Objective information about financial planning, investments, and retirement plans

Reader Question: Do I Really Need a Financial Advisor?


This question came from a reader who is around 60, works for a major corporation and has retirement assets in neighborhood of $1 million.  He indicated he is looking to either retire or be able to retire in the near future.  His question was in response to my recent request for story ideas and I appreciate this suggestion.  I will address this question largely from the perspective of this person’s situation as this is the type of client I am quite familiar with.

Do I really need a financial advisor? 

Do I really need a financial advisor? The only answer of course is that it depends.  There are many factors to consider.  Let’s take a look at a few of them.

How comfortable are you managing your own investments and financial planning issues? 

This is one of the main factors to consider.  The reader raised the point that the typical fees for ongoing advice on a portfolio of his size would likely be $8,000-$10,000 per year and wondered if the fee is worth it.

Certainly there is the issue of managing his portfolio.  It sounds like he has a significant 401(k) plan balance.  This will involve a decision whether to leave that money at his soon to be former employer or roll it to an IRA.  Beyond this decision is the issue of managing his investments on an ongoing basis.  And taking it a step further the fee level mentioned previously should include ongoing comprehensive financial planning advice not just investment advice.

Since it is likely that his 401(k) contains company stock (based upon who he works for) he has the option of electing the Net Unrealized Appreciation (NUA) treatment of this stock as opposed to rolling the dollars over to an IRA. This is a tactic that can save a lot in taxes but is a bit complex.

Can you be objective in making financial decisions? 

The value of having someone look at your finances with a detached third-party perspective is valuable.  During the 2008-09 stock market down turn did you panic and sell some or all of your stock holdings at or near the bottom of the market?  Perhaps a financial advisor could have talked you off of the ledge.

I’ve seen many investors who could not take a loss on an investment and move on.  They want to at least break-even.  Sometimes taking a loss and redeploying that money elsewhere is the better decision for your portfolio.

Can you sell your winners when needed and rebalance your portfolio back to your target allocation when needed?

Do you enjoy managing your own investments and finances?

This is important.  If don’t enjoy doing this yourself will you spend the time needed not only to monitor your investments but also to stay current with the knowledge needed to do this effectively?

In the case of this reader I suggested he consider whether this is something that he wanted to be doing in retirement.

What happens if you die or become incapacitated?

This is an issue for anyone.  Often in this age bracket a client who is married may have a spouse who is not comfortable managing the family finances.  If the client who is interested and capable in this area dies or becomes incapacitated who will help the spouse who is now thrust into this unwanted role?

Not an all or nothing decision

Certainly if you are comfortable (and capable) of being your own financial advisor at retirement or any stage of life you should do it.  This is not an irreversible decision nor is there anything that says you can’t get help as needed.

For example you might hire a financial planner to help you do a financial plan and an overall review of your situation.  You might then do most of the day to day work and engage their services for a periodic review.  There are also financial planners who work on an hourly as needed basis for specific issues.

Whatever decision that you do make, try to be as objective as possible.  Have you done a good job with this in the past?  Will the benefits of the advice outweigh the fees involved?  Are you capable of doing this? 

Please feel free to contact me with your questions, comments and suggestions for future topics you’d like to see covered here at The Chicago Financial Planner.

Schwab Intelligent Portfolios: The Evolution of the Robo Advisor?


Charles Schwab (SCHW) recently launched its much anticipate entry into the Robo Advisor space, Schwab Intelligent Portfolios.  Schwab instantly will become a major player here simply because they are Schwab.

I honest don’t know if Intelligent Portfolios are a good thing for investors or not.  I do suspect that the introduction of Schwab Intelligent Portfolios represents a big step in the evolution of Robo Advisors.

Competitor reactions to Schwab Intelligent Portfolios 

Betterment CEO Jonathan Stein appeared on CNBC recently and frankly I was taken aback at how critical he was of the new Schwab offering.

Wealthfront’s CEO wrote a very critical post about Schwab’s entrance into the Robo Advisor space.

These reactions alone tell me that Schwab’s Intelligent Portfolios are a big deal and a potential game changer in the Robo Advisor world.  Wealthfront and Betterment are two of the stronger players in the Robo Advisor space.  Both are well-funded and Betterment has forged a deal with Fidelity to allow them to offer Betterment to the advisors who custody assets with Fidelity Institutional.  The reactions of these executives tell me they are more than a bit concerned about Schwab entering their space.

