I‘ve been a Dave Ramsey fan since stumbling onto his radio program in 2000. Disillusioned by the dot.com fallout that led to the evaporation of a significant portion of my 401k, I’d been searching for a guru who could lead me out of the financial straits that had frustrated my wife and me for the first fifteen years of our marriage.
Following Dave’s advice, we repaired our financial house. By 2003, I decided that I too desired to serve others in teaching personal finance. Long story short, I quit my day job, went back to school full-time, and graduated in the spring of 2005 with a BA in Finance.
Upon graduation, I was hired by a major wire house and began my career as a Financial Advisor. Company sales goals were established, and I was provided with an array of investment options to offer potential clients. These different types of investments came with varying levels of fees and commissions. I decided to use a fee platform. But, I found myself discounting the fee to what I felt was a reasonable rate. Now reasonable is probably subjective, but most people assuredly don’t understand the long term implications associated with paying higher fees and commissions, especially as they relate to compounding. And, herein lays the issue.
Understanding the intricacies of investments can be a complicated issue. Even I, with a finance degree, and additional training in investments struggle to grasp the subtle nuances of some financial products. In my opinion, “Caveat Emptor”, or rather “Let the buyer beware” shouldn’t apply to investments.
Now, as history repeats itself, we’ve experienced another bursting of a financial bubble. Folks have once again been victimized by their own spending habits, and the greed of others who had gained their trust. Aside from commissions, I agree mostly with Dave’s ideas. Perhaps the greatest tool to risk management is found not in amassing an enormous retirement nest egg, but in getting out of debt, and living life with a vision.
Thursday, November 5, 2009
Tuesday, February 3, 2009
Managing your money during any economic season
When I don my hat as a Financial Advisor, many folks want me to give them the next hot stock tip, or provide them with some sage advice on where I think markets are headed. As I mentioned before, folks want someone to tell them everything’s going to be OK; that their desired retirement date remains intact, that they’re not going to run out of money in retirement.
The current recession serves as a grim reminder of the economic uncertainties facing our Nation, and the rest of the world. But, recessions do happen… they’re supposed to! The economy is cyclical, and is continually expanding and contracting in an effort to attain homeostasis. Intellectually we understand this, but our humanness, finds it difficult to deal with, especially when we’re in the throws of a downward cycle. During recessions, fear overrides intellect, and panic sets in. As job losses begin to hit closer to home, our fears are heightened. The events around us; deepening concerns about the economy, job loss, etc. begin wearing on our psyche. And, it appears as if everyone is in the same boat.
Notice, that I used the word “appears”. Believe-it-or-not, there are people who aren’t in panic mode, people who haven’t fed into the mass medias almost tabloid representation of the crisis at hand. Sure, some of these folks might chime in during an office discussion about the condition of their 401k, but they refuse to get caught up in the panic-driven fray. So, what’s different about these folks? They eat, drink, and sleep just the same as you and I. They live in the same neighborhoods, work the same types of jobs, and frequent the sorts of places and events as you and I.
Maybe the biggest difference is that these individuals aren’t swayed by marketing and media. They choose instead to determine for themselves the nature of their priorities. Perhaps the biggest difference is that they these folks have a plan for their lives. They know what they want, and take the necessary steps to make it happen.
Planning includes setting goals, determining the paths to achieving those goals, initiating a course of action, and making adjustments as needed. Setting goals is about establishing your priorities. Make a list of the things that are most important to you, really important! Now, number these things in order of priority. Next, review your actions to date. Determine which actions are aligned with your stated priorities (goals), and which ones are counterproductive. Now comes the tough part! Stop doing less of the things that are least productive, the things that are eroding your ability to get what it is that you really want! And, start doing more of the things that are in-line with your goals. This all sounds fairly simple on the surface, but the reality is that it can be very difficult. Why? Because we are creatures of habit, and have conditioned ourselves to think and act in certain ways. Besides, it’s easier to keep doing things the same old way, than it is to do things differently. Or, is it?
One could say that there is a pretty good argument for failing to act. And that is, that change can be scary. But, failing to act can be even more frightening, and potentially disastrous to ones well being, or quality of life. Look around you. What you see is the sum total of all your actions up to this point. Do you like what you see? For many people today, the answer is resoundingly, No! Unfortunately, many don’t even know where to begin, even after they’ve decided that change is necessary. So, they continue on with their daily routine, hoping that things will get better. Unfortunately, they usually don’t. But, really, why would they? You’ve heard of the adage about insanity. The definition of insanity is doing the same thing over and over and expecting different results. If you want to win with money, then change is not an option. It is imperative that you change, or you are doomed to fail. So, go ahead. Take the plunge, yes it can be scary, but the alternative is a whole lot scarier. For more information on managing your money, go to the “Financial Services” tab located on my website; www.longrunfinancial.com
The current recession serves as a grim reminder of the economic uncertainties facing our Nation, and the rest of the world. But, recessions do happen… they’re supposed to! The economy is cyclical, and is continually expanding and contracting in an effort to attain homeostasis. Intellectually we understand this, but our humanness, finds it difficult to deal with, especially when we’re in the throws of a downward cycle. During recessions, fear overrides intellect, and panic sets in. As job losses begin to hit closer to home, our fears are heightened. The events around us; deepening concerns about the economy, job loss, etc. begin wearing on our psyche. And, it appears as if everyone is in the same boat.
