Money Rehab with Nicole Lapin - Swipe Right on a Financial Advisor

Episode Date: May 18, 2021

A relationship with a financial advisor is exactly that - a relationship. Nicole unpacks why you shouldn’t jump into bed with just any advisor, what they can really do for you, and how to find “the one”. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it. And you think the whole world revolves around you and your money.

Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Financial advisors have the reputation that they only work for folks with a gazillion dollars with perfect credit and 25 streams of income.

And then they take your money. But that's actually not true. I got an interesting question from money rehabber Lily on this point. So let's dive in. Hey, Nicole. I've been investing in the market for a few years now, and I'm ready to kick it up a notch. But I sort of feel like I've maxed out my knowledge on trading. What do you recommend?

I know. I know. It is hard as heck to ask for help. I mean, I am the poster child for the I've got this on my own mentality, even with the Miss Independent ringtone and a book of the same name coming out. But even I, the rich bitch herself, has help with my own finances and lots of it. It's okay. Doctors have doctors. Shrinks have shrinks. Trainers have trainers. We all need help, even the experts. I would recommend any money rehabber at any step along the way have a financial advisor. But not any financial advisor. There are

probably 200 different names for financial advisors, many of which are not regulated by FINRA, which is the oversight body that watches how investments are pitched to potential investors. Oftentimes, their credentials are pure puffery that aim to razzle-dazzle those who don't know the difference. But you will. The biggest misconception about finding a financial advisor is thinking that your broker is one of them. Your broker is not on your team. By definition, brokers work for financial services companies and are not required to do what's in your best interest. The only way brokers get paid, think about it, is by selling you the financial products that their company manages. They may talk a big game. They may act

like your friend. They might even send you a holiday card. But their MO is to get you to put your money into the financial products that are most profitable for them and their companies. Not a lot of folks are going to tell you this, but I will. And let me say it again. Brokers are not your pals. Several large-scale anonymous surveys have shown that brokers don't practice the advice that they give when it comes down to their own investments. In fact, about half of them don't even have a stake in the products that they're pushing. That's like a shady baker who doesn't even taste her own treats. I mean, why not? The only reason could be that she knows they're made

with some nasty-ass artificial ingredients. The only title you should be looking for when sourcing a potential financial advisor is RIA, or Independent Registered Investment Advisor. These folks are fiduciaries. A fiduciary is just someone who doesn't have conflicts of interest, and if they do, they have to disclose them to you. And someone who puts their clients' interests first, ahead of their own. Yours truly is a fiduciary, but not everyone who gives financial advice is a fiduciary. I find this really interesting. The financial services industry, like the brokers, their standard is to provide suitable, seriously, suitable financial advice. Think about this

for a second. Would you accept suitable anything? Suitable food at a restaurant? Suitable coffee? Suitable friends? Suitable sexy time? I mean, I wouldn't. I wouldn't want you to either, especially when it comes to where you're putting your money. One of the biggest differences between a fiduciary and others who might dole out financial advice is their fee structure. Fiduciaries charge a flat fee that is tax deductible, while non-fiduciary advisors

charge a fee that you pay based on your investments, which aren't at all tax deductible. Think of a fiduciary as being your stylist and a non-fiduciary as being the salesperson working on commission. You're likely paying the stylist a flat fee to make you look awesome and feel great. Their reputation depends on you looking and feeling great. So while they have relationships, right, with all the brands and all the stores, their ultimate loyalty is with you. On the other hand, if you walk into a department store and the salespeople are only incentivized for you to buy the stuff in their section, so they collect a commission on that sale,

they're going to push that stuff and that stuff alone. I get it. It's confusing when the gals at your favorite stores act like you're besties and it may feel like they want what's best for you, but they do not. They've already decided that your money is theirs, and they are going to do anything sneaky to get more of it. My intention is not to bash all financial advisors. The truth is, despite my warnings, which I do hope you will take seriously, there are some truly all-star ones out there who do have your best interest in mind. And having a trusted advisor who's not a fiduciary is better

than not having an advisor at all. I just want you to know who your real friends are and early on when your friends can have a real positive impact on your bottom line. Finding friends is not hard, but finding the right one for you and your money goals can be a little tricky. You should start with cfp.org and the National Association of Personal Financial Advisors. These will give you a list of all the fee-only advisors. It doesn't mean that they're all good or that they're even good for you. It's like searching through a list from your state's bar association to find a lawyer

or the medical board to find a doctor. It's a great first step to know that they aren't a quack, but it's certainly not the last step. Of course, you don't have to have anyone help you at all, and if you don't, that means even more cost savings. You absolutely can read up and manage your own investments, or you can treat your advisor like a personal trainer from whom you get a fitness plan, and then you work out on your own following that plan. And you check in every once in a while for some tweaks. But there is a lot of added value in continuing to work with a financial trainer as you strengthen your investment strategies and tax planning and

portfolio management. It's also really nice to have a buffer between you and all the news, or panic porn, as I like to call it, out there, especially in the financial world. Just don't forget, not all advisors are created equal. Like I said, doctors have doctors, right? They're not going to perform surgery on themselves. So not to flex, but yeah, I'm a financial expert. That's why I have this show, duh. And I also have a financial expert. Her name is Rebecca. She is amazing. And I remember our first meeting very vividly because it was so embarrassing and hilarious. So first I was sweating like a lot, a lot, lot. So I bought maxi pads from the little machine in the firm's bathroom to stuff under my armpits.

I was sweating that bad. I was nervous about how the meeting would go. I thought a financial advisor would be judgmental and more similar to those so-called financial experts who nix any money I'm spending on my extras category or like on a latte. I imagined Rebecca to be some old pantsuit wearing troll who hid out in a dark closet with a calculator and stacks of paperwork all day. But no, she was actually really cool, smart, kind of trendy. In your first meeting with your financial advisor, you'll probably walk through all of your bank accounts, your bills, your credit card statements, and your investments. That's what Rebecca and I did during our first meeting, and it was relatively painless. Then she asked me about growing wealth. I told her that I was making

a good salary and I was on track to getting promoted and keeping step with the pay ranges. She was the first person who told me, though, that getting an increase in salary wouldn't grow my wealth. She told me that even if I saved more money, I would actually be losing money over time in a regular savings and checking account because of inflation. Think about it, guys. Historically, inflation rates go up by about 3% a year. If you're making 1% at a bank a year, then you're actually losing 2% in purchasing power in the future. The rate of inflation would still be more than what you're earning. Rebecca was totally right. Making more money at work is always great

if you can swing it, but you should have your money make money for you at least to cover the pace of inflation. We all work so hard for our money. It's time it returned the favor. We all work so hard for our money. It's time it returned the favor. So in my meeting, Rebecca started talking to me about how I should grow my wealth. She asked me if I knew about tips, which I now know are treasury inflation protected securities. They are bonds that you can buy to protect you and your money. They're government bonds.

But at the time, I thought she was asking me to tip her. So I literally tried to give her cash. I just didn't know the jargon. The best sport is laughing at your former self. It's one of my favorite things to do. I stopped hating on that sweet girl long ago. She was doing the best she could with the information she had. go. She was doing the best she could with the information she had. But I will never forget now what tips stand for, and Rebecca won't let me live this one down anyway. So tip your waitress, don't tip your financial advisor. And follow money rehab tips that you can take straight to the bank. So here's today's. A good rule of thumb is to keep your investment fees to around 1.5% or less. That means around 1% in fees to your financial advisor and as little as possible in fees for your investment. So check out CFP.org and find your financial soulmate.

Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikadur and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.