Being solicited for financial advice

[ERD50]

I am a bit nicer, I offer to give the same level of advice that I give on the forum.
Which funds are better than others, the importance of asset allocation, and suggested books to read.

The way I figure it is if I have a question about subject which I am pretty ignorant say auto repair, or home improvement. I'll ask somebody who is knowledgeable for advice. They typically give me some pretty generic advice, mostly about things to watch out for. Sometimes a very specific advice get product A not B.

I never expect to come back and sue them if the advice isn't great, I just don't ask again.

If someone asks for help & I think I have some help, I try to help.

I'm with you guys. I'm kind of shocked at some of the responses, don't friends try to help friends? If I knew that a friend of mine had specific expertise in an area, and he refused to even talk about some problem I was having in that area, I would question that 'friendship' (although the OP referred to these as 'colleagues', so maybe they are not 'friends'?).


I understand the reluctance of giving specific advice and then being (even if irrationally) held 'accountable'. But that isn't how I handle it. Much as clifp said, you lay out the basics - it's up to them to decide. You are just providing information, resources. If people talk about a 'hot fund' or a 'hot stock', you can mention how things go in cycles, and often what is hot today is cold tomorrow, then lead into basic AA, diversification, rebalancing, etc.

Before I retired, I found that 100% of co-workers asking for financial advice wanted a stock tip that would act as a "magic bullet", allowing them to retire without making much effort. ....

Yep, that seems to be the way most people think, so problem solved!

-ERD50

 

[MichaelB]

I'm with you guys. I'm kind of shocked at some of the responses, don't friends try to help friends? If I knew that a friend of mine had specific expertise in an area, and he refused to even talk about some problem I was having in that area, I would question that 'friendship' (although the OP referred to these as 'colleagues', so maybe they are not 'friends'?).


I understand the reluctance of giving specific advice and then being (even if irrationally) held 'accountable'. But that isn't how I handle it. Much as clifp said, you lay out the basics - it's up to them to decide. You are just providing information, resources. If people talk about a 'hot fund' or a 'hot stock', you can mention how things go in cycles, and often what is hot today is cold tomorrow, then lead into basic AA, diversification, rebalancing, etc.

-ERD50

The question was about giving financial advice to colleagues, and that is how I suspect most responded.

So, a few colleagues have got wind of my imminent E(S)R departure here at MegaOrg. I'm mostly getting sympathy; presumably any jealousy is being kept under wraps.

What I'm also getting (2 cases so far) is veiled suggestions that people would like me to help them look at their finances and see if they can do the same.

 

[Ronstar]

I used to offer friends/coworkers advice when asked. But they always asked for more. It was not only financial - it was everything that they needed advice on that they thought I knew something about. It got to the point where I didn't want to give advice anymore. Now I act confused when they question me, and the requests have stopped.

 

[Hamlet]

+1.

I'm going to do my best to try to help people I like if they ask for my help. Obviously, it makes sense to be careful about expectations so that you don't end up getting blamed when the market goes down.

I'm with you guys. I'm kind of shocked at some of the responses, don't friends try to help friends? If I knew that a friend of mine had specific expertise in an area, and he refused to even talk about some problem I was having in that area, I would question that 'friendship' (although the OP referred to these as 'colleagues', so maybe they are not 'friends'?).


I understand the reluctance of giving specific advice and then being (even if irrationally) held 'accountable'. But that isn't how I handle it. Much as clifp said, you lay out the basics - it's up to them to decide. You are just providing information, resources. If people talk about a 'hot fund' or a 'hot stock', you can mention how things go in cycles, and often what is hot today is cold tomorrow, then lead into basic AA, diversification, rebalancing, etc.

-ERD50

 

[FinanceDude]

Just go out and get yourself some E&O insurance for $2200 a year like I do and get licensed and you're set............

 

[FUEGO]

I figure I can judge a person I know quickly as to whether they have the capacity to understand basic stuff like "spend less than you make, save the difference, and one day you will be wealthy". If the person is unlikely to be able to understand a concept like that, then it is not worthwhile getting involved in explaining incomprehensible concepts to them.

For those that have the capacity to understand, I can be vague enough to talk about what I do without really providing concrete advise as to what they should do. If they are really interested in drinking from my fount of knowledge I can let the waters flow more freely if they are receptive. I never make decisions for others, but rather say "you might want to develop a spreadsheet to calculate that and figure out which is a better option for yourself". Of course there are general things like Whole Life Insurance that can usually be dismissed as inappropriate without a lot of thought, but advice is presented as "accepted wisdom is that whole life is usually a worse deal than buying the term life you need and investing the rest. Keep your insurance and investments separate."

