Free Financial Advice is Far Too Expensive

There’s no such thing as a free lunch, and that especially applies to supposedly free financial advice.

Here’s how to spot them so you don’t get stung.

Cold callers offering to slash your repayments

Most of the time these guys call you just as you’re sitting down to dinner, promising to manage your cash flow and generally get you out of debt. Barefoot’s view is that cold-calling debt consolidation companies should be outlawed. If you want to pay your debts off faster, there are only two ways: either lower your interest rate (if you are able) or make extra repayments. Everything else is sales spin trying to cream thousands of dollars from you that you don’t have.

Car loans from used car dealerships

I’d barely trust a used car dealership to recommend me a car – so why would you let them recommend you a loan? Don’t do it. Sure it’s convenient, but that convenience comes at a cost. Better to do your own research. Buy what you can afford and never get roped into a finance deal at a car yard.

Free financial advice from financial planners

They’re not free when you realise that the person giving you ‘free’ advice is actually a salesperson paid by the companies of the products they push. Don’t listen to their spin, commissions will affect the advice they give. A much better deal is to pay an expensive fee for service advisor. It will save you tens of thousands of dollars over the long run.

Mortgage brokers

These guys operate in much the same way as ‘free’ financial planners. They may do all the legwork for you, but are unlikely to give you the cheapest effective interest rate on the market, because many of the cheapest mortgage providers refuse to pay kickbacks. Better to do your own research and put the rest into the mortgage!

Where to Get the Best Financial Advice?

Savings and the first 10 years of adulthood

The secret of a financial well being is following good financial advice. However, while there is found arbitrary financial advices in galore, only a few can make the real difference. And one among them is definitely an advice to start saving early, which seems a tough one to embark upon as soon as money starts flowing in. However, fact remains that people still can continue living on a shoestring budget like the college days since old habits die hard. But once you get used to luxury and lavishness right from the start, saving for the later days becomes a hard-to-accomplish dream.  

The secret is to consider the total monthly sum you are receiving as your total turnover; you need to fix a salary for yourself to meet your expenditures; the remaining amount should be kept aside. If you are still a bachelor, then this is the right time to embark upon the process; if you are married and even nearing your 50s, you are still not too late.

Use the strategy to make money. Albeit there shall be an initial period of struggle, it shall ensure the golden days ahead.

Help at Hand
 
Now, that was just an example of one of the methods you can use to save money; the simplest one that shows you how to accumulate the greater part of your earnings. But the real trick is to put your money into action, which can only be accomplished if there come sound financial advices from people who know their job. However, it used to be the toughest part finding them out; now, that Wiser Advisor.com has marked its online presence by bringing together the most renowned and reliable financial advisors from all over the country, you job turned easier by a few more times.

Therefore, to put into use what you are willing to save, you need a financial advisor to guide you. So remember the last point – you need to achieve more from your money – therefore; if you are planning to seek the best financial advice, a visit to WiserAdvisor shall let you access to an entire domain of financial advisors who shall let your money grow, even covering the cost of hiring one of the financial advisors.

How Much Money Should You Have To Obtain Financial Advice?

The question gets asked often: is financial advice worthwhile? Implicit in this question is: how much money should I have to make financial advice worthwhile? The answer is that it does not depend on how much money you have but what your needs are and whether the advice will provide enough value to justify paying for it. However, there are many common misconceptions about financial advice and what level of service you are getting. The financial services industry is tailored towards people with money – so the more money you have, the more and better quality advice you would get. If you have no money, you have few options which is where the expression comes from; “no money, no advice”. Why is this? Advice is not charged for on its own: its value is combined with products that get sold. If you don’t buy any products, there are limited avenues for getting any advice. If you use a non-traditional approach to obtaining advice like doing it yourself, a money coach or a fee for service planner, you will have more options.

