Help a FP Go Straight

[Koolau]

Got a relatively new friend who is a Financial Planner with one of the "big" firms. I won't mention the company because you might give up hope of ever influencing him. I don't work with his company (heck, I don't "work" with any company) when it comes to financial planning. I'm strictly DIY at this point - too many bad experiences when I tried to get "paid" help.

SO here's the deal. In general terms, I've talked to this guy about "How I Did It" (e.g., retired early, moved to paradise, bought a condo, still have growing non-RE assets, etc.) He's a young guy, not quite 40, and seems genuinely interested in "learning" about financial planning (I was thinking that it's about time since he's been doing it for several years!) He actually asked ME what books he should be reading.

My first inclination is to suggest he read "A Random Walk Down Wall Street" and then find everything Jack Bogle has ever written. Sounds too "simple" so I thought I'd ask the group what books (from financial "history" to "nuts-and-bolts") you all would recommend to him. This guy is an honest man who would not knowingly take advantage of his clients nor steer them wrong for his own profit. Still, he does "sales" and I sense that he was set back on his heels by the recent unpleasantness just like the rest of (many of) us.

I see a window of opportunity to make a "bad boy (with good intentions) go good" so to speak.

So any suggestions you have (preferably with a line or two of synopses - e.g., "A Random Walk Down Wall Street" - A treatise on managing your own portfolio) would be appreciated.

 

[brewer12345]

Fror starters, send him to Home Page - NAPFA - The National Association of Personal Financial Advisors

 

[haha]

Got a relatively new friend who is a Financial Planner with one of the "big" firms. I won't mention the company because you might give up hope of ever influencing him. I don't work with his company (heck, I don't "work" with any company) when it comes to financial planning. I'm strictly DIY at this point - too many bad experiences when I tried to get "paid" help.

SO here's the deal. In general terms, I've talked to this guy about "How I Did It" (e.g., retired early, moved to paradise, bought a condo, still have growing non-RE assets, etc.) He's a young guy, not quite 40, and seems genuinely interested in "learning" about financial planning (I was thinking that it's about time since he's been doing it for several years!) He actually asked ME what books he should be reading.

My first inclination is to suggest he read "A Random Walk Down Wall Street" and then find everything Jack Bogle has ever written. Sounds too "simple" so I thought I'd ask the group what books (from financial "history" to "nuts-and-bolts") you all would recommend to him. This guy is an honest man who would not knowingly take advantage of his clients nor steer them wrong for his own profit. Still, he does "sales" and I sense that he was set back on his heels by the recent unpleasantness just like the rest of (many of) us.

I see a window of opportunity to make a "bad boy (with good intentions) go good" so to speak.

So any suggestions you have (preferably with a line or two of synopses - e.g., "A Random Walk Down Wall Street" - A treatise on managing your own portfolio) would be appreciated.

I recommentd that you leave him alone. Giving him books will only introduce dissonance which will give him trouble at his main cash generating occupation-gathering assets and commissions. It would be like giving a commando Ghandi's books.

Ha

 

[kcowan]

Well it might rescue a nice guy. I think arming him with DIY knowledge might cause him to go independent.

 

[Koolau]

I recommentd that you leave him alone. Giving him books will only introduce dissonance which will give him trouble at his main cash generating occupation-gathering assets and commissions. It would be like giving a commando Ghandi's books.

Ha

I actually thought about that. I sense the guy is at a cross roads in his life. Perhaps it's a crisis of continence. I'd rather he had some direction at this point. As I mentioned, even though he is in sales rather than fee per hour, he wants to do the right thing by his clients. I think Kcowan may be right that he wants to throw off the shackles of the "company" and at least become independent. Who knows, maybe he'll become a fee only guy. He has the patience and temperament for it (I've seen him juggling the needs of his wife and kids with his volunteer stuff as well as work).

He asked me a serious question and I thought I'd pass it along. It's not every day we get a chance to influence "the enemy" instead of just criticize him or take cheap shots like we usually do at such folks. It's funny how, when you get to know someone, you can overlook his foibles and see the "good guy" trying to get out. I just thought maybe I could get a "seeker" some help here. Maybe I shouldn't have told the truth about who he was, but that's not my style.

 

[IndependentlyPoor]

a crisis of continence

 

[LOL!]

The books I would recommend:
Anything by Larry Swedroe, but "The Only Guide to a Winning Investment Strategy You'll Ever Need: " is a good starter.
Books by William Bernstein, "The Four Pillars of Investing" is probably the best, but he keeps saying the exact same thing but dumbed down in "The Investor's Manifesto"
Rick Ferri, "All About Asset Allocation" and others by him
Larimore et al.: "The Bogleheads' Guide to Investing"

I think books that say, "Just do index investing" like those of Bogle and Malkiel are too simplistic. If you want less fluff, then I think the books I mentioned are better.

Of course, these books would give financial salesreps some ideas of where the clients leaving them might be coming from.

