Axiom Home Page Forums General Discussion The Water Cooler Totally OT: financial advisor

Hey guys,

We're in need of a financial advisor to help us do some investment planning, savings, retirement plans. I've looked around online, and come to the conclusion the best way not to end up with a scumbag is to get a personal recommendation. If anyone has any leads in the SF Bay Area, that would be great. Also, how much should I expect to pay for this service? I don't know much about this, obviously...

BTW, I won't take recommendations from anyone who hasn't been on the boards for awhile. See the aforementioned problem of looking online... astroturfing seems to be a popular way of getting business for these guys.

Thanks!

Ken, as you might recall, besides criminal prosecution my areas are estate planning, investments and taxation, including doing pro bono advice on other forums under a different name. Unless your situation is unusually complex, it's unlikely that a "financial advisor" has to be hired. There's nobody who's going to take care of you financially with the care that you will use yourself, after educating yourself a bit. If an advisor is used, he should be paid on an hourly fee basis($100 up)rather than collecting commissions on investment products which he sells, raising the possibility that the size of the commission would affect his recommendations.

I have no problem with discussing this in general on the board, which may possibly also help others, or in a PM if there're some specific personal matters which aren't appropriate for open discussion.

I have a financial advisor, but to be honest with you, I don't really use him too much anymore. After everything was set up, it was pretty much smooth sailing. I have a 403b with Fidelity, and I hit them up for advice regarding fund choices. This is what he did for me:

1) He made sure I had life insurance and disability (be careful in this one).
2) He made me get Roth IRA's.
3) He made me max out my 403b.
4) He help set up a mutual funds and money market accounts.
5) He looked at our income, and made sure our budget was reasonable.

That was it... All I have to do is remember to become less aggressive with my mutual funds as time goes by, and my wife and I should be set for life (knock and wood).

Ken, do either you or your wife work at a company that offers retirement (401K) plans? Most companies should have people that can explain the various options from more guaranteed categories to more risk. If one of your employers has such benefits, the company they have the plan with should provide educational information free of charge. At least that is what my company does, and we are one of the leaders in 401K plans and investments globally.

gool duck man

Randy

You can do it yourself by opening an account directly to one of the fund companies. Fidelity is a good one, I agree. Unless you have a lot of money. In this case you can probably hire a financial advisor to see how your money should be allocated. But, if you want to only buy mutual funds shares, you can do it yourself. For example, you can open a Fidelity account, they have great customer support and will advise you some fund that suits you well, and you can even buy other companies' funds through the Fidelity account.

I should probably be more clear. Our main objective is to buy a house. We have no idea how to save money to do that, how much money we need, or what we can afford. Our secondary objective is to save money in case of emergencies, with the tertiary being to save for retirement.

My objective, of course, is to save up to buy more toys. But that's beside the point.

I have a 401(k), and my wife has a 403(b). But we're not quite sure about the investment mix, etc.

Thanks for all the replies so far!

I've been in a 401K now since 1994. Since my wife is a teacher, she is automatically in the states IPERS program, but she can't add to this, so we started a 403b plan for her on the side as well.

Depending on your plan, it is very important to spread out how much you allocate to each check in the various options. A good rule of thumb is to put the same percentage in more guaranteed funds, as your age. For ex., if your 30, place 30% of your money into say bonds or mutual funds. The other 70% can be put in more risky categories. It is good to be very diversified in many categories, that way if some areas are not doing well, others may help balance out your overall percentage of return.

Saving money is tuff man, especially when you have other bills and activities you enjoy. At least you guys are doing the right thing by saving for retirment. I know guys that I work with that have been with the company longer than I, and they don't do the 401K because they say they can't afford to, or they don't have enough money now to live on. I say "They can't afford not to do it". Most of them don't understand the concept of compounding money.

It is like the old question, what would you take if I gave you:
A) A million bucks right now.
OR
B) A penny each day doubled for 30 days. So a penny today, two pennies tomorrow, four pennies the next day, etc....for 30 days.

Most people say give me the million now man, WRONG answer. The penny doubled everyday for 30 days ammounts to over 5 million. That is the whole concept of compounding money.

Good luck, and put the most you can in your plans, and hope some of your ammount is matched by your companies...

Ya gotta get a house man, there is nothing better than realstate for being a good investment, especially if you can apply a little extra each month, to build on the equity. We lived in our first house for 10 years. Since the value of homes keeps going up, we had a lot of equity so we where able to build a new house about 3 years ago.

There are many types of loans available, some for new home buyers where you don't have to come up with as much money for a down payment. I would try to see if any of your friends can refer you to a realtor that can talk about the various types of home loans available. You may be suprised, and your payment might be the same or less than renting.

