MONEY financial advisers

Flesh-and-Blood Advisers Face Threats from Robots

Robot Lost in Space with Will Robinson
©20th Century Fox—Courtesy Everett Collection

Fidelity and Charles Schwab will be offering automated financial advice that's low-cost or even free, pushing other advisers to be tech-savvy to compete.

Last month, both Charles Schwab Corp and Fidelity Investments unveiled so-called “robo” advice programs that offer free or very cheap algorithm-driven portfolio management to investors.

That strikes fear into the hearts of many financial advisers who typically charge 1% or more of assets under management to offer personalized advice to investors.

Some, such as Ritholtz Wealth Management, are responding in kind. Earlier this month the firm launched Liftoff, a digital portfolio management tool aimed at young would-be clients with under $100,000 to invest who want account oversight but don’t need complete wealth management. The new offering aims to give investors easy and inexpensive (0.4% of assets per year) access to the firm’s investing strategies and to keep those clients in the fold as their wealth grows, said CEO Josh Brown.

Upside, the San Francisco-based startup that provides the technology behind Liftoff, is also working with other registered investment advisers to offer a way to compete with the direct-to-consumer “robo” offerings from such firms as Betterment and Wealthfront, which offer consumers digital-only access to low-cost ETFs and automatic portfolio design and rebalancing through algorithms.

On Oct. 27, Charles Schwab announced it was moving into the automated advice space with a free product.

Fidelity said on Oct. 15 that it would refer its advisers who wanted a low-cost automated investment offering to Betterment, one of the largest of the new robo-advisers.

Still a Small Space

Advisers who fear their business will be undercut by products like these should remember that the current competitive threat is tiny, accounting for less than $5 billion in assets, said Sophie Schmitt, senior analyst at Aite Group, a research firm. So, panic isn’t necessary, though it’s probably a good time to make some moves.

“The traditional financial services world is waking up to the reality that clients want to consume financial information digitally, and 2014 is a pivotal year,” Schmitt said.

Advisers can start to compete with these automated products by offering clients online access and beefing up the technology tools they use themselves when working with clients, she said.

One case in point is Merrill Clear, launched earlier this year by Bank of America’s Merrill Lynch, which allows advisers to help clients plan for retirement, and prioritize goals on iPads.

Flesh-and-blood advisers who use digital tools have an advantage over algorithms because they can “marry technology and human behavior,” said Daniel Satchkov, president of Rixtrema, a firm that offers software advisers can use to demonstrate portfolio risk to clients.

Brian Eddy, a Beverly, Massachusetts, adviser, said he agrees. His firm, PortfolioFix, offers online access to their accounts and automated portfolio rebalancing. But he also talks to them in person, on the phone and via Skype, the teleconferencing program.

“There’s always going to be a market for someone who’s available to the client on a one-on-one basis,” he said.

MONEY Gold

What I Tell Clients Who Want to Buy Gold

Stacks of gold bars
Mike Groll—AP

Sometimes people want gold because of greed, sometimes because of fear. Here's what you should know before you buy it.

“Okay,” the client said at the end of our meeting, after I had recommended my investment strategy, “I’ve just got one more question.”

“Go ahead,” I said.

“What about gold?”

“Why gold?” I asked. I’ve found that the reasons people give me really vary. When they say they want to buy gold, there’s some deeper issue we need to get at. “What is it about gold that appeals to you?”

“It’s low right now. You believe in buy low, sell high, right? I want to earn more than I can from bonds. There’s always a market for gold, no matter what happens.”

Hmmm. The client is expressing both greed and fear. It’s usually one or the other.

So I tried to explain:

You don’t invest in gold; you speculate on gold. Gold grows in value when someone else will speculate more than you did when you bought it. Perhaps it rises and falls with inflation. An exhaustive 2013 article in Financial Analysts Journal concluded that’s not really true. The authors found that the price of gold rises…when it rises. The price of gold fall…when it falls.

There’s some evidence that gold has kept its value in relation to a loaf of bread. The problem is that this comparison goes back the reign of the Babylonian king Nebuchadnezzar in 562 BC. For most investors, that time frame is way too long.

