InsuranceExpert said:It's very easy to confuse investment advice with financial advice. They aren't the same thing.

Please show an example of investment advice that isn't financial advice.

InsuranceExpert said:destarr said:I had a gentleman stop by my door about a year ago wanting to just let me know that he had moved into the neighborhood and was a EdwardJones financial planner and would love to help me plan for my future. Well about every other month or so he called me back and, being a bit impressed with his perseverence and with a year already going by, I decided to meet with him.

My wife and I met with him tonight and the meeting went well. We discussed our overall financial status, and I gave him paperwork outlying our financial status and desires. He is looking over our information and we have another meeting scheduled for next tuesday, we did not discuss any specific products that he wanted to show us nor did he push any specific products.

What has me wondering about going with him as my financial planner is:

-Do I really need a financial planner or do I just need someone to handle my investments (currently I don't have any investments)

-The fees seem high to me, it was $40 for starting a fund and then he collected a small amount on monies earned in the fund-Is there anywhere online where I can see typical fees for the larger companies?

Thanks for the help - I have a minor in Insurance and really enjoy the financial scene, but I also appreciate those that have gone farther in their education to recieve their CFP and other designations.

I'm going to tell you not to use him, but for a very different reason than everyone else. An Edward Jones door knocker who is new to your neighborhood is probably brand new to the business. He probably doesn't have a CFP nor any other designation. He probably just has his Series 7 and his insurance licenses. He is a product salesman and not a financial planner. I don't mean that as a negative comment. You just need to understand that.

Personally, I think that a quality financial advisor is very important. The problem is that it is very difficult to know if you have one. From 20 years of experience, I don't think that it makes any difference whether the advisor is making his money from commissions, fees, or a combination of the two. It needs to be disclosed and understood.

If you've been working in the financial industry (your screen name says 'insurance,' but that's not relevant, I assume), it's my opinion that'll you're inherently bias to the positive side of utilizing a financial planner. I'm not stating this is intentional, mind you, but a natural course given your occupation and tenure.

one thing that might be added to the discussion is that while we all minimize the usefulness of having sales people take your money to invest, the usefulness of having a good accountant or estate planning attorney shouldn't be underestimated if you got a substantial estate or if you own a business

if you are in that boat, you can be pretty sure that an Edward Jones sales guy or an insurance expert selling you some mutual funds or annuities isn't qualified to perform the professional tasks you need

...

If you've been working in the financial industry (your screen name says 'insurance,' but that's not relevant, I assume), it's my opinion that'll you're inherently bias to the positive side of utilizing a financial planner. I'm not stating this is intentional, mind you, but a natural course given your occupation and tenure.

It depends what you mean by the term "financial planner". If a "financial planner" is someone who is getting paid to put together a financial plan, I actually think that one is not needed much more often than they are needed. That being said, yes, I a very biased towards someone using a financial advisor. A financial advisor can bring great value. Too many people confuse "financial advisor" with "mutual fund picker". If the purpose of a financial advisor is to pick the best funds, using an advisor is a waste of time and money.

I believe that I'm a good advisor, but there is no reason to think that there is any reason that I can do a better job of fund picking than my client. So, I don't believe that an advisor's value is in their ability to pick funds. A good financial advisor can almost always find a way to help their client.

Here's an example from my last appointment yesterday:

My client and his business partner thought that meeting with me would be a waste of time. They work closely with their attorney and CPA. They also have someone who handles their investments and they have an insurance agent. I took a look at their buy-sell agreement. Unlike many of them, it covers both death and disability. It is funded with a term life insurance policy for death, but there is no funding for disability. The existence of the buy-sell agreement without funding virtually guarantees that the business will die if one of the partners becomes disabled. In short, the buy-sell forces the healthy partner to buy out the unhealthy partner at the same time that the business is severely crippled due to the disability of someone who is bringing in half of the revenue. The business cash flow makes this close to an impossibility. Without the buy-sell, at least the healthy partner could have continued in the business.

Fortunately, there is an easy solution to the problem. They'll fund the buy-sell for disability along with death. That way, if a disability occurs, the healthy partner has the funds to buy-out the unhealthy one. The business continues and the unhealthy partner has a buyer for his half of the business.

Do I need to draw a Venn diagram? Why are you struggling with this simple concept. Investment advice is a subset of financial advice. Investment advice is financial advice. Financial advice may or may not be investment advice.

Just go to bogleheads.org and post some questions. They will help you design your own portfolio for free.