General Trends in the Traditional Advice Model

The more money you have, the more customized your advice, the more investment choices you have and the lower the fees are per each dollar invested. The total dollars paid in fees will rise as you invest more money in most cases. The choices you have will also expand for products offered and which institutions you can choose from. You will also obtain more holistic advice. This means you would have access to services such as legal advice, tax advice, estate planning, money management or business advice. If the amount invested is below $500,000, you may have to buy standard products which are the same for many people. This figure is a typical threshold for a “high net worth” client which means you have the best options of service above this amount. This limit will vary depending on who you invest your money with, but it is very common to segregate clients that are above or below this threshold.

Fees

In many cases, the fees charged are a percentage of how much money you invest. These fees can also be charged by how many trades you make, or a flat fee percentage based on how much money you have. There may also be fees for referring various products, or dealing with certain institutions. The time or work required to manage your money is usually not factored into the equation. As an example, if you have $10,000 or $1 million to buy into an individual stock, you can either buy 100 shares or 10,000 shares and it is the same amount of work to execute. There is an argument that 10,000 shares can be a large order, and so some thought has to be put into timing the order to get the best price. There is also the argument that if you have $1 million, there are many more options to explore which will require more work. There is truth to these statements, but there are also people with $500,000 buying a few mutual funds or index funds that are paying the same fees as a tailored made list of individual securities. The fee would include execution of trades, rebalancing and advice on each particular holding. The key thing is to find out what you are paying and what value it is producing for you. You should understand all of the fees and what the total cost is at the end of the day.

Investable Assets

Keep in mind that the assets being referred to here are investable assets. An investable asset is money that can be invested anywhere and that is transferable or liquid. Another way to think of this is that an investable asset has the ability to generate fees for the institution holding your account. A house for example would not be useful as you cannot invest part of your house in your trading accounts. If you take out a loan against your house and invest the money, this is possible but this has different types of risks which need to be understood. Rental properties, land, businesses, collectibles or other assets that are not readily available to hold in a trading account are other examples of assets that are not investable. Even though you own these assets and they have value, they are not available to generate fees and therefore would be excluded typically. There are cases where your net worth in total is being asked for, and discussing these assets does give you some advantage because they can indicate to the institution how much wealth you have and can be used as collateral in case your investments do not perform well. In the case of fee for service planning, money coaching and doing it yourself, all of your assets would be included because they are part of your investment situation.

Advice is Not Free

The vast majority of financial advisors and financial planners work on commissions. They can also receive fees from trading, referral fees or a percentage charged on the amount of assets in the customer’s account. These fees need to be calculated based on some quantifiable number. Advice is included with these transactions so its value is never itemized. Some institutions will tell you that advice is free. Advice is not free; it will be included in some other payment which is typically the products you buy or hold onto. If something is free and you cannot isolate how much is worth, it is hard to know if you are getting a good deal or if you are getting value for the money and time spent.

Assets Over $500,000

If you have more than $500,000 in investable assets, you can obtain some very detailed advice with a dedicated person. This $500,000 will depend on the institution and their asset minimums as well as what type of investments they have available. A general rule is that the more exotic or complicated the investments are, the higher the minimum amount of money the company would want. These minimums also depend on whether the company is managing your money by itself, or combining it with other people’s money in “pooled accounts” or “pooled funds”. Another variation on this theme is that the company will create some standard portfolios or “model portfolios” and you would buy units of these products. You would need to ask yourself if these pooled accounts or standard portfolios are much different than a product you can buy at a bank or a discount broker.

Assets Under $500,000

If you have under $500,000 in investable assets, you will likely be serviced by an “undedicated person”. Examples of this would be the customer service person at your bank, a call centre or a mutual fund representative. They would basically help you choose from a more limited range of products and process your order. The amount of advice is more limited to investment options and these are limited depending on which institution you go to.