 

[Surewhitey]

Generalities for most, replacing budget costs with interest earned and expect an "event" annually (health, home repair, car replacement).

If I give anything, I usually just tell the ones who want to know what investments I make and I'll try to temper my success with a "loser" choice I make. Usually these are good friends who really understand the loss you may have with investing or retiring.

I also focus on staying debt free to take some pressure off in case of the "events". If you tell them you've been saving for 5-10 years AFTER becoming debt free, that throws water on 99% of their fires.

 

[Midpack]

Before I retired, I found that 100% of co-workers asking for financial advice wanted a stock tip that would act as a "magic bullet", allowing them to retire without making much effort. They did not want to hear anything about LBYM, and would shut off their ears and mind if cutting back on spending was suggested.

In addition to my earlier response, my experience was like W2R's. Sadly they didn't want to learn anything, they just wanted a silver bullet, 'what's the trick.' Investing isn't rocket science, but it's definitely an area where (too) little information can be very dangerous. I watched employees do all the wrong things with their 401k's and then be beside themselves when the market tanked. Their knowledge was based on annual 401k lectures with Schwab trainers and earlier providers, and casual discussions with peers - which clearly proved to be too little information. As much as I would have liked to help them, I limited myself to nudging them in the right direction as my earlier post stated.

Bad advice on car repairs isn't in the same league as bad or incomplete investing advice. The first time someone sees their nest egg drop 25-50% can be pretty alarming to a newbie investor.

No good deed goes unpunished...

 

[brewer12345]

Just go out and get yourself some E&O insurance for $2200 a year like I do and get licensed and you're set............

FD, is that about what E&O costs? Can you get it as a sole proprietor/small shop? I always figured it would be prohibitively expensive and unavailable, so I had mentally wiped the idea of hanging out a shingle away.

 

[52andout]

when I have been asked I have recited the following:

read (from the library of course)
for living below your means and the real value of wage:
Your money or your life
The millionaire next door
Dave Ramsey if you are religious as he can turn people off
various money saving books such as Tightwad Gazette etc. for ideas

for investing:
the books mentioned here, ie. Bogle, Bernstein
I got my first education reading Money magazine

I also advise them to write down every dollar they spent so they knew how much eating out and clothing for example cost, and save up for stuff so you don't pay interest (we even saved up for cars) and negotiate the best deals. We often get free shipping and take away on appliances thrown in when we offer cash on the spot after doing our research.

That by far is the best advice I can give anybody as we all have different tolerances for stock/bond/cash ratios and some people won't invest in utilities that have Nukes for example. To each his own.

Of course their eyes glaze over before I get past the first round of books but they don't ask anymore.

What, no magic stock tip, no way to pick the winning lottery numbers? What good am I.

and don't laugh about the lottery numbers. I know quite a few people whose plan is to win the lottery to retire.

 

[easysurfer]

Before I retired, I found that 100% of co-workers asking for financial advice wanted a stock tip that would act as a "magic bullet", allowing them to retire without making much effort. They did not want to hear anything about LBYM, and would shut off their ears and mind if cutting back on spending was suggested.

So, I usually just pushed the TSP and contributing the max if possible. They probably would have passed out had I mentioned that contributing to the TSP wasn't all they might have to do.

+1. I think many get fixated on if you are able to retire, it's mainly you got lucky in stocks, a big inheritance, or something else that made a big payday.

When explaining the concepts of LBYM, the need to budget, slow and steady (maxing out retirement accouts, Index and rebalance, start young, DCA) they almost get a look of disappointment on their faces.

 

[Bestwifeever]

I do remember one conversation about retirement I had with a friend; however, I was the one who was picking her brain as she is an MBA and also the smartest, most financially pragmatic I have ever known.

Her advice was short and to the point. She referred me to a certain website .

 

[donheff]

Her advice was short and to the point. She referred me to a certain website .

So what's the URL?

 

[rescueme]

When explaining the concepts of LBYM, the need to budget, slow and steady (maxing out retirement accouts, Index and rebalance, start young, DCA) they almost get a look of disappointment on their faces.

The only folks who questioned how we were able to plan for an early retirement were my DW's relations.

However, the suggestions you stated (which we followed) will not work for her relatives, who are the same age as us. They don't have enough time left to "catch up".

As for their kids (who are younger?) They have no interest.

 

[ducky911]

I mentioned a mutual fund to a friend once..than 10 years later she tells me how bad it is doing...but i had got out of the fund 8 year earlier.

So i with you it is not worth the responsability.

 

[Bestwifeever]

So what's the URL?

www.donheff.com, of course.

