We help you understand whether you need an adviser, and if you do want one, how to find someone who will act in your best interest.

Here's what to remember:
- Many people don't need to pay for financial advice.
- Use a "fee-only" adviser, not a "fee-based" adviser.
- Consider low-cost options like robo-advisers or Vanguard.
- You might need to break up with your adviser — but you can still be friends.
- Two online resources can help you find an adviser: NAPFA and Kent on Money.
United States


00:00:00if your toilet breaks you've got options maybe it's not that battery maybe it's just that little flapper thing in the back you know that thing you can learn how to fix it yourself but maybe it's a bigger mess than that and you're just not that much of a
00:00:13do it yourselfer anyway and it's just time to call a plumber yeah this is kind of a good way to think about financial advice went to pay for except for one really big difference it's not like the way that you pay the plumber is to hand over a
00:00:29huge bag of money your entire life savings it just say Hey you know take whatever you want because I just don't get toilets you would never do that that's that's crazy but that is basically what millions of Americans do with their financial advisors with out even realizing this
00:00:47is your NPR life kit for saving and investing in this episode if we're to talk about how to decide whether you need to pay for financial advice and it's a tough decision because there are so many pitfalls seriously like advisors who will steer you into investments with giant
00:01:02fees it'll eat up half your returns but don't worry we're gonna help you decide what you can do by yourself and if you do need an adviser how to find a good one that's right after this support for NPR and the following message come from linkedin learning which
00:01:27offers more than thirteen thousand online courses to help you achieve your goals you can take a course like managing your personal finances and learn from experts about saving money managing investments negotiating a job offer preparing for retirement and much more linked in learning videos are short so you
00:01:46can fit a lesson in over lunch an appliance that afternoon and life Kate listeners get a month of learning free start your free trial and linked in learning dot com slash NPR I'm Chris Arnold and I cover consumer protection and personal finance for NPR and in this episode
00:02:04we got six tips to help you out when it comes to financial advice first tip number one it is that you might not need to pay for any financial advice at all like we said it there's football's the can be expensive and you just might be able to
00:02:19do this yourself because at many stages of life saving and investing is not rocket science so I've got a checklist that if you can say yes to these boxes that I think you're fine not having a financial planner that's the best cold whiner and I am a financial
00:02:39journalist and spent pretty much my whole adult life teaching financial literacy particularly to young people Beth also has a lot of good advice for you and our episode and how to start saving and it now we're getting into a little more advanced stuff here with bath here are
00:02:57the main things that she says you need to know if you're going to manage your own financial life without the help of an adviser and is actually a bunch of stuff here but this is stuff that you can learn so number one you know what index funds and
00:03:10ETFs are and you under stand why low fees matter and you invest in them she says you also need to know about diversification and to take advantage of four oh one K. or IRA retirement plans you're paying down or I've already paid down high rate that you're saving
00:03:27automatically ideally you're putting away twenty percent of every paycheck into savings you don't panic when the market dips or even plummets you don't sell everything you know you're in it for the long term you have the set it forget it model and then there is various types of
00:03:42insurance health disability life insurance basically if you hear that checklist and you're like I know most of that or I could figure the rest out that that's as you like we don't need to pay for financial advice also you can learn a lot of this stuff on your
00:03:56own with our other life kit episodes and there are some really good books out there I love Burton Malkiel random walk down Wall Street %HESITATION and they're a bunch of others that really can help you think this the real and get a grip on it yourself I really
00:04:13like David Swenson's Buck unconventional success double check that one out and Jack Bogle he's like the George Washington founding father of index funds very cool guy he's got a book called common sense on mutual fund okay so if you could do a lot of this yourself but let's
00:04:31be honest there's also a lot on that list there that you need to know to do it right and if you don't know it the hold D. I. Y. thing can get you into trouble so our next big take away tip number two a good adviser can help
00:04:45you avoid some really big mistakes add it many you out there told us that you learned this the hard way we heard from a guy named on saying who is doing pretty well investing by himself this was two thousand six two thousand seven the stock market was a
