Financial planners: bricks&mortar versus online

[Nords]

http://www.businessweek.com/printer/...ick-and-mortar

Admittedly this comes from the perspective of NYC, where everything costs more.

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We went to visit our financial planner-to-be and were immediately reassured by the Park Avenue address, a well-appointed waiting room with crown molding, and framed photos and letters from happy, affluent families. To top it off, the planner was a fee-only shop, which meant it earned no commissions from the financial products it recommended. (This is really the only kind of planner you should ever talk to.) My wife and I had a lengthy conversation with the two owners of the firm and an associate. They asked us roughly 972 questions, which may sound tedious but was actually delightful. First off, the questions were about ourselves, so that’s fun; in this way, financial planning is very much like psychotherapy. Second, we felt that every question brought us one step closer to our sustainable, responsible financial future. It was like the financial equivalent of exercising. We left the advisers’ offices excited and relieved. Our money would be properly allocated, our investments guided to the most efficient mutual funds, and our spending kept within bounds—all by sensible, highly educated men and women in really, really nice suits. All we had to do was furnish the firm with our most up-to-date financial information and fill out a questionnaire together to assess things like our tolerance for risk. Oh, and we had to pay them $5,000.

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Then I read an article about online financial-planning websites like LearnVest, NestWise, and Plan & Act that offer similar services for far less. I could think of 5,000 reasons to look at the alternatives. I signed up with NestWise, which was founded by a Wharton professor. For $250, NestWise would match you to one of its 17 advisers. Your adviser would craft a detailed financial plan that you would execute. All we had to do was furnish the firm with our most up-to-date financial information and fill out a questionnaire to assess things like our tolerance for risk. Sound familiar? That’s what struck me. In practice, this wasn’t terribly different than what Park Avenue was offering. In both cases, all my wife and I were seeking was a road map for our finances: Save X each month in your 401(k)s, set aside this much to grow your emergency fund, and so on. Whether that was done in an office of fine leather and rich mahogany or on my laptop while I, pantsless, ate Hot Cheetos was immaterial.

Of course the downside of both businesses is how much time they spend getting to know you and your financial goals. For $5000 they can do a much better job, but for $250 you might be just as happy with a cookie-cutter plan.

Another financial planner, Jeff Rose, works from Illinois. (Where things probably cost less than NYC.) He's stopped doing online plans because he can make more money blogging.
November 2012 Income Report – Does the Streak Continue?

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I tested out offering financial plans on my site for $500 at the beginning of the year and I’ve had some people take me up on the offer. One month I had four people contact me. With increased demand I raised the fee to $750 (and one case $1,000) but people still kept calling. With such high interest you’re probably wondering why I would be giving up what seems like a sure thing. Here’s why: they take way too much time. To do a financial plan right, it will take me anywhere from 6-8 hours to complete. As my online business grows, I’ve realized that my time can be spent better elsewhere. Case in point example: my niche sites. This month was a record month for my new niche site with over $3,400 of revenue. Not too shabby. I think I’ve mentioned that I’m building out a secondary niche site to compliment the main one. What I don’t think I’ve mentioned yet is that I secured 2 new domains that I’ll be building out in 2013. As your online business grows you’ll realize that certain paths you started down don’t make as much sense as they once did. I know I’ve learned that several times.

I think the conclusion would be that a $250 plan requires too much time to be worth the income, or else it's going to be done quickly by someone with little experience.

I'm not a fan of the $5000 planner, either.

I think the best compromise still lies with a combination of DIY and a fee-only planner who can check for mistakes. But when you've done your own planning and had it checked out here, I don't think there's much left for a fee-only planner to suggest.

After that it's a matter of how much hand-holding and "stay the course" pep talks you want to buy.

[LOL!]

At least the author of the first article admits why he (a financial journalist) could not do this on his own:

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That dutiful, responsible impulse to seek out a planner was present in both of us, but there was something more self-aggrandizing at work, too. Hiring a planner implies that you have finances sufficient to require planning. While what we sought to do was not purely a luxury—it is, after all, a good idea to have a plan for your money—there was a part of all this that was pleasing and affirmative that we had “made it.”

and

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So if your life details are common, what are you paying for? You’re paying for coaches and cheerleaders. It’s the same reason people join health clubs. After all, if you want to lose weight and get fit, it’s simple: Eat better and exercise more. But not everyone can do that on their own—they need to pay a gym or a trainer for motivation.

