Objective information about retirement, financial planning and investments

Choosing the Right Financial Advisor – Key Considerations


Happy young couple in discussion with a financ...

With the holidays behind us and taxes on the horizon, many folks are looking to find a qualified financial advisor who is right for their situation.  Maybe getting your finances in order was a New Year’s Resolution.  Perhaps you’ve realized that retirement is getting closer.  Whether you will be looking to work with a financial advisor for the first time or feel that your current advisor isn’t meeting your needs, here are some issues for you to consider in your process of choosing the right financial advisor for your situation.

Understand yourself first 

The first question that I ask a perspective client is:  What prompted you to seek the services of someone like me?  While you may not be totally sure of all of the areas in which you need help, thinking about what you want from a relationship with a financial advisor up-front will help you to find the right advisor for your unique situation.

Some common answers to my initial question over the years:

  • Retirement is looming and I want to make sure that I have everything in order.
  • We inherited some money and want to know how to best invest it.
  • Our investments are all over the place and we have no plan.
  • We want an independent review of our situation and a financial plan to help us move forward. 

How would you and the advisor interact? 

What is the advisor’s communication style?  How often would you meet?  Will the advisor be proactive about bringing relevant ideas and suggestions to your attention?

There is no right answer here, but you should be sure to ask about this so that should you enter into a relationship with this advisor your expectations are realistic.

Does the advisor work with clients like you? 

An advisor who focuses on clients who are retired might not be the right advisor for you if you are in your 30s with small children for example.  Does the advisor have a minimum level of net worth or investible assets?  Where does your situation fall in comparison to these minimums?

If, for example, you are a corporate employee seeking advice on how to best manage the stock options granted to you by your employer does the advisor have experience helping clients deal with their stock options?

Advisor or product seller? 

Does the prospect advisor focus on selling financial products?  Do they offer financial planning services?  Are they compensated on a fee-only basis or do they depend upon commissions from the sale of financial products for all or part of their compensation?

It is important that you fully understand how the advisor is compensated so that you understand if there are potential conflicts of interest that might be driving their advice.

What are this advisor’s qualifications? 

There are an increasing number of designations in the financial advice world.  The two that hold the most weight as far as financial planning goes are the CFP® designation and PFS designation.  The latter is the personal finance designation awarded to CPAs who qualify.

Make sure to ask about the designations held by a prospective advisor and also about their education and experience.  While none of these ensure that the advisor is right for you the answers to these questions will give you a sense of their commitment to gaining the knowledge needed to address your financial planning and advice needs.

Do some checking 

Check on the prospective advisor’s record.   FINRA’s Broker Check database of federally and state registered investment advisers allows you to search by name, and lets you check up on firms as well. Several private services, such as BrightScope, have services to check an adviser’s regulatory record. If the adviser is a Certified Financial Planner you can also look up their information at the CFP Board’s website. None of this is a guarantee, but it is a great starting point.

The right financial advisor can help you build the wealth you need to reach your various financial goals.  Take the time and put in the effort to select the right advisor for your unique needs.

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

Check out our Resources page for links to a variety of tools and services that might be beneficial to you.

Photo credit:  Flickr

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Mutual Fund Expenses – Where Real Holiday Savings Can be Found

Blue Piggy Bank With Coins - Retirement

As I write this its Cyber Monday, the biggest online shopping day of the year.  Where to save a few dollars on this item or that has been the focus of many news stories and discussion.  While we all like to save money on the things we buy, these savings are “chump change” compared with the savings opportunities available by reducing your expenses on the mutual fund and ETFs in which you invest.  Here are 5 tips for reducing your investing costs for mutual funds and ETFs to help grow your investments for retirement, college savings, and other goals.