00:05:04course chugging along back then and then at the market collapsed and I was like you know who knows how long this this market's gonna fall for you know I I put all this money that I saved up over the years and into the stock market hoping that you
00:05:19know I I would at least make a make a decent return and then here here I see basically I'm I'm losing all this money and I just I just sort of panicked at the moment panicked and sold his stock at the bottom and this is what Beth just
00:05:35said you're not supposed to do and then even when the market started to recover my confidence was so rattled that even as the market was was sort of coming back up I was still too scared I think to jump back in okay this is like the worst possible
00:05:51mistake you can make as an investor if you panic and sell after a market crash you can just get destroyed and that's good stocks like I mean they eventually come back up but if you sold at the bottom you lose a ton of money on it lost half
00:06:07his life savings these are very scary are examples and there are scary times when you don't know what to do so I think that for someone like that having a financial adviser who talks you out of doing something that could really be harmful that certainly is a good
00:06:25thing another good thing that an adviser can do it if you're not saving any money at all or not very much is to get you set up with automatic payments into retirement accounts or other savings accounts are you just doing this consistently and building up money and get
00:06:41that money invested in a smart low cost way you had it bad says a good adviser will talk you out of wanting to buy individual stocks just because you read some article about hot stock picks in a magazine or heard something from a friend people who work constantly
00:06:55%HESITATION let's buy this stock let's buy that stock you know it isn't is a great time to buy you know all this stuff is going out and then you said you know they're doing the right thing for you there was a guy in the news room %HESITATION at
00:07:08at a local station is that the other day and he's like McCormick spices the McCormick spice company I'm gonna I'm buying and I'm like that against the required space anyway it's like really like oregano investing tips I mean I don't know but like you don't know enough to
00:07:24buy that stock that in many other experts say look buying individual stocks it's just too risky give to any eggs in one basket that's that's just one of the problems that actually over the years has changed her thinking she used to say that most will just learn how
00:07:40to manage their money their investments themselves but there really is so much to learn it especially at certain points in life you get married you start having kids or when you're retiring and things get really complicated then it vice is certainly worthwhile sometimes it makes sense to pay
00:07:57a financial adviser if you need one but you have to figure out is it worth ten thousand dollars is it worth fifty thousand dollars you know if that means I'm losing out that much money over the long term and that leads up to our next big step number
00:08:14three you don't want to pay too much for financial advice because we heard from so many of you out there who are just getting hammered with fees weird from Laura in Pittsburgh who for years had the same financial adviser that our parents used and you never really questioned
00:08:29it until recently I was kind of like well how much do I pay him and his firm to invest this money they were not really doing anything with right now it's just kind of sitting accruing so basically I found out that you know it was a charge of
00:08:49around one point four percent and on top of that lorries adviser had %HESITATION invested in mutual funds that charge more than five percent up fried's and then there were other annual fees going forward so it's definitely ugly that's Kent's matters he's an economist at the Wharton school of
00:09:06the studies this whole world of financial advisors and how to cut through all the marketing and salesmanship and find a good one this person is in fact being charge of very high fee for the mutual fund and then top it that appears to be playing it at this
00:09:20office okay here is a rude awakening about this industry when you go to a lawyer or a doctor they have to act in your best interest but when you go to a financial adviser some of them it's more like a car salesman thing going on yeah and what
00:09:35people don't realize is that the vast majority of financial advisors %HESITATION two hundred eighty five thousand registered advisers in United States are in fact can mission Bates edit can says that a good adviser can help you in fact I think that most people could benefit from advice but
00:09:54the wrong adviser can steer you into investments with huge fees that they get a bigger commission on and in particular you are paying a lots of hidden fees %HESITATION Darren package inside the products and it's in very hard to figure out those fees basically the adviser gets paid