Good luck Ken.

>>Ya gotta get a house man, there is nothing better than realstate for being a good investment

... or for building a home theater

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...and your payment might be the same or less than renting.

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Really? tell me how!!! We are trying to purchase a Town Home as well here in N. VA, but we simply can't find a good one we can afford. We even visited four TH in Springfield today, that were selling for around 350K, but we were so dissapointed: too small, in the middle of nowhere, and kind of not-so-well built. I guess we have to look elsewhere. with a 300K loan, monthy mortgage payments plus other monthly fees will reach around 2K, which is far more than what we pay for rent in a very spacious apt. where we live now. Today, I seriously thought of giving up wanting to buy a house for a year or two...

Most first home buyers aren't looking for something above 300K. And yes, I know many people that are paying rental payments far above what they could get a 30year conventional loan.

If you can locate anything worth buying below $300K in the Bay Area, I want to know about it...

You could get mine for about that in Iowa I know the cost of living out there is nutzzzz.

i would wait a little while before making a first home purchase
the whole real estate market is out of control,it has to calm down soon.i dont think it will be like the 80s but prices have to come down 15-20%(just my oppinion)to put a decent house in a affordable price range for the middle class- younger people and ftb's

We're certainly not buying now--but we need to save efficiently in order to buy at some point. I have my doubts about a housing crash, as nice as that might be for me, so we're going to need some pretty serious dough by the time it's time to buy.

not so much a crash,but at least it has to settle to a comfortable level so people can live decently.
if i had to start now id s&^t

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If you can locate anything worth buying below $300K in the Bay Area, I want to know about it...

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Yes, I would ask the same favor for Washington DC metro area as well...

Also, waiting is a valid option for now. However, I don't think the prices will ever go down in DC area. They may flatten out, that means decrease in real terms though. As such, waiting will do nothing other than saving some more money, which, on the other hand is not substantial when talking about a 300K loan. Dilemas, dilemas...

I had the pleasure of saving for a house a couple of years ago, right at the beginning of teh big real estate run-up here in the Metro-NYC area. My best advice to you is to put your savings into a high-yield money market account where you do not have easy access to such as a ATM or debit card. I would recommend opening up a money market account with INGDirect.com . The yield is very high and their website gives you the ability to transfer in cash from another account seamlessly, making it easier to add to your savings. With the stock market so volitile now, it is best not to invest your home savings into a mutual fund right now. I have a bunch of friends who did that in 2000 and are still renting 5 years later.

You sound just like me. I just bough a townhome in Leesburg, VA for $300k. It's a little smaller than I would like, but it will work just fine for the less than 5 years I hope to be living there. I've already got a list a mile long of things I'd like to improve in the house. I've been waiting a long time to have my own house to work on, so I don't see the house's shortcomings as that much of a bad thing. They're all fixable.

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but prices have to come down 15-20%

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I am highly doubtful that prices will come down that much, but I totally agree. The market in the DC area has settled a great deal in the last 6 months. I had no competition for my townhome and got it for less than asking. Not much less, but that would have been impossible earlier in the year. Still, I paid about double what the previous owner bought the place for 2 years ago. And from the looks of it, she put absolutely zero work into improving it.

Waiting also means higher interest rates.

Peter makes excellent points.

Interest rates are quite low right now, and, short of a 1929-style event, it is highly unlikely that values will drop any time soon - banks, consumers and county auditors have far too much at stake in keeping home values stable.

One other thing not yet mentioned is that home mortgage interest is the last great American income tax deduction. By reducing your taxable income by the amount of your interest payments, you effectively reduce the net out-of-pocket cost significantly, especially during the initial years.

Finally, the amount of property taxes and utilities you pay as a homeowner varies WILDLY - even within small geographic areas - due to not only the intuitive things like levies, bond issues, and park districts but also utility rates controlled by mutual companies, cities or other private or government entities. My sewer tax is ~$100/mo for no particular reason except that my city can raise that rate to increase revenue under the public's radar and without statutory interference.

>>> My sewer tax is ~$100/mo for no particular reason except that my city can raise that rate to increase revenue under the public's radar and without statutory interference. <<<

That's wild Tom, and I though we we're nailed pretty hard with a state mandated 'Windstorm' insurance for those living on the barrier islands here in Florida. Fortunately our local government hasn't gone hog wild with outlandish taxation ... yet.

Peter;

Leesburg has good deals at homes, but, unfortunately I have to stay closer to DC, as my wife works downtown and has to commute every day. Hard to find anything worth considering around here. Now I will be looking in Lorton area, and possibly Burke, but not further away from DC. My question is: would we be able to find a nice TH with monthly payments less than 2K??

