“A unique voice on money,
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one singularly attuned to…his generation.”
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—San FranciSco chronicle
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founder and writer of
ToBE No Guilt.
THE MYTH OF FINANCIAL EXPERTISE
I Bet You Don’t Need
a Financial adviser
ou’ve heard my rants against the media hype surrounding
investment and the poor performance of most professional
investors. Now there’s one more category of financial
professionals that I want to warn you about: financial advisers.
Some of you might say, “But Ramit, I don’t have time to invest! Can’t I
just use a financial adviser?” Ah, yes, the old outsourcing argument. We
outsource our car cleaning, laundry, and housekeeping. So why not the
management of our money?
Most young people don’t need a financial adviser. We have such
simple needs that with a little bit of time (a few hours a week over the
course of, say, six weeks) we can get an automatic personal-finance
infrastructure working for us.
Plus, financial advisers don’t
always look out for your interests.
They’re supposed to help you make
gIvE YOu gOOd
the right decisions about your money,
but keep in mind that they’re actually
not obligated to do what’s best for
you. Some of them will give you very
good advice, but many of them are
pretty useless. If they’re paid on commission, they usually will direct you to
expensive, bloated funds to earn their commissions. By contrast, fee-based
financial advisers simply charge a flat fee and are much more reputable.
(Neither is necessarily better at providing good investment returns, or your
top line; they simply charge differently, affecting your bottom line.)
The key takeaway is that most people don’t actually need a financial
adviser—you can do it all on your own and come out ahead. But if your
choice is between hiring a financial adviser or not investing at all,
then sure, you should hire one. People with really complex financial
situations, those who have inherited significant amounts of money, and
those who truly are too busy to learn about investing for themselves
also should consider seeking an adviser’s help. It’s better to pay a little
and get started investing than to not start at all. If you’re determined
I Will Teach You to Be Rich
So You Really Think You Need a
I f you really want to look into hiring a financial adviser, here’s an
introductory e-mail you can adapt and send:
I’m looking for a fee-based financial planner, and
I found you on www.napfa.org. A little bit about
me: I’m twenty-six and have about $10,000 in total
assets—$3,000 in a Roth IRA (uninvested), $3,000 in a
401(k), and $4,000 in cash. I don’t need the money any
time soon, so I’m looking for investments that will
maximize long-term returns while minimizing costs.
If you think you can help me, I’d like to meet for
half an hour and ask you some specific questions. I’d
also like to hear details on other situations in which
you’ve worked with similar people with similar goals.
Would next Friday, 2/6, at 2 work at your office?
Alternatively, Monday, 2/9, is wide open for me.
For your thirty-minute meeting—which shouldn’t cost you anything—
you’ll want to come prepared with questions. There are hundreds
of sample questions available online (search for “financial adviser
questions”), but at the very least, ask these three:
n How do you make your money? Is it through commission or
strictly fee based? Are there any other fees? (You want a fee-
based adviser with no hidden fees.)
n Have you worked with other people like me in similar situations?
What general solutions did you recommend? (Get references and
n What’s your working style? Do we talk regularly or do I work with
an assistant? (You want to know what to expect in the first thirty
days, sixty days, and ninety days.)
THE MYTH OF FINANCIAL EXPERTISE
to get professional help, begin your search at the National Association
of Personal Financial Advisors (www.napfa.org). These advisers are fee
based (they usually have an hourly rate), not commission based, meaning
up paying tens of thousands of dollars over their lifetime simply because
they didn’t spend a few hours learning about investing. If you don’t learn
to manage your money in your twenties, you’ll cost yourself a ton one way
or another—whether you do nothing, or pay someone exorbitant fees to
“manage” your money.
providing any special return on my investment, but costing me 1.5
percent in fees each year, I made the decision to open an online
brokerage account and take charge of my money.
—SARAH PURA, 24
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About the book
At last, for a generation that's materially ambitious
yet financially clueless comes I Will Teach You To
Be Rich, Ramit Sethi's 6-week personal finance
program for 20-to-35-year-olds. A completely
practical approach based around the four pillars of
personal finance—banking, saving, budgeting, and
investing—and the wealth-building ideas of