The Real Cost Of A Financial Advisor
Episode 140R
Episode Guide
Episode Timestamps
Show Notes for ChooseFI Podcast Episode Featuring Nick True
Episode Summary:
In this episode with Nick True from Mapped Out Money, we discuss the importance of taking control of your financial future. Nick shares how he and his spouse prioritized their values, used the internet for remote work, and approached their financial journey differently. The conversation emphasizes effective financial planning, scholarship strategies, and the necessity of clear communication between spouses regarding financial goals.
Timestamped Highlights:
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Podcast Intro
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Introduction to Nick True
- Discussion of Nick's unique approach to financial independence.
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The Importance of Financial Independence
- Financial independence offers a framework for life choices.
- Engaging in proactive personal finance decisions.
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Understanding Financial Planner Fees
- Be informed about how financial planners earn their fees.
- Compare and contrast assets under management (AUM) with other compensation structures.
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- Key takeaway: Know how your financial planner is compensated for informed decision-making.
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Scholarship Strategies for Students
- Nick shares how he applied for numerous scholarships and the impact of a solid educational foundation.
- Action item: Explore scholarship opportunities and apply persistently.
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- Focus on dual enrollment and how it can save time and money on college education.
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Listener Voicemails
- A listener shares tips on college hacking, including dual enrollment and CLEP tests.
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Community Shout-Outs
- Celebrating listener accomplishments and encouraging community engagement.
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Podcast Extro
Key Quotes:
- "Why wait for financial independence? Design your life today!"
- "You should not be wondering how your financial planner is making money off you."
- "Homeschooling offers stunning flexibility in education and lifestyle choices."
Actionable Takeaways:
- Engage in discussions with your spouse about financial goals.
- Investigate dual enrollment options if you're in high school.
- Be proactive about understanding financial advisor fees.
FAQs:
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What are some strategies to reduce student loan debt?
Utilize dual enrollment, scholarships, and CLEP tests as strategies to minimize or avoid student debt. -
How can spouses have productive conversations about financial independence?
Open discussions about priorities and values are crucial. Shared goals lead to collaborative decision-making.
Related Resources:
- How to Win Friends and Influence People - A must-read for building relationships and networking.
Discussion Questions:
- What financial independence strategies have you found most effective?
- How important is it to communicate financial goals with a partner?
Conclusion:
In this episode, Brad and Jonathan explore innovative paths to financial independence with Nick True, focusing on effective financial planning, scholarship hacks, and communication within relationships to achieve financial goals.
SEO Keywords:
financial independence, early retirement, personal finance, financial planners, budgeting, travel rewards, scholarship strategies, FI community, student debt, money mindset, investing strategies
Podcast Description:
Join Brad and Jonathan as they explore innovative paths to financial independence in this episode featuring Nick True from Mapped Out Money. Discover methods for effective financial planning, scholarship hacks, and strategies for proactive discussions about finances with your partner.
Embracing Financial Independence: Strategies for Success
In today's fast-paced world, achieving financial independence can seem daunting. However, as highlighted in a recent episode of ChooseFI, it's not only attainable but can also be woven into your lifestyle decisions. Here’s how you can take actionable steps toward financial freedom while remaining aligned with your personal values.
Understand the Financial Independence Framework
At the core of financial independence (FI) is the idea of re-evaluating how you visualize and engage with your finances. Instead of merely saving for a distant retirement, you should actively design your life in a way that values experiences and flexibility.
Premium on Practicality
It’s essential to frame your financial decisions not just around abstract numbers but through practical implications for your life today. Ask yourself, "How can I design that life now?" rather than postponing happiness for an indeterminate future full of savings. This mindset shift encourages you to appreciate the present while being proactive about your financial future.
Have Transparent Conversations About Finances
One key takeaway from Nick True's journey is the importance of communication, especially with your spouse. Engaging in open conversations about financial goals ensures that both partners are on the same page, avoiding misunderstandings and fostering collaboration.
Take Action
- Discuss Priorities: Sit down with your partner to identify what financial independence means for both of you. Create shared goals that align with your values.
Understand Financial Planning Costs
When seeking financial advice, clarity about how your financial planner or advisor is compensated is crucial. Many advisors operate based on assets under management (AUM), which can be a hidden cost impacting your financial growth.