Index Funds are Not Created Equal

As an example the Dreyfus Mid Cap Index Fund (ticker PESPX) has an expense ratio of 0.50% which is pricey for a core index fund of this type.  The Investor Share Class of the Vanguard Mid Cap Index Fund (VIMSX) carries an expense ratio of 0.24% and the SPDR S&P Midcap 400 ETF (MDY) has an expense ratio of 0.25%.  An investment of $10,000 in each of these funds made on May 31, 1998 and held until October 31, 2012 would have grown to:

Dreyfus Mid Cap Index


SPDR Midcap


Vanguard Mid Cap Index


The above information is via Morningstar and is based upon the earliest common inception date of the three funds and also assumes reinvestment of dividends and distributions.  Note that an investment in one of the lower cost share classes of the Vanguard fund would yield even better results.

ETF Price Wars are a Good Thing

There is a price war happening among several providers initiated by Schwab to offer the lowest cost ETF.  Vanguard has jumped on the bandwagon by changing the index provider on many of its funds and ETFs; Blackrock’s ishares unit has also joined in.  While I likely would not suggest switching from an already low cost index ETF product because it is not the absolute lowest in cost, I would suggest taking a look at the offerings of the “warring” factions.  You should also take any transaction fees into account as well.  Schwab and Vanguard allow transaction free trading of their own ETFs, TD and Fidelity offer a menu of transaction free ETFs as well.

Your Financial Advisor May be able to Save You Money

In many cases I am able to invest my client’s money in less expensive share classes of a given mutual fund than they might be able to purchase on their own.  As an example PIMco Commodity Real Return as a number of share classes as do most of the PIMco Funds.  I am able to invest client dollars in the Institutional Share Class (PCRIX) with its 0.74% expense ratio and typical $1 million minimum.  This compares to the no-load D shares (PCRDX) with an expense ratio of 1.19% and a $1,000 minimum initial investment.  Often the savings in expense ratios that I can provide to my clients can go a long way in covering a portion of my professional fees.

Ensure that Your Stock Broker or Registered Rep isn’t costing you Money

The flip side of the last point is to make sure that you are not paying more in mutual fund fees just so that your broker or registered rep can make additional fees and commissions.  Case in point is if your money is invested in a proprietary mutual fund offered by the rep’s employer.  While some of these proprietary funds can be decent, all too often they are under performers that are laden with fees and charges to generate revenue for the broker and their firm.

Read your 401(k) Plan Fee Disclosures

Some plans sold by commissioned reps and producing TPAs (Third-Party Administrators) may contain funds that are not very low cost.  Case in point might be a plan with an American Funds fund in the R1, R2, or R3 share classes.  This might also be the case with some Fidelity shares classes (typically the Advisor share class), as well as with some T. Rowe Price funds (the Advisor or the R share classes).  These shares exist typically to compensate a producer.  If you see these or similar share classes for other fund families in your plan it would behoove you to ask the person who administers your plan if it might be possible to move the plan into lower cost funds or fund share classes.

We all like to find a bargain when doing our holiday shopping.  If a fraction of the time and effort that people spend on this activity went into analyzing their investment portfolios, the potential cost savings alone would dwarf anything that you might realize from finding a couple of deals this holiday season.  These savings are not just one-time in nature, but they “keep on giving.”

Check out Morningstar to review the expenses for all of  your mutual funds and ETFs and to get a free trial for their premium services.

Please feel free to contact me with questions about your investments.

Photo credit: Flickr

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Much to be Thankful For


Thanksgiving is a time to reflect on life and to give thanks.  In my case I’m most thankful for my family.  My wife of 28+ years Kyung is pictured below with two very bored Chicago Police Officers this past June over the weekend in which NATO met here in Chicago.  We had hoped to see some “real live” protesters but we were too far north (this photo looks east from the Wrigley Building) and several hours too early. 

I am also thankful for our three great kids.  I couldn’t be more proud of each of them.  The best part of the holiday is that we will all be under the same roof (assuming no airline glitches for my oldest Jen who lives in LA). 


I’m thankful that people actually read this blog and have some interest in what I have to say.  Blogging is like coming full circle for me.  Back in high school my career interest test indicated that being a lawyer, funeral director, or an author were the three most likely career paths.

Being a Financial Advisor

I’m thankful to have had the opportunity to work in such an interesting and challenging profession for the past 14 years.  I’ve been blessed with wonderful clients and I’ve enjoyed contributing to their success.