Schwab Intelligent Portfolios 

Schwab Intelligent Portfolios have a low $5,000 minimum investment, they carry no management fees, investors will not incur any direct transaction costs and there are no account fees.

Like most Robo Advisors, Intelligent Portfolios will be powered by algorithms using ETFs across 20 different asset classes, as well as a cash allocation invested in a bank account at a Schwab-affiliated bank.

The Schwab Intelligent Portfolios are bit different than other Robo Advisor models in that they will allocate a significant percentage of an investor’s portfolio to several Schwab ETFs based on the fundamental indexing approach of advisor Rob Arnott. The service will utilize model portfolios for investors based upon their goals and risk tolerance.

Additionally each of the portfolios has a significant allocation to cash via Schwab’s affiliated bank. The allocation would range from 7% for a 30-year-old investor to 15% for a more conservative 65 year-old investor. The cash allocations have initially drawn a skeptical reaction from some financial advisors.

While there will be no fees for the service, Schwab will make money from the expense ratios of the ETFs, as well as the money invested via the Schwab affiliated bank.  The Intelligent Portfolios will include tax-loss harvesting for investors with at least $50,000 invested as well as automatic rebalancing.

Additionally Schwab has announced the launch of an institutional version of the Intelligent Portfolios during the second quarter of 2015 for use by financial advisors who custody assets with Schwab Institutional.

The Evolution of Robo Advisors 

Schwab’s Intelligent Portfolios represents the latest entry into the Robo Advisor space by a major financial services firms.

Fidelity Investments has formed partnerships with Betterment and Learnvest that allows financial advisors who custody assets with them to offer these services to their clients under their own umbrella.  This is a great way for these advisors to court younger clients who might not meet their normal minimums and work with them in a meaningful way until they might become full-service clients in the future.

Vanguard has launched its own Robo Advisor service and it has drawn over $4.5 billion in assets without any advertising.  Most of this money has likely come from investors with money already at Vanguard and represents an additional 20 to 40 basis points in revenue on money that is already there.

For the very reasonable fee Vanguard offers clients a financial plan, asset allocation advice, rebalancing and ongoing financial advice.  They likely will roll this service out more widely in the near future and they reportedly are thinking of offering a version for financial advisors whom their institutional sales group already calls on.

Overall the Robo Advisor offerings by Schwab, Fidelity, Vanguard, TD Ameritrade and some others represent the next step in the evolution of Robo Advisors.

At some point I envision the use of Robo Advisors by the likes of Schwab and the financial advisors who custody with them almost like Major League Baseball uses the minor leagues as a farm system.  Clients who want solid advice but who don’t meet the minimums of many financial advisors will start out in some sort of online service and as their accounts grow and their needs evolve they will move to the “big leagues” and become full service clients.

Overall I view the evolution of the Robo Advisor as a good thing for both clients and financial advisors.  For clients this represents another choice in how to get financial advice.  For financial advisors it represents a viable way to serve clients who the financial services industry has not done a good job of serving in the past.

Read more about Robo Advisors 

We Interrupt This Program To Bring You… RoboWars a great piece on I heart Wall Street.

Broken Values & Bottom Lines the piece I mentioned above by Wealthfront CEO Adam Nash.

I asked three robots how I should invest, got three different answers by Yahoo! Finance’s Michael Santolli.

I’ve written several pieces on the topic for Investopedia:

Schwab’s New Robo-Advisor Service Explained

Robo-Advisors and a Human Touch: Better Together?

Is An Online Financial Advisor Right For You? 

I invite you to contact me to ask any questions that you might have, to tell me what you like or don’t like about the site, and to suggest topics that you would like to see covered here in the future. 

Please check out our Resources page for tools and services that you might find useful.

Robo Advisors – A Brave New World?


The piece below is written by Doug Dahmer and originally appeared under the title “Robo-Advisors” – rise of the machines on Jon Chevreau’s site Financial Independence Hub.  Jon is at the forefront of a movement he calls “Findependence.”  This is essentially looking at becoming financially independent so that you can pursue the lifestyle of your choosing.   Jon is a Canadian author and journalist, check out his book Findependence Day.  Jon has contributed several prior posts here as well. 

I know Isaac Asimov’s Three Laws of Robotics, I read Arthur C. Clarke’s 2001: A Space Odyssey and I love the Terminator movies (I’ll be back!).

From all this I know three things: Robots are very smart. Robots always start off to help you. Robots have a tendency to turn on you.

One of the newest crazes and buzzwords in personal finance is: “Robo-Adviser.” If you’re not familiar with the term, it refers to investment management by algorithm in the absence of human input.

