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Thread: Financial Advisor Question

  1. #1
    Senior Member rosarugosa's Avatar
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    Financial Advisor Question

    A very dear friend of mine recently had a consultation with a financial advisor. Friend has a history of making poor financial decisions, and despite a long work history in a high-earning profession, has a very modest net worth to show for it. They have somewhat substantial savings in a 401k, but this is offset by a fairly large mortgage, credit card debt and some personal loans (currently on track to get the debts paid off within the next 2 years). Friend has been scammed in the past and has loaned large sums of money to friends who never repaid the loans.
    The friend told me with some enthusiasm that they can hire the advisor for $100 per month to be an "on-call" financial advisor, who will help find the best rate for refinancing their mortgage, and will help interact with their HR dept when it is time for them to retire (10-12 years away). Presumably there would be other benefits, but these are the two that were mentioned to me.
    I thought it sounded like a horrible idea. I think I could actually help with those two items mentioned, and I wouldn't even charge for my services. I get the sense that this person is just overwhelmed by handling their own finances, and loves the idea of having someone else take over. This is not a good mindset, and I fear has helped set them up to be victimized in the past. The friend doesn't have brokerage accounts or anything complex going on, so it seems to me that $1200 a year is a lot to pay.
    My question is whether I'm letting my own biases get in the way. Maybe a $1200 advisor is a terrible idea for me, but a good idea for my friend who wishes they didn't have to think about their own finances. It does look like the firm and the advisor are on the up and up. Maybe a financial advisor would help steer friend away from future poor financial decisions - or maybe hiring this advisor would just be another one of those poor decisions. I would love some unbiased opinions from you folks please.

  2. #2
    Senior Member bae's Avatar
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    I generally think most financial advisors are a waste of time and money if you have normal finances, as they seem to deliver cookbook approaches that you could do yourself with an hour of Google learning, and I think it is important to at least have a baseline level of understanding of your own finances.

    That said, some people can’t for various reasons do it themselves, so for them, maybe it’s helpful. $1200/year still seems to me a bit high - I can’t imagine the job described takes very long, and $1200 for on-call services for such simple tasks is silly.

    For reference, I keep a sizable (7-8 figure) sum under active management with a reputable firm, and they charge me 0.5% per year of the portfolio value, and no fees. They also happily provide the sort of baseline financial advice and assistance for free, but Schwab does that too for me, also for free.

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    Over the top expensive IMO. Should find a fee-based financial planner that charges a one time fee to tell them what to do. Why would anyone need an on-call financial advisor? Scam.

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    Quote Originally Posted by rosarugosa View Post
    A very dear friend of mine....
    They should run away from that financial advisor as fast as possible, even though the advisor and the firm they work for seem to be on the up and up.

    It sounds like you could give them the kind of advice they need on an as-needed basis if they will trust you to do it. After all, they don't have anything complicated that needs to be constantly monitored by an expert advisor.

    Talk to your friend some more about what exactly this financial advisor is going to do for them on a day to day basis. If you can make them realize the advisor is mostly going to be doing simple stuff like balancing their checkbook and giving them a cookie cuter budget they should follow, then you'll have a good chance of convincing them they can do that for themself, and that you'll be available if they need help or even just some reassurance that they're making the right decision.

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    Senior Member Teacher Terry's Avatar
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    Definitely ridiculous for what they are getting!

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    Senior Member iris lilies's Avatar
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    Looking at this very broadly, your friend, rosa, apparently needs someone to do most every little thing in her financial life for her. We can all silently scream at her to take responsibility for herself and learn a few basic things, but she most likely will not start adulting now if she is well into maturity.

    $1200 annually against what you hint is a pretty good salary is not much, if the $1200 guy is stone cold reliable, and will be of use to her. In the right scenario, this guy could easily save her $1200 annually, in the first few years of his service anyway.

    so she needs someone to act as her dad. Unfortunately she’s not gonna be able to buy that care and concern, and any guy who offers this kind of weird service (hunts dor best mortgage rate? Talks to HR in her behalf) seems suspect. I mean, I understand that busy Hollywood stars have their “business managers” who do exactly this kind of thing as well as manage their assets.And there are many stories of these business managers who scam their clients.

    I just don’t think it’s a reliable scenario so after all of my verbiage I say NO.

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    Quote Originally Posted by iris lilies View Post
    she needs someone to act as her dad.
    Actually I was thinking something similar while I was offline. Maybe what she's buying, or thinks she's buying, is the financial equivalent of a Weight Watcher's membership or having a prepaid on-call fitness coach. IOW someone who will be her "Daddy" and keep her on the straight and narrow in spite of her tendency to wander off the path every time she sees temptation. Maybe hiring this financial advisor is like hiring a shrink to cure your addiction, or maybe she just thinks it is....

    Anyway, step one is to clarify exactly what she expects to get from this guy and why she thinks he'll actually provide that level of service.

  8. #8
    Senior Member iris lilies's Avatar
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    Quote Originally Posted by GeorgeParker View Post
    Actually I was thinking something similar while I was offline. Maybe what she's buying, or thinks she's buying, is the financial equivalent of a Weight Watcher's membership or having a prepaid on-call fitness coach. IOW someone who will be her "Daddy" and keep her on the straight and narrow in spite of her tendency to wander off the path every time she sees temptation. Maybe hiring this financial advisor is like hiring a shrink to cure your addiction, or maybe she just thinks it is....

    Anyway, step one is to clarify exactly what she expects to get from this guy and why she thinks he'll actually provide that level of service.
    yeah, your analogy of a fitness trainer is good and may be what she is thinking of. And the idea that the service is charged monthly is very much consuma sucka territory.

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    You mentioned there may be other benefits. Without knowing those, I can't say this is or isn't worth it. There are different benefits to a financial advisor I can think of, one of them is, those "friends" who want to borrow money, will have to deal with the advisor, not the person who has the money.

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    Quote Originally Posted by ToomuchStuff View Post
    There are different benefits to a financial advisor I can think of, one of them is, those "friends" who want to borrow money, will have to deal with the advisor, not the person who has the money.
    At $100/month I would learn real quick how to say no to friends who want to borrow money. My standard line goes something like this "If you need cab fare to get home -- If you need a few dollars for a vending machine because you don't have any cash on you -- I'll give you the money. But don't ever ask me to loan you money, because I don't loan money to nobody."

    Of course, I'm a hardnosed warehouse guy, so I'm accustomed to dealing with people who only want to be your friend so they can sweet talk you into doing them a favor. Most people probably aren't as cynical as me about such "friends".

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