Notice, that I used the word “appears”. Believe-it-or-not, there are people who aren’t in panic mode, people who haven’t fed into the mass medias almost tabloid representation of the crisis at hand. Sure, some of these folks might chime in during an office discussion about the condition of their 401k, but they refuse to get caught up in the panic-driven fray. So, what’s different about these folks? They eat, drink, and sleep just the same as you and I. They live in the same neighborhoods, work the same types of jobs, and frequent the sorts of places and events as you and I.
Maybe the biggest difference is that these individuals aren’t swayed by marketing and media. They choose instead to determine for themselves the nature of their priorities. Perhaps the biggest difference is that they these folks have a plan for their lives. They know what they want, and take the necessary steps to make it happen.
Planning includes setting goals, determining the paths to achieving those goals, initiating a course of action, and making adjustments as needed. Setting goals is about establishing your priorities. Make a list of the things that are most important to you, really important! Now, number these things in order of priority. Next, review your actions to date. Determine which actions are aligned with your stated priorities (goals), and which ones are counterproductive. Now comes the tough part! Stop doing less of the things that are least productive, the things that are eroding your ability to get what it is that you really want! And, start doing more of the things that are in-line with your goals. This all sounds fairly simple on the surface, but the reality is that it can be very difficult. Why? Because we are creatures of habit, and have conditioned ourselves to think and act in certain ways. Besides, it’s easier to keep doing things the same old way, than it is to do things differently. Or, is it?
One could say that there is a pretty good argument for failing to act. And that is, that change can be scary. But, failing to act can be even more frightening, and potentially disastrous to ones well being, or quality of life. Look around you. What you see is the sum total of all your actions up to this point. Do you like what you see? For many people today, the answer is resoundingly, No! Unfortunately, many don’t even know where to begin, even after they’ve decided that change is necessary. So, they continue on with their daily routine, hoping that things will get better. Unfortunately, they usually don’t. But, really, why would they? You’ve heard of the adage about insanity. The definition of insanity is doing the same thing over and over and expecting different results. If you want to win with money, then change is not an option. It is imperative that you change, or you are doomed to fail. So, go ahead. Take the plunge, yes it can be scary, but the alternative is a whole lot scarier. For more information on managing your money, go to the “Financial Services” tab located on my website; www.longrunfinancial.com
Monday, January 12, 2009
Financial Advice
I opened my fledgling Financial Practice in the fall of 2007. As any entrepreneur will tell you, the first few years can be brutal. From trying to define my business model to best satisfy my target markets needs, to getting the word out through marketing trial and error, it’s been tough.
For many, the title of Financial Advisor or Financial Planner conjures up a vision of a salesman. And, by most accounts, this interpretation would be correct. The most successful “Financial Advisors” by industry standards are those that have amassed significant “assets under management”. For companies, assets represent revenue and commissions. The role of the broker is to bring assets to the firm. Those that bring in the most assets are touted as the best in class. Competition is fierce for these Advisors as Brokerages and Insurance Companies attempt to lure them away from the competition, enticing them with increased revenue sharing packages and huge sign on bonuses.
If you ask me, I think the broker model is flawed. With financial advice contingent on the sale of a product, clients aren’t getting the advice that they really need, advice that isn’t related to an investment or insurance product. Consequently, it’s no wonder that most folks are suspicious of brokers and insurance agents, A.K.A. Financial Advisors. Yet, even as other industries transition to a more transparent compensation structure, these financial firms cling fast to this form of compensation.
In efforts to separate myself from the public’s perception of this industry, I’ve opted for a fee based model. This means that my compensation is based on the needs of the client. A fee-only model enables me to work with anyone along the socioeconomic spectrum and additionally provides assurance that my values remain in line with those of the clients. (To date, I continue to be contacted by Financial Services firms and Insurance companies touting their compensation packages over the competitions. I have yet to receive an employment offer whose focus is on the client.) My services range from providing simple budgeting advice (charged at an hourly rate) to sophisticated portfolio management (charged on a percentage of assets). Now, the trick is overcoming the negative image created by my predecessors and which is perpetuated by many still within the industry. Until these folks clean up their acts, the going will be tough for the rest of us.
For many, the title of Financial Advisor or Financial Planner conjures up a vision of a salesman. And, by most accounts, this interpretation would be correct. The most successful “Financial Advisors” by industry standards are those that have amassed significant “assets under management”. For companies, assets represent revenue and commissions. The role of the broker is to bring assets to the firm. Those that bring in the most assets are touted as the best in class. Competition is fierce for these Advisors as Brokerages and Insurance Companies attempt to lure them away from the competition, enticing them with increased revenue sharing packages and huge sign on bonuses.
If you ask me, I think the broker model is flawed. With financial advice contingent on the sale of a product, clients aren’t getting the advice that they really need, advice that isn’t related to an investment or insurance product. Consequently, it’s no wonder that most folks are suspicious of brokers and insurance agents, A.K.A. Financial Advisors. Yet, even as other industries transition to a more transparent compensation structure, these financial firms cling fast to this form of compensation.
In efforts to separate myself from the public’s perception of this industry, I’ve opted for a fee based model. This means that my compensation is based on the needs of the client. A fee-only model enables me to work with anyone along the socioeconomic spectrum and additionally provides assurance that my values remain in line with those of the clients. (To date, I continue to be contacted by Financial Services firms and Insurance companies touting their compensation packages over the competitions. I have yet to receive an employment offer whose focus is on the client.) My services range from providing simple budgeting advice (charged at an hourly rate) to sophisticated portfolio management (charged on a percentage of assets). Now, the trick is overcoming the negative image created by my predecessors and which is perpetuated by many still within the industry. Until these folks clean up their acts, the going will be tough for the rest of us.
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