Question:
We’ve been married just under five years, and we feel we’re finally at a point where we’d like to start working with a financial planner. From what we’re seeing, most require $250,000 or more in investable assets. We have more about $150,000—including our 401(k)s. What should we be looking for?
Answer:
We recommend seeking a fee-only adviser. You may see some brokerage houses lean toward a similar structure, charging a fee as a percentage of assets, but the difference between a registered investment adviser and a broker is the fiduciary duty. The registered investment adviser has a fiduciary duty to put your interests first. Brokers have a duty to place you in suitable investments.
We highly recommend you understand how your adviser gets paid. Registered investment advisers are required to file a form ADV with the Securities and Exchange Commission. The document outlines the services the adviser provides, how they are paid for the services, and it also clearly states any potential conflicts of interest.
Generally, advisers charge a fee as a percentage of your investable assets, often between 1% and 1.5%. However, many also charge an hourly rate or flat fee for a financial plan. Depending on your financial situation, you may not need a comprehensive suite of services that includes planning and asset management. You may only need an adviser to sit with you to develop a plan that you follow. Generally, you make an appointment for a check-up every three years or so. Depending on the complexity of your situation and the expertise of the planner, a plan can cost between $500 and $5,000.
Ideally, a planner should look at your estate plan. In Georgia, there is almost nothing worse than dying without a will if children are involved. It can be a tremendous waste of money and resources to obtain a guardian ad litem for the children—or someone who is legally responsible for protecting the well-being and interests of a minor—and go through the courts to straighten your affairs out. The essence of a financial plan is knowing your family is provided for should something happen. A financial adviser should review your estate plan, and he or she should consider your insurance planning as well. You may also need life and disability insurance to protect your family and wealth.
Your financial plan should dictate what investment strategy you should follow. At Henssler, we recommend investing using the Ten Year Rule, where any money needed within the next 10 years is kept in Treasury bonds or similar liquid investments. Any money not needed within the next 10 years is invested in high quality stocks with the intent of holding long-term.
The other part of the financial plan involves cash flow planning and budgeting. We often find people don’t know what they spend. Most people are not rational about their money. There are millions of articles and books available on how to address the various financial issues that you may face. It is possible to do it yourself, but when you get to a point where you are uncomfortable doing it yourself, it is time to call in the experts. This point may be for complex areas that you do not understand like tax laws, or perhaps you become uncomfortable once your portfolio reaches a certain dollar amount. Some people reach the point when it is no longer the best use of their time to learn the complexities of financial planning. It could also be not knowing what to do in a difficult market.
At Henssler Financial we believe you should Live Ready, which includes understanding the type of expert you need for your financial situation. If you have questions regarding your financial plan, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