With a “Robo” you are asked to complete an on-line risk assessment questionnaire. Your responses determines the prescribed portfolio of ETFs (Exchange-Traded Funds) with a built-in asset allocation best suited to your needs. Once a year the portfolio is rebalanced to this prescribed asset allocation recipe. 

Dynamics change as shift from Saving to Spending

The “Robo” approach relies heavily upon a basic “buy/hold/rebalance” investment strategy. This passive strategy can work to your advantage during your accumulation years. These are the years when time is your friend, and dollar cost averaging through market cycles offers the opportunity to give your returns a boost.

However, as we get older and begin to prepare for and transition into our spending years, things change. Unfortunately, too few people realize that the investment strategies that served us well during our savings years turn on their head and work to our disadvantage as the flow of funds reverses and savings turns to spending. 

Dollar Cost Ravaging

Suddenly time changes from friend to foe where “dollar cost averaging” turns to “dollar cost ravaging” or what we call, the Mathematics of Catastrophe. (More about which in our next Hub blog). During the second half of your life the simplistic money management approach followed by “Robo- Advisers” can start to look like a “deed of the devil.”

Another concern is that “Robos” are unable to deal with the reality of expense variability. If you believe that in retirement, a fixed, annual withdrawal rate from a diversified portfolio will address your income needs I can with confidence suggest you are at best short-changing yourself and at worst setting yourself up for a cataclysmic financial failure.

I have been in this business a long time and know beyond a shadow of a doubt that a properly constructed life plan is very important in the second half of your life. It is only when you know what you want to do, when you want to do it and what it will cost to do it, that you can start to build the financial framework to make it happen.

Only through your life plan are you able to anticipate years of surplus and years of deficits and take the steps to bend them to your benefit. You need to bring together cash flow optimization, tax management and pension style investment management to make it happen and in the process add hundreds of thousands of dollars to your lifetime assets and cash flow. 

Robos ill equipped to link life to investment plan

Linking your life plan to your investment plan is the secret to success, but “robo investing” is not equipped to handle the nuances of that linkage. A Retirement Income Specialist knows that the type of money management you need is much more complex where the cash-flow demands outlined in your life plan need are linked to your investment plan. Tax planning, income optimization and risk mitigation means it is dangerous to leave your investment management running on auto-pilot.

Isaac Asimov’s first law of robotics holds that: A robot may not injure a human being or, through inaction, allow a human being to come to harm.

“Robo-adviser” firms would do well to review this law. When it comes to investors heading into the second half of their lives, “Robo Advisers” may well be about to break it. 

Doug Dahmer, CFP, is founder and CEO of Emeritus Retirement Income Specialists. With offices in Toronto and Burlington, Emeritus’ C3 process is one of the industry’s most comprehensive retirement planning processes. 

Online financial advisors or Robo Advisors are popping up all over the place and if you believe the financial press they are the future of financial advice.  In part I believe they are or will at least shape the future of financial advice.  I weighed in on this topic recently via  Is An Online Financial Advisor Right For You? for Investopedia.

Please feel free to contact me with your questions.  

Check out an online service like Personal Capital  to manage all of your investment and retirement accounts all in one place. Please check out our Resources page for more tools and services that you might find useful.

Financial Advice and Mini Bottles of Liquor


Regular readers here know that the inspiration for some of my blog posts comes from non-financial sources such as youth soccer fields and the Rolling Stones.  In that spirit the idea for this post popped into my head while waiting in line to pay for an item at a local gas station.

Financial Advice and Small Bottles of Liquor

I noticed the clerk behind the counter restocking the very prominent display case with mini bottles of liquor of the type you would buy on an airplane.  When I asked if they sell a lot of these she indicated that I would be surprised and I was.  This is the last place that I would think of buying mini bottles of liquor.  My hope is that the contents are not being consumed en route from the gas station.

I liken this to some of the places that people seek financial advice.  Are you getting financial advice from someone best positioned to advise you or simply from where it is convenient to obtain it?  Here are a few thoughts on some of the alternative sources available to you when seeking financial advice.

Insurance companies and agents

We have had our auto, homeowner’s, and person umbrella policies with an agent affiliated with a major insurance company for years.  Our agent is great and has provided outstanding service.  His company made a big push into providing personal financial planning largely to tap into their vast customer base to try to sell various financial products to these customers.  When I asked my agent if he was now going to become a financial planner he just kind of grumbled as he wanted no part of this.

