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So my friends and I talk about a lot of things over txt. However, recently the question arose about what I do as a financial advisor. Given the series of posts I’ve been writing to shine a light on what it’s like to be a financial planner I figured this would be a great conversation to break up the usually blog post and give you some insight as to what a financial advisor does.

Thread Members:

Fred

Me!

Hunter

IT consultant for a financial firm

Maddie

Currently a marketing consultant going back to school to transition into nursing

Kevin

Biology Phd Candidate

Thread:

Hunter

Hmm–so what is it exactly you do? Is it sales or advising?

Fred

I’m in sales and a financial advisor.

Hunter

So how can you do both? Isn’t that conflicting?

Fred

No every financial advisor is a sales person

Fred

As far as the conflicts of interest it depends on how the advisors are compensated. Which is why there is so much hype about the DOL rule if ur familiar with that.

Hunter

And  no not necessarily…at least I thought not…I mean what about the guys who are solely an advising shop and are fiduciaries? Are they sales ppl?

Fred

Ya cuz they get paid on what they sell usually

Hunter

Ok, so that’s where the fiduciary part comes in

Fred

U could be a fee only advisor but few established advisors do that

Hunter

Ok yea that’s what I was thinking of…but I’m thinking if DOL comes through that will become more prevalent…advisors will have to better clarify their value proposition.

Fred

Ya that’s why there’s a huge push for ppl to get CFPs so they will be held to be fiduciaries. And that’s why a lot of companies are dropping some client because the way that they were making money off them they can’t do anymore if that rule passes.

Maddie

I don’t understand the words you are saying? What is the DOL thing?

Fred

It’s a ruling that is pending which would change the way advisors can be paid so that every advisor has to operate as a fiduciary

Fred

So that the conflict of interest that Hunter asked about is less

Hunter

Ohhh–gotcha. And Maddie, DOL stands for department of labor and they came out with the rule.

Maddie

What’s a fiduciary?

Fred

A fiduciary is someone that is required to put the client’s interest first before their own

Hunter

*legally required to put their client’s interest ahead of their own

Maddie

Shouldn’t that be any financial advisor?

Kevin

I think its a Harry Potter spell

Fred

Should but it isn’t right now

Fred

Lolz Kevin

Hunter

^

Hunter

Lots of advisors can advise things for you that actually aren’t the best thing for your financial situation. Annuities are often an example bc you can usually have more money if you just invest in the market.

Kevin

But why?

Hunter

They get paid to recommend and sell certain things

Maddie

Oh

Hunter

So if their client get a product they can get some type of benefit

Maddie

So the DOL is making it harder to do that?

Hunter

…did I get that all right Fred? Or am I messed up somewhere? Yup which is good and bad.

Maddie

What’s the bad?

Hunter

The bad is like Fred mentioned many shops say they are going to have a harder time advising people with less money

Maddie

Ahhhh

Hunter

Bc typically they would take a percentage of your assets as a fee, but they won’t have other benefits to help their compensation…I think

Fred

^idk what you mean by other benefits and regarding annuities ur kinda right. That is an area where a lot of ppl don’t act in client’s best interest but idk it is so much the reason u mentioned because a client looks at annuities for guarantee not growth

Hunter

That’s what they should look at it for but I don’t think that is always the way it is advertised–I’ve heard stories of people our age buying them which is stupid

Maddie

What’s an annuity?

Hunter

And well its not always direct benefit, it could also be a way they lower advisor fees or something so that they have less fees. An annuity is when you pay someone money with the understanding that you will be paid a certain yearly amount no matter what for a certain amount of time. Lots of times retirees will pay for that lasts until they die.

Maddie

Ah okay

Hunter

But they cost a lot of money and you can normally make more money in the market.

Maddie

So it wouldn’t be helpful for someone our age really. That makes sense

Hunter

In addition, your heirs won’t get any money (even if you die 6 months later). Yup

Fred

There are different types of annuities but the one that we are talking about is like building ur own pension

Maddie

I’m just gonna keep contributing to my 401k. No inheritance; that blows

Hunter

And lol Maddie. Probs wise about 401k

Fred

Wrong Hunter. That’s only certain types of annuities that don’t have death benefits

Hunter

Ok–but I’m betting you a premium for the ones that have it

Fred

Hunter, that’s correct. And Maddie for us now it doesn’t make sense but when you get to the point of making  lot of money where you are maxing out ur 401k and want to save more, it can make sense

Hunter

And thx for keeping me honest 🙂

Maddie

Hahahahahahahah

Lots of money

Lol

Hunter

Ok now this I don’t get tho–bc why would you just do a brokerage account? If you’ve maxed out your 401k, IRAs, and HSAs why not just retire?

Fred

Because u don’t want to pay taxes on while ur growing the money. And ya no. I’m going to need like 2.5mil to retire and when I get to the point of maxing my account I’ll still have a ways to go to get there

Hunter

Ok, but what about tax advantaged funds–doesn’t that get you the same thing tax wise? Are you planning to retire early then? I know you were talking about the real estate thing a while ago

Fred

Ur not going to make as much with tax advantaged funds over a tax deferred annuity. I am aiming for 42. We will see how it goes

Hunter

Huh–did not know that–can you do a Roth annuity? Is that a thing? And that is so cool!!!

Fred

That would be cool but i doesn’t exist at this point and I highly doubt the gov with edit the tax code to create it

Hunter

You should start a blog!

Fred

I’m actually working on getting that off the ground now

And so Finance Your Dreams was born.

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