No Assets or Debt

If you have no money saved, have debt or very small investment amounts, you will likely not be able to get advice from traditional channels. If you have debt, you are likely dealing with a bank or whoever you owe the debt to, and the fees are being made via interest. If you have neither debt nor assets, you are not paying money for an institution either way, so you would be targeted for savings plans, credit cards or incremental payment options. Advice on what you need for all of your financial needs is likely not forthcoming.

Do it Yourself

Some people get discouraged with the lack of advice or lack of options and decide to manage their money on their own. This is a viable strategy, however, it is a lot of work and you need to learn a lot of things before you can feel comfortable managing all aspects of your money. Courses are available as well as books and semi-nars that can be attended. Another variation of this theme is “trial by fire”. You can try various ways of doing something with respect to your money. When something works, you keep doing it and when it doesn’t, you try something different. This method will take a lot of trials, and you may lose a lot of money and waste a lot of time. You can also learn from other people’s mistakes and pay attention to other people’s stories to steer clear of land mines. This is very helpful to do when learning anything new, but it is likely not as efficient as first seeing what options are out there before making the trials. There are no asset minimums when you do things yourself, but in some cases you would not have access to certain products, or trading fees might make it too expensive to entertain trading strategies that have a lot of frequency or expensive share prices.

Fee For Service Planning

Fee for service planning charges you for the advice provided and not for the products sold. This removes a lot of barriers like how much money you have and what type of assets you have. You may have no money at all, but a sound financial plan may be what you need to obtain some savings and build that asset base. The knowledge may be more useful before you start handling the money than after a tirade of losses. It does not matter whether you have a business, real estate, a house or anything else – it is all part of the financial plan. Fees are not determined by the assets you have but by the work performed by the fee for service planner. This type of advice also may include tax advice, estate planning, budgeting and any other aspect of money depending on what the qualifications of the fee for service planner are. There is an element of “do it yourself” in executing the advice, because you would need to decide where you will put the money and what products to buy. There are ways of getting advice on this as well, but the customer would have to open the accounts and actually do the buying and selling of the products.

Money Coaches

If you want to focus more on the education aspect of your finances, you may obtain the services of a money coach. The name describes what they do very well in that a money coach will focus more time on motivation and education about your finances as opposed to the investing of the money. Retaining someone like this may enhance do it yourself efforts, or make you a more savvy customer if you follow traditional channels. There are also no limitations on what you have, how much you know or what specific areas you would need help with. There is also no issue with product selling as this would not typically be done with money coaches.

Combinations

Any of the above methods of handling money can be combined together. You may have a traditional lender, a traditional investment advisor as well as a money coach and fee for service planner. You may opt to do part of the work yourself, and leave some aspects to a professional. You may invest part of your assets yourself and have someone invest the rest of the assets. You may also enlist a money coach or fee for service planner as a starting point, a second opinion, or a double check of traditional channels. There is also a possibility of hiring a fee for service planner for advice with an investment firm for the investing aspect. This type of arrangement comes in many forms, so the relationship between the parties should be disclosed. In general, if you have multiple people engaged in your finances, make sure you understand what each person or institution is supposed to do and what you can expect. Arrangements can always be changed no matter how long they have existed.

Summary

The key to obtaining the proper advice for you is to understand how you are paying for the advice and what value you are receiving. Also make sure you know how much you are paying after everything is said on done and the return generated is in hand after fees and taxes. You would then explore the options for obtaining the advice and whether they are suitable for you or not. This is like shopping around for a household item – you will see different versions for different prices. You would ask what features are most suitable for you for the best price. You want to see how much you are paying in total and what value you are receiving net of costs compared to what you would like to receive. Thinking in this way will reveal a lot to you and allow you to consider more alternatives.

Getting Financial Advice – How to Make Sure You Get the Right Advice For Your Personal Finances

Once you have identified your goals, it is time to find out how to best go about achieving those goals. The financial services industry is a complex business, and there are few of us who could be expected to navigate its murky waters without help.

Perhaps the most important decision you can make when considering buying any financial product or service is the decision on the kind of advice you will seek out.