 

[Koolau]

I think books that say, "Just do index investing" like those of Bogle and Malkiel are too simplistic. If you want less fluff, then I think the books I mentioned are better.

.

Thanks LOL! You're probably right about the "indexing" issue. That was a phase I went through at least in my reading, though I never completely followed through with it. Thanks for the books/authors list. That's what I'm looking for.

 

[Koolau]

It could happen - even to a sales guy!

 

[nvestysly]

Some of My Favorites

These are not all "financial" books but they deal with money, life, etc. and may be helpful

The Richest Man in Babylon by George S. Clason (all time favorite financial book - just pay yourself first and everything else will be fine! Also discusses topics related to life)

Your Money Or Your Life by Joe Dominguez and Vicki Robin (very good for somebody trying to find their niche in life. FIRE can be achieved via a number of different paths)

The Only Investment Guide You’ll Ever Need by Andrew Tobias (sort of "indexing is the way to go" but also simplifies the topic of investments)

Money For Life by Robert Sheard (another take on finding a life that suits you and then how to financial support that lifestyle)

The Future for Investors: Why the Tried and True Triumph Over the Bold and New by Jeremy J. Siegel (old fashioned advice on dividend stocks, etc. Siegel makes a good case for boring stocks rather than following the next hot stock tip. I'm re-reading this book and find it as useful today as when I first read it five years ago.)

 

[ERD50]

I recommentd that you leave him alone. Giving him books will only introduce dissonance which will give him trouble at his main cash generating occupation-gathering assets and commissions.
Ha

Well it might rescue a nice guy. I think arming him with DIY knowledge might cause him to go independent.

Yes, the trouble is I don't think you can really make money doing it the simple way. One of the forum members (can't recall who - maybe clifp?) talked about how they were interested in doing straightforward PF as a part-time endeavor, but how much can you charge to say "Buy a few index funds, rebalance once in a while"?

-ERD50

 

[jayc]

He's a young guy, not quite 40, and seems genuinely interested in "learning" about financial planning (I was thinking that it's about time since he's been doing it for several years!) He actually asked ME what books he should be reading.

I think you are wasting your time. He has been playing fast and loose with the label of "Financial Planner" and has to ask you which books to read. Unbelievable. First thing, advise him to never tell this story to anyone again. If he was really interested he would have stumbled unto this forum and countless references by doing ONE google search on the subject. I have had surgery and I have a brain. I guess that makes me a brain surgeon.

 

[Koolau]

I think you are wasting your time.

Well, then, I guess there is no hope for any of us to change. Even those of us who express an interest in doing so. What a shame.

I met him socially through volunteer work and have gotten to know him and his family very well. It's clear to me that he is a good person, honest, successful and... searching. I recall times in my life like that and I thought I (we) could help. Some obviously want to help and others - not so much. But thanks anyway for your comments.

Actually, I called him an FP. Don't know if he uses that term or not. I don't recall it. He shared his interest with me because we had spent time talking about how I had been able to retire early. I think he is wondering if there is a better way to help his clients. Call him ignorant - he apparently feels that way himself. But why question his motives? Question mine perhaps. But as you so eloquently pointed out, he hasn't found this forum nor has he asked a single question.

 

[Koolau]

Yes, the trouble is I don't think you can really make money doing it the simple way. One of the forum members (can't recall who - maybe clifp?) talked about how they were interested in doing straightforward PF as a part-time endeavor, but how much can you charge to say "Buy a few index funds, rebalance once in a while"?

-ERD50

I see your point and I've always kind of wondered about that too, ERD50. If it were simple, no one could charge $150/hour to tell you what to do. Right? Still, I DIDN'T pay the $150/hour for someone to tell me to index and rebalance when I was young. Because I didn't, I didn't figure out about index/rebalance for a long time. I tried to do it myself and/or "buy" help from sales people. It cost me a lot more in the long run until I learned it the hard way. So, maybe there really IS a market for FPs that just say "index/rebalance (and I'll hold your hand)" for $150/hr. Who knows?

 

[RonBoyd]

http://www.early-retirement.org/for...reading-list-with-a-military-twist-45562.html

 

[jayc]

"So any suggestions you have"

Don't ask the questions if you are not sure the answers will fit your expected outcome. Also, reading between the lines of what you wrote (calling him a Finiancial planner, when now he isn't) is not one of my strong suites.

 

[tmm99]

Koolau,

I think it's great you are trying to offer your friend information that might have not gotten it sooner if it weren't for you.

Of course, it's up to him to take or leave the offered information, but at least, you are doing your part in trying to help, as a friend.

As long as you don't get attached to the information you give him (with intent of changing him - as you have it on the title of the post, or him appreciating you for it, or with expectation that he will follow up), I think all will be well.

 

[Koolau]

Koolau,

I think it's great you are trying to offer your friend information that might have not gotten it sooner if it weren't for you.

