Darryl W. Lyons
Co-founder | Author of Small Business Big Pressure | Financial Advisor | Investments | Insurance | CEO
The advice industry is evolving as we speak as a result of a ruling passed in April 2016 called the Fiduciary Rule. Our financial planning office in San Antonio has been wrestling with this all year. However, if we set aside some of the nuances of the ruling, and look at a practical approach, we can identify five situations where a financial advisor makes sense in someone’s life. In addition, I would like for you to know (from the advisor’s point of view) the minimum investments required.
1. You have paid off consumer debt
In this scenario, after all credit cards and car loans are paid, you should have enough monthly cash flow to start a Roth IRA. Not all investment firms will accept a starter account. So, check around and ask if they accept $0 minimums. If they do, ask about what you can expect from customer service and support. Will it be a 1-800 number or an automated system or a real person? Of course, there are robotic and online solutions, but if you can find a human firm, lean into that option first.
2. You need to simplify your investments
You have old 401(k)s and little IRAs that have had their face on a milk carton. You can’t even recall the amount and the investment selections. In this scenario, you might have more than a starter amount of money, but possibly not enough to meet the $500,000 minimums for many firms. However, there are a lot of financial companies that will accept $25,000 or $50,000 if all your accounts add up. Just know, fewer firms are willing to engage accounts without hundreds of thousands of dollars. But, you can still find some.
3. You are making emotional investment decisions
If you are honest with yourself, you realize that you really aren’t that good at managing your own trading account. Although you have a few wins, collectively your returns aren’t flattering. You may recall the friend who always brags about his winnings in Vegas, but you know that he’s always in the red. Liberate yourself to focus on what’s really important in life. You may want to consider wholeheartedly moving to a financial advisor for it to make sense for both of you. Those minimums could be as low as $10,000 or as high as $1 Million.
4. You are five years away from retirement
Many advisors will provide advice if they know you will eventually have assets to manage in the near future. If you are five years away from retirement, then you may be able to retain an advisor either complimentary or for a flat fee. The idea is that you can date them to identify if they understand your situation, provide evidence of competency, and provide the leadership you need. This is one unique situation where you may be able to engage with an advisor with zero dollars to invest.
5. You need to save for your children’s education
Many savers today use a section 529 for college planning. The minimums per month are usually around $50. You can set the accounts up directly with an investment company. However, if you need a little more direction, check with an advisor to confirm that they will set up college accounts. If they can, usually they will lean into the marketplace minimums of $50 per month. However, many advisors find this process to be cumbersome and have elected not to offer college accounts to the consumer.
Although there isn’t a standard dollar amount in the industry, there are still competent advisors without a minimum. The key is to know the minimum, evaluate the competency of the advisor, and confirm the level of service and attention. Long term, the relationship of the right advisory team could be one of the most important relationships in your life. Generally speaking, many people need a financial advisor. As long as there is a need, PAX Financial Group has made a commitment to a zero account minimums.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.