Financial Planners- Waste of Money?

[pepperdoo]

So, on the advice of several folks, I went to 3 different financial planners to help with maintaining Paul's insurance money.

At the end of the day, I was speechless. Each wanted a 5% commission, they all pushed for playing the stock market, and not one of them knew how to make a budget. Needless to say, this is not going to happen.

What are your thoughts on financial planners?

[tiredboomer]

I, personally, would not use one, but my husband and I have the financial saavy that we need. He constantly studies, also, to improve his knowledge. But, some people do need them. I sent my daughter to one because she is so terrible at handling money (and wouldn't listen to mom or dad!!!). She really got her on the right track, and helped her learn enough so that she is getting out of debt, and saving for the future. Never see a commission-based planner; always a fee-for-service.

[oreo]

I was wondering the same thing so I hope someone responds to your thread. I have my 401K money sitting mostly in cash because I'm not sure how to invest it (it bothers me to lose a lot of money!). I have a few stocks and mutual funds but most of the money I was putting in cds but now the rates are so low, it is not really worth while. The way I was thinking is that they want you to pay them to invest your money (which is a service so that is reasonable) but when they lose your money (the stuff they put it in goes down) it doesn't really affect them at all because it is your money and they get their pay regardless so it is hard for me to understand the relationship.

I'm going to try to educate myself but there is just so much out there, it is overwhelming. I mean there are probably hundreds of mutual funds and way more stocks--how do I figure out which ones to buy (hence, the usefulness of a financial planner)?

[MN-Investor]

Post over in the YM or Investing: Basics and Beyond and ask for some general information. There are some real knowledgeable people over there. They can help you get started.

[desertmover]

My experience is that you can tell if they are telling lies because their lips move and air comes through the vocal cords.....Run!
Have you checked with your local community college to see if they are offering any personal finacial management courses?

Mover

[bobbysgirl]

The generations before us did not need planners, they were their own planners. Ed u ma cate yourself and gain the confidence you need to handle your own resources.

Personally, we don't hand over our money to people we do know, why would we hand it over to people we don't know, and pay them. I just can't wrap my mind around that one.

The bottom line is you need to feel comfortable and not consumed with it. My post is just my HO. OK, my opinion. Humility is not part of who I am. I MAY work on that one!

[pepperdoo]

I'm going to do things myself. I've already made 2 budgets, one with the mortgage and one without, and they both balanced the first time out:)

[Deleted]

The 5% fee is priceless. How much of a return do you have to make to cover that?

[bobbysgirl]

Jan 17, 2011 18:38:12 GMT -5 pepperdoo said:

I'm going to do things myself. I've already made 2 budgets, one with the mortgage and one without, and they both balanced the first time out:)

That's my girl! You've certainly got what it takes. (Just in case you didn't know that) ;D

[Deleted]

I think some people need this. By some people, more like those who used to post in ask a credit counselor because they were in serious trouble.

I've looked at the Investing forum. They seem to have good solid advice from what I can tell. My mo is to learn what I can on my own and go from there. I've dabbled in stock based for fun right as it crashed. I picked based on what companies I knew had been around forever (John Deere for one) probably not the best advice for lots of money, but I'm researching more now and trying to look for trends in the economy.

[Gardening Grandma]

What are your thoughts on financial planners?

My thoughts are that you have been talking to the wrong person(s). We use a fee based CFP (Certified Financial Planner). The fee is 1% of our portfolio. One of the first questions he asked me was about our budget. When I admitted I didn't have one, he gave me a template and urged me to get started. He also got me started doing an annual net worth statement.

When my BIL retired, he and my sister felt they could do just fine on their own (he has an MBA and she's played the market for some time). Ten years later, their nest egg is less than 1/3 of what they started with. They made all the classic mistakes.

For retirement planning, I think plenty of folks who are financial savvy can do OK on their own. Actually retiring is a whole nuther ball game.

[Deleted]

they all pushed for playing the stock market,

I have my 401K money sitting mostly in cash because I'm not sure how to invest it (it bothers me to lose a lot of money!). I have a few stocks and mutual funds but most of the money I was putting in Cd's but now the rates are so low, it is not really worth while.