Some people want gold in case all hell breaks loose. It makes them feel safer than boring bonds. I can understand where they’re coming from. Bonds are almost purely conceptual because most people don’t ever even get a piece of paper saying they own them. These people want gold so they can make a run for it if necessary. Like I said, I understand: I like feeling safe, too.

If you’re in this camp, you could use 1-2% of your portfolio to buy some gold. Take physical custody of it. Put it in your safe at home.

Remember the practicalities. Small coins will probably work best; you don’t want to be stuck trying to get change for $1,000 gold bars when the banks have closed. Gold weighs a lot so just buy enough to get you over the border. You don’t want your stash to slow you down when you’re sneaking away in the night.

Still not feeling secure? To take the next step down this road, add the following to your safe: guns, ammo, water, and copy of Mad Max or other favorite movie of this genre. The Book of Eli was okay and 2012 was even better.

However, none of these movies features a post-apocalyptic gold standard. According to them, if and when all hell breaks loose, you’ll want guns, ammo, gasoline, and perhaps a jet.

———-

Bridget Sullivan Mermel helps clients throughout the country with her comprehensive fee-only financial planning firm based in Chicago. She’s the author of the upcoming book More Money, More Meaning. Both a certified public accountant and a certified financial planner, she specializes in helping clients lower their tax burden with tax-smart investing.

Read next: Dubai’s Kids Now Worth Their Weight (Loss) in Gold

MONEY Out of the Red

Have You Conquered Debt? Tell Us Your Story

140618_money_gen_13
iStock

With patience, you can pay off large amounts of debt and improve your credit. MONEY wants to hear how you're doing it.

Have you gotten rid of a big IOU on your balance sheet, or at least made significant progress toward that end? MONEY wants to hear your digging-out-of-debt stories, to share with and inspire our readers who might be in similar situations.

Use the confidential form below to tell us about it. What kind of debt did you have, and how much? How did you erase it—or what are you currently doing? What advice do you have for other people in your situation? We’re interested in stories about all kinds of debt, from student loans to credit cards to car loans to mortgages.

Read the first story in our series, about a Marine and mother of three who paid off more than $158,169 in debt:

My kids have been understanding. Now I teach them about needs and wants. The other day, I was coming home from work, and I said, “Do you need anything from the store?” My son said, “We don’t need anything, but we’d like some candy.” If they want a video game, they know they need to save their money to get that video game—and that means there’s something else they won’t be able to get. They understand if you have a big house, that means you have to pay big electricity and water bills. I’m teaching them to live within their means and not just get, get, get to try to impress people.

Do you have a story about conquering debt? Share it with us. Please also let us know where you’re from, what you do for a living, and how old you are. We won’t use your story unless we speak with you first.

MONEY risk

The Crucial Investing Advice You Need Right Now

glass of water balanced on see-saw
Martin Barraud—Getty Images

When the stock market is near record highs, it's more important than ever to think about risk.

Don’t let history repeat itself.

You’ve heard that phrase before, likely as a warning to those who might be traveling down the same dangerous path as those before them. But it’s also currently the most important piece of advice I offer to clients.

Recently, I’ve been helping clients rebalance portfolios that have become stock-heavy due to the bull market that’s taken the S&P 500 up 194% since March 2009. With the bull now more than five years long and memories of the financial crisis starting to fade, I’m finding that investors aren’t exactly excited about reducing their stock allocations.

One of my duties as a financial adviser is to encourage my clients to rebalance their portfolios to the levels that we agreed made sense for them given their risk tolerance. In August, however, the S&P 500 topped 2,000 for the first time, giving investors a new boost of confidence.

And although seeing the market at new highs is exciting, let’s not forget that markets can go the other way too. On October 19, 1987, the Dow fell 22.6% in just one day. Applied to current levels, a 22.6% drop would be 3,801 points. During the financial crisis, from October 11, 2007 through March 6, 2009, stocks fell 57%, which would be 9,586 points today. I don’t expect anything that drastic to happen anytime soon, but investors need to remember that bear markets — declines of 20% or more — historically have occurred on average every four-and-a-half to five years.

So even though I’m a big believer in holding stocks for the long run, lately I’ve been making a point to show my clients how portfolios like theirs would’ve performed during previous bear markets, including the crash of 1987 and the financial crisis. I help them understand not just stocks’ growth potential but also the risks associated with achieving that growth.

