Financial advisors typically won’t work with those who may not have a lot of assets. In contrast, a financial coach can work with anymore.
If a client needs a financial advisor, I will do my best to refer them on.
I was on the phone with one of these kind folks recently, explaining the plight of someone who was looking for an advisor.
He hemmed and hawed, and I could hear that he was struggling with a response. “Well, we wouldn’t close the door. But, well, I wish I could offer something more concrete.“
I had a sense I knew what he was getting at, and I asked my question more explicitly. To my surprise, he seemed to wince at my frank admission.
“We’re really not supposed to say that. But it’s true.“
In short, this person was turning my referral down.
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A financial advisor’s (not so) dirty secret
A financial advisor provides wealth building advice, including investment management and (sometimes) tax and insurance help as well.
Let me say at the onset that I have the utmost respect for the financial advisor profession. These people (well, most of them) do great work and serve their clients admirably.
The problem is that, well, to be totally honest, there are many people for whom a financial advisor won’t work.
And it might be you.
Why not? The problem is as simple to state as it is painful: they won’t work with you because you don’t have enough money.
You don’t have enough assets. You’re not wealthy enough to work with an advisor.
Ouch, I know. But let’s talk about why this is.
Assets under management
Financial advisors—well, at least the reputable ones—derive their income from an “assets under management” (AUM) model. Put simply, this states that a financial advisor will manage your assets and take as payment a percentage of them, perhaps 1% or so per year.
So if you have a million dollars and go to a financial advisor, they will take as a cut, $10,000 a year.
If you have $500,000 in assets, that’s $5,000 a year.
If you have $100,000 in assets, that’s $1,000 a year.
Are you seeing the problem here?
What happens if you have little or no assets? What if you’re just starting out?
Then the assets under management model breaks down. There’s no money in it for a financial advisor.
And so, they won’t work with you. You need to have a minimum amount of assets to work with most financial advisors.
If a financial advisor works on a different pay plan, it’s often a commission-based model, where they get paid by recommending services and funds to you. For example, when you buy this particular mutual fund, the fund will pay the advisor.
But that’s horrendous. That’s the definition of biased advice, and as anti-fiduciary as it gets. I would never recommend a commission-based advisor.
(There are some financial advisors who work on a flat-fee scale, but those can be harder to find.)
So this is the problem: if you have few assets and are interested in building up more, a financial advisor will mostly likely be unable to help.
And this is, to put it bluntly, unjust.
This system helps to sustain wealth inequality. If you have assets, then a financial advisor can help you build more assets. If you don’t have assets, then you are on your own.
It’s a classic scenario of the rich getting richer, and everyone else losing out.
On one hand, I understand that an advisor has to be paid somehow, and they should be paid adequate and commensurately with their work.
But when you have a gated system where you need to have money to make more money, that doesn’t seem right.
What’s the solution?
So what is the solution?
I jest, of course, but only slightly.
The solution, if you are unable to work with a financial advisor, is to work with a financial coach.
I don’t charge based on how much you have. I charge a flat-fee, meaning that I can work with, and help, a vastly larger population than the typical financial advisor.
In my experience, most financial coaches work this way.
In this way I feel like I’m doing my part to help combat the incredible wealth inequality and disparities that exist in our country.
Why should it only be people with the money who are able to be helped?
Just like I want to work with “the heathens“, I want to work with the people for whom financial advisors are ignoring.
I don’t care how much in the way of assets that you have. You may not have any. You may have a negative financial net worth. You may have debts that are in collections.
I’ll work with you no matter your situation. What you need is a willingness to work hard, dig deep, and take action, all with my support, guidance, and accountability.
Together, we’ll figure out how to build you some assets, and put you on a path toward even greater wealth building.
I believe everyone can be wealthy. And I’m doing my part to help you be one of them. If this sounds like what you want, please reach out.