Gary Alt, co-founder and financial advisor at Monterey Private wealth in Pleasanton, CA, was quoted in a MarketWatch article, "Financial advisers aren't just for the rich," by Cliff Goldstein, published on May 5, 2014.
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Financial advisers aren't just for the rich
Published by MarketWatch.com; Author: Cliff Goldstein; May 5, 2014.
Time was, stockbrokers dealt primarily with the wealthy. That was before low-commission trades, triggered by deregulation in 1975 , democratized the industry.
Then, 401(k) retirement plans practically forced Americans to gain at least a bit of investing knowledge to steer their investments away from the rocks. So many investors still struggle to make sense of the process, yet neglect to hire a financial adviser, thinking their portfolio values aren't worthy of professional guidance.
Middle America needs help
"Some folks seem to think they need a seven-figure portfolio before consulting a financial adviser, but investment is only one facet of your broader financial picture," says Larry McClanahan, a financial planner in the Portland, Ore., area. "You don't have to be 'rich' to benefit from help mapping-out your financial priorities. In fact, Middle America may need help in some of these areas even more so than the wealthy."
Gary Alt, a financial adviser in Pleasanton, Calif., likes the mapping analogy as well: "Investing without a financial plan is like driving across the U.S.A. without a map. The financial plan starts by outlining where you want to go — expenses that are important to you, such as educating children, taking care of loved ones, house upgrades, etc. The financial road map then drives the investment plan by answering the question 'How do I need to invest in order to meet all of my needs?'"
But Americans need help on the other side of the ledger, too
Investing for retirement is a common goal, but many Americans are struggling with debt — and until that burden is removed, saving for retirement is often not an option. Focusing her practice on women and Gen X/Y young adults, Anika Hedstrom in Medford, Ore., is familiar with the damage that can be done by debilitating debt.
"Often, in our society, we have a tendency to look at the rich as an untouchable class filled with good fortune, family connections, and an Ivy League degree," Hedstrom says. "But by picking up the book 'The Millionaire Next Door,' one can begin to realize that the average millionaire did not stumble upon a large inheritance, or make one stock trade to amass their portfolio. Rather, it is consistently living below one's means, pursuing business opportunities, and planning/strategizing for the future."
If debt is draining your assets, a specialized adviser known as a Certified FICO Professional may be able to assist. These advisers are particularly knowledgeable about credit reports and how to improve low credit scores. Services can include short sales, debt consolidation or settlement, loan modifications and general credit restoration.
How to choose an adviser
Choosing a financial adviser can be a chore. Thomas Batterman, a fee-only adviser based in Wausau, Wis., believes consumers are best served by searching for a very particular type of financial consultant.
"By hiring a fairly uncommon type of adviser — a fee-only fiduciary adviser — an individual investor can relieve themselves of the stress and frustration of making these types of decisions on their own and instead delegate them to a knowledgeable professional who is legally obligated to only make decisions that serve the client's best interest," Batterman says. The National Association of Personal Financial Advisors (NAPFA) is the country's leading professional association of Fee-Only financial advisers.
There are several compensation structures to choose from. The key is finding out how your adviser is paid and deciding what's right for you. William Bissett, a wealth manager in Charlotte, N.C., walks us through the options.
"Some advisers offer comprehensive financial planning with no product sale or expectation to manage your money. These people will charge a flat fee, likely ranging from $1,000 to more than $10,000, depending on your complexity," Bissett says. "Others will offer financial planning 'for free' but only if you let them manage your investment portfolio as well – at a cost between 0.6% and 1.5% of the assets they manage."
He says other advisers charge strictly by the hour. "If you don't need comprehensive planning but need to ask some questions of qualified professional, then an hourly planner is for you. This could range from $100/hour on the low side to as much as $700 or $800 on the higher side."
Finally, and most traditionally, are advisers who offer advice and then recommend a product based on that advice. "It's tough to know how much they get paid as the commissions structures can vary widely," Bissett says.
Working with a financial adviser isn't only for the rich. In fact, it may make even more sense for those of us who aren't yet in a strong financial position.