Marion's Blog

Financial Advice

I use the Google blog reader to read the blogs I follow and I am way behind. Currently it says have 383 posts unread. I pretty much stay current on my favorites like Ronni Bennett's Time Goes By and Flight Level 390. Of course my favorites also include the blogs of my friends like HD's Soapbox ,  Easier Than Scrapbooking, and Chuqui 3.0. Chuq the author of Chuqui 2.0 also does a great job of using Google reader to share items that he finds of interest and I subscribe to his feed of shared items.

That feed of shared items was one of the things that was contributing to my 383 unread posts. As I was scrolling through the more that 50 unread shared items from Chuq I came across a post on Mark Cuban's Weblog - Blog Maverick, titled How to Get Rich.

Cuban wrote this post back on October 4. What he says is absolutely right. Saving is key, "if you use a credit card you don't want to be rich" and his other advice is not something I always followed but I learned it late in life and I know it works.

I think that the reason that this caught my eye is that with all of the current economic problems I have been thinking a lot about credit and debt lately. It is only in the past 40 years or so that everyone has carried a credit card and assumed that they would always have a mortgage. My Dad still remembers the first time, sometime in the late 60's, when he was traveling on business from his job in Australia and a hotel made him pay for his room every day because he didn't have a credit card. He used to say that paying for things on credit was like paying for a dead horse.

Of course I use credit cards and like the ability they give me to track my spending and there have been times in my life when I didn't pay off my balance every month. But I have to tell you that living debt free is incredibly empowering.

I also think that having a goal of being rich may mean you  want to live rich now which of course is at odds with living debt free.

This is a subject I would love to have a conversation about. As I said I have been thinking a lot about what advice I would give about money and what advice I would have liked to receive. I know that I have some pretty strong  ideas but I haven't figured it all out. If you are reading this I would love to know what your thoughts are. What does it takes to get rich or what does it takes to reach your financial goals?

What I've been working on

This is what I have been working on at Intuit for the last 3 months. The week after next I am going to the Financial Planning Association convention in San Diego. I'll be helping to demonstrate the product.  Right now we are in the middle of beta testing. It has been very interesting to watch planners start to use the product for the first time. If you are going to be at the FPA conference and would like to meet up let me know or just come by the Intuit booth.

Broker Dealers and Clearing Houses

I have been calling financial planners this week to ask them if they would like to help us test some new software . On of the things I ask them is what firm they use as a custodian. I am mainly talking to financial planners who manage their clients assets for them. That means that the planner is able to trade and manage assets in the client's account. Planners custodian their accounts with companies like Schwab, TD Waterhouse, and Ameritrade. What is confusing is that there is also the concept of a broker dealer, and a clearing house. It is important to know who the clearing house  is because that will be the source of account downloads. If I understand it correctly big companies like Schwab and Waterhouse do both the broker dealer function and the clearing house function. But there are broker dealers who use  a separate clearing house like Pershing. In talking to planners it  is important for me to know the difference  because it will impact our testing. I am enjoying learning all this new stuff.

How to Get Financial Planning Experience

I met with a Financial Planner last Friday to discuss possible ways we could work together to allow me to get financial planning experience and at the same time have the relationship be advantageous for him. I had lots of questions about how financial planning works and he was very informative. He is a fee only planner. That means he doesn't make any commissions from his clients investments. He charges a fee to do a financial plan for a client and when the client has him manage their assets he charges a fee based on a percentage of assets under management.

If I wanted to work as an associate with his firm I would need to pass my NASD series 65 license exam. Then as I brought clients in we would work together to provide the services they needed and we would share the fees. I would get experience and my clients would get the benefit of his extensive experience. In a few years if I wanted to go out on my own I could buy the clients back from him.

This planner uses mutual funds from Dimensional Fund Advisers to create portfolios based on an asset allocation designed for the needs of each client. Dimensional Funds are institutional funds with a very low cost structure. Individuals can't buy the funds directly but must work through an adviser.

I really enjoy doing informational interviews. I not only learn a lot but I also meet some very interesting people who are doing what I may be doing some day. My plan has always been to do planning for an hourly fee.  I envision serving clients who don't have big asset portfolios so I'm not at all sure working with this planner would be a fit for me. Plus I am not sure I would be very good at bringing in clients with money to manage. On the other hand one of the big advantages of working with an established planner is that since I only want to do planning part time for now this would be a way to learn a lot and get experience.

I think I'll just put all my energy into work for now. I am very committed to my new job at Intuit. I am working on some very exciting things and that is my first priority.

CFP practical experience

I recently passed the exam to become a certified financial planner. The certification
process has three main requirements. Last year I completed the education requirement
through the UC Santa Cruz Extension program. The second step was passing the exam and the third
step which I still need to complete is the experience Requirement. I have to complete
at least three years of qualifying work experience.

I am starting a new job at Intuit tomorrow which I am very excited about so I am looking for ways to get the experience without changing careers. At some point in the distant future I'd like to become a
fee only planner. But not right now I want to start getting some experience in my
spare time. Being a fee only planner means I would make my money based
based on an hourly rate in contrast to some planner who make their money based on
commissions for the financial products they sell.

Anyway I am trying to figure out ways to get experience. Recently I made an appointment with
one of the instructors  I had when I was taking financial planning classes to ask
for his input.

Here are some of the questions I asked him and his answers.

Q: Would you recommend starting out by doing planning for families and friends and would I
need to register as an investment adviser with the state.

A: Doing planning for friends and family can be very difficult. They may not want to share all the relevant information  with you. They may not really want advice and they may have unrealistic expectations. As long as you don't charge for your services you don't have to register with the state. What most aspiring planners do is form a relationship with an established planner who is willing to let you work under his or her supervision and use his or her registration.  The established planner can vouch for the time you spend and can also be your mentor.

Q. Would you recommend the Financial Planning Associations Residency Program?

A. Yes, absolutely. The residency program is an intense week long learning opportunity. You work with teams to do three case studies which include roll playing and  getting feedback from  experienced and expert planners. It counts for 3 months of work experience. You  learn an amazing amount about the practice of financial planning and you make friends for life.

Q I'm thinking about taking the H&R Block Income tax class would you recommend it?

A. Yes if you want to do income tax it is a good class to take and they sometimes offer people jobs.

Q. What other learning opportunities can you  suggest?

A.  The Bridge the gap track a the FPA annual convention
     The National Association of Enrolled Agents
     The Chartered Financial Analyst Institute
      
Q  How do I find someone to allow me to work under their supervision?

A. There are multiple ways to do this but you should go into it with a plan in mind. It should be a 50/50 proposition so that the planner you are working with gets as much out of the relationship as you do. You need to identify what you can offer whether it be computer assistance, filing, data entry, marketing or something else. It is worthwhile creating a written business plan so that you have a focused approach to take. Then you can start talking to planners, people you meet at FPA meetings, other students etc. Considering a specialty is a good idea.  Possible areas of specialization include things like working with divorced women or providing financial counseling,. Once you have a plan then you just have to get out there and start making yourself known.

Q. Do you have other suggestions?

A. It can be very helpful to create a study group or a group of planners who are going through the same experience. Agree on an approach and a structure for how often you will meet and what you will all contribute. You can bring in speakers, share ideas and learn from each other.