The doctor is in.
Posted by ultrafastx 13 years ago
Well, now that I'm officially Dr. Oofex and will be starting my new job in a week, I've got a question for the more financially savvy around here...  
 
Do you use a financial advisor? Why or why not? And if so, how'd you go about choosing one?  
 
I ask because honeydew and I know how to start getting our financial house in order, so to speak, but we'd really like to start planning for a home, kids and retirement savings. I think we can figure out the basics, but we'd be more comfortable having someone--at least initially--help us formulate a game plan.
...
Mac: >>Do you use a financial advisor? Why or why not? And if so, how'd you go about choosing one?  
 
I do use one. I have found him valuable in getting my financial crap under control.  
 
First thing he/she should do is help you come up with a baseline profile:  
 
Income vs Outgo  
Define baseline of disposable income based on above  
Short term financial goals  
Long term financial goals  
 
The results will be delivered with pretty pie charts and bar graphs.  
 
Then their next step is to sell you on disability and whole life insurance (as an investment)...this is where they make their money. I already had supplemental disability insurance, whole life may make sense for some, just not for me...I went with a term policy from another company...YMMV  
 
Then the next step is to layout a plan for your disposable income to move towards the short/long term goals.  
 
All of the stuff a financial advisor does, one could do themselves given the time/discipline. I have neither so I asked for help.  
 
As for choosing an advisor? I asked friends and coworkers for recommendations. Audition them. Ask about their results. Pick the one who has values and history that most closely matches your own.  
 
Good luck!
darkstar: When I was embroiled in business, I used a CPA for tax filing. The convolutions between the four companies I was a principle in between '92 and '98 (a c-corp, an s-corp, a sole proprietorship and a partnership) as well as trying to untangle my investments (short-term vs. long-term capital gains, amortization, itemized deductibles, etc.) made tax time way, way beyond my capacity. At least in the first few years until I learned.  
 
As for other financial planning, and tax filing now, I handle my own. I've streamlined my investments and am only in one self-employed role. I also have a pretty good understanding of what I'm trying to do financially and the discipline to do it.  
 
Finally, I'm single and solvent. Having assets and not providing for a spouse or kids simplifies matters greatly (no college funds, no trusts, no need for life insurance, etc.). That diminishes greatly the need to have ongoing financial planning consultation.  
 
Otherwise, I generally agree with Mac.
Darwish: Congratulations, Doctor.  
 
And, oh, by the way, I have this rash...
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PAgent: When I got my first real job after my post-doc, and we bought a house, we got an offer for a free financial evaluation as part of a 'Welcome Wagon' kit. We took them up on it, and have been using the same guy ever since.  
 
Whoever you go with will probably do a financial evaluation, and then tell you that if you don't start heavily investing for retirement, you will end up eating cat food. And they're probably right.  
 
Before picking someone, I think it's key to find out how your advisor gets compensated: For example, if he/she is on commission, that provides an incentive to juggle funds around. Not that it's a bad way to go, just something to be aware of.  
 
By going through our advisor, we have access to funds and investment options we wouldn't otherwise even know about. He answers our questions, and keeps us from doing something stupid through ignorance. At the very least, we have someone who sits down with us every year and makes sure we are still following our original plan, evaluates whether the plan should be changed, and checks that our investments are doing what we want them to do. At least once a year, funds get shuffled around to match our 'profile' of risk versus potential earnings. If we decided to do that all ourselves, it just wouldn't get done, or at least done as well.  
 
We use these guys: Waddell & Reed.
..
manGina: Chop wood. Carry water.  
 
That is all you need to know.
thanks all
ultrafastx: I appreciate the advice!
...
clu: You should absolutely get a financial advisor.
For what it's worth...
Bud Tugly: First rule:  
 
Don't choose a financial advisor that has something to sell. PERIOD!  
 
Choose a financial advisor that charges a fair fee for his service, experience, etc.  
 
Second rule:  
 
Buy a house as quickly as possible. Rates are still historically low - get in fast - VERY fast. Beg, borrow, or steal a down payment! You probably qualify for an FHA Loan, so you only need 3% down.  
 
Third rule:  
 
For God's sake, DON'T pay commissions, or "loads", for your investments. You're extremely young, so every dollar you pay in loads is $25, $50, or even $100 you won't have, from compound interest, when you retire.
Bud Tugly: Fourth rule:  
 
Read this book!  
 
From a review...  
 
If we were not in a democracy someone would lock this guy up. He has spilled all the beans on the fake financial advisors and financial and insurance sales people that want to sell you the grotesque front end loaded mutual funds and those annuities that make piles of money for everyone except for the investor. Bogle founded one of the biggest mutual fund groups in America - the Vanguard Group - and he is a burr under the saddle of many financial people. His advice saves you money at the expense of the broker.  
 
The bitter truth is that over the long haul only 10% of mutual funds outperform the conservative S&P 500 index. So why pay some company a front end load fund of 5-7% to under-perform the S&P 500 plus an annual fee of 1.5% when you can buy S&P index shares or Vanguard mutual funds that have no load fees, and have very low annual expenses - often less than 0.5% per annum. You end up giving away a chuck of your money if you do not follow his sound advice.
ultrafastx:  
Second rule:  
 
Buy a house as quickly as possible. Rates are still historically low - get in fast - VERY fast. Beg, borrow, or steal a down payment! You probably qualify for an FHA Loan, so you only need 3% down.
 
 
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!  
 
Sorry...I guess you don't know where I'm going to be living.  
 
I'm going to be working in one of the most expensive parts of LA. And I don't really want an hour+ commute each way. Between a ridiculously hot housing market and speculative buying, prices are extremely high. There are typically multiple bids on properties and a 2-bedroom condo/townhouse is running $450K-500K right now (1 bedrooms are $350K). Houses are out of the question. Even if we could dig up the 3% down payment, the monthly payments would be about 25% more than we're looking to pay. Short of me winning the lottery or moving to Compton, there is little chance we're going to be able to buy a home for a least a couple years.  
 
The sad thing is, I'm making decent money. I don't know who the hell is buying all these multi-million dollar properties.
darkstar:  
Space onleys.
fabulon7: Yeah, plus there's all this talk of the housing bubble down there where you're going to be living, so maybe you wait it out and buy some giant mansion for dirt cheap in a few years...
ultrafastx: That's what I'm hoping. I thnk realistically the market will cool, but I doubt there will be a huge crash. But hopefully it will cool while my salary goes up and the two can meet somewhere in the middle.
Bud Tugly: For what it's worth - The hour-plus commute may be worth the hassle: building equity in a home you can afford right now. It'll suck for a year or two, but the benefits may be being able to afford a house closer to work sooner.
I know it's not what you were asking but...
Testy Cod: The Millionaire Next Door and Rich Dad, Poor Dad were both well worth the time it took to read. Neither of them are get rich quick books but they both give a pretty good, if simplistic, overview of investment techniques.
Testy Cod: by the way, what's your new job?
ultrafastx: Thanks for the recommendations.  
 
My new job is mostly going to be doing some laser damage studies on CCDs and CMOS detectors (among other things).
fabulon7: For once you're supposed to damage stuff with lasers? Right on.