InsuranceExpert said:It's very easy to confuse investment advice with financial advice. They aren't the same thing.larrymoencurly said:Please show an example of investment advice that isn't financial advice.InsuranceExpert said:Do I need to draw a Venn diagram?That would have helped you, a few messages ago.

InsuranceExpert said:Why are you struggling with this simple concept.I'm not. I just noticed that you were. So why are you going into salesman's rage?

Coming to fwf to ask "whether or not i need a financial planner" is like going to Automechanics dot com and ask "whether I need to get a professional to fix my really old car."

-Fixing your own car will always be cheaper (same thing w/ DIY your finances, you don't pay any fees)

-If the car runs fine and you fixed it yourself, you feel like a genius!! (since in the long run, markets go up so these fwf DIY gurus are doing great!!)

-If you go to the mechanic to fix the car, but the car ended up breaking down anyway then the MECHANIC IS A LYING SNEAKY S.O.B. (at least thats what fwf people think....everything must be result driven)

The key to hiring a planner is like the key to hiring any SERVICE PROVIDER...only do it if you need it.

Then again, I'd be very concerned if a guy who just graduated from school w/ a certification in mechanics knocks on my door asking to work on the most important machinery I've ever owned that I'm not sure is broken or not...

mikef07 said:I am of the opposite opinion. I use and have a great financial advisor. He did an assessment of my risk level when I first started using him and has made great choices for me. He does get a cut off the top, but after fees I am well ahead of most of the people here that invest on their own. At the start of this year he advised me to move out of two specific funds and into two other funds. The two I moved out of have returned around 14% and 6% this year. The two he moved me into have returned 25% and 23% so far this year. That is what I pay for. He did it all while keeping my portfolio risk exposure the exact same.

All I can say is that many people here who do it on their own look for 7-8% returns while I seek 10% returns. WIll I get it? Who knows, but looking at my portfolio long term it does not seem to be an issue. Finally I have not seen a ton of people's portfolios here, but almost all these DIYers portfolios that I have seen have returned less than mine, and done so with more risk long term the majority of the time. You can form your own opinion as to why.

I cant tell OP whether this guy is great or absolutely horrible, nor would I blindly say use a FA since there are a ton of bad ones out there, but a good one is worth his weight in gold. For the record I would have never moved out of the funds that my FA had me move out of on my own. He also made sure it was my choice, but told me why e felt the funds he moved me into would do better than the ones I was in. While I am definitely not the most knowledgeable person about MUtual Funds on this board I guarantee I know more about investing than 99% of the people on this board since many don't understand long term rolling periods, std. deviation and how to assess it within a portfolio, beta (Volatility), alpha, etc.

IMO most people here think they know more about investing than they really do.

Looking at some portfolios I have seen including index funds over 10 years

DIYer funds with 5 Vanguard funds - Ret 1.79% Std Dev 20.46
3 Fund Vanguard Portfolio 90/10 - Ret .85% Std Dev 20.46
Mine - Ret 4.07% Std Dev 19.04

This is why I use him. I end up with less risk and more return. Will they all do that? No. Do I pay attention still? Yes.

I'm glad for your sake that your financial adviser has done well for you, the problem is that most financial professionals can't beat the market and I have yet to hear of an even vaguely reliable way to determine if a person will be able to do so in the future. A lot of financial advisers are also utterly clueless. Our 401(k) company at work occasionally has a planner come in to talk about retirement planning, asset allocation, etc. I once asked him a simple question about the expense ratios of the mutual funds in our plan and he couldn't give me a straight answer. At that point I decided that all financial planners are charlatans until proven otherwise.

ppatin said:IMO it's a lot easier for a typical middle class American to handle their own finances than it is to repair a car. If I could find a financial professional who had a consistent ability to get above average returns then sure I'd pay for his services, the problem is that there's no reliable way to find such a person.

This misunderstanding is part of the problem. The job of a money manager may be to get above average returns. That is not the job of a fiancial advisor. The job of a financial advisor is to help a client achieve their financial goals. Sometimes, this means investing in such a way that will typically get below average returns.

Ex. John is retired and is fairly financially comfortable. His only goal is to not run out of money. If his investments just get a positive rate of return, he should be able to do this easily. His investments are 100% low cost index funds. A good financial advisor is going to get John to invest much more conservatively, thus making it very likely that he will get below average returns, but at the same time, drastically increasing his odds of hitting his financial goal.