Money recently launched Dollar Scholar, a personal finance newsletter written by a 27-year-old who’s still figuring it out: me.
Every week, I’ll talk to experts about a money question I have, whether that’s “Are online banks sketchy? or “How many credit cards do I need?” As I learn, I’ll share simple ways to improve your financial life… and post some funny memes.
This is (part of) the 14th issue. Check it out below, then subscribe to get future editions of Dollar Scholar every Wednesday.
From which filter I should use on my Instagram Story to what I should be for Halloween, I tend to ask for a LOT of advice.
For example, I just wrapped up an hour-long Gchat debate with two girlfriends over which bridesmaid's dress I should order from Azazie for a wedding next year. I won't eat anywhere without checking the restaurant's Yelp reviews first. I'm constantly Slacking my editor questions about whether he thinks my Bottom Line GIFs are funny enough, and whenever I bake a cake I always end up calling my grandma for tips.
It's not really that I'm indecisive; I just like hearing other people's opinions. Most of the time, they have more expertise than me in whatever I'm talking about, so it's nice to get their feedback before I do something. (Whether I actually follow their advice is whole other issue, do not @ me.)
But I don't usually seek out money advice, and I've been wondering if I should. Like, do I need a financial advisor? What do they do? Can I even get one if I don't have a ton of money?
To figure it out, I checked with Christopher Van Slyke, a Wyoming-based founding partner at financial planning firm WorthPointe. He told me that having a financial advisor is mostly about deciding and achieving money goals.
"People tend to kind of let life happen financially," Van Slyke says. "[Then] they wake up and they're 50 or 60 and they're like, 'Wow, retirement's expensive.' Or their kids are going to college and they go, 'Oh my gosh, this is $200,000 per kid.'"
Financial advisors can help with that. Van Slyke said that simply talking about what I hope to do — buy a house, retire early, send my unborn children to a good school — can help me make more conscious choices while I'm working toward it. And that's probably something I can never do too early.
"You're going to benefit massively from just the exercise of setting goals and beginning to chip away at them," Van Slyke adds.
It's hard to argue with that. Statistically, more than 60% of Americans over 18 admit they could improve their financial planning habits, according to Northwestern Mutual's 2019 Planning and Progress Study. (Yeah, yeah, guilty as charged.) But only about a third of people actually have advisors, which baffles industry professionals like Van Slyke.
To him, it's the same concept as hiring any other sort of coach.
"Why do you have a personal trainer?" he says. "It's not because you can't figure out how to do push-ups. It's because your form will slip and you'll stop going to the gym."
Fine, I'm sold. But how does a person go about finding a financial advisor? Can I even get one, as a kind-of broke 27-year-old who spends most of her disposable income on frozen margaritas, Uber rides and this one particular Target pajama line?
Yes, according to Andres Garcia-Amaya, the founder of Zoe Financial, a company that matches financial planning pros with customers. However, it's not something to go into blindly.
First of all, "financial advisor" is a vague term. Some people who call themselves advisors are essentially salesmen hawking financial products for commission, Garcia-Amaya said. It's like if I thought I was going to the doctor but instead I met with a pharmaceutical sales rep. (And that pharmaceutical sales rep was NOT Jake Gyllenhaal in Love & Other Drugs.)
Secondly, I can't automatically assume that an advisor is legit just because they have a bunch of letters after their name. Garcia-Amaya explained that while some designations require people to pass rigorous tests, other titles can be bought. Shady.
He said what I need to look for are certified financial planners (CFPs) or chartered financial analysts (CFAs) who operate on a fee-only basis. Fee-only means that the client — in this case, me — is the only person who pays them. Otherwise, outside interests could influence the tips they give me.
"The easiest way to figure it out is to ask the advisor, 'How do you get paid?' Push them — 'Is there any other form of compensation?'" Garcia-Amaya adds.
As far as how much *I* have to pay them, it varies. Some advisors have account minimums and charge a percent based on assets under management. Others work on retainer or offer subscription models for less-affluent people like me.
In Garcia-Amaya's eyes, it's worth it. Ponying up a couple hundred (or thousand) dollars is a good deal to get access to someone who's "going to steer you away from bad decisions and into better decisions that compound over the next 30 years," he says.
The bottom line: Since my portfolio is uncomplicated and my financial life is pretty simple, I don't necessarily need a full-service, ultra-expensive advisor. Garcia-Amaya said I should get serious, though, if/when I get married, have a major career change, plan for a baby, pay down serious debts or prepare to buy a house.
At that point, I need to look for a fee-only CFP or CFA. I should probably be wary of any free advice because there could be someone else pulling the strings.
"If they're driving a nicer car than you, they're getting paid somewhere else," Garcia-Amaya says.