00:10:15more to stick you with hi fi products that hurt you and if that sounds kinda sleazy that model by the way has been banned in lots of countries now %HESITATION like the United Kingdom Australia but it's it's very much legal here in the United States if you remember
00:10:35one thing for this entire episode this is step number four can't says if you get an adviser you want what's called a fee only adviser has that up front you say are you a fee only adviser you waited on the palm of your hand before you call the
00:10:52person on the phone and those two words exactly be only are really important the way we sell people to memorize is only fee only and that is if you ask an adviser are you feet only and they say yes I'm fee based on how he did it with
00:11:10you Ron because fee based believe or not is not the same thing is the only cat says actually there's a huge difference the only as an actual legal term it means they cannot charge %HESITATION these hitting commissions that also puts the adviser under completely different legal standard to
00:11:29do what's in your best interests can says there's this trickery that goes on in this industry where advisors are told to tell customers that they are fee based so it's like this wolf in sheep's clothing fact and it actually works I mean I I cover this stuff is
00:11:43a reporter and in talking to can the studio at one point I I goofed up even you did it which is why the fee based %HESITATION anyway says he based not okay %HESITATION yeah yeah yeah yeah I'm tell you that's why it's so subtle and why the fee
00:11:56based movement has been so effective that kind of undermining true foodie sherry that sounds so similar five five that is affected by the marketing speak of the industry this is this is super bad I I have to go take a shower yeah Beth co wider she also likes
00:12:12these fee on the advisors and she has another question at that you should always ask when you're scouting for a financial adviser what do you think about low cost index funds or ETFs and frankly even if someone doesn't understand what that question means still ask it of your
00:12:27financial planner on the idea being on that of a financial planner is a fan of index funds that's an excellent sign that's because you pay a very low expenses for these index funds and over decades they do better than more expensive funds studies have shown so if your
00:12:47adviser lakes index funds that tells you %HESITATION they're not just looking out for big commissions for themselves they're looking out for my interest and if you don't know what an index ideas and want to learn more about this check out our investing upset okay our next big step
00:13:06coming your way to number five there are some good low cost options and alternatives to traditional adviser where you can get the advice that you want but for a lot less money so it better is one thing you should definitely consider is what's called a robo advisor I'm
00:13:21a big fan of room %HESITATION advisors I think they're kind of a good compromise these are basically computer I financial planners that use smart algorithms to invest your money according to what your goals are at it that's because even if you find a good fee only adviser they
00:13:38might charge a one percent a year one and a half percent a year and that definitely adds up that says there are a bunch of good robo advisor is well front betterment is one called financial engines and some of these were founded by Nobel laureates so they'll invest
00:13:53your money in a very smart way for a much lower annual fee like around zero point three percent but the downside is that you're not gonna have a human being to talk to you unless you have higher amounts usually as much as you know a hundred thousand then
00:14:08you can get a financial planner okay remember the guy on saying who lost all that money when the market crashed if figured it after that experience he probably needed some help with this whole investing things so we got a robo advisor for bed and that was pretty good
00:14:26but you still kind of wanted to talk to a real person so he founded the company vanguard which is run like a nonprofit has what sounded like a good option where you could actually talk to human advisors for about the same super low fee just having someone in
00:14:41the loop to sort of guide me and also to sort of take my emotions out of it when it comes to investing I thought that that was something that I wanted to do and so %HESITATION I guess here we are now where I was actually moved on my
00:14:55investments over to vanguard so what what's your take bath and on we're on sensor to life journey in investing here is this thing I was gonna say he's had quite the journey yeah I think he's hit investment nirvana and I think he really has sort of landed in
00:15:13a place that makes a lot of sense for him and probably help you know most people lined out and actually on thinks that he's in a good place to he's invested in a good mix a low cost broad based index funds like you're supposed to be but he's
00:15:26also wondering it now that he's gotten this good advice and he's all set up and it's all basically on auto pilot maybe could just stop paying for the advice at least for a while and if you find the right kind of adviser you can just pay for financial
