question: I am a single mother with 3 young children. I want to help pay for their first car and college. I have a financial advisor who manages my finances and used debt, mortgages, and other financial factors to create forecasts. From this, it seems that if I keep working and contribute to my 401(k), I can help my kids, retire at 65, and outlive my money. But those predictions were made before the market began to crash.
We started with $1 million. I expected it to grow quite a bit, but instead it’s lost money over the last few years. I understand the market is not doing well, but even before the market started crashing, I wasn’t seeing the growth I had hoped. My financial advisor has done a lot for me. I don’t know if she’s doing it. (Looking for a new financial advisor? This tool will help you find an advisor that fits your needs.)
Advisors meet quarterly, but it’s not worth it because you feel like you’re being hounded and don’t know what to ask. I need to know how the money is managed, the account is set up and I feel like nothing is being done, but she made about $15,000 out of my money last year. What kind of question is it good to ask and the rate is confusing to me it’s not a 1% flat rate one of the buckets he believes she is 1.5% so I’m paying a lot and I don’t know if I’m getting anything in return. How do I know if it’s worth the money?
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answer: There’s a lot to unpack here, but your advisor doesn’t seem to communicate enough with you about what you’re doing with your money and what you’re paying her Let’s start with what you are paying her.
Are the fees your advisor charges you fair?
Regarding fees, 1.5% is the upper limit of the fee scale. Landmark Wealth Management Certified Financial His Planner Joe Favorito said: (Looking for a new financial advisor? This tool will help you find an advisor that fits your needs.)
This article will help you understand the average financial advisor fees. Also note that the fees are negotiable.
Also note this. Your advisor may be making money from you in other ways (in addition to a percentage of your assets under management). In fact, if an advisor isn’t a commission-only advisor, but is instead commission-based and earns a commission by selling something, “they can also get paid as part of the investment product sale,” he said. Favorito says. It “could create a conflict of interest and drive up internal costs not seen in the investment,” he adds. Basically, if she knows you’ll get a lot of commission by recommending products to you, she’s not necessarily in your best interest, even if it doesn’t make the most sense for your situation. It doesn’t mean that you have it in mind.
As surprising or unfair as it may sound, it’s common for advisors to get paid even when their portfolio is down. If you’re using the Assets Under Management (AUM) model, you may earn less than if your portfolio was growing. Still standing regardless of market volatility.
Ideally, you want a commission-only certified financial planner. They have completed coursework, are experienced and adhere to a strict code of ethics. You can find them through the National Association of Personal Financial Advisers (NAPFA). Advisor” tool. Also know that you do not have to choose the circumstances in which you place assets under your control. Some advisors charge by the project or by the hour, which may be a better option for you.
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It’s a good sign that your advisor is working with you on budgeting, investments, and future planning, and is willing to meet quarterly. It’s a good idea to make sure you’re on a promising trajectory for yourself.
“I like to equate financial planning with sailing. If you plan your course and then go to sleep on your boat with nothing adjusted, you might end up on another continent. It just puts you on the right track,” says Favorito.
However, she still seems to fall short on some points. One thing you have to sharpen is trust. “Given the turbulent economy, it’s normal to worry about money, but if you’re not confident that you’re on the same page as your advisor, you should consider talking to her right away.” says Andy Rosen. Investment spokesperson for NerdWallet.
It also sounds like you’re wondering if you should adjust your plans to account for the bear market. You can ask them to explain it in simpler terms, or you can ask for a clearer breakdown of the pricing structure,” says Rosen.
In fact, James Hemphill, a Certified Financial Planner at TGS Financial, suggests asking in writing to answer three questions: 2) Identify the specific vehicle used for all funds in my portfolio. 3) the upfront sales commission I paid to purchase each of these vehicles, the postpaid termination fee I would pay if I let go of the vehicle now, the costs specific to each vehicle, and the amount of time that an advisor would pay to supervise each vehicle. Please indicate the price you would like to be charged. vehicle.
Also, you should know how your portfolio is benchmarked. “If half of your assets are invested in the bond market, you don’t want to compare your entire portfolio to the S&P 500 index (which is 100% in the stock market).” We need to have comparative benchmarks to see if the portfolio is performing worse than the market as a whole,” says Favorito.
Ultimately, it’s important not to get too caught up in the short-term results of the market. “Investments are always long-term, and it usually makes more sense for him to measure returns over a seven to 10-year market cycle,” he says.
If you are still feeling anxious after addressing some of these issues, it may be time to find a new financial advisor. Good places to start are the National Association of Personal Financial Advisors or the XY Planning Network there is. Both offer a database of fee-only trust planners.
“If the advice or communication you receive makes you uncomfortable, you should find another advisor. are confused and discouraged,” says Georgia Bruggerman, certified financial planner at Meridian Financial Advisors. (Looking for a new financial advisor? This tool will help you find an advisor that fits your needs.)
To make sure you get an advisor to work with, you should ask prospective advisors to explain their investment philosophy and approach, says Bruggerman. “If it’s explained in a way or jargon you don’t understand, keep looking. Advisors should be able to explain the specific investments the client owns and why they were chosen,” he said. says. Here are 15 questions to ask any advisor you want to hire.
Having trouble with your financial advisor or looking for a new one? Send an email to picks@marketwatch.com.
