I hear people all the time say, “When I get some money, I’ll give you a call” or “I don’t have enough money to work with a financial planner”. This is a faulty concept of financial planning. Our industry has done people a disservice and have alluded to the fact that financial planning is only for the very wealthy. Additionally, there’s the notion that financial planning is really only beneficial for those who have investments. But this is simply not true.
INVESTMENT MINIMUMS
To compound the issue even further, many financial planning firms will only work with clients if they have a large amount of existing investments. For example, some firms require you to have at least $500,000 of investments; I’ve even heard of firms only working with you if you have $5,000,000 or more. This only reinforces the faulty idea that you have to be rich to have a financial advisor. I find these sorts of approaches very arrogant, rude, and greedy. You can’t tell me that a firm can’t find a way to work profitably with those who haven’t yet had a chance to accumulate assets. The truth is they can, but they are too busy going after the big fish which is a very narcissistic approach.
In my opinion, this selfish mentality is detrimental because who do you think will one day inherit the assets of the wealthy? It’s likely those who don’t have a whole lot right now. It’s no surprise that the baby boomers have had time to accumulate assets, but one day these assets will be passed on to their potentially less wealthy children.
From the very beginning when my business was first established, I had the mindset that I wasn’t going to be one of those firms who only works with the big fish. I always felt angry when a company would tell me I wasn’t good enough or big enough to work with them and I decided I never wanted any of my clients to feel that way. My thought was that if someone wants help, I will help them. I have a platform to be able to do so and I feel it is my responsibility. But how do you help someone who doesn’t have a whole lot?
HOW DO YOU HELP SOMEONE WITH NO ASSETS?
Even though a person may not have a lot of investments or assets, there are many financial planning opportunities to explore. It’s a common misunderstanding that a financial planner only works with a person’s investments. Investment management is just one component of a person’s financial life. There are many other areas a financial planner can help with such as:
– Choosing the right credit card depending on your habits
– Reviewing your expenses to help find ways to save money
– Reviewing your income to see if there is a way to increase it
– Deciding whether you should rent or buy
– Putting a plan together to handle student loan repayment
– Investing existing assets appropriately even though you don’t have a lot
– Choosing an investment strategy that will work for you in good times and bad
– Reviewing your tax return to uncover mistakes or tax savings strategies
– Discussing whether or not you need a Will, Trust, or other estate planning documents
– Helping you choose the right employee benefits at your employer
– Determining whether or not you need life and disability insurance
– Reviewing your auto and home insurance (this helps with protecting your investments)
– Determining how much to have in an emergency fund and where this money should be held
– Creating goals (short, intermediate, and long term) and developing a strategy to reach them
– Determining how to invest in your 401k plan and choosing between the regular or Roth 401k option
– Determining when and how to invest money outside of a 401k
– Preparing for an eventual inheritance
– Handling stock options you’ve received from your employer and understanding tax consequences
– Planning for a marriage
– Helping you prepare financially to have a child(ren)
– Discussing whether to invest for your child(ren)’s future education and how to go about doing so
HOW MUCH WOULD IT COST?
As you can see, there are numerous financial planning items that can be discussed and advised on. Many clients are accustomed to using their investment dollars to pay for this advice, but how would this work if you have very little, if any investments? This is partially the reason why many clients get turned away by financial planning firms. But it is a poor reason, because the fee structure could easily be adapted to accommodate clients in this situation.
There are many great firms out there to work with and at the same time many different pricing structures. In my experience, on average, financial planning firms that work with individuals who have little assets typically charge an initial planning fee of around $1,000, a monthly subscription based fee of around $150 / month, and an investment management fee ranging from 0.50% to 1.00% / year.
At our firm, we take a slightly different approach. What we do is the following:
Since we don’t have any investment or fee minimums we will essentially work with a person where they’re at. What this means is that if someone doesn’t have any investments then we will do financial planning for them at no cost! Our goal is to help them get on the right track so that they can get to a point where they are investing. And when that times comes, we’ll be there to help them manage their investments. It’s really our way of helping people today who get turned away elsewhere.
If a person has investments, then we’ll do all the financial planning work upfront at no cost. And then if they are satisfied with us, our planning, and our process then they will officially hire us and we will begin managing their investments.
We find that this approach is very simple for people to understand and it provides them with financial planning advice that they often times can’t get elsewhere.
There are many different pricing structures and many great firms out there to work with. Find one that suits what you are looking for and recognize that just because you have few assets today, there are many great reasons to begin financial planning now!
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