The reason that you invest in the stock market is because of inflation. Inflation averages a loss of buying power of your money that averages 3% per year. So your money becomes worth less by that 3% each year. (That's the historic average) The stock markets historic gain is 11% which when combined with that 3% loss still means that you gained 8%. There aren't a lot of investments that will gain enough to beat inflation long term. Oh & don't forget that sooner or later you are also going to pay taxes on what you made so with the stock market you should still be making money. Something like Cd's will sooner or later make you broke (unless you start out with a WHOLE LOT of money). Just my thoughts.
As for where to invest, I suggest a couple of Vanguard index funds to start & then study up on your own to figure out what YOU want to do. It does look hard to do when you open your first Mutual Fund, but it's really fairly easy. The hardest part is making that first step. A lot of people wait to long & then find themselves in trouble.

[Deleted]

pepperdoo every single library in this country has at least 5 books that will show you step by step how to make a budget. One trip to the library & within a few hours you should be able to have one laid out for yourself. Why would you want to pay someone for that info? They will not stand over your shoulder & make you stick to it (they can't force you to).

[❤ mollymouser ❤]

I would also recommend a fee-based CFP v. a commission-based one.

If you're not inclined to invest in the stock market, have you considered T.I.P.S. or Bonds, which tend to be less risky. (Note: less risk = less returns) Did any of the planners mention these things?

If something were to happen to my wonderful DH and I had his life insurance to deal with, I'd probably start by contacting Ron Blue www.ronblue.com/ ... I've read some of his books and I appreciate his christian perspective on things. This is a national fee-based company of Financial Planners, by the way.

[pepperdoo]

Thanks everyone for all the info:) I think I can do this without having to fork over the commission fee.

One of Paul's friends called this evening to check on me and we talked a bit about the financial planning. His response was: You're a biker chick, and if you'd take someone on my size with no fear, then there's no good reason you should be afraid of a little money!"

I thought about it, and if I need help, I can always raise my hand:) Plus, if I don't feel 100% about something I can always say no.

[museumgal]

Not every financial planner has fees that high! That's insane!

I have one and where I find they are good is if you have a lot of diverse investments (esp. stocks) you can keep them all under one "roof" so to speak -- makes it easier to see at a glance what you have and how everything is doing. But its best for a portfolio that you don't trade on often.

Also a lot of banks offer free financial planners -- depending on the bank sometimes they really work to "sell" the banks products (investment services, usually managed funds) but some of them will work with you on budgeting, finacial planning for college, mortgages...it all depends on the bank.

Edit: re: investing in the stock market: Another good reason to do so is a lot of stocks pay dividends, and continue to pay them even if the market itself fluctuates.

[yclept]

You didn't find a certified financial planner. Legitimate planners don't charge a percentage of assets, they charge for their time. You found three salesmen. Search here: www.cfp.net/search/

I'm not really in favor of financial planners, even when legitimate. People should learn to manage their own money, but for those unable or unwilling, consulting a legitimate planner is far better than turning it over to a thieving financial products salesman such as the three you contacted.

[olderburgher]

I think I am not unfamiliar with investing and financial planning but have talked with several financial planners. Some were commission planners and some were fee based planners. There are things I have learned and decisions we have made based on the advice we have received primarily from the fee based financial planners. That advice that was taken was first thought through carefully and it paid off. Maybe we have been lucky but in bust years of the 2007-2009 era when so many said "I just lost my shirt", we lost some money but no where near what others say they did and we have come back in 2010-2011.
So my advice is don't think reading one or two books gives you all the knowledge you need. It doesn't. Read and think and listen to the advice you get and admit to yourself that you don't know it all. Take your time in deciding what to do and look to the long haul approach not the get rich quick i.e. big money in the next year or two. Do use a fee based planner but don't rely on what you are told exclusively and think, listen, think, read and think then act. How much better is it to earn 7% or slightly more, year in year out, then it is to earn 20% this year followed by a -10% in each of the next 3 years.