Dear PoPville – Looking for a financial advisor

Photo by PoPville flickr user Faucetini

“Dear PoPville,

I am looking for a financial advisor referral.

With the economic situation going on, I have stopped looking at my 401k, it is very depressing 🙁
I know everyone is in the same boat at this point. My problem is that I contribute a big portion of my salary every month in my 401k (there is no matching). My contribution get invested in different mutual funds portfolio that I (randomly) selected with not much knowledge of their financial status (thus my next question)

I am wondering if it is smart to keep automatically withdrawing a big amount of my paycheck to put in my 401k which is losing value daily? Maybe I should direct deposit the money after taxes to my saving account for emergency fund?

I also believe that I need a financial adviser to guide me on how to manage/invest my 401k.
I dont know any financial advisor with good reputation (i.e. not trying to sell me some kind of insurance and reasonable fees),

maybe popville reader have used one before an can make a suggestion? (price info if available will also be great)
Thanks in advance.”

From a press release:

“Metro Washington Financial Planning Day was created to assist people in our community, District of Columbia, Mayor Vincent Gray and Metro Washington Council of Governments invite you to participate in Metro Washington Financial Planning Day on Saturday, October 15 at the Columbia Heights Educational Campus (Bell Multicultural High School).

The event is a groundbreaking effort to provide Metro Washington residents with free financial advice and education, delivered by professional financial planners at no cost and no strings attached. The advice will be offered through one-on-one counseling and classroom-style presentations by experts from the Financial Planning Association and highly qualified Certified Financial Planner™ professionals. Attendees will have the chance to win one of two $500 scholarships.

To learn more about the event and register, residents can visit”

44 Comment

  • Try smart401kdotcom

  • As long as you have a healthy balance in your emergency fund, keep dumping money into your 401K.

    When you invest in your 401K, you are buying shares. Right now the share price is dropping, meaning that you can technically buy more shares each pay period than when the market was stronger and share prices were up!

    Now you’re right that your balance might look sad, but in the long term (I’m assuming you’re not 2-5 years from retirement) the fact that you were buying shares now will pay off as long as the market (eventually) recovers.

    Tbe take away is you can get more for your money now… the only benefit to this down economy is that if you have the time, you can buy lower priced shares now and enjoy their growth if and when the economy rebounds.

    • This is exactly the advice I was given. I’m 32 and was encouraged to keep contributing as usual. I was told the only people who need to drastically change their contributions are those that are within 10 of retirement, but who really knows these days?

    • That’s the conventional wisdom, but you can’t really rely on the stock market to generate returns in a “set it and forget it” way over the next 15 – 20 years. Take the last 15 years for instance. Or look at the years 1965 – 1985. If you had been “dumping” money blindly into stocks or mutual funds during those periods, you likely have little to show for it — maybe a negative real return. The typical dollar cost averager lost wealth during those periods.

      Really, the only smart way to invest is to have enough cash to justify a well paid advisor or to invest the time yourself to learn at least a couple basic tricks.

  • I haven’t used a financial adviser, but I’ve been pleasantly surprised that Calvert Socially Responsible fund (a good chunk of my retirement portfolio) has continued to increase in value over the past few years, rarely seeming to waver. I’m sure there are lots of other similar funds that have the double value of doing good and giving you a return on your investment!

  • Check out Community Ladders. They are a social business devoted to consumer protection, group bargaining power, and upward mobility.

  • Kevin is correct that now is the time to be dumping money in and not pulling money out of the market. Buy low and sell high, not the opposite.

    However, you shouldn’t be investing in random mutual funds. You need a balanced portfolio with the proper mix of stocks and bonds, domestic and foreign, small and large. Your portfolio should take into account your risk tolerance and your future retirement needs. You should make sure that your investments have low fees, and I would generally steer clear of “managed” funds.

    If you’re the do-it-yourself type, pay a visit to the Bogleheads Forum (named after Jack Bogle, the founder of Vanguard): They will help you straighten everything out and put together a simple, set-and-forget portfolio. You can also learn more advanced portfolio theory. It’s free.

    If you’re not the do-it-yourself type, then a financial advisor is probably the best way to go. Bogleheads can probably recommend a few, but I would suggest that you use someone who works on a flat-fee basis and not someone who works on commission (i.e., selling you expensive mutual funds and engaging in frequent buying and selling to run up commissions).

  • I agree with Kevin above. While your account may be diminishing today, as long as you have a reasonable amount of time before you cash it out, now is a time to buy because you can buy more shares for the price.

