Show notes
Maggie shares her various stories of working with four different financial planners, all different types. They all taught valuable lessons on why she doesn’t need a financial planner, and not one of them did anything of value or anything that Maggie couldn’t have done on her own better.
There are a few different types of financial planners:
- % of portfolio + fee/commission-based - The majority charge you a % of your portfolio. They also make fees/commissions on various products that they sell you from insurance to mutual funds.
- Fee-only financial planning - aka a fiduciary - There’s a newer trend in the last decade of fee-based that charges hourly in theory, but many more established ones charge a start-up fee, and then monthly, quarterly, or annual charge. There are resources like NAPFA and XY Planning Network that provide more information and directories on these advisors.
- Financial coaches - There’s a growing trend of financial “coaches” that often charge hourly or for a package of hours. These we’re the least offended by, and if you need help budgeting or getting your finances in order, this could be a good investment. You can get a lot of this content for free or for small fees if you’re willing to take a more DIY approach, but if you’re not going to and this would help you, then investing a bit in this area could be a solid investment for you.
Why we think you do not need a financial planner:
- They cost you a lot of money.
- Their fees tend to be hidden or taken out of your investments. You often don’t receive a monthly bill, though they disclose their fees upfront and on any formal statements or tax documents.
- The costs may seem small, but they add up significantly over time.
- You can do it just as well yourself, if not better.
- Financial planners are trained and incentivized to make you think this is difficult, but it’s not.
- They do not offer a value-add service that’s worth paying for, for the average person.
- Index funds are all you need - listen to our episode on getting started investing.
- Research shows your performance in index funds will match or beat anything actively managed.
- They aren’t as smart as you think they are - many of them are very “old school.”
- They often aren’t familiar with financial independence or early retirement.
- They are not trained or incentivized to optimize your taxes.
- They aren’t skilled in more advanced tactics like rothIRA backdoors or rothIRA conversion ladders.
- You have to do the hard work either way.
- You still have to gather all of your documents, have tons of conversations, and think about what you want and what’s important to you.
- They don’t care about you more than they care about themselves.
- You are the only one who will always put your best interests first - you can’t outsource this.
- Financial planners are trained and incentivized to use sales tactics on you.
- Any financial planner who’s tried to sell you whole life insurance should raise a big red warning flag that they are likely focused on trying to make large commissions and not what’s best for your financial situation.
- You should learn about this stuff yourself.
- Understanding this stuff matters, and it doesn’t have to be overly complicated.
- You can keep it simple and learn slowly.
Top 3 takeaways:
- Don’t be intimidated by managing your finances, and don’t fall for someone’s sales tactics that try to overcomplicate and push you into things you don’t understand and don’t need.
- You can do this yourself. It’s simple. Check out our 2021 checklist if you’re not sure where to begin. Read a book!
- Start now. Go and do the next step for you today.
Show references:
- Episode #68 - 5 simple steps to investing
- Template for $3 at friends on FIRE etsy store – 2021 Financial Checklist
2021 financial checklist available on friends on FIRE website for free - Six reasons why you don’t need a financial planner
- Maggie’s favorite personal finance books
- XY Planning Network of fee-only financial advisors
- NAPFA
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