My experience is that insurance companies are looking to sell annuities and other insurance-based products as their answer to your financial and retirement planning needs.  Many of these companies also offer their own proprietary families of mutual funds and other investment vehicles.  As with anything you need to understand the motivations and capabilities of the person trying to sell these products to you.  Is this agent qualified to provide you with unbiased financial advice or do all questions lead to a solution that involves the sale of a variable annuity or a related product?

Banks offering financial advice

Many banks offer investment and financial advice across a number of formats.  It’s not uncommon to have a registered rep at the branch selling various financial products.  The bank may even have their own line of mutual funds and their own brokerage operation.

Other banks have in-house or affiliated investment advisory operations which offer investment and perhaps wealth management services for a fee as opposed to the commission-based services mentioned above.

Again banks view this as a way to expand their service offerings and broaden their revenue streams by tapping into their depositor base.  As with any financial services provider you need to understand what your bank offers, how they offer it, any potential conflicts of interest, and most of all if this type of arrangement is right for you. 

CPAs offering financial advice

CPAs have rightly earned a reputation as a trusted advisor, especially for business owners.  The good ones offer a range of tax and financial advice that is invaluable.  Many CPAs have ventured into the business of offering investment and financial advice as well.  They realize that this is an excellent revenue stream, often a better one than they can generate via their core business.

As with other providers of financial advice you want to understand that if your CPA is qualified to provide financial planning and investment advice as this is a different knowledge base than his or her normal world.  A few other considerations:

  • Does the CPA have specific knowledge or training here?  A designation such as the CFP® or the PFS (the CPA equivalent) can be good evidence of training and commitment to this area.
  • What happens during tax season?  Are they available to answer your questions and monitor your situation?
  • Is the advice offered as an RIA (Registered Investment Advisor) or via a Broker-Dealer type arrangement?  In the latter case the CPA is likely engaging in advice via the sale of commissioned financial and insurance products.   

Financial Planners 

The term financial planner can be used by anyone so you will want to understand a few things about how any financial planner operates before determining if this is the right advisor for you.

  • What are the financial planner’s credentials and training?  Does he/she hold a CFP® or some similar designation?
  • How is the financial planner compensated?  Fee-only?  Commissions?  A combination of fees and commissions?  It is important for you to understand if there will be any conflicts of interest involved in the delivery of financial advice.
  • What type of financial advice does the financial planner offer?  Hourly as needed?  Comprehensive financial planning? Investment advice and wealth management?  More importantly is this the type of advice that you need?
  • Who are the financial planner’s typical clients?  If you are 60 and nearing retirement an advisor who specializes in clients in their 20s and 30s is probably not the right advisor for you.
  • Check out NAPFA’s guide to finding an advisor for some tips on choosing the right financial advisor for you.  

I’m often puzzled by the process used by many folks in choosing a financial advisor, but I guess it is no stranger than buying mini bottles of liquor at a gas station.  Choosing the right financial advisor can be very rewarding, choosing the wrong advisor can have a devastating impact on your financial life.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra.


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Financial Advisors to Follow on Social Media


For those of you who are regular readers here you know that I publish list posts very infrequently, so two in a row is a real rarity.  However both the nature of the list below and the fact that I am in and out of the office about equally this week convinced me to go this route.

BrightScope, a leading provider of independent financial information and research, just released their first Social Influence Rankings for Financial Advisors.

While I was astonished to be number three on this list, I am flattered to be included on a list that includes a number of people whom I admire and learn from.  This list includes Jim Blankenship, George Papadopoulos, and Russ Thornton who I’ve followed from the onset of my involvement in social media.

Josh Brown, Carolyn McClanahan, Neal Frankle, Jeff Rose, Jason Hull, Jude Boudreaux, Alan Moore, Sheri Cupo, and Tom Brakke are others who I follow on a regular basis.   I plan to become familiar with the rest of this list and learn from them as well.

If you are looking for good information about investing, financial planning, retirement, and related financial topics this list is for you.