At times like this I talk about risk for two reasons. First, focusing on risk prevents clients from being caught up in the moment and making choices that they may regret. Second, risk is still very much a reality. Investors are more optimistic these days, but this optimism allows them to be tempted to abandon their rebalancing strategies in order to maintain or increase their exposure to the aggressive side of their portfolios, which reduces the downside protection that rebalancing back to bonds and cash may offer.

No matter how the market performs, I reinforce investment discipline by coaching clients to stick with their investment plans. Past performance is not a guarantee of future returns, but a good way to cut the odds of repeating the history of buying high and later selling low is to rebalance in a disciplined way. For many investors, that could mean reducing stock exposure and adding to bonds — especially at times like this, when our impulse is to do just the opposite.

———-

David A. Schneider, CFP, is the principal of Schneider Wealth Strategies, a financial services firm based in New York City. Schneider has more than 25 years of experience in the wealth management industry and specializes in the planning needs of business owners, professionals, and affluent individuals. He is a registered representative of Cambridge Investment Research and an investment adviser representative of Cambridge Investment Research Advisors. Schneider is also a member of the Financial Planning Association.

Note: The S&P 500 and the Dow are stock market indices containing the stocks of American large-cap corporations. An index can’t be invested into directly. Asset allocation does not guarantee a profit or protection against loss.

MONEY Financial Planning

A Simple Tool for Getting Better Financial Advice

financial advisor with couple
Ned Frisk—Getty Images

If a financial adviser doesn't know what's going on in a client's life, the advice will suffer. Here's one easy way to fix that.

True story: Many years ago, I was meeting with a married couple for an initial data-gathering session. Halfway through the three-hour meeting — the first stage in developing a comprehensive financial plan — the husband excused himself for a bathroom break. As soon as the door shut, the wife turned to me and said, “I guess this is as good a time as any to let you know that I’m about to divorce him.”

That’s just one example of why exploring a client’s financial interior is a worthwhile investment for both the adviser and client. All the effort we had expended on their financial plan, for which they were paying me, was for naught.

So how can an adviser really understand what’s going on with his or her clients?

A great first step is to fully explore the simple question “How are you doing?” Not “How are your investments doing?” or “How is your business doing?” but “How are you doing?”

As financial planners, we are quick to put on our analytical hats. We will gladly examine numbers down to three decimal places, but we often fail to delve below the superficial on a relational level.

Here’s a tool that can help. I include it with permission from Money Quotient, a nonprofit that creates tools and techniques to aid financial advisers in exploring the interior elements of client interaction. It’s called the “Wheel of Life”:

Wheel of Life

The instructions are simple: you rate your satisfaction with each of the nine regions of life listed on the wheel. Your level of satisfaction can range from zero to 10—10 being the highest. Plot a dot corresponding to your rating along each spoke of the wheel. Then you connect the dots, unveiling a wheel that may — or may not — roll very well.

If you’re wondering what value this could bring to your client interaction, consider these five possibilities:

  • It’s an incredibly efficient way to effectively answer the question, “How are you doing?” In a matter of seconds, you know exactly where your client stands. You now have an opportunity to congratulate them in their successes and encourage them in their struggles.
  • It demonstrates that you care about more than just your client’s money. It shows that your cordial greeting was something more than just obligatory. It shows that you recognize the inherently comprehensive nature of financial planning.
  • It helps in gauging how much value you can add to a client’s overall situation. For example, if this is a new client, and all the numbers are nines and tens except for a two on the “Finances” spoke, then it stands to reason that good financial planning could have a powerfully positive impact on the client’s life. If, on the other hand, a prospective client’s wheel is cratering, you might conclude that his or her problems lie beyond the scope of your process. Your efforts may be in vain, and a referral to an external source may be in order.
  • It could tip you off to a major event in a client’s life that should trump your agenda for the day. Many advisers use this exercise as a personal checkup at annual client meetings, sending clients the “Wheel of Life” in advance. Doing so encourages clients to share if they have suffered one of life’s deeper pains, like the loss of a loved one. That’s likely your cue to recognize that now isn’t a time to talk about asset allocation. It’s simply time to be a friend and, as appropriate, address any inherent financial planning implications.
  • You’ll likely find it a beneficial practice for you, too! I don’t recommend putting a client through any introspective exercises that you haven’t completed yourself. So please, complete your own “Wheel of Life” exercise. You’re likely to see this tool in a new light and find valuable uses for it that I’ve not uncovered here.