The past 14 years have been challenging in terms of the economic environment we’ve faced and I’m sure the next 14 years will be equally challenging.  I can honestly say that even the worst day as a financial advisor beats the heck out of the best day spent in the corporate world.

Having gone down the path of being a fee-only advisor and having later joined NAPFA (the largest professional organization of fee-only advisors in the country) I’ve had the pleasure to meet and learn from some of the finest, most dedicated financial advisors around.

Personally and professionally I feel very thankful and blessed.  Now on to tomorrow’s food fest.  As much as I adore my kids they had better keep their mitts off of my drumstick.  There is nothing better than cold, leftover turkey drumstick dipped in barbecue sauce.

I hope that you and your family have a great Thanksgiving.  As always please feel free to contact me with any and all questions.

Are My Investments Safe?


This is a question that I hear and am asked often.  Concerns over the issue of investment safety have increased markedly over the past few years in the wake of high-profile investment scams, such as with Bernard Madoff, as well as a result of the severe market decline of 2008-09.  This is a question that should be addressed from several points of view.

An assortment of United States coins, includin...

An assortment of United States coins, including quarters, dimes, nickels and pennies. (Photo credit: Wikipedia)

Which investment was the safer choice? 

A major concern of investors in or approaching retirement is the risk of losing money from their investments.  Any way you look at it, a 37% loss in the S&P 500 Index (as occurred in 2008) is devastating, especially to an investor on cusp of retirement.  Many investors sold out of their equity positions in late 2008 or early 2009 just as the stock market was nearing bottom (the S&P 500 hit its low point of that cycle on March 9, 2009).

Let’s look at an investor who had $10,000 in an S&P 500 fund at the beginning of 2008.  The index lost 37% for the year so his fund was worth roughly $6,300 (we will ignore fund expenses for this example).  If this investor sold his holding and moved it all to a money market fund his money would have “grown” to maybe $6,500 by September 20, 2012.  As anyone who invests in a money market fund knows the interest rates are abysmal.

By contrast if the investor had held onto his fund, it would have been worth about $10,899 as of September 30, 2012.  While the market fund would not have lost any money during a couple of down periods over this time span, the investor certainly lost purchasing power.  Which investment was the safer choice?

When investing client money risk of loss is certainly top of mind, hence the reason client dollars are invested in a diversified portfolio that combines their need for investment growth with their aversion to losses.  I would tell any retiree or pre-retiree that their biggest risk in retirement is loss of purchasing power (aka running out of money) vs. the risk of investment losses.

Safety from fraud 

Whether its Madoff, Alan Stanford, or any number of lesser know fraudsters investment scams are in the news a lot.  I’d like to tell you that using a fee-only NAPFA member like me is an iron clad guarantee, but alas we’ve had several former members accused of defrauding clients, including two former organization chairmen.  Part of protecting yourself is using you own good common sense.  Ask these two questions (among others):

  • Are the returns touted by the money manager too good to be true?  In the case of Madoff he sold false consistency.  The returns were very steady, but unspectacular.  They were also not possible given how he claimed to have invested the money during the years of his fraud given what actually occurred in the financial markets.
  • Will your money be housed at reputable third-party custodian (Schwab, Fidelity, your bank, etc.)?  If not, this is huge red flag, end the relationship immediately.  This was again a key element in Madoff’s fraud.

Over and above this, check up on what your advisor is doing.  Get online access to your accounts and review each statement carefully with an eye towards verifying and understanding each and every transaction that occurred. 

Safety from fear mongers 

This isn’t one that makes many lists of investor concerns.  I won’t call these folks fraudsters as such, but when the markets aren’t doing well folks telling you to shun more traditional investments and put your money in gold or index annuity products come out of the woodwork.  Both of these can be viable alternatives for a portion of your investment allocation, as can many other non-traditional vehicles.  Again, understand what you are buying, the fees involved, any restrictions on accessing your money, and who is selling the investment product to you.  Invest from a position of knowledge, not fear.