BrightScope’s 2013 Top Social Influencers in the United States:

Advisor Pages Profile – Blog – Twitter Handle

1. Josh Brown – The Reformed Broker – @ReformedBroker
2. Barry Ritholtz – The Big Picture – @ritholtz
3. Roger Wohlner – The Chicago Financial Planner – @rwohlner
4. Jason Hull – Hull Financial Planning – @hull_j
5. Michael Kitces – Nerd’s Eye View – @MichaelKitces
6. Russ Thornton – Wealthcare for Women – @RussThornton
7. Charles Sizemore – Sizemore Insights – @CharlesSizemore
8. George Papadopoulos – George Papadopoulos on WSJ – @feeonlyplanner
9. Cullen Roche – Pragmatic Capitalism – @cullenroche
10. Jeff Rose – Good Financial Cents – @jjeffrose
11. Jim Blankenship – Getting Your Financial Ducks In A Row – @BlankenshipFP
12. David Merkel – The Aleph Blog – @AlephBlog
13. David Fabian – Investor Insights Blog – @fabiancapital
14. Ted Jenkin – Your Smart Money Moves – @oXYGenFinancial
15. Meb Faber – Meb Faber Research – @MebFaber
16. Alan Moore – Serenity Financial Consulting Blog – @R_Alan_Moore
17. Kimberly L. Curtis – Wealth Legacy Institute Blog – @KimCurtisLegacy
18. Ric Edelman – Edelman Financial Services Education Center – @ricedelman
19. Tom Brakke – The Research Puzzle – @researchpuzzler
20. Carolyn McClanahan – Carolyn Sue McClanahan on Forbes – @CarolynMcC
21. Tim Maurer – Tim Maurer Blog – @TimMaurer
22. Neal Frankle – Wealth Pilgrim – @NealFrankle
23. Wade Slome – Investing Caffeine – @WadeSlome
24. Sheri Cupo – SageBroadview Blog – @sage_cupo
25. Jude Boudreaux – Upperline Financial Blog – @HJudeBoudreaux

To view the complete list of the Top 100 Social Influencers in the United States, visit the BrightScope Blog.

Please check out our Book Store for books on financial planning, retirement, and related topics as well as any Amazon shopping needs you may have (or just click on the link below).  The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.  If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.

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Would You Meet With Me For $100?


Sorry to get your hopes up but I have no intention of paying you to meet with me.  I was looking for a topic to write about and thank goodness for the financial services industry.  The mail brought an invitation for a complimentary consultation with a local financial advisor.  As a thank you to prospective clients for their time the advisor is offering a $100 gift card to one of two local restaurants (both of which I like by the way).  My wife’s reaction when I told her about was on the order of “… she’s really going to pay someone to meet with her?” 

100 Dollar Bills

Regular readers of The Chicago Financial Planner might recall prior posts about financial dinner seminars.  I’m not a big fan.  This approach, however, intrigues me and dumbfounds me.

The economics for the registered rep 

If you stop and think about this it’s pure genius as a business development ploy.  This advisor is clearly trying to sell financial products such as annuities, life insurance, and other products which would generate sales commissions for her.

Certainly the cost of the gift card pales in comparison to the potential commissions so even a mediocre closing rate would seem to make this a very cost effective sales promotion for her.

In fact this strikes me as a far more cost effective approach than a dinner seminar in that the registered rep gets to sit down one on one with a prospect vs. having to feed a meal to group and the other costs associated with a seminar.

Is this really a good way to select a financial advisor? 

One of the restaurants is really a favorite of ours and a $100 might even be enough to cover the cost of bringing one of our offspring with us.

If you go to one of these sessions be prepared to be sold financial products and also be prepared to say “… I need to think about this…”  At the very least do your online homework about the advisor offering this type of meeting incentive.  You can check out financial advisors at FINRA’s Broker Check, BrightScope, and the CFP Board (if they are a CFP).

Check out NAPFA’s guide to finding a financial advisor via the link on our Resources page (under the heading Financial Advice).

Questions to ask a financial advisor 

On a prior post on this blog, I wrote Choosing A Financial Advisor? – Ask These 6 Questions.  I suggested asking these six questions of your current or  a prospective financial advisor:

  • How do you get paid?
  • Are you the next Madoff?
  • Are we the exception or the norm for you?
  • What can you do for me?
  • What are your conflicts of interest?
  • Do you act in a fiduciary capacity towards your clients? 

So would you meet with a financial advisor for $100? 

I’m really interested to learn whether a $100 would be an incentive for you to sit down with a financial advisor.  Please leave a comment or contact me directly with your thoughts.

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner.

The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. Click on the Amazon banner below to go directly to the main site or check out the financial planning related selections in our Book Store.

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Is Fear the Ultimate Financial Sales Tool?


If you are like me you may have noticed a preponderance of TV and radio ads where fear is used to pitch various financial products.  If seems that these are overwhelmingly from providers of products such as annuities, insurance or other commissioned financial and investment products.   Recently I heard commercial for a variation of the insurance product called Be Your Own Banker.  Their pitch was the inevitability of a 50% loss in the stock market.  Really, come on.

