Financial Planning Blog

Sheryl Garrett, founder of the Garrett Planning Network, was recently featured in the New York Times "Your Money" column. She was an obvious choice for this discussion about how much advice people need, how it should be delivered, and how much they should pay. (There is an accompanying podcast with the author, Tara Siegal Bernard and the Times personal finance columnist, Ron Lieber.)

The gist of the article and podcast is that most people need financial advice, at least at some points in their lives. For wealthy people, this is not an issue, and they are used to paying significant sums for financial advisors who are basically on some sort of retainer. But, those with fewer resources still have a number of places to turn to, and many of these are discussed. (A great option for many, of course, is to find an hourly, fee-only financial planner from the Garrett Planning Network. In Idaho there are two Garrett Planning Network firms--Table Rock Financial Planning in Boise, and Dillon Financial Planning in Eagle.)

It is worth noting a mild debate in the Times column between two financial advisors I truly respect. Sheryl Garrett holds to the position that "very few people need a full time financial planner." What she is referring to here is the delegation of investment management to a financial advisor, and paying the advisor an annual retainer or a percentage of the assets being management. Although she admits this is appropriate for some, she feels "it's being way oversold, and the price is pretty steep."

Taking the other side of the argument is William Bernstein, author of some great investment books, including most recently, The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between. Bernstein points out that the most investors do a lousy job of managing their own investments, and thus lag the market by two or three percentage points. (See this Morningstar article on investor returns.) He thinks improved performance under a skilled advisor's full time management can more than offset the fees paid. "What you get from an advisor is not the winning allocation...What you are getting is the discipline. And an annual checkup provides precious little discipline."

Who is right? Well, I think both are right in their own way, and there is plenty of reasonable ground in between. There are many people capable of adhering to a disciplined investment strategy. Better yet, if they have the on-going coaching of a competent professional who can help develop the strategy and show them how to implement it in a cost effective manner. Garrett Planning Network advisors do this work every day, either by the hour or with a reasonable annual retainer fee.

I agree with Bernstein, however, that there is a significant element of the investing population who lack the discipline, desire, knowledge, or emotional make-up to effectively manage a sizeable investment portfolio. These people would be better off with delegating the management of the portfolio to a fee-only advisor who will keep them on track and allow them to benefit from market returns. If you fall in this camp, however, realize your need to be a vigilant, informed consumer, so you are not fleeced by elements of the financial services industry.

While on the subject of fleecing at the hands financial advisors, check out Jane Bryant Quinn's recent blog post. It's another reminder from the respected financial columnist that the commission-driven broker and insurance world is not your friend. Her advice: "The best way to protect yourself from commission-driven sales is to switch to a fee-only investment advisor. Fee-only advisors sell no products and take no commissions, they charge only for their advice. Two places to find them: The National Association of Personal Financial Advisors (napfa.org) and the GarrettPlanningNetwork.com."