This is an area where some care is required. As complex as the financial services industry is, so too are the relationships of those who work within it, and you must be sure you understand the relationship between the person giving you advice and the product they are advising you on.

Always remember that the primary purpose of such advice is to help identify what your needs are, not to encourage you to purchase specific products. It may be that the best advice is to do nothing. Sometimes, an adviser will appear to go to a great deal of trouble on your behalf, in the hopes of encouraging you to feel obliged to stick with them – always remember you can say NO.

The rights you are entitled to in receiving advice vary according to the type of product. Check with the appropriate independent authority (as defined in various places in this guide, and in the Useful Information section) as to what your rights are with regard to a given product.

If you choose to buy a product without seeking advice, your rights are often less than they might be otherwise. In some cases, the attitude is ‘you didn’t seek advice, so it’s your own fault’. While it may be appropriate in some cases to go it alone, getting good advice is always worth the investment.

What may seem like advice may not be – do not mistake information for advice! If you buy from a direct mail shot, through a website or from a ‘direct’ company, you may be considered to have not taken advice, as far as your rights go. Marketing material is not objective and impartial – an obvious point, but worth restating.

Broadly, the kind of advice you can get falls into two categories: independent and tied. Both have their advantages and potential pitfalls.

Tied Agents

Tied advisers generally sell and advise on the products of just one company. They may or may not work directly for that company – sometimes they simply have strong ties and a good working knowledge of that company’s products. They may be able to get access to a good deal because of their exclusive relationship with the provider.

They can tell you which of the company’s products suits your needs. They have a responsibility to advise you honestly, and if none of the company’s products suit your needs they should tell you so. But always be aware that they are not necessarily trying to advise you on the best over-all product for you, but rather the best product that the company itself has to offer you. They should not tell you a product is appropriate for you if it is not, but sometimes what is ‘appropriate’ can be a slippery concept.

Tied agents almost always work on commission, though there is some movement towards having advisers tied to specific companies working for a flat fee. You may find it more comfortable to seek out one of these companies.

Citizen’s Advice Bureau

The Citizen’s Advice Bureau (Website: http://www.citizensadvice.org.uk) is an independent charitable organisation that focuses on giving advice on a whole range of subjects.

They are able to offer help in regards to issues such as debt, your rights, and general consumer issues. However, certain bureaux can offer specialist advice, often in conjunction with professional partners such as solicitors.

If things go awry, the CAB can help you to determine a way forward. They will help identify what your rights are, how to move forward with the issues, what kind of back up you can expect from various bodies etc.

The Financial Services Authority

The FSA is an independent non-governmental body that has statutory powers to regulate the financial services industry. Their funding comes from the industry itself, but the Treasury appoints the board. The FSA is guided by the Financial Service And Markets Act (Website: http://www.fsa.gov.uk), which came into force in June 2000.

One of their primary purposes is to secure the appropriate degree of protection for consumers. With this in mind they provide an excellent consumers guide that provides information on such things as consumer alerts, what to do if you have a complaint, a suite of comparative tables of similar financial services and even a firm check tool to find out if a company you are considering using are reputable and accredited.

Independant Financial Services

An independent advisor can nominally give you advice without you having to worry that they are pushing you towards a product that isn’t right for you. If they are not tied to using products from a particular company, they are free to look at the various products on offer, and make suggestions based on what is best for your particular circumstances.

They can give advice on a variety of products. If they give advice on investments such as pensions, life insurance, unit trusts and shares, then they and the company they work for must be authorised by the Financial Services Authority, and must abide by their code of conduct. Those advising on loans, most mortgages, non-investment (‘general’) insurance, term insurance or bank and building society accounts need not currently be authorised, though from 31st October 2004 all mortgage advisors will have to register and be authorised by the FSA. From early 2005, general and term insurance advisors will also have to be authorised.

If you want to check to see whether a person or firm is authorised by the FSA, you can use their Firm Check Service.