Fear Is the Mindkiller

My personal pet peeve is that far too often these fear mongers seem to target seniors afraid of losing their nest eggs.

Should fear be a financial motivator? 

Ameriprise has been running a commercial asking folks if they would outlive their money in retirement.  A valid question and one in part based upon fear.

In fact many folks in their 50s or 60s looking for financial planning help as they approach retirement are asking this question.  Whether it’s fear-based or born out of a desire to be prepared it is a good lead-in to the financial planning process for folks in this age range.

On the other hand scaring people, especially seniors, into purchasing a financial product that may or may not be right for them strikes me as sleazy.

In a prior post on this blog, 5 Steps to a Lousy Retirement, I listed making financial decisions based on emotions as one of the steps to take on the road to a lousy retirement.  This especially true when you are being sold annuities or insurance products because so many of them come with onerous surrender charges meaning that it will cost you dearly to move your money elsewhere over the first 5-10 years of ownership.

Planning should precede the sale of financial products 

The logic, other than the desire to earn a sales commission, of pitching a financial product instead of a financial plan to a client escapes me.  In my world a financial planning strategy generally comes first, the implementation of that strategy including the use of appropriate financial products comes afterwards.

Inflation vs. investment loss 

Many of these fear-based product pitches cropped up in the wake of the financial crisis of 2008-09 and the corresponding drop in the stock market.

In my opinion, however, retirees should fear the impact of inflation on their purchasing power vs. losing money in the stock market.  Even a relatively benign 3% inflation rate will cut your purchasing power in half over a 24 year period.

Yes the stock market was hammered in 2008 and if you use the SD&P 500 as a benchmark the market gained very little during the decade 2000-2009.  However a diversified portfolio did reasonably well even during this “lost decade.”

Ask questions and do your homework  

Many successful financial sales types are very personable individuals.  In some cases the sales person might be your neighbor, a member of your church, or a fellow member of the local Rotary club.  This shouldn’t disqualify them as an advisor, however you should also be prepared to scrutinize their credentials and the products they may be trying to sell you with the same tough standards that you would hopefully apply to a stranger in the same situation.

As an example, with the Be Your Own Banker (or any of its variations) sales pitch that I mentioned at the outset, you need to dig very deep before writing a check for this type of insurance policy.  I went to the site and found much of the presentation confusing and found little or no information about the associated policy costs and expenses.

Whether an insurance policy, an annuity, or commissioned investment products you need to ask many, many questions of the agent/registered rep.

  • At the very least understand ALL associated fees, expenses, and restrictions on moving your money.
  • How does this individual get paid?
  • With an insurance related product how solid is the company behind the policy or annuity contract?  

Fear must be a very effective tool in selling financial products, otherwise we would not see so many fear-based product pitches.  Don’t fall for this type of sales pitch.  The only financial products that you should consider are those that are right for your situation, not those that you are scared into buying.

Please contact me at 847-506-9827 for a complimentary 30-minute consultation to discuss  all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services. 

The Chicago Financial Planner is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. If you click on my Amazon.com links and buy anything, even something other than the product advertised, I earn a small fee, yet you don’t pay any extra. Click on the Amazon banner below to go directly to the main site or check out the selections in our Book Store.

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How Does Your Financial Advisor Define Success?


I am grateful to Jean Chatzky for her selection of this blog as her top pick among investing blogs in a recent piece for AARP Finance Blogs You Should Read.  In her write-up she generously calls me “An entertaining writer prone to football references…”  With that said I could think of no better way to start a piece about your financial advisor’s definition of success than with a mention of the University of Louisville’s rehiring of Bobby Petrino as their head football coach.  To this college football fan, Louisville’s definition of success is clear and unambiguous.  Is your financial advisor’s definition of success just as clear?

Photograph of Coach Bobby Petrino at the 2010 ...Just win baby

The short story is that the University of Louisville rehired Bobby Petrino as their football coach to replace Charlie Strong who had left for Texas.  Petrino was highly successful at Louisville from 2003-2006 before leaving for greener pastures.  Petrino’s alleged lack of character and morals typify everything that critics point to as being wrong with big-time college sports, however I’m pretty confident that none of that was a factor in the decision to hire him.  He is a talented coach and a proven winner and Louisville needs both qualities as they move to the ACC next season to compete with the likes of Florida State, Clemson, Miami, and Virginia Tech.

As the late Al Davis, founder and owner of the Oakland Raiders, said, “Just win baby.”

