Financial Planning Services

I don't provide traditional financial planning services. And that surprises some people because I've written books about personal finance. So what gives? My experience is that most people should take a very passive, index-based approach to investing, saving, and retirement planning. But let me explain...

Most individual investors don't appreciate how costly traditional financial planning services are if you end up using actively managed investments. If you're using a typical assortment of mutual funds, for example, your portfolio may earn on average about 8% a year. Which doesn't sound so bad. But if you're paying (indirectly) the mutual fund company a 1% fee and an investment advisor another 1% fee, you're giving up 2% of your 8% return just in fees. Note that such an arrangement is equivalent to a 25% tax.

But the numbers get even worse... If you're also paying typical investment income taxes (25% of your 8% return would mean you give up another 2% of your profits to taxes) and inflation runs its historical average of roughly 3.5%, you will never--I repeat, never--accumulate significant wealth through your investment earnings. Why? Your profit will be almost entirely siphoned off through taxes, investment and advisor fees, and inflation.

Tip: If a 2% fee doesn't sound so bad to you, fast-forward a few years to the point where you've got, say, a million dollars in your investment portfolio and you're earning $80,000 a year in profits. Paying 2% in total fees at that point will take $20,000 a year out of your income.

My response to the realities of the preceding financial arithmetic is to say that individuals should use a passive investment approach based on index funds. If you choose to go the passive investment route, the personal financial planning process becomes very cost-effective, tax-efficient and truly straightforward. Most questions that you have, in fact, can be answered when I do your annual individual tax return. Some of your other questions can be answered with the short articles below. (Much of this material comes either from magazine articles I've written or portions of personal finance books that I've written.) Finally, when you do need additional help, I'm happy and able to provide hourly financial planning services--as long as you're an individual tax client.

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