Do I Need A Financial Adviser

Shoulder I Hire a FA?

 

7/26/2015
I’ve been spending the past few weeks trying to figure out if I would benefit from a financial adviser. This refers to a person with some sort of experience in the financial advising industry. They don’t have to have a specific designation (CFP, CFA come to mind) but they do have to have a license in order to practice in their given state. In Oregon, a FA has to pass either the series 65 or the series 7 exam. Once they get the proper licenses they can become an IAR, investment adviser representative.

 

xy planning network logo

I looked into XY Planning Network which has fee-only advisers who won’t be trying to sell me any insurance products. I’ve worked with financial advisers who have sold such products to me (or tried) and who were still very effective. However, it’s harder for me to determine whether the person sitting across from me has my best interest in mind or theirs when they are making a commission on the sale of their product. A fee-only adviser generally charges either hourly, annually or monthly. They also have separate fees it appears for what they call AUM, assets under management.

 

Initial Interview with a Potential Adviser

I interviewed one person who seemed very personable and quoted me $125/mo with an initial $500 set-up fee. I can cancel anytime and for this money I can essentially contact him whenever I need to, within reason I’m sure.  During our free initial session which lasted 45 minutes (done over google chat) he told me that he would help me figure out my disability insurance and also help me setup a trust to hold my investments in. If I decide to have him manage my investments as well then I would pay 0.75% annually of the assets invested.

Disadvantage of a FA

I would pay about $2,000/yr for financial advice plus $1,200/yr for asset management. This particular person has experience at a larger firm but is starting out on his own, if he doesn’t get enough clients he may revert back to a large firm. I would have to spend time uploading a lot of documents for this person and also pick up an extra 4-hour shift a moth to cover this expense which comes out to about $266/mo. If he is bad at what he does he may end up costing me a lot of money.

Advantages of a FA

A security blanket, someone who I can go to with financial questions and decisions. Someone that will keep me in check in case I contract frugal fatigue. He (maybe a she, depends on who I choose) may point things out to me that I never thought about. He might keep me from making very serious financial mistakes in my career. I may feel less stressed about my finances knowing I’m paying someone to worry about it for me.

I have sent the following questions to this particular person and will wait to hear back. I’ll sleep on it and decide what to do next.

  1. How long are you planning on staying the course of starting your own firm before you may give up and join a larger group?
  2. If I decide to manage my own investments can I still ask you for advice regarding them?
  3. Do you have any references I can contact?
  4. What are your favorite blogs or podcasts in your field?

Update – 8/5/2015

After a few more email exchanges I felt comfortable enough to want to go ahead and sign up with this particular adviser. I haven’t interviewed others but after reviewing other profiles I wasn’t inclined to even contact the other ones. I think $2,000 for one year is a fair price to pay and if nothing else it will be a good experiment and perhaps someone else will learn from me by reading this.

He answered the above questions to my liking. I can continue to manage my own assets and he will advise me on them based on the $2,000/yr fee ($500 initial and $125/mo.). His plan is to try this model of financial advising for the foreseeable future since he prefers this over the corporate structure.

He will need to gather some data from me over the next few days so that he can put together a good financial plan. I’m sure we will be exchanging more emails which I’ll document here.

As I mentioned before, creating more freedom in my mind is valuable to me at this stage in my life. If someone else can worry about my finances it will leave me to explore other aspects of life. Over the next few months I’ll be the judge of his expertise and competence. Just like many docs I can be a micromanager and often think I can do it better myself.

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