I may be wrong, but it seems to me that things even out. When interest rates are low, housing prices tend to be hght. When interest rates are high, housing prices tend to be more reasonable. However, this is just a limited experience after buying two houses in 3 years.

thyname, depends on how much you can put down. Since mine is a first home and I only started saving about 2 years ago, I wasn't able to put down 10%.

Rumor has it that Leesburg will get a metro station within 2 years. My company apparently dropped a load of earmarked cash on the Transit Authority to 'encourage' them to make it happen. When it happens, it should raise property values. I'm crossing my fingers.

Not sure about your area, but I was able to buy my first home this past September with nothing down and the buyer picking up the closing costs. It's possible in Nashville, anyway.

Spend a little time talking to a realtor in the area and see what options are available to you. My situation was similar to yours in that I cared less about the overall price of the home and I was more concerned about a specific monthly figure I had in mind. The market may have fizzled a little bit, but I imagine there are still plenty of ways to get you into a home.

A fizzling market is a good thing for a buyer - at least in the short term. Houses are staying on the market longer, inventory is up, there's less competition, and many sellers have already found their next homes. All these factors put the cards squarely into the buyer's hand.

"Fizzle" probably wasn't the right word. Over the course of the summer I gradually watched rates climb and I didn't end up with quite the same percentage on the good faith estimate that was written in May compared to when I closed in September. All the same, rates are still better than they'll be this time next year (or maybe for some time to come). All of your other points are right on target.

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Not sure about your area, but I was able to buy my first home this past September with nothing down and the buyer picking up the closing costs. It's possible in Nashville, anyway.

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That is a pretty sweet deal. I had the same deal with the mortgage company in Brentwood, TN.

When I lived in Ohio, I remember being able to do the same thing. However, I think your income and credit score plays a huge role on what type of mortgage you are able to get. I don't think I would have gotten the loan if my credit score was in the 500s and I made half as much.

Obviously that should have read, "the seller picked up the closing costs." Oops. Y'all knew what I meant.

And your comments about income & credit scores are on the mark. My salary doesn't suck, but it IS pretty modest. One thing I did focus on was spending several years building my credit score up to a pretty respectable level. I ended up with an 1150 square foot 3bdrm/2bath house a little north of Nashville. For a single guy, that's plenty. And for my first house, it was all I could ask for.

Zero... LOL... I would definitely prefer to pay nothing down. In fact I could probably afford 5% down, and with another 2-3% closing costs, I would be left without any money in my bank. Besides, how much difference would 5% make in terms of monthly payments with a 300-350K loan anyway??!! The bad thing is that I am spoiled with my current apartment: 960 sf for a one-bedroom is awesome. Great view from 18th floor as well. So you can see, I have a very tough comparison base when looking for a house.

We will probably actively look for a mortgage in January. Our objective is to find a home before our lease is due on March 31st. And, if we cannot find a good mortgage or home, we can spend another year here.

I think you bring up a great point. In addition to saving up for a down payment for a house, credit scores must be built up. But I figure for many of us in this hobby, we probably do a good job of using our credit cards.

-J

kcarlile, my girlfriend is a Financial Advisor for Smith Barney. pm me if you want to. she might be able to help you out or put you in touch with someone in your area. let me know.

Thyname - 5% can make a difference in your mortgage payments (alhtough 10-20% is much better), as does the type of loan - sit down with your sig other and figure out what the real cost of owning versus renting would be. Make sure you factor your tax savings out of what your are paying for your mortgage.

For example, my wife and I were paying $1300/month for our rental 2 bed + den apt (Chicago). 2.5 years ago, we bought a 2 bed condo for 283k with 5% down. Between our two loans and condo fees we pay approx $1800/month principle and interest. Last year, after our first full tax year, we received $3700 income tax return. So our net per month payment is about $1500.

While it's still more then what we paid in rent, it is significanlty less than what we have (hopefully) earned in equity: Our niegborhood has been averaging 10% appreciation/year and a unit a floor below us recently sold for $330,000. We are looking to sell in April or May and should be able to use the equity and capital gains from our sale to cover the 20% down on an actual house in the burbs.

I think the thing that really convinced us to buy is we sat down with our accountant, and using rate quotes we received from lenders (0 down, 5 down, fixed, ARM) we looked at hypothetical scenarios and picked one that would allow us to purchase and still save a bit on the side. Renting was still a possible choice down to the end.

Good luck!

Great advice, thanks. We definitely have to do some thinking, and calculations with a mortgage broker. Great thread this one, I learned a lot!

Very good, DL, and note that since you'll have used it as your principal residence for about three years, there'll be no capital gains tax to pay on the sale($500,000 exclusion for couple who've owned and used it as their principal residence for at least two of the five years before the sale).