As a brokerage commercial stated many years ago “… money doesn’t come with instructions…”  You don’t need to be a financial expert but you do need to be diligent about who you invest with and where your money is invested.

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

Prognosticators or Product Sellers?


PIMco’s Bill Gross is arguably the best bond manager around and a really smart guy.  He and several of his PIMco colleagues are also master salesmen, just witness the number of appearances on CNBC and how often they are quoted in the financial press.  In the interest of full disclosure I have a fair amount of client assets invested with PIMco.

CNBC.com - 1996

In his August investment outlook letter, Gross proclaimed “… the cult of equity is dying.”  As we’ve come to expect, Gross lays out a very logical case to support his argument and he also says that the bond returns that we’ve seen over the past 30 years are unlikely to be replicated into the future as well.

At the end of the day this is a stroke of genius on many levels.  First it’s controversial and gets people writing and talking about Gross and PIMco.   Second, even with a new push into equities, PIMco is a bond shop.  I can’t help but think that anytime Gross talks down equities there is some motive, conscious or otherwise, to push PIMco’s fixed income products.

Josh Brown in his excellent blog The Reformed Broker recently wrote a post calling out Morgan Creek CEO and CIO Mark Yusko for predicting flat returns for equities over the next 9-10 years and conveniently suggesting alternative investments as the only way for financial advisors to achieve the types of returns their clients expect over this time horizon.

Morgan Creek is in the alternative investments business, and while I’m sure Mr. Yusko is a very bright guy, let’s face it this is just another thinly veiled sales pitch, aimed at financial advisors, for what his firm is selling.

The list goes on and on.  Except during the duration of the Olympics, I generally have CNBC on in the background during the business day.  Many of the guests function in the same fashion.  “Equities are the place to be” might be the mantra of a growth stock mutual fund manager.  The manager of a commodities fund might be predicting inflation into the future and touting commodities as a way to hedge against it.

Look I’m not saying any of these folks are bad people and don’t know what they are doing.  Whether you are a money manager or a financial advisor, you have to engage in sales and marketing in order to attract clients.  Financial advice is a business like any other in that respect.

As a financial advisor whose clients count on me to recommend financial strategies and the products to implement those strategies, I’ve learned to be an intent, but detached listener of pitches.  I attend several conferences throughout the year and listen in on any number of webinars and conference calls on a regular basis.  Many of these are sponsored and presented by financial services providers.   Generally there is much good information presented, but one always has to listen with a critical ear.

As always, please feel free to contact me with any financial planning questions or concerns you may have.

Photo credit:  Wikipedia

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Financial Advice – Have it Your Way


I spent most of today at a seminar conducted by Marie Swift, a marketing and communications guru for financial

Current "blue crescent" logo (July 1...

advisors.  Marie, assisted by her son, did a great job of educating us and stimulating the thought process.  One key takeaway is that content directed to clients and prospects should be all about them, not us the advisor.  This is also true when it comes to the delivery of financial advice.

You are the consumer of professional financial advice, why shouldn’t you have it your way?  I don’t like guacamole and our local Mexican restaurant is glad to put mine on the side so I can give to wife or son.

All too often, investors complain that they can’t or don’t receive the services they need from their financial advisor.

I’ve written often on this blog, US News, and elsewhere that everyone should have a Fee-Only Advisor who takes a comprehensive view of their situation.  That is my service model and it is the right one for my ongoing clients.  That doesn’t mean that it is the right model for your needs and your situation.

With the advent of several online advice sites there are many delivery models that you can consider.  A good place to start is to take stock of where you might need financial help.

  • Are you looking for someone to analyze your overall situation, tell you what you are doing well, and offer actionable suggestions for areas that need improvement?
  • Are you looking for someone to manage your investments using asset allocation and low cost index mutual funds/ETFs?
  • Are you seeking comprehensive ongoing wealth management advice?
  • Do you have just a few issues and would like to work with someone on an “as needed” basis?
  • Do you want to sit down face-to-face with an advisor several times per year to review your investments and overall situation?
  • Are you comfortable doing your own investing and financial planning, but would like to be able to run ideas by a professional on occasion?
  • Are you comfortable working with an advisor remotely?
  • Are you looking for a low cost online solution?
  • Are you concerned about how your advisor is compensated?  About any potential conflicts of interest that may come with their compensation structure?
  • How and how often would you like to be contacted by your advisor?