Be Informed
- Key Insight: Do not wonder how your financial planner is making money. Knowing their compensation structure allows you to manage expectations and avoid unnecessary fees.
Scholarships and Minimizing Student Debt
As discussed in the podcast, investing in education need not lead to crippling debt. Implementing scholarship strategies and pursuing less expensive educational options can make a significant difference.
Scholarship Strategies to Consider
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Dual Enrollment: If you’re in high school, explore dual enrollment options. College classes taken during high school often come at a fraction of the cost and count for both high school and college credits.
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CLEP Testing: Consider exploring College Level Examination Program (CLEP) tests to earn college credit. This can save you time and money on coursework.
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Continuous Scholarship Applications: After securing a full ride, don’t stop there. Continue applying for additional scholarships—every little bit helps to reduce future debt.
Embrace Remote Work Opportunities
The flexibility afforded by remote work can greatly enhance your ability to pursue financial independence. As Nick True's experience illustrates, leveraging opportunities available through the internet can provide you with income while allowing for a mobile lifestyle.
Steps to Take
- Evaluate Your Skills: Identify what skills you can offer in the remote job marketplace and seek opportunities that align with your aspirations and lifestyle.
The Power of Community
Engage with a community focused on financial independence. This could be through forums, local meetups, or online groups. The support system not only provides accountability but also shares valuable insights into reducing costs and maximizing savings.
Join the FI Community
- Actively Participate: Share your financial independence stories, strategies, and hacks with others. You may just inspire someone to take the first step.
Re-evaluating Your Investments
It's vital to have a solid understanding of investment strategies and how fees impact your returns over time. The podcast emphasizes the importance of knowing everything that goes into your investments, ensuring you're not undercut by high fees that erode your savings.
Investment Insights to Implement
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Be Mindful of Fees: Grasp how seemingly small fees can accumulate significantly over decades.
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Opt for Low-Low Cost Index Funds: Consider funds that have lower management fees if you go with an advisor, as they typically provide better long-term returns.
Conclusion: Designing Your Future
Achieving financial independence is a multi-faceted journey that requires careful planning, open communication, and a proactive attitude. By embracing these strategies, you can begin to design a life that prioritizes your values while building toward a financially secure future.
Your journey toward financial independence doesn’t have to be a lonely one. Join the ChooseFI community today, share your experiences, learn from others, and let’s cultivate financial freedom together!
Brad and Jonathan dive into the costs of a financial advisor and college hacking.
[elementor-template id="143609"]Financial Advisors
Jonathan recently recorded an episode with Pete Matthews from Meaningful Money. Pete mentioned that he had been at a financial planning conference where they told the audience that financial advisors need to be prepared to talk to people about reaching Financial Independence.
FI is a framework on life. That's what people are looking for.
FI is a framework to build your life around. It's not simply playing defense to protect your future self from financial despair. The exciting part about financial planners talking about FI is that it might create a new anchoring point. For example, instead of struggling with their clients to help them save 4% the new anchoring point could be 50%!
However, many financial planners feel that they are on the defensive, based on the information being put out by the FI community. This is because it will become increasingly more difficult to charge high fees when clients are more aware of what these fees are actually costing them. As people become more informed, it will be more difficult to justify high commission products that do not benefit your client.
How Financial Planners Get Paid
The most common is based on 'assets under management.' The advisor manages the money for you and in return, they get a percentage off the top. The percentage could range from 0.25% to 7%! Those fees matter!
The market has to outperform those fees in order to justify it. And your advisor, that's working with you just says 'Well, I don't charge you anything upfront, I just make money when you make money and I just charge you a 2% assets under management fee.' To understand what that means, well, it's just 2%. That means I'm keeping 98%. But it's 2% every single year. It's 2% regardless of the market goes up or down. And that 2%, if all things being equal and you were to make an extra 2% on your money...that can take off probably close to 25% of your portfolio by the time you've reached the end of that investing timeline.
Whether the market goes up or down, your financial advisor will take their fee from your assets. over the course of your investment timeline, this could eat up 25% of your portfolio.
Two Examples
- Investor A: Starts with $100,000 and invests an additional $10,000 each year, thereafter. This investor pays no fees. With an annual return of 8%, their portfolio would grow to $4.97 million at the end of the 40 years.