———-

Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

MONEY Kids and Money

You Can Teach a Two-Year-Old How to Save

child's hand with ticket stubs
Frederick Bass—Getty Images/fStop

Worried about your children's retirement? With the help of a few carnival tickets, says one financial adviser, you can get them started early on saving.

A new type of retirement worry has recently surfaced among my clients. These investors are concerned not just about their own retirement, but about their children’s and even grandchildren’s retirement as well.

Much of our children’s education is spent preparing them for their careers. But in elementary school through college, there is little discussion about what life is like after your career is over. Little or no time is spent educating children about the importance of saving — much less saving for their golden years.

When it gets down to the nitty-gritty, parents want to know two things: One, at what age should they start teaching their children about saving? And two, what tactics or strategies should they use to help their children understand the importance of saving?

While parenting advice can be a very sensitive subject, discussing these questions has always worked out well for my clients and me. I keep the conversation focused around concerns they have brought up. In a world where student debt is inevitable and other bills such as car loans and mortgage payments add up quickly, parents are concerned for their child’s financial future. We now live in a debt-ridden, instant-gratification society, so how can our children live their lives while still saving for the future?

Here is what I tell my clients:

You can start teaching children the value of saving as early as two years old. At this age, most children don’t necessarily grasp the concept of money, so instead I recommend the use of “tickets” or something similar — maybe a carnival raffle ticket. As a child completes chores or extra tasks, he or she receives a ticket as a reward. The child saves these tickets and can later cash them in at the “family store.” This is where parents can really get creative: The family store consists of prepurchased items like toys or treats, and each item is assigned a ticket value. The child must exchange his or her hard-earned tickets to make a purchase.

I’ve seen first hand, and been told by others, that the tickets end up burning a hole in children’s pockets. They want immediate gratification, so they cash their tickets in for smaller, less expensive prizes. This is where parents can begin to really educate kids. Through positive reinforcement, they can encourage their children to save their tickets in order to purchase the prize they are really hoping for.

Eventually, saving becomes part of the routine. As children receive tickets, they stash them away for the future with the intentions of buying the doll, bike, video game or whatever their favorite prize may be.

As the child gets older, parents can transition to actual money using quarters or dollars. Now the lesson has become real. Parents can also implement a saving rule, encouraging the child that 50% of the earnings must go straight to the piggy bank. By age five, most children can grasp the concept of money and can begin going to an actual toy store to pick out their prizes. By starting out with tickets, parents are able to educate children about the power of saving at a younger age. By switching over to real money, children can then begin to learn the importance of saving cash for day-to-day items while still setting aside some money for later.

While this tactic may seem like it’s just fun and games, I have received feedback from several clients and family friends that it does in fact instill fiscal responsibility at a young age. Most importantly, I have seen it work first hand. My wife and I used this system with our five-year-old daughter. She was like most children in the beginning and wanted to spend, spend, and spend. Now, it is rare that she even looks at her savings in her piggy bank. She has graduated to real money and seems to really value its worth. She identifies what she wants to buy and sets a goal to set enough money aside for it. Before purchasing, she often spends time pondering if she actually wants to spend her hard earned money, or if she wants to continue saving it. In less than a year, she developed a true grasp on what it means to save and why it is important.

By implementing this strategy, financial milestones like buying their first car, paying for college, or purchasing their first home could potentially be a lot easier for both your clients and their their children. And the kids will learn the value of saving for their retirement, too.

———–

Sean P. Lee, founder and president of SPL Financial, specializes in financial planning and assisting individuals with creating retirement income plans. Lee has helped Salt Lake City residents for the past decade with financial strategies involving investments, taxes, life insurance, estate planning, and more. Lee is an investment advisor representative with Global Financial Private Capital and is also a licensed life and health insurance professional.

MONEY charitable giving

Give to Charity Like Bill Gates…Without Being Bill Gates

Bill Gates, co-founder of Microsoft, co-founder of Bill and Melinda Gates Foundation.
Chesnot—Getty Images

You don't have to be rich to set up the equivalent of a charitable foundation — one that can continue making donations even after your death.