    I also have the opinion that most people should learn a bit more about the funds they invest in and should learn some basics of market fundamentals. Otherwise you’re guessing at best for results that you don’t understand. A financial advisor in my opinion will only give you a false sense of security and direction. You are the best manager of your own money.

    • I agree with Craig.

      You need to revaluate the varying fund elections you’ve chosen for your 401K. I am no investment genius but my 401K has been increasing in value (obviously not including the biweekly contributions) since early 2009. Most 401K programs let you change your elections as often as you like, I change mine a few times a year. Every fund has a long descrption as to what it does, costs, past performace etc.

      There is no reason you need to accept your 401K losing value. At the bare miniumim you should be putting it into the low interest savings /money market election most 401Ks have.

  • Have you used your plan’s investment tools, that would be Good starting point.

    Don’t pick a crook review your candidates disciplinary history on BrokerCheck.

  • obviously I’m biased, but my qualified sister does independent financial consulting. she’s NC-based but also does it remotely. she’s especially passionate about helping young professionals get their financial life in order and as a result I think she is really affordable. if you have any interest, comment back and I’ll email you…

  • I recently inherited a bunch of Schwab funds, and have been very happy with their advisors and online management tools. They allow you to take as much control as you like, and when you need help it’s very easy to get.

    • The OP was asking about his/her 401k, which typically does not allow the flexibility of choosing your own broker. But that does raise the question of what s/he is investing in besides the 401k, which probably will not be enough unless the OP has a pension as well. Schwab has some excellent no-load index funds, as do Vanguard and Fidelity. TDAmeritrade offers dozens of low-cost ETFs for no trading fees. These are all things the OP should consider, but getting the 401k in order should probably be the first priority.

      • Your post made me think that maybe the OP should cut back on the amount invested in the 401(k)and take the difference to a financial advisor of their choice. My advisor takes time regularly to teach me about investing, the market, and about my investsments. You can apply that knowledge to management of the 401(k). One of the posts I read here claimed that unless you have more than $250k to invest, to not bother with financial advisors. That simply is not true. I’ve been investing with my guy for many years and have never been given the impression I don’t have enough money to play. An added benefit is that my advisor helps me plan for my financial goals and helps me invest in ways appropriate to my stage of life. You can’t get that with a broker.

        The advisor I keep referencing is located in Cape Cod. I haven’t had an issue with our long distance relationship, so I personally would recommend that you expand your search for an advisor beyond the area.

  • Use only a CFP that is a fee only planner (NAPFA). Too many financial sales people in sheeps clothing. Fee only planners are not commissioned based (Series 65 as opposed to Series 6 or 7). CFP is the gold standard. Any other designation is worthless.

  • unless you have a significant amount of money that you are looking to invest (greater than 250k). financial advisors are useless. they will just put you into mutual funds that are often over bought — since these funds often pay advisors the highest commissions. Once you have above $250k, financial advisors will pick up your phone calls and entertain you with single stock trades. if you want to just buy a mutual fund, do it yourself through a broker, you dont need a financial advisor, just do the research yourself. if you have more than $250k and enjoy following the markets, go to one of the big houses (merill lynch, jpmorgan, etc.)

    less than 250k, better off going at it yourself
    more than 250k, you have enough to lose and you’ll get your phone answered by a FA, so go the $$$$ route.

  • Agree with most all of the people above that say you should continue to contribute to your 401k. Think about the automatic 30% haircut your money would take in taxes if you were not contributing. It would be hard to find an investment that could make that worthwhile. Definitely try to leverage the free tools available that take into consider your risk profile and estimated retirement date.

  • Skip the wirehouses. They just buy large blocks of stocks at a discount and then have their brokers call you pushing product. Above or below whatever figure, go fee only CFP.

  • Actually Suze Orman recommends Roth IRAs over 401Ks if there is no company match. Her point is you are putting away pre -tax funds in a low tax era that will be withdrawn some day in a high tax era.

    • Unless you retire to a lower income than you make now, in which case your effective tax rate could be lower than it is today.

    • “that will be withdrawn some day in a high tax era”

      Pure speculation. No one knows what the tax code will look like in 20 or 30 years. Make decisions based on known information. Besides, there are many ways to reduce or eliminate your tax burden in retirement. Moreover, there is also a Roth 401k, so your argument is more about pre-tax vs. post-tax contributions and not IRA v. 401k. I’m not saying the OP should not contribute to an IRA–s/he should do both–but I don’t necessarily buy into the benefits of a Roth.