 

[Midpack]

www.donheff.com, of course.

 

[mickeyd]

I'm a big fan of folks being self educated when it comes to finances. I would not give them a book, but I'd recommend that they read both of the Boglehead books and anything that Bogle has written. They all can be checked out of the public library for free. Most will not take the time to do so.

LBYM.

 

[Sirka]

no reward for helping with investing

and don't laugh about the lottery numbers. I know quite a few people whose plan is to win the lottery to retire.

+1

Winning a lottery is a poor man's dream.

I am helping my DD with their 401k & IRAs, but I see how nervous she gets when I send her a chart, that is not going UP. Her husband does not want to look. Basically, there is no reward for helping with investing, especially a friend or neighbor. No matter what you say, it will come back as: You told me to buy XYZ and now I lost BIG.

 

[NW-Bound]

So even after you showed her where she would have been if she had stayed in the single high ER fund compared to what you recommended she was still upset?

Unfortunately, yes.

MIL simply expected you to be good, really really good, like the TV ad some brokerage house ran a while back (or perhaps they are still running it).

It said "The market goes up, you make money. The market goes down, you make money." Yep, that's what stock shorting is for, isn't it?

I once advised a brother-in-law to diversify from putting all his 401k contribution into his company stock. Unknown to me, another BIL of his had advised him to do exactly that, because he believed that company was hot!

Nope, no more! Nowadays, I only talk stocks with friends who understand the risk, and know how "things work".

 

[Free To Canoe]

Before I retired, I found that 100% of co-workers asking for financial advice wanted a stock tip that would act as a "magic bullet", allowing them to retire without making much effort. They did not want to hear anything about LBYM, and would shut off their ears and mind if cutting back on spending was suggested.

So, I usually just pushed the TSP and contributing the max if possible. They probably would have passed out had I mentioned that contributing to the TSP wasn't all they might have to do.

Uncle: Did you make a killing in the stock market?
Brother: I wish I could be rich (like you). Can you show me?
"Friend": How did you do this? Selling drugs?

I fear that most don't understand the multiple pronged effort involving earnings, investing and LBYM. They want a silver bullet story in less than 3 minutes. Interesting that the "Friend" now gets it. Bought a retirement home that he rents out and is planning for the day. There is hope. People sometimes learn from our examples.

 

[Nords]

I used to offer friends/coworkers advice when asked. But they always asked for more. It was not only financial - it was everything that they needed advice on that they thought I knew something about. It got to the point where I didn't want to give advice anymore. Now I act confused when they question me, and the requests have stopped.

In addition to my earlier response, my experience was like W2R's. Sadly they didn't want to learn anything, they just wanted a silver bullet, 'what's the trick.'
No good deed goes unpunished...

Uncle: Did you make a killing in the stock market?
Brother: I wish I could be rich (like you). Can you show me?
"Friend": How did you do this? Selling drugs?
I fear that most don't understand the multiple pronged effort involving earnings, investing and LBYM. They want a silver bullet story in less than 3 minutes.

You guys raise an interesting point.

10 years and six months ago, when I was still in uniform (with a military haircut, freshly shaved, neatly groomed, and dressed up like a recruiting poster) everyone wanted to hear my advice on how my brilliant investing got us to ER.

Today, though, they look at how I'm groomed & dressed and they're afraid that I'm going to ask them for money.

"Hey, c'mon, I put a fresh scrunchie in my ponytail last week!!"

So this problem will rapidly disappear after your retirement farewell party.

 

[growing_older]

When I have been asked for advice, I do give it. But as far as I know it is never taken. What the people asking really want is either a secret that will magically make money with little effort, a hot stock tip, a way to safely withdraw 10% or more of a portfolio, or validation for whatever crazy idea they found that they are going to do anyway whatever I tell them. I hope that maybe they will think about what I say and it might influence them slightly in the future, but my experience says that is unlikely.

I have a friend who is a very successful investor and he tells me similar stories about being approached. In a few rare cases, family members prevailed upon him to actually invest on their behalf - and he has all the professional licenses to take them as "clients" albeit non-paying ones. These are the only people who do what he advises, and only because he's actually doing it for them. So then he does the work, but still gets the complaints when they hear about some hot new stock and their account didn't beat those returns.

 

[mickeyd]

Oops! Internet Explorer could not find www.donheff.com

I could not resist...

 

[obgyn65]

I would stay away from giving financial advice. Like others above have mentioned, I like the idea of recommending a book (or this website http://www.early-retirement.org/)

Should I offer to help, or smile politely and pretend that I haven't noticed the veiled suggestions?