One of my clients — I’ll call him Jonathan — came to me recently with concerns about his estate planning. Jonathan was a successful corporate manager who received a big payday when a major firm acquired the company he worked for. With no children of his own, he’d arranged for most of his wealth to be divided between two favorite charities: a local boys club and an organization that helped homeless people train for work and find jobs. Life had been good to Jonathan, and he wanted to give back.

But recently, there had been some management changes at the homeless support agency, and Jonathan was no longer confident that his gift would be well used. He was thinking about removing them from his trust.

We suggested something that sounded to him like a bold plan, but was really quite simple. Amend your trust, we told him, so that upon your death your funds go to a donor-advised fund — a type of investment that manages contributions made by individual donors.

Jonathan knew what a DAF was. He was already using one for his annual charitable giving because it let him donate appreciated securities, thus maximizing his annual tax deduction. Like many people, however, he’d never thought about donating all his wealth to a DAF after his death. He was under the impression that a donor needed to be alive to advise the fund.

Not so. Jonathan just needed to establish clear rules on who the future adviser or advisory team would be and how he would want them to honor his philanthropic wishes. With a DAF, he could arrange for a lasting legacy of continued giving beyond his own life. Another plus: Because no organization’s name is written into trust documents, changing your mind about what charities to give to is quick and simple. With a trust, changing a charitable beneficiary often requires a trip to your lawyer.

People tend to think that leaving an ongoing charitable legacy is exclusively for uber-wealthy people such as Bill and Melinda Gates, whose foundation gave away $3.6 billion in 2013. While there is no defined level under which a foundation is “too small,” Foundation Source, the largest provider of foundation services in the US, serves only foundations with assets of $250,000 and up. While foundations offer trustees greater control over investing and distribution of gifts, they are costly to set up and run, and have strict compliance rules.

DAFs offer an alternative. Their simplicity, relatively low cost, and built-in advisory board make them an ideal instrument for securing a financial legacy. Unlike foundations, there is no cost to set them up. And the tax advantages are better. The IRS allows greater tax deduction for gifts of cash, stock, or property to a DAF, compared with a foundation. Foundations have to give away 5% of their assets annually, but there are no distribution requirements for DAFs.

All DAFs have a board of directors as part of their structure. Many of them are willing to maintain the gifting goals of a donor after their death and insure that the recipient charities are eligible for the grants each year. At my firm, we have been asked to serve as part of clients’ DAF’s adviser team, to which we have agreed. Upon Jonathan’s death, we will continue to monitor his charitable recipients for quality of services, efficiency, and results — all very important goals of Jonathan’s.

You have many options to choose from. DAFs come in many shapes and sizes, from local community foundations to national organizations. Most of the independent brokerage firms have their own funds, with minimum initial contributions as low as $5,000.

With a little research, a family should be able to find a suitable home for their estate and leave a lasting legacy — whether they are rich, Bill-Gates-rich, or not wealthy at all. To learn about finding the DAF that fits you or your loved one’s vision and values, one way to get started is to check out the community foundation locator at the Council on Foundations.

———-

Scott Leonard, CFP, is the owner of Navigoe, a registered investment adviser with offices in Nevada and California. Author of The Liberated CEO, published by Wiley in 2014, Leonard was able to run his business, originally established in 1996, while taking his family on a two-year sailing trip from Florida to New Caledonia in the south Pacific Ocean. He is a speaker on investment and wealth management issues.

MONEY financial advisers

When It’s Time for the Adviser to Fire the Client

Pink Slip of termination
Tetra Images—Getty Images

The relationship between a financial adviser and a client can be like a marriage — sometimes a failing one.

Sometimes there’s a client relationship you sense is no longer as functional or effective as it once was.

Perhaps the client engagement was never ideal in the first place, but you took on the client even when your gut suggested it wasn’t an optimal fit. Or, in some cases, the client did once fit the ideal client description in your practice, but your own practice changed rather than the client. In other cases, the client chemistry changed just like it can between two spouses. Life circumstances sometimes prompt this shift, but other times you can’t even put your finger on why things aren’t quite like they used to be.