These questions and many others should be considered when looking for financial advice and the method of delivery for this advice.

Please feel free to contact me with any general questions you may have or if you are interested in learning more about the services I offer.

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Time to Let it Go


I received a call from a prospective client today.  She was upset at the major stock brokerage firm that she was using.  The caller was in her mid-fifties and clearly had educated herself on many of the aspects of being an investor.  She was upset that she and her 7 figure portfolio were shuffled to a new advisor when her old broker left the firm.  She was rightly upset that she had no input in choosing who would handle her money.

Further the caller was upset that she wasn’t receiving trade confirmations on a regular basis and wondered what she was actually paying for the services she was receiving.

These are all great questions and ones that should be asked by all investors.  The caller had indicated that her portfolio was the result of a “windfall” and that she had been doing a lot of reading to education herself from scratch.

While I applauded her for asking these questions, towards the end of the call I turned the conversation around a bit.  She had indicated that her portfolio was her major source of income and that she didn’t know what she was spending on an annual basis.  Further she really didn’t understand how her money was invested or why.

I indicated to her that I thought she was focusing on the wrong issues and that she should focus on getting a financial plan in place and getting a handle on her spending and the resources available and needed to support her lifestyle.

Clearly this is not what the caller wanted to hear as she seemed fixated on determining if the brokerage firm was doing what it claimed for her and if they were overcharging her for these services.  When I asked, she did not feel that she was the victim of fraud or anything related.

While I can understand how she feels, her fixation on this is in my opinion causing her to focus on the wrong things.  What’s the point of focusing on this broker, given that she doesn’t feel valued as a client and that they had indicated to her that they wanted her to move her account?

Investing is about the best use of your dollars from this point forward.  I hope that this caller will ultimately “let it go” and hire a real financial advisor and listen to their advice.

Please feel free to contact me with your financial planning questions.

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Conference Season in Chicago

Although this year is an exception, we generally have a short non –winter season here in Chicago.  For my money there is no better city for a conference when the weather is nice. 
Sponsors of financial conferences have certainly noticed this and “conference season” is in full swing through early fall.
Yesterday I attended a one-day session sponsored by Pension & Investments Magazine called the 401(k) Investment Line-up Summit.  There were some excellent sessions geared toward retirement plan sponsors and those of us who provide consulting advice to them.
Tomorrow and Friday I will be attending the Fi360 Conference downtown.  I’ve been a user of their Toolkit product for a number of years and have a great deal of respect for the organization.  I am looking forward to many of the sessions.  I will be posting about my experience at the conference here next week.
In May I will be attending the NAPFA (the largest professional organization of fee-only financial advisors in the country) conference here.  It’s always great to see many of my fellow advisors.  As good as the conference sessions might be I always learn more from ad hoc conversations with my fellow advisors.
Finally in June I will be attending the Morningstar Investment Conference.  This conference has really grown over the past decade and always provides insights into the investment process and into specific investment vehicles.
You might be saying to yourself, that’s quite a time commitment.  These conferences are great opportunities to learn from great speakers and to talk shop with other advisors.  My clients pay me for what I know it is my responsibility to stay current within my industry.
Thankfully I really enjoy learning about financial planning, investments, retirement plans, and related areas.  These conferences are hardly all fun and games.  The days are typically long and I generally commute back and forth from home to downtown each day for local events.  There are conference fees and the added cost of travel for out of town events.
Overall the benefits far outweigh the costs in terms of time and money.  Next time you talk with your financial advisor or if you are trying to select one ask them how they keep current and what types of conferences they attend.  There’s no right answer, but listen and judge their response for yourself.
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What do Financial Advisors Talk About? Should You Care?