00:15:40advice that the points in your life when you really need it okay so it turning our invisible radio scope on you now do you know how much you're paying in fees to be invested in the mutual funds that index on the chat and it's okay if you don't
00:15:58I mean a lot of people don't know the stuff like we're talking about but if you don't you just really need to call up and find that out Kent's matters says you should not be paying more than zero point one five percent in annual fees for your actual
00:16:14investments like index funds are mutual funds add if you got an adviser that has you in mutual funds that are charging way more than that and this is your number six tap it could just be time to break up with your financial adviser now a lot of people
00:16:31when they get to this point I think all but come on my financial adviser to like my friend I mean here she might be charging a lot but they're really nice yeah if I tell people if this advice is making this much money in the most you know
00:16:44under head that way from you it better be really nice I mean of course they're nice yeah so okay financial advisors have a reason to be nice but this can also be legitimately emotional right because you might have had a real long term relationship with this person like
00:17:01Laura whose advisories steered her into mutual funds with the super high fees this is like her long term family adviser breaking up with him is difficult I felt very bad %HESITATION because I'm pretty sure when I was much younger eight or ten I would actually be with my
00:17:20mother and like the waiting room at the investment firm and I would you know be doing homework or whatever and she'd be meeting with him my mom has said that you know our adviser is asked about me it's it's it's a tangle and makes me feel bad to
00:17:36even talk about it right now because I feel like they're going to be mad or sad I'm you know have broken with them E. hear this a lot today they seem like a really good person and Hey they have to make a living too so what's the big
00:17:53deal but do keep in mind this adviser made a choice is still making a choice to engage in a commission based model that to simply lacks transparency and so you can actually go to the place that you want to move your **** in many cases they in that
00:18:08new company will actually contact the previous company and manage that the transfer of the assets and remember that this is money that could go towards a nice retirements are your kids college you're paying off your own student loans best as local if you do the math on this
00:18:24and you see that you could be getting better advice and invested in a good range index funds for like ten or twenty times cheaper then it's time to break up any of to be straight forward and say I really appreciate your business but I have to think of
00:18:39my family and what's best for me now it's time for me to move on you know this might be a lovely man to maybe we could have brunch sometime but right now I have to invest in the smartest way possible okay we covered a lot of ground here
00:18:56set up remember the most important tips here at com they take away the first one many people don't need to pay for financial advice this is not rocket science tip number two a good adviser can get you to start saving more money and investing it in a low
00:19:13cost way and help you avoid mistakes but tip number three this one's important to at the wrong adviser can sticky with huge fees they can eat half of your returns number four user fee only adviser the word only is super important here by the way in the episode
00:19:34description we got two good websites to go to find the only advisors so check that out okay tip number five for bad they're good low cost options out there like global advisors and lastly tip number six high it's hard to break up but you might need to break
00:19:52up with your adviser and that's okay so there you go what you need to know about financial advice and if this is helpful for you and you're like yeah okay I'm I'm like get a little more on top of it make sure to check out our other life
00:20:08gets podcast at life kit dot NPR dot org while you're there subscribe to our newsletter causes lots of stuff we can tell you about that way we got more podcasts coming out every month on also the topics also it check out NPR's at your money and your life
00:20:23Facebook group we have thousands of people in there now with questions and answers on all kinds of personal finance issues and as always as we wrap things up here we're gonna have an otherwise totally unrelated life Ted this time from NPR producer Lauren land out if you get
00:20:38a bit Kay and some of the flowers are still closed up like two laps or sunflowers and you want them to open you can just put the cut flowers in warm water and they'll if you have a tip for you wanna suggested topic we want to hear about
00:20:54it email us at life kid at NPR dot org I'm Chris Arnold thanks for listening how often do people lie on dating apps are robots taking our jobs why are we less productive I'm Stephen X. math co host of the indicator from planet money where we explain economic
00:21:17ideas that help you understand everyday news and everyday life that's the indicator from planet money

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