Some care has to be taken when taking such advice. While an advisor may not work directly for a particular company, they do often have relationships with companies (sometimes with a suite of companies). Often companies will offer bigger commissions or other such inducements to advisors in the hope that that will encourage them to promote their product.

The only truly independent financial advice you can get is when the advisor has no stake in your final choice of product. This can only come about if you get advice from one source, and buy your product or service from another with no connection between the two.

However, financial services often will prefer one product over another because those products genuinely are better than their competitors – the advisor’s reputations is founded on giving the right advice and achieving good results over time. In a sense, the advisor acts as a filter, discarding poorly performing or sub-standard products and focusing on the products that do perform.

When considering what advice to take, always establish what the point-of-view of your advisor is, and how that will affect the kind of advice they give.

You pay advisors in one of three ways: a one-off fee, a commission on any products bought, or a combination of the two. Always establish from the start what the deal is. The Financial Services Authority has decreed that from late 2003 all independent financial services must let you pay them with a flat fee if you wish to. This removes the temptation to recommend a product that pays them better commission.

Finally, it is always worth asking whether the advisor will be prepared to take a cut in their commission in order to give you a better deal (called a ‘commission sacrifice’). They won’t always agree, but if you don’t ask you certainly won’t get. Sometimes they will consider it worthwhile in order to get your custom.

3 Tips Of Solid Business Financial Advice

With the world economic downturn today, it is more important than ever to carefully plot the course of your business. Many businesses will fail under these financial times, but if you find someone who can give you good business financial advice, you will have a much better shot at making it through and being stronger when things swing around. Success also comes with the knowledge of a good accountant where they can help you to find legal tax breaks and help you minimize your tax exposure. However, keep in mind that there are also many dishonest accountants around so saving a few thousand dollars today isn’t worth the nightmare where you get audited by the tax office.

Here is a list of ways you can find a good accountant to help you with all your business accounting needs. Keep these tips in mind when you are interviewing professionals as they will help you choose just the right person for your business. Remember, you will be working closely with your accountant so you will need make sure this person is not only qualified, but someone whom you will like and be able work with.

1. Ask other business owners to recommend a good accountant. If the accountant they are using is good, they will be sure to recommend them to you. Remember most accountants can help with individuals with personal taxes but for a business, you may need to find an accountant that specializes in business taxes. If this is the case, then your business will requires a higher degree of specialization. You will need an accountant who is up to date on all the rapidly changing business and tax rules and who can help you legally minimize your tax burden. Legally lowering your tax bill with the right financial advice is one of the best ways to help your business succeed. The lower your tax bills, the more money you can keep and put back into your business to help shore it up during these rough economic times. Money is in your pocket is better than money in somebody else’s pocket!

2. You may want to consider hiring a larger accounting firm instead of a single accountant. Why? Because you are likely to have many different elements of financial advice you’ll need beyond just business tax advice. Hiring a firm gives you the possibility of working with several accountants, each one specializing in a certain area. For example, one accountant might be an expert in business issues, while another might have more expertise in personal finance and estate planning. By combining the strengths of each of these accountants you are getting the absolute best advice for all of your financial needs. This ensures you have most of your bases covered as to the reason you hired an accountant in the first place.

3. This method works well when your business has a tight cashflow and you don’t have a lot of money to hire an expensive accounting firm. However, for tax purposes, you still need to keep up-to-date accounting records for the tax office so you may consider buying some accounting software. Most softwares have regular updates as tax laws change and you can usually just plug in and play and these softwares are user friendly. Some software programs even offer live help if you have questions that aren’t answered by the software. If you decide to go this route it, it would also be advisable to do a bit of research and check with other business owners on which softwares they use and whether it is good. This will give you a starting point, though ultimately it will be your decision based on your needs.

There are many highly trained professionals that can give you great business financial advice. Just take a little time, ask some questions, do your research and use professionals that you think will be easy to work with and who you think will be able to offer your business the most.