Suze Orman's Take On Financial Planners (2024)

FAQs

Suze Orman's Take On Financial Planners? ›

As Orman observes, a planner or advisor who can't keep his/her own items in order can't help you keep your life in order, either.

As I explain in my book The Ultimate Retirement Guide for 50+, I think working with an advisor as you near retirement can be such a smart decision given there are so many moving pieces to figure out. (It also can be smart at any age if you are unsure or worried that you are making the best choices.)

They Charge You Regardless of Whether or Not They Make You Money. The fees that financial advisors charge are not based on the returns they deliver but on how much money you invest. This means that you'll still get a bill for their services even if they lose the money you entrust them with.

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Many, but not all, registered investment advisors use an independent firm as their custodian. This means they don't take actual possession of your money. The investment manager may have the discretion to buy or sell securities and in what quantity for your account, but the custodian holds the assets.

Perhaps the most significant concern of hiring a financial adviser is that they don't always have your best interests in mind. Despite many advisers making decisions that will benefit the client, it is not unusual for conflicts of interest to arise.

If you have considerable wealth and require a long-term estate plan with multiple moving parts, such as preservation of capital, income generation, taxes, insurance and legal issues, a financial planner is likely the better choice.

But even the best financial advisors are at the whim of the market. Most professional investors who try to beat the market actually underperform it over a given time period. And those who do manage to outperform the market over one time period can rarely outperform it again over the subsequent time period.

Is 1% too high for a financial advisor? ›

While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.

The rule is often used to point out that 80% of a company's revenue is generated by 20% of its customers. Viewed in this way, it might be advantageous for a company to focus on the 20% of clients that are responsible for 80% of revenues and market specifically to them.

Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Some traditional financial advisors have minimum investment amounts they require to work with clients. These can range from $20,000 to $500,000 or even more. Why? Because their fees need to cover their time and expertise, and managing smaller portfolios may not be cost-effective for them.

If you're wondering whether doom and gloom stories about financial advisors becoming obsolete, here's some reassurance: people will always need financial advice.

Many of the issues around day-to-day finance will only get more important in retirement, as budgeting gets more important without new income coming in the door. The simple truth is that financial planning for the future never stops. If you can afford it, professional help can make that process much easier.

An advisor who believes in having a long-term relationship with you—and not merely a series of commission-generating transactions—can be considered trustworthy. Ask for referrals and then run a background check on the advisors that you narrow down such as from FINRA's free BrokerCheck service.

What Percentage of Financial Advisors are Successful? 80-90% of financial advisors fail and close their firm within the first three years of business. This means only 10-20% of financial advisors are ultimately successful.