- Investor B: Starts with $100,000 and invests an additional $10,000 each year, thereafter. This investor pays a 2% fee which lowers the annual return from 8% to 6%. With everything else the same over the 40 year period, their portfolio would be worth $2.67 million.
Many advisors claim that their worth is in their ability to beat the market. However, that might not be worth the expense. If you had $2 million in assets under management, then you can expect to pay your financial advisor $40,000 a year!
The other way your advisor could be paid is through a fee for service model or a blend of the two.
Of course, not all financial advisors are able to provide a substantial amount of value. However, you should be completely aware of exactly how your financial advisor is earning money.
Go in eyes wide open. You should not be wondering how your financial planner is making money off you. You should understand what those incentives are and how it works. And then with that in mind, then keep in mind the benefits that you are getting. And if that mirrors up, then I feel like we have successfully achieved what we wanted to achieve with this segment.
Listen: Let's Talk About Fees
Nick True Returns
This week, we caught up with Nick True from Mapped Out Money. He and his wife have designed an amazing future for themselves before reaching FI.
I think it's essential in life to look at what you do value, what you do prioritize, and how do you move forward based on that information.
If you are on this path with a partner, then make sure to get on the same page. Communicating about your goals is critical for building a life that you are both excited about.
Going To College For Profit
Although his parents did not pay for college, Nick was able to leave school with a positive net worth through hard work. That hard work started in high school with a high GPA. He searched for a low-cost in-state school that was able to offer him a full ride based on his outstanding GPA.
He did not stop at a full ride. Nick continued to apply for 20-30 scholarships each year. Eventually, he landed one for $15,000 in his last year of college. Over the years of writing college scholarship essays, he discovered how to tell a better story about himself.
Listen to the full episode with Nick here.
2020 Goal
ChooseFI is working to create a collection of college resources for the community. The goal is to help high schoolers get through college for free or for profit. The student loan debt and the lost decade after doesn't have to be the story anymore.
Crowdsourcing information, right, everybody has this little bit of info that can be life-changing but its in the silo of their own life. And now we have a way to share it.
Please consider calling in to share your own college scholarship or hack.
You can leave a voicemail here. Or write your story here.
Announcement
Zach, our former showrunner, is now helping us roll out a video podcast that will air on Monday's and Friday's. You can find us on YouTube at Choosefi.tv. Please consider taking a second to subscribe. The goal of these videos is to make ChooseFI a more comprehensive experience.
MK will be joining our team as the showrunner and the lead of ChooseFI publishing. MK has experience self-publishing several books. She will help make more resources available to the community.
Listen: From Passion To Profit With MK Williams
Feedback From The Community
Let's hear what the community has to say.
Voicemail From Liz
As the oldest of seven homeschooled kids, Liz's family has optimized the college process. Here are some of her great tips:
- Dual enrollment. Dual enrollment allows high school students to take classes at their local college. The classes count for both high school and college credit. It is possible even if you are not homeschooled. If you take these classes you'll be ahead for college. Plus, many times the classes are offered at a discount to high schoolers.
- Five years of high school. You can stay in high school for an extra year but exclusively take dual enrollment classes. If you complete a whole year of these classes, then you may only need around 2 years of traditional college.
- CLEP testing. You can take CLEP tests that can count for college credit in certain subjects. The tests cost between $75 to $100 but you can avoid the tuition cost of the class.
ChooseFI: Your Blueprint To Financial Independence
The book is now available for pre-order here. If you pre-order and send in proof of your receipt then you'll have access to an exclusive Q and A with the authors.
The official release date is October 1, 2019!
After the release, there will be a limited book tour. The first stop is in Salt Lake City on October 12, 2019, at the Sugarhouse Barnes and Noble at 2 PM.
Shout Outs
Allison paid off her mortgage!
Autumn's son knew all the answers for finances in a 7th-grade math class. And to the parents for including him in the conversations!
FWOTW: Jason's adjusted his W4 after some life changes and that helped him "find" $260 a month!
Related Episodes
- A Second Generation FI Case Study With Cody Berman
- Demystify College Scholarships With Brian Eufinger From Edison Prep
New to FI? Be sure to check out Episode 100: Welcome To The FI Community!