I am sitting in the Orlando airport waiting for my flight back home to Chicago. We just finished our fifth annual NAPFA Mix Group winter meeting. This is our third time in Florida and the first time here with decent weather. A Mix Group is a fancy name for a study group.

All eight of us are either solo or run very small financial advisory practices. All of us are members of NAPFA the largest professional organization of fee-only financial advisors in the country.

As both financial advisors and small business owners we have all found it vital to have a sounding board of our peers who are dealing with many of the same issues. The winter meeting is mostly devoted to our businesses. We reviewed our financials from the prior year with the group and also discussed our 2012 goals. In the course of these reviews we provide suggestions about each advisor’s business. Besides the direct input about my practice issues, much of the advice we gave to other members was applicable to me as well. I took many notes on points raised in these discussions.

For example we all told one member that she needed to make a tough personnel decision and that she should not be shy about implementing client fee increases that truly reflect the value she provides to her clients (a suggestion from a prior meeting). As was a surprise to nobody, she mentioned that there has been no negative feedback from the clients whose fees have already been increased.

Additionally we reviewed several sessions from the TD Ameritrade conference that a couple of the members had attended just prior to our meeting in Orlando. We also discussed several specific client and business issues raised by members relative to situations they were dealing with in their practices. At our Phoenix meeting last year we had a local estate planning and asset protection attorney do a presentation on issues we should be considering for our clients in these areas.

We do another face-to-face meeting, generally in Chicago in the summer or early fall where we tend to discuss a broader range of issues including investment ideas and strategies, practice tools such as financial planning and client management software, and often discuss client specific issues a member might be having. We schedule a group conference call bi-monthly and all during the year we call each other to help resolve a wide range of questions or issues ranging from client situations to investments, estate planning, or what have you. In short we serve as each other’s board of directors and collaborators.

As a client or potential client of a financial advisor why should any of this matter to you? I can’t speak for other advisors, but I often share with clients the fact that I have this support system of seven other experienced professionals with whom I can discuss any number of issues that might arise on their behalf. In addition to these folks, the entire membership of NAPFA advisors across the country is generally willing and ready to share their expertise to help a fellow member. I have been on both sides of that help frequently since joining in 2003.

NAPFA has over 20 of these Mix Groups and the feedback from advisors who participate has been excellent. Besides the NAPFA Mix Groups there are many advisors who participate in other study groups. Additionally most of us attend conferences during the year that focus on education on various topics such as investing, retirement planning, estate planning, and other areas. From my experience the best exchanges occur at these conferences via conversations between advisors in the halls and over dinner. Much learning takes place informally.

Ask your advisor if they participate in a study group or attend conferences. Ask about what they take away from these gatherings.

Differentiate between educational sessions and the trips that many financial sales types win as perks for peddling the most financial products. If your advisor goes on many of these outings ask yourself who is really paying for the trip.

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Is This a Good Investment?


When people learn that I am a financial advisor, they often ask me if a particular stock or mutual fund is a good investment.


 My answer is always “it depends.” I answer this way for two reasons:

    • The better question is not whether fund XYZ is a good investment, but rather whether fund XYZ is a good fit with this person’s overall financial and investment strategy. Knowing nothing about their financial situation there is no way to give them the good answer they deserve.
    • From a selfish perspective, I don’t want to assume the liability of providing off the cuff financial advice. I’ve read about several financial advisors who have been sued for providing free advice of this type by investors who followed it and subsequently lost money. 

Over the years I have encountered many folks who have an array of various stocks, mutual funds, and other investments scattered over a variety of accounts. There is no overall plan for their portfolio. Rather they have read about this fund, a friend talked up that stock, etc. They have a collection of investments or what I call “financial clutter.” The investments are not in any way aligned with their financial goals or any sort of overall financial plan. There is often a high degree of overlap among holdings and not much real diversification. This can place their portfolio at significant risk during a market downturn.

Is this a good investment? A simple question, maybe. The answer is not simple, however.

Feel free to contact me with questions about investing and your investments.

Please check out our Resources page for links to some additional tools and services that might be beneficial to you.

Photo credit:  Wikipedia


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