Have you tried to advise friend on investing?

[Plantman]

99% of people have no interest in learning how to get rich slowly, with sacrifice. On the other hand, if you know how to get rich quick with no sacrifice, they'd be interested.

Ain't that the truth!

 

[Gallaher]

People that really care about wealth accumulation will figure it out on their own, like the people on this forum did/do.
I believe financial conversations bore most people. Hence the poor finances of most Americans

 

[aja8888]

People that really care about wealth accumulation will figure it out on their own, like the people on this forum did/do.
I believe financial conversations bore most people. Hence the poor finances of most Americans

How very true this post is. It's really all about desire to take the steps, and they are out there for the taking. But....it's too easy to have someone "handle" it.

 

[rayinpenn]

Lucille, a colleague at work, had a tuff life .. her X took up with a significantly younger woman, married her then died soon thereafter. Left her with 2 kids and zero child support. Her investment in her 401K were all in the safe fund (grew maybe 5% each year). We got to talking and I convinced her to take some risk... maybe 15 years later she told me at her retirement party “Ray if it wasn’t for you I wouldn’t have anything”.

I’m glad I stuck my nose in.. It still gives ma a good feeling.

 

[travelover]

........I’m glad I stuck my nose in.. It still gives ma a good feeling.

Timing is everything. What if this happened in 2008 and she sold in a panic in the crash? Then you'd have been the heel that destroyed her retirement.

 

[rayinpenn]

Timing is everything. What if this happened in 2008 and she sold in a panic in the crash? Then you'd have been the heel that destroyed her retirement.

Ive counseled people not to sell during the crash..some listen some dont. I do what i can

 

[HI Bill]

I try to get people to at least think about when they want to retire. Most just think, "I"ll work until I can't", or "I'll work until I qualify for SS". It's amazing to me how many smart, technical, STEM, and even finance folks can manage millions of dollars in projects, but can't or don't plant adequately for thier own retirement, or even think about what they want to do then!

 

[rayinpenn]

I try to get people to at least think about when they want to retire. Most just think, "I"ll work until I can't", or "I'll work until I qualify for SS". It's amazing to me how many smart, technical, STEM, and even finance folks can manage millions of dollars in projects, but can't or don't plant adequately for thier own retirement, or even think about what they want to do then!

America is a nation of spenders.. I think the national savings rate is less than 5% of disposable income and we all know that double that may not be enough. Until that changes people will approach retirement age without adequate means.

That shinny red truck is a case in point..seems like TV says they come with a super attractive woman sometimes wearing a camo bikini. The trouble is that the average cost of that truck is approaching $50,000. The first time i walked through a lot of new trucks I had sticker shock.. and I wasn’t buying just cutting through the lot.

I just saw a financial blog where a mature women wearing too short jean shorts posing next to her Mustang 5.0 convertible that she was buying. My comment” that car has only average reliability, is expensive too insure, is a gas guzzler. Answer live a little! My thought: today.

 

[griffithee]

My SIL had asked me recently about what to do with her 401K in preparation for retirement in 10 years. Upon reviewing her statement, I noticed she does not take advantage of the company matching nor does she invest to her max per year. I told her, "If it was me I would max out the contribution and then some and put it in a total market fund. I also explained to her the Trinity study and the SWR. Told her to go to fireCalc and play around in it." Her reply was, "Thanks." I had not heard anything about it until last week when she asked me, "Should I sell all my stocks since the market is melting down?" I only replied, "I would not. I do not believe it is melting down and remember when I talked about the Trinity study?" Nothing but crickets since then. I suppose free advise is valued at the amount it was paid for.

 

[karen1972]

I assume most people won't really follow it, they usually are asking because they already have a choice in mind and were told no by at least one other person. They know you are smart with money so if you side with them, they will be able to use that to get their way and justify it. It seems though you are in agreement with her husband which is likely why you got asked.

 

[steffano]

they aren't really asking for your advice

This is classic for people wanting to alleviate their anxiety by wanting you to support their behavior. If someone wanted advice they would actually do something differently.

I put questions about money in the same bucket as questions about property lines. The emotional response is highly idiosyncratic and even knowing someone for many years you can't know how anyone will respond.