[donheff]

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Originally Posted by Nords I think the best compromise still lies with a combination of DIY and a fee-only planner who can check for mistakes. But when you've done your own planning and had it checked out here, I don't think there's much left for a fee-only planner to suggest.

Back in 2004 just before I retired (and found this forum) I did this. I had run the numbers but wanted a check from a professional. I read a lot of articles about financial planners and realized fee only was the way to go. I didn't want to pay some ridiculous .5-1% annual fee for the advisor to pick funds and redistribute so I found a young and hungry local fee advisor who would be willing to look at and critique my plan for an hourly fee. I cranked out a detailed list of anticipated expenses, income streams, assets, withdrawal plans, etc and she reviewed it. Her conclusion (at a cost of about $250, IIRC) was that we were good to go with some possible tweaks to the AA. Tellingly, she didn't find any expenses we hadn't anticipated - we had consulted several free online expense worksheets. Naturally, she expressed some reservations about moving to a index fund approach and argued that we would be safer if we entered into a permanent relationship with her. My conclusion was that her conformation supported my expectation that we could DIY it. If I was a more anxious type, I might followup with her every five years or so if she remained amenable. I did like her and the reassurance was valuable at the time.

[pb4uski]

I think DIY works great for those with engineering or accounting or financial backgrounds and others who have the interest and aptitude for numbers and planning. Personal financial planning is not rocket science. Many people can figure it out if they devote sufficient time and study and there are oodles of helpful tools available at no or little cost.

However, there are many who don't have the interest or aptitude and would start, encounter difficulties and give up. For those people a fee only financial planner makes a lot of sense and the online offerings seem reasonably affordable and are probably good enough (and surely better than nothing).

[Midpack]

Small world, I just read the same Bloomberg article at the library a few days ago. I messaged the names "LearnVest, NestWise, and Plan & Act" to myself to research when I got home.

Since the author used NestWise, I went there, but the many links you can access without joining really don't tell you much. They even have a live chat feature, so I went on and asked 'is there any place I can see an example financial plan for a retiree' to get a sense of your product before providing personal information? The response was 'that's a really good idea, but there isn't any place you can see an example. But I will pass the idea on to our management.'

I don't trust sites that want you to sign up/provide personal information before giving you any idea what their products/services are, so I didn't pursue it.

Does anyone have personal experience with any of these sites?

[racy]

DW and I have done our own financial planning for 35 years. However, we did go to an independent planner once about 5 years ago. One of the things that came out of that session was a realization of the high fees my DW's employer was paying to their 401k administrator & the high fund loads. She mentioned this to her boss; about a month later he ended the 401k plan. So, we paid $1000 to the planner and lost matching contributions!

[FinanceDude]

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Originally Posted by Nords Another financial planner, Jeff Rose, works from Illinois. (Where things probably cost less than NYC.) He's stopped doing online plans because he can make more money blogging. November 2012 Income Report – Does the Streak Continue? I think the conclusion would be that a $250 plan requires too much time to be worth the income, or else it's going to be done quickly by someone with little experience. I'm not a fan of the $5000 planner, either. I think the best compromise still lies with a combination of DIY and a fee-only planner who can check for mistakes. But when you've done your own planning and had it checked out here, I don't think there's much left for a fee-only planner to suggest. After that it's a matter of how much hand-holding and "stay the course" pep talks you want to buy.

He is flat out not telling the truth. For 99.9% of all interested investors, you can put together a plan in less than 3 hours, probably less than 2 hours if their portfolio is not complex. He sounds like a guy selling "buy my program and get rich on the Internet" kits..........

[LOL!]

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Originally Posted by FinanceDude He is flat out not telling the truth. For 99.9% of all interested investors, you can put together a plan in less than 3 hours, probably less than 2 hours if their portfolio is not complex. He sounds like a guy selling "buy my program and get rich on the Internet" kits..........

Sure and free sites like bogleheads.org can put together a plan in less than 15 minutes. I suspect it takes longer to explain it to the client and get buy-in though.