For those of you who read this blog on a regular basis you know that I am a fan of openness and transparency in the financial services industry so I have no issue with Louisville’s motives for this move, though I did razz my friend, NAPFA study group mate, and UL grad Greg Curry immediately (Greg is an outstanding Louisville-based fee-only advisor).

Just as Petrino was clearly brought in to win, many financial advisors sadly seem to be in this business with the primary motivation of winning, which I am defining here as earning a whole lot of money for themselves.  Why else would sales training be such a big part of the orientation programs at many firms?  Why else would there be sales contests with nice prizes such as trips to luxurious destinations for selling certain financial products?  Don’t get me wrong I’m not against earning a good living, just not at the expense of the people whose interests are supposed to come first and foremost.

For more on Petrino and Louisville check out this piece on the CNN/Sports Illustrated site by Andy Staples and this one by Michael Rosenberg. 

Is your advisor a wolf? 

In keeping with our tradition for fine family entertainment on Christmas day, this year’s family movie outing was The Wolf of Wall Street.  Watching the film made me wonder what I’ve been missing by being a fee-only advisor all these years (just kidding).

Clearly I am not insinuating that if your financial advisor earns all or a substantial portion of their income from commissions and product sales that they also participate in dwarf tossing, consumption of mass quantities of drugs, lewd sex acts, or other forms of debauchery.  I do wonder if their measure of success is the same as that of the characters portrayed in the film, namely money.  Specifically money that inures to them from selling financial products to you.

While many advisors who sell financial products are competent professionals motivated by their client’s best interests, you always have to wonder if a particular investment, annuity, or insurance product is being recommended because it is the best product for you or rather because it is the most lucrative for the advisor.

As long as some financial services firms run sales contests for advisors and incent sales production this conflict will always be there.

My definition of success 

My definition of success is simple.  I am only successful as a financial advisor if my clients achieve success. 

I would venture to say that my closest circle of financial advisor colleagues, my NAPFA study group, would wholeheartedly agree with this definition.  My guess is that the bulk of my fellow fee-only NAPFA colleagues would as well.

If you are looking for a financial advisor to start off the New Year right check out this guide from NAPFA. 

Make sure that you clearly articulate your goals and your definition of financial success to your current financial advisor or to any advisor that you are considering working with.  Clear and open communication is a vital part of a successful client-financial advisor relationship.

Please feel free to contact me with your questions. 

Check out an online service like Personal Capital to manage all of your accounts all in one place.  Please check out our Resources page for more tools and services that you might find useful.

Photo credit: Wikipedia

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Lessons the Financial Services Industry Could Learn from Visiting Lambeau Field


My son and I attended the Green Bay Packers game against division rival the Detroit Lions this past Sunday at Green Bay’s Lambeau Field.  I’m glad his first NFL game was at Lambeau and that I was able to experience this with him.  If you are a football fan and have never been, a trip to Lambeau on game day is a must for your bucket list.  Here are some lessons that the financial services industry could learn from a trip to Lambeau Field.

The folks are friendly 

As you enter Green Bay you will be struck by the fact that the whole city is pretty much all about the game.  Many houses near the stadium turn their front lawns into parking lots, as did at least one gas station and local motel.  Some will let you tailgate right on their lawn and even use the restroom in their home.  We parked on the lawn of an elderly couple for $20.  The husband who was in a wheel chair directed us as to where to park even before taking our money.  In fact I had to find him to make sure that we paid him.  He didn’t seem the least bit worried about me stiffing him.

I can’t tell you how often a prospective client has told me that the reason they were leaving their financial advisor was that the advisor talked down to them.  I’ve never understood this and the only reasons that I can come up with here is either true hubris or that the advisor really doesn’t want the client to understand where they are putting their money.  In the latter case this could be because the investments are sub-par or there is some sort of fraud ocurring.

There are many good choices 

Wisconsin (I’m an ex-patriot Cheesehead) is all about good food and drink.  Like to tailgate, these folks are pros.  Want to buy your food, no problem.  Before you even get into the stadium there is a permanent bar in the parking lot, plus other choices like a McDonald’s food truck.  Once inside, the atrium is much like a shopping mall including a food court with a great selection of reasonably priced “game food.”

Sadly all too often employees have a menu of lousy 401(k) investment choices.  Clients of commissioned registered reps also are frequently offered financial advice that may be suitable for them but not totally focused on their best interests.  This may include being sold products such as high cost annuities.