So the only thing I have found helpful is to help build a financial spreadsheet with cash flow and balances with my friends and relatives who ask. It seems neutral enough to make an impact.

I did give advice once to a friend who is a cardiologist and got a $100K bonus. He asked me what to do and I told him to put it in VTMFX. He told me it was too risky so instead invested in a rubber glove factory in China and promptly lost everything.

 

[NoMoreJob]

Most people don't want to be bothered by all the details and would rather offload that to an 'expert.' Unfortunately in the details is where the devil hides.

 

[Doc0]

I took a friend who was stuck in a mound of cash and fear and created for him a standard format kind of 60/40 portfolio but that's as much as I wanted to get involved.

 

[FinancialDave]

It's a delicate subject giving financial advice to friends (or family.) I usually advise against it.

The first thing I ask myself is -- did this person ask me for advice or did I just think they needed my advice, for whatever reason.

If they directly ask me for advice I would probably tread lightly, but spend as much or more learning about what they felt about it than trying to force my opinion on them. Maybe just trying to "work them" through the issues is one way of handling it. In the end, they need to be 100% comfortable with whatever they decide.

Dave

 

[FinancialDave]

This is classic for people wanting to alleviate their anxiety by wanting you to support their behavior. If someone wanted advice they would actually do something differently.

I put questions about money in the same bucket as questions about property lines. The emotional response is highly idiosyncratic and even knowing someone for many years you can't know how anyone will respond.

So the only thing I have found helpful is to help build a financial spreadsheet with cash flow and balances with my friends and relatives who ask. It seems neutral enough to make an impact.

I did give advice once to a friend who is a cardiologist and got a $100K bonus. He asked me what to do and I told him to put it in VTMFX. He told me it was too risky so instead invested in a rubber glove factory in China and promptly lost everything.

That's a classic!

 

[msanniee]

I educated myself on investing and was comfortable with my results.

My colleagues from my second career tended to not know the difference between gross and net salary. Was never comfortable giving advise.

Never understood how educated people knew so little about money. Yep- I am retired as a teacher.

 

[FIREd]

I don't offer advice on investing anymore. When MIL (at the time) got divorced in 2007, she asked me to look at her portfolio because she didn't know anything about investments (FIL took care of money). She was in her mid 60's and her small portfolio was extremely aggressive (100% of her equities was invested in international stocks and that represented IIRC 80% of her total portfolio). So I proposed an asset allocation more in line with her age (much lighter in equities and a more balanced US/International split). Anyway, 2008 comes along and I get blamed for the losses (it would have been so much worse if I had done nothing but she did not understand that). Similarly, she asked me to help draw a new budget based on her new situation as a divorcee. But she blamed me for trying to "starve her" when I came up with a sensible budget meant to stretch her meager resources and SS check. That was the last time I volunteered to help anyone with their finances.

 

[Walt34]

I don't do it often but a young lady we know (and through legal adoption is now legally our niece, a long story) asked for advice on her then-401k options. I sent her some books that I ordered from Amazon, and a few years later we were thrilled to learn that she actually read the books and then acted on what she'd learned.

http://www.early-retirement.org/forums/f28/sometimes-the-message-does-get-through-94019.html

At this time Mom & baby daughter are doing just fine.

 

[Callitaday2022]

My first chief out of school gave me advice to read Money and Kiplinger's, and immediately start investing in no load mutual funds. I am so appreciative of that that we give interns a basic handout.
A couple of weeks ago had a coworker thank me for encouraging him to refinance to low rate 15 year mortgage when rates were super low. He said almost paid off!
Thought about teaching financial peace university for coworkers, but not too much interest and lots of local classes offered if they did want to take it. I didn't need the class, but found it interesting that cost a lot more to teach the class than take it. Don't agree with all his teachings, but seems to work for many.

