced folks, read "The Four Pillars of Investing" followed by "The Intelligent Asset Allocator," both by William Bernstein.

Basically, the advice boils down to 1) diversify, 2) cut down on costs and taxes, 3) use passive asset-class investing (e.g., a mutual fund that tracks an index), 4) allocate between asset classes that don''t necessarily follow each other, and 5) rebalance the portfolio when desired.

If you want to hire an investment advisor, go with fee-only and try to bargain down the fee. Definitely avoid commission-based advisors; it''s just too tempting for them to sell you investment vehicles with the highest commissions, regardless of their performance. Make it clear to them up front what your tolerance for risk is. If you can''t stomach a 20% loss, then they know not to recommend the more aggressive strategies. You won''t make as much money, but you''ll sleep better at night.