      With a regular IRA and 401k, you realize the tax savings immediately, and in theory, you can put those savings back into investments that will grow over time. With the Roth IRA and Roth 401k, you pay the taxes on the contributions up front, and thus you forego the money that could otherwise be invested over time. It is debatable whether foregoing that investment is outweighed by a potentially (but not by any means necessarily) lower tax burden in the future.

      • Those are good points. I guess Orman is betting that historically low tax rates indicate that it’s unlikely they drop further, incurring a loss by having gone with a Roth whatever. Still, pure speculation.

        More likely, it’s a bad bet because most people retire to a lower income. Say you and your spouse make $120k today, and you two plan on retiring on the equivalent of $60k/year, with an empty nest and a paid off mortgage.

        Suze’s good for being a kind of gateway drug to greater financial awareness, but she’s not a true guru.

        • Agree on Suze. Dave Ramsey too (arguably more dangerous).

        • Most erconomists agree that some day taxes will need to be raised to deal with the enormous debt combined with the retirement of the baby boomers. I’m going with Roths over anything above my company match in my 401k.

  • One word: Vanguard

  • I would take an IRA over a no matching 401k because it can be ROTH converted under certain circumstances and when conditions are tax favorable. Accessing low cost index funds may be more difficult in a 401k.

    • That’s what I did too. No matching, get a standard IRA.

    • This advice assumes that the OP does not already have access to a Roth 401k. Lots of people do now, myself included.

      • Actually, I think I misunderstood RollingO’s advice. If you’re saying to contribute to a standard IRA now and then convert it to a Roth IRA during a year in which, for whatever reason, you’re in a particularly low income bracket, that makes sense.

      • A matching ROTH 401K would be a plus but only the Employee contribution is ROTH. If above the AGI threshold then cannot do ROTH IRA. No matching and no limitation issue then depends on product offering between a 401k and IRA (ROTH or non-ROTH)

  • I would max the IRA (if you qualify) before the 401k

  • A lot of the above advice seems good, but if you want to stick with the 401(k) route, a good quick and dirty trick is to mirror the asset allocation of a target date fund for whatever date you plan on retiring.

    For instance, if you plan on retiring in 2050, look up what the vanguard 2050 retirement target fund has as its asset allocation. Then pick funds in your own 401(k) that correspond. 25% international, 25% domestic large cap, 25% extended fund, whatever it is.

    Once you’ve got a good initial allocation, you really can “set it and forget it” by rebalancing once a year. That is a built in way to “buy low, sell high” with your 401(k).

    I’ve also heard that Roth IRAs are better than 401(k)s. But, depending on your situation, you should strive to both max out the Roth IRA and still contribute to 401(k). The money automatically comes out, so you don’t feel it as much. With the miracle of compounding, a little pain today can yield great dividends thirty years from now.

    • Use Dollar cost averaging for the buy high and sell low end. The only problem is that Vanguard is based on indexing the market and you would need to find index funds in your 401k with possibly the same benchmark to create a dirty mirror. How many people have access to index funds in their 401k?

      • buy low…sell hi

      • That’s my primary problem with 401k’s…most of them have crappy selections. If there is no match, and your 401k doesn’t offer index funds (mine and my wife’s actually do), then you should almost certainly save in an IRA first, since that allows much greater flexibility.

  • Your time horizon is too short, a least for 1965-1985. If you were consistently “dumping” money into the stock market during these years, and did not sell in 1984, you’d be very happy with the results. Even if the OP is planning on retiring 20 years from now, that does not mean she will need all the money 20 years from now, so the hypothetical OP retiring at 1985 could still reap the rewards of 1985-2001.

    Lets hope the same holds true for someone “dumping” money into the market during the last 15 years. Let’s also hope these years are exceptional.

    • this was intended as a response to Tres, above.

    • The early years in your life as an investor are disproportionately more impactful than any others. If the first 5 years of your life as an investor are losing ones, by retirement you’ll be hundreds of thousands of dollars behind someone who had the luck of making average returns for the first couple years. You’d have been *much* better off staying in cash for those years, and buying after a bull market is very clearly established — even if you’re relatively late to the game.

      If it doesn’t matter when to you when/if you retire, just invest that money willy nilly. Buy every month and hope that the you don’t lose money every year until your newborn has graduated high school…

  • Wait. You mean I am suppose to do something with all the money under my matress?

  • I use Justin Dean at Edward Jones in DC. He has been informative, friendly and gentle during the past year 🙂 His fees are very reasonable and performance-based. I highly recommend and he should do a free assessment on the front end, so you can make an informed decision.

    1150 17Th St Nw Suite 307
    Washington, DC 20036
    (202) 223-1179

Comments are closed.