 

[Oakster]

Yesterday a friend, who I know from high school, called me about buying a rental property. She is a psychologist and works as a therapist. She is not a money or a numbers person, but she knows that I am. She told me that she isn't earning enough on her financial investments. She thinks that she's earning 5%. At first we discussed the basics of real estate investing. The property that she has in mind sounds okay to me. She could buy it for cash. She owns her own house free and clear and she inherited her mother's house free and clear and rents it out. I asked her what percentage of her assets would be in real estate but she didn't know. I asked her what she has for other investments but she didn't know. She told me that she has a financial adviser that she pays a percentage to and they make the investment decisions. I suggested that the first thing to do is to access her situation, create a balance sheet and income statement. She has never done this. Next I asked her to read her financial statements and give me a list of the investment ticker symbols and the number of shares and I'd estimate her income and risk. She's never done this and wants to fax me the statements. I have not seen them yet but I gather that they are from the adviser and not from brokerages. She told me that she transferred her investment money to the adviser, I guess to an account that the adviser controls. From what she said the adviser is an independent planner who some of her work friends use. I told her that I didn't advise giving this control to someone or paying a percentage. It's okay to pay for advise but she should have control over her trades and accounts. She told me that she's comfortable with this person making the decisions. She did send me a high level list of what she has. Currently she has 5% cash, 42% investments of type unknown, and 53% real estate. She's done alright and has about $1.3 million net worth. Once I get the statements I'll look up the tickers and see what interest and dividends they pay and how risky they are. The money for the real estate if she bought it would come from the money that is with the adviser. I'd probably advise against any more real estate and I have advised against giving a blanket power of attorney to an adviser. I don't plan to give advise on individual investments, but I do think that people should be aware of their allocations, income and risk and they should have contingency plans. During our discussion she told me that an adviser talked her mother into selling her blue chip stocks that she had owned forever and he sold her annuities. There went the inheritance. Her husband was a house flipper who got totally wiped out in 2009. He's of course reluctant to buy more real estate. I guess I'm wondering if people on here have had similar discussions with friends and how that went.

I think I would start with helping her understand that wealth and financial independence do not happen by accident. That being said, finances do not have to be difficult either. Very simple use of mutual funds and decisions made on purpose with money can get you there. Investors and advisors have their own motivations as well as your own. They have goals to meet, quotas etc. You are right on the mark about not letting others have control of your investments and especially your financial decisions.

 

[Oakster]

I really was not interested in investing or retirement or anything having to do with money. What an idiot 30-year-old self was. So there was a pretty big market swing down and all my mutual funds lost money repeatedly for months. At the bottom I sold them all and blamed him.

This person you want to help is willing to cede complete control to someone else, without understanding anything. Just ask yourself what will happen if she takes your advice and it doesn't seem to pan out in the short term.

Great point, with the proof to go along with it.

 

[gayl]

She did send me a high level list of what she has. Currently she has 5% cash, 42% investments of type unknown, and 53% real estate.

Stop

42% 'unknown' & is the 5% cash with same 'advisor'?

Transfer to anyone of the Big3 (Fido, Schwab, Vanguard) so that the money is real, statements are real, suggest she watch an episode of American Greed b4 she retires to 47% $0 & 53% real estate

 

[MichaelL]

Lots of great observations and experiences mentioned in this thread. I looked over my friends statements and she has layer upon layer of expenses. Mutual fund, full service brokerage and financial adviser for 3 layers of fees. The FA put some of her money in an annuity that is full of penalties and additional fees. The brokerage account is invested in dozens of mutual funds that are being churned and running up transaction fees. I was surprised that my friend was open to hearing all of this and has taken the action to have the adviser fully disclose everything to her. Once she understands the costs she has agreed to move her money to a discount brokerage and take control and invest in just a few funds. I hope to see this happen. It will be a big change for her. She is realizing that she needs to take control if she is going to meet her goals. As far as the real estate we discussed her selling a property that she doesn't like so much and buying one that she will eventually retire to when she down sizes. That way her AA doesn't change but she is working the plan to retire. The good part is that she has enough money to follow her goals. I did a cash flow for the next 30 years and showed what she might do, such as working 5 more years, then moving to the smaller property and renting the larger one and then selling the larger one. This all works out with conservative estimates for everything. I was concerned that she might not like hearing the bad news but fortunately she was more pleased to know the good news, that her goal is reachable.

 

[easysurfer]

Not often. But the times I've had, I tell them about not trying to beat the market but invest passively by indexing. That's pretty much a conversation killer and they lose interest. Unless they also see the light .

 

[Teacher Terry]

Michael, that’s great news and it sounds like you really helped her!