Of course, it's up to him to take or leave the offered information, but at least, you are doing your part in trying to help, as a friend.

As long as you don't get attached to the information you give him (with intent of changing him - as you have it on the title of the post, or him appreciating you for it, or with expectation that he will follow up), I think all will be well.

Excellent advise - I plan to take it! I have the best of intentions, but I know he will be up against years of "training" designed to downplay the things we've all learned - some, like me, the hard way - and others at a very early age. At least I can say I tried and I'll still be his friend even if he doesn't listen.

Thanks!

 

[samclem]

In theory it would seem that an FP could be a "good guy" and do okay.

Meeting one: "Let's talk about your goals and risk tolerance. After that, I'll show you how I'm going to construct an asset allocation and how I'm going to find investments that meet that allocation at very low cost to you. I'll explain why I'm putting certain investments in particular places to help minimize your taxes. I'll also give you a short exposure to the academic research behind what I'm doing, and the very solid case against trying to constantly guess what the market will do next. I'll also show you the historic returns of a portfolio like the one we're building, though there's no guarantee the future will be like the past. I can't guarantee that you'll always make money, but I can guarantee that the things we've chosen to invest in will always perform within 1% of "the market" of similar things. And, any year that you don't do as well as the average investor, I'll refund my fee. For this I'll charge you $300--let me show you what you'd pay, total, if you went to a commission-based financial planner."

One year later: "Let's look at your returns for last year and compare them to the indexes [they'll be within 1%] and to the returns of the average investor [the client will almost certainly do better]. . , and I'll show you what your account balance might have been if I'd put you in investments favored by commission-based FPs.

Okay, here's how I intend to rebalance your investments to put things back into the same risk category we started with last year. See you next year--that'll be $300."

Most investors would be far better off with an arrangement like this than if they used a commission-based FP or if they tried to do it themselves. An FP doing business like this would gross over 60K per year if he met with just 4 clients per week. To make big money, this would have to be a higher-volume operation, but, in theory the potential is there. And, he could sleep soundly knowing he was doing well by doing good.

But, theory is different from reality. I'm sure this business model stinks or else people would be doing it. It's very hard to compete with all the market hype and the sharks promising a quick buck and/or no risk. Or the FP's who charge "nothing" . . ."I get paid by the fund companies, I offer this service at no charge to you." Ugh.

 

[LOL!]

The advisor associated with our old 401(k) was a nice enough guy. He knew about Fama & French and asset allocation. The funds in our 401(k) at the time were all actively-managed high expense ratio beasts, but they did cover almost all the asset classes that anyone would want. For example, we even had a small cap international fund available in our 401(k). A colleague showed me a recommendation the advisor gave them for 401(k) choices. He was given a full-on small and value-tilted asset allocation with about half US, half foreign, half large, half small, half blend and half value for the equities. My colleague understood none of this, nor the expense ratios they were paying.

So Koolau's acquaintance could learn about asset allocation and some other things, but implement them for his clients while using non-index funds.

 

[jayc]

So Koolau's acquaintance could learn about asset allocation and some other things, but implement them for his clients while using non-index funds.

If he works for the ‘big firms’ then he is directed/trained to follow their recommendations and push their products. Which is to get the most assets as possible under the 2% annual fee plus commissions. He is probably not allowed to give ‘his’ recommendations or the DIY FIRE approach (i.e. Buy products with the lowest expenses). Plus it would probably lower his annual salary.

 

[LOL!]

Our 401(k) advisor worked for MorganStanley. I'm not sure if that counts as a 'big firm' in your eyes or not. My impression is that the approved list includes high-fee funds in just about every asset class.

 

[chinaco]

A financial planner from one of the Big Firms who really want to learn asking for advice... from a DIY non-pro (no offense to the OP of course). What about the Company training, the MBA, CFP, etc.

Reassuring isn't it... I hope he learns before he engages clients.

Just shows you what your likely to be dealing with.

 

[kcowan]

A financial planner from one of the Big Firms who really want to learn asking for advice... from a DIY non-pro (no offense to the OP of course). What about the Company training, the MBA, CFP, etc.

Reassuring isn't it... I hope he learns before he engages clients.

Just shows you what your likely to be dealing with.

Usually they just parrot the sales pitch that they are given.

 

[ERD50]

In theory it would seem that an FP could be a "good guy" and do okay.
...

Okay, here's how I intend to rebalance your investments to put things back into the same risk category we started with last year. See you next year--that'll be $300."

An FP doing business like this would gross over 60K per year if he met with just 4 clients per week. To make big money, this would have to be a higher-volume operation, but,

A 200 active client base, I wonder how many calls you'd need to make to get 200 clients to say "Yes"? (plus replace those who leave, die, or realize they can do this themselves). I think that's the rub. I think it could be done, but it would need some kind of Costco, or WalMart type mass access/credibility to get it off the ground.

-ERD50