The game day experience is fantastic

I’ve been a Packer fan since 1966 when they won the first Super Bowl.  A couple of weeks ago I was so fanatical during the debacle against the Bengals that my wife and dog left our family room.  I care who wins.

Being there with my son on Sunday transcended who won or lost.  The fact that we were able to get down to the bottom row of the stands and watch pre-game warm-ups was as much fun as the game.  Mike is a Communications major at Northern Illinois University where he also works for the Athletics department.  He was very interested in watching the media setting up for the game  as well as seeing the likes of Clay Matthews up close.

Sadly the financial services industry doesn’t always offer the investing public a great game-day experience when they are seeking financial advice.  A recent study by TIAA-CREF noted:

  • Forty-eight percent of Americans say it is hard to know which sources of financial advice can be trusted.
  • Thirty-seven percent of Americans say they don’t like talking to anyone about their finances.
  • Forty-six percent of Americans say that more than ever, they need a trusted place to go for financial advice.
  • Two-fifths of Americans think good financial advice costs more than they can afford.
  • One-third of Americans say they lack the time to get proper financial advice.
  • More than half (58 percent) of Americans say they would prefer to get financial advice from a single point of contact or location.

The financial services industry could learn a lot about service, the quality of the financial products and advice offered, and the need to serve clients for a reasonable fee by visiting Lambeau Field on game day.  It’s an experience like no other.

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner. Please check out our Resources page for more tools and services that you might find useful.

Choosing A Financial Advisor? – Ask These 6 Questions


Deciding to hire a financial advisor can be a tough decision for many investors. Once you’ve made this decision, how do you go about finding the right advisor for you?  Here are six questions to ask when choosing a financial advisor: 

Madoff, Looking the Other Way

How do you get paid?

Fee-only advisors receive no compensation from the sale of investment or insurance products. When selecting a financial advisor, ask yourself whether you feel that a financial advisor who receives a significant portion of their compensation from the sale of financial products can really be counted on to recommend solutions that are in your best interest?

Are you the next Madoff?

One of the tactics used by Bernard Madoff to perpetrate his fraud was to send clients his own statements instead of statements generated by a third-party custodian like Charles Schwab, Fidelity, TD Ameritrade, and others.  A third-party custodian provides periodic (monthly or at least quarterly) statements independent of any reports provided by the advisor.  You should never give your investment dollars directly to a financial advisor, they should always be sent directly to the custodian.

This is critical if the advisor will be providing on-going investment advice.   In fact it is a deal-killer if this is not the arrangement.  If the advisor says something like “… we send out our own statements to our clients…”  end the conversation and find another advisor.

Are we the exception or the norm for you?

Ask your financial advisor about their client base. If you are a corporate employee looking for help planning for the exercise of your stock options, you should ask the adviser about their knowledge and experience in dealing with clients like you.  A financial advisor who deals primarily with teachers or public sector employees might not be the right choice for you. Likewise if the advisor’s typical client has a minimum of $1 million to invest and your portfolio is more modest, this advisor might not be a good fit for you.

What can you do for me?

If the advisor’s primary service is focused in an area like constructing bond portfolios for their clients and you are looking for a financial planner to construct a comprehensive financial plan for you, this advisor may not be a good match.  Make sure to find someone who offers the types of services and advice that you are seeking.

What are your conflicts of interest?

Financial advisors who are registered representatives will often be incentivized to sell insurance or annuity products promoted by their broker dealer or employer.  Ask how they select the financial and investment products they recommend to clients. Ask them directly about ALL forms of compensation they will receive from working with you, and if they will disclose this information on an ongoing basis. Ask them if there are any restrictions regarding the products they can recommend.

Do you act in a fiduciary capacity towards your clients?

In laymen’s terms, you are asking if the adviser is obligated to put your interests first. The brokerage industry uses the suitability standard, but in my opinion this falls far short of a true Fiduciary Standard. This argument continues in the financial services industry as the regulators work through this issue.

The questions listed above are just a few of the many questions you should ask when choosing a new financial advisor or to ask of an advisor with whom you currently have a relationship.

As an investor, it is ultimately up to you to select the right financial advisor. Do your homework and due diligence. The National Association of Personal Financial Advisers (NAPFA), the largest professional organization of fee-only advisors, has a guide to selecting an advisor called “Pursuit of a Financial Adviser Field Guide,” which is an excellent resource for those seeking the help of a professional financial advisor.

Please contact me with any thoughts or suggestions about anything you’ve read here at The Chicago Financial Planner.  

Photo credit:  Flickr

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