How do you decide if it would make more sense to discontinue the relationship? When do you make the change? And how do you do it? I have sometimes struggled with the ifs, whens and hows.

I think it is part of the DNA of advisers to want to serve our clients no matter what, and thus very difficult to see that it is not always best for each party, even if it seems obvious. I give a lot of credit to a financial coaching firm I worked with many years ago for encouraging us as advisers to try to recognize when it’s time to say goodbye. They told us if we could recognize that the relationship was not working for everyone, it might be time to consider parting ways. In the end, they said, it’s often better for the client, better for the adviser, and better for the other client relationships.

Years ago, I had a client who, at the beginning of the relationship, fit the description of my ideal client. This person even added services over the years to the point where he was one of my highest revenue clients. In time, he began making requests that I felt were unrealistic and unreasonable. But, for a time, I stretched and successfully responded to each request, even though I was stressed by them. He persisted and made the same request again and again, also saying he was going to reach out to other advisers to get other quotes.

The stress on my business grew as the demands continued, even though each time he apologized afterward. After four of these anxious experiences, I realized that if it happened again, I would need to let the client go. Remembering the coaching, I thought it through on all fronts.

It would be better for my client to find another adviser who might provide a better overall fit, and thus my client would be better served in the long run. But also, I’d be less stressed as a result of no longer attending to requests that seemed inappropriate. And I’d be that much more fully available to help out my clients who were still with me. Ultimately it would be a win, win, win for all.

If realizing the need for a break up is tough, working through the breakup can seem worse – but try to remember the end result of things getting better for everyone.

Such was the case when I informed this particular client — in an email followed by a phone call — that I was resigning from our work together and that I felt I wasn’t the financial adviser to take him through the next phase of his financial life. As could be expected, he was at first upset and unhappy. I don’t know what happened with that client and his next advisers, but I do know that I slept better the first night after that conversation and went into the office the next day feeling much more relaxed.

And despite having to make some adjustments when that client revenue ended, in time, the loss of that client actually propelled me to make some major changes to my practice that took me to new professional heights. In the end, the move helped me better serve my remaining clients, add more ideal clients, and pursue other professional and personal goals for myself.

How to end a client relationship depends on the client relationship. Sometimes a letter is sufficient. Other times a phone call is best. And from time to time, an in-person meeting is the way the go. The breakup can be awkward, no doubt, and I don’t think there’s a template to follow. But it’s best to formalize the end of the relationship so the client knows his or her next steps, your staff knows what is happening — when and why — and everyone can go forward with eyes wide open.

In the end, this is all about the client and making sure your client is well served…even if you have decided you no longer want to be the adviser serving him.

———–

Armstrong is a certified financial planner with Centinel Financial Group in Needham Heights, Mass. He has guided clients since 1986 in matters of financial planning, insurance, investments, and retirement. He currently serves on the national boards of the Financial Planning Association and PridePlanners. His website is www.stuartarmstrong.com.

MONEY financial advisers

Get in Touch With Your Prejudices…About Money

Tipped scale
Steven Puetzer—Getty Images

Financial planners need to understand that their feelings about wealth are in fact their feelings — not necessarily their clients'.

It’s only human to hear and see a situation through the lens of our bias and experience. And that’s often where we tap into when we speak.

So, when years ago, a client of mine expressed how she and her boyfriend were “freaked out” by his sudden and very dramatic jump in income, I can forgive myself for bungling my reply. I don’t remember exactly what I blurted out, but it was probably something along the lines of “What do you mean freaked out? Most people would love to be in your situation.”

I saw their situation through my lens: If he were well paid for work that had been his life’s passion, that could only be a good thing. I just couldn’t relate to the stress they were feeling and the cascading dominoes of what that high income now meant for them.

The reality is that their stress was related to the change they were experiencing, the change that psychologist Jim Grubman, in his book Strangers in Paradise, likens to what immigrants experience upon arriving in a new land. With both my client and her boyfriend having earned modest incomes up until then, how would this high income change each of them? How would it impact their relationships now that they had arrived in the Land of Wealth? Could they adapt in a healthy way? What if they bungled it?

Because of my lens and the money scripts playing in my own head, my ears focused just on the part about their jump in income. It was only because I asked her to elaborate on her “freaking out” that I understood the stress they felt. It’s now easy to see that I should have known that wealth and stress often go hand in hand.

This experience reinforced how important it is to bring my own biases to the surface and identify the lens I wear. It also reiterated that while it’s essential to learn about tax strategies and portfolio design, it’s equally important to continually study the cultural and psychological aspects of money. These go hand in hand too.

It’s from this place of deeper self-awareness and deeper understanding of the psychological side of money that I can truly be present with my clients who experience a windfall, to anchor them as the tidal wave hits, and to move forward with them after the wave passes.

Here are some resources I’ve found helpful in understanding my own biases surrounding money and getting a better idea of what my clients are thinking:

  • The Soul of Money book and workshop with Lynne Twist (www.lynnetwist.com). This was very useful for me at the beginning of my financial planning career; it helped me let go of a lot of mental baggage related to money.
  • Money Psychology teleclasses with Olivia Mellan (www.moneyharmony.com). Taking her classes, along with being coached by her, increased my understanding of gender and money, and how couples communicate about money.
  • Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists by Brad Klontz, Rick Kahler, and Ted Klontz. This important and accessible textbook for financial planners includes useful exercises to use with clients.
  • Strangers in Paradise by James Grubman (www.jamesgrubman.com). This book about generational wealth transfer among the superrich made me think more about what clients at all income levels go through when they become wealthier.
  • The Challenges of Wealth: Mastering the Personal and Financial Conflicts by Amy Domini, Dennis Pearne and Sharon Lee Rich. I read this when I had my first client who inherited wealth. It has exercises to help clients who feel knocked over by the experience.
  • Sudden Money: Managing a Financial Windfall by Susan Bradley and Mary Martin. Written for the general public, it has advice for dealing with specific types of windfalls, whether it results from the death of a parent or winning the lottery. One important lesson: In these situations, it’s as normal and helpful to have a therapist as it is to have a lawyer or accountant on the client’s financial team.

——————-

Jennifer Lazarus is a certified financial planner and the founder of Lazarus Financial Planning, an independent, fee-only firm specializing in the financial planning needs of socially responsible investors in their 20s to 50s. She most enjoys helping people reach a place of empowerment and financial calm.

MONEY Financial Planning

Here’s What Millennial Savers Still Haven’t Figured Out

Bank vault door
Lester Lefkowitz—Getty Images

Gen Y is taking saving seriously, a new survey shows. But they still don't know who to trust for financial advice.

The oldest millennials were toddlers in 1984, when a hit movie had even adults asking en masse “Who you gonna call?” Now this younger generation is asking the same question, though over a more real-world dilemma: where to get financial advice.

Millennials mistrust of financial institutions runs deep. One survey found they would rather go to the dentist than talk to a banker. They often turn to peers rather than a professional. One in four don’t trust anyone for sound money counseling, according to new research from Fidelity Investments.

Millennials’ most trusted source, Fidelity found, is their parents. A third look for financial advice at home, where at least they are confident that their own interests will be put first. Yet perhaps sensing that even Mom and Dad, to say nothing of peers, may have limited financial acumen, 39% of millennials say they worry about their financial future at least once a week.

Millennials aren’t necessarily looking for love in all the wrong places. Parents who have struggled with debt and budgets may have a lot of practical advice to offer. The school of hard knocks can be a valuable learning institution. And going it alone has gotten easier with things like auto enrollment and auto escalation of contributions, and defaulting to target-date funds in 401(k) plans.

Still, financial institutions increasingly understand that millennials are the next big wave of consumers and have their own views and needs as it relates to money. Bank branches are being re-envisioned as education centers. Mobile technology has surged front and center. There is a push to create the innovative investments millennials want to help change the world.

Eventually, millennials will build wealth and have to trust someone with their financial plan. They might start with the generally simple but competent information available at work through their 401(k) plan.

Clearly, today’s twentysomethings are taking this savings business seriously. Nearly half have begun saving, Fidelity found. Some 43% participate in a 401(k) plan and 23% have an IRA. Other surveys have found the generation to be even more committed to its financial future.

Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35. And more than half of millennials in the Fidelity survey said additional saving is a top priority. A lot of Boomers didn’t feel that way until they turned 50. They were too busy calling Ghostbusters.

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