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The Pros and Cons of Being a Financial Advisor

November 4, 2020 by Jacob Sensiba 1 Comment

If you’ve ever considered a career as a financial advisor, there are some things you’ll want to consider before jumping in headfirst. There are definitely some perks like being your own boss and earning what you’re really worth, but there are some pitfalls too. Here’s a look at some of the pros and cons of being a financial advisor to help you make your decision.

The UpSide

You can be self-employed

While working for a firm, either public or private, is an option, so is working for yourself. You can set up an office at home to save money on office rental and even set your own schedule in a way that works with your lifestyle. If you don’t want clients coming to your home office, you can set appointments at their home or office and go to them.

There’s no salary limit

Working in another field usually comes with a salary based on your experience and the company’s pay schedule. As a financial advisor, you set your own fees for the services you provide and can even earn commissions on the products you sell. Your earning potential is up to you.

Start-up costs can be low

If you’d like to be self-employed, this is definitely a plus. Of course, you’ll have to pay licensing and other business fees, which can be a little costly but are usually a one-time or annual expense. As far as your monthly expenses, you can keep these to a minimum, especially if you work from home. Monthly website fees and a little online advertising can cost about $300 – $500 a month. Be mindful of Errors and Omissions Insurance (E&O). You must be cognizant of fees assessed by your firm, if you decide not to work for yourself.



You get to help others

Whether you’re working with individuals or small families, you can help them reach their goals of buying a home, saving for their child’s college education, or putting money away for retirement instead of living paycheck to paycheck. A job where you get to do something useful and help others is a great way to spend your days.

Get your own finances in order

As you’re developing your practice, as well as going through the licensing process, you’ll have to learn a lot about finance. Every part of the “financial journey” needs to be an area of expertise. When you’re helping others meet their goals, you’ll be able to get your own finances in order using the knowledge you acquired.

The Down Side

There’s a lot of stress

In order to be successful, you have to be great with numbers and a pro at multitasking as you’ll be switching from one thought to another all day long. The only way to make more money is to take on more clients, which leads to more stress. You have to learn how to manage your day instead of letting your day manage you.

It’s a lot of work

Depending on where you live, your state and even your county will have licensing and certification requirements that you will have to meet. You may need a college degree or special training. And in most cases, you will need to be sponsored by a brokerage firm which means you’ll need to work for one for a bit. You’ll need to acquire a lot of knowledge about finances, as well as sales, marketing, and psychology. Continuous prospecting and licensing are needed to propel your business forward.

You have to be a people person

While you’ll begin receiving referrals at some point, finding clients of your own will be difficult in the beginning. You have to be committed to going to networking events, calling people, asking for referrals, and marketing your services. This can mean working a lot of hours when you’re just starting out.

There are certainly some great perks to being a financial advisor, but there are some challenges to consider before deciding to make this your career choice.

Related Reading:

Hiring a Financial Advisor

5 Questions You Should Ask Your Financial Advisor

Different Ways Financial Advisors Charge

Filed Under: Hiring Advisors Tagged With: advantages, disadvantages, financial advisor, financial advisors

Jemstep Portfolio Manager Review: Finding the Asset Allocation Middle Ground

April 2, 2013 by Average Joe 15 Comments

How do you review your investments? We give Jemstep a test-drive to see if it’s worth your time and money.

As OG bemoaned last week when writing about his broken garage door, at some point, calling a professional is the right move. In the comments, there were some wonderful discussions about finding “experts” without consulting with a person locally by using YouTube videos, better online tools and calling trusted friends.



The Middle Ground in Asset Allocation

There’s plenty of middle ground between wingin’ it and hiring a financial advisor when picking the right basket of investments. One tool I’ve had the opportunity to test drive is Jemstep. After meeting a Jemstep rep at FINCON last year, I was impressed enough with the product to have Simon Roy, the firm’s president, on our 2 Guys & Your Money podcast. He informed me that they were upgrading the product, and now it’s available.

The “New” Jemstep Portfolio Manager

Jemstep is a program that helps you diversify your investments. You know that dartboard you’ve been throwing at? No longer. Jemstep takes the guesswork out of discovering which investments you should be using and pinpoints suitable replacements for duds (or, surprisingly, good investments in asset classes that really don’t meet your investment needs). During my trial run, JemStep told me some things I’d (shamefully) already knew: I’d let my winners run a little too long, and Jemstep recommended cutting back in those “overgrown” areas where the risks now exceeded the chance for rewards.

How Jemstep Portfolio Manager Works

The Jemstep approach is consistent with that of an advisor. First, JemStep asks you questions about your goals. What do you need your portfolio to do? It asks questions about how far away the goal is, how much you may need to access at a time, and other relevant questions. I found this process fun. The interface is intuitive and the style of the website draws you in.

Jemstep Portfolio Manager Review at The Free Financial Advisor

Jemstep asks you for information about your retirement goal, among others. The interface is easy to use, and the blue lines below tell you just how far you still have to go: I have to still fill in information on my finances and investment preferences.

Once you’ve answered goal-related questions, you can upload your portfolio directly from your broker or add in funds manually. Finally, JemStep does it’s work and voila….gives you the correct asset allocation for your goal.

Jemstep Portfolio Manager basic recommendations

Here is the basic recommended portfolio. With these changes, I stand to gain over $9,000 per year in retirement. Yee-haw!

The premium version of Jemstep includes lists of what investments you should sell (in many cases only trim back), which investments you should accumulate, and new suggestions for your portfolio (often in asset classes that don’t exist in your portfolio). Here’s what that looks like:

jAction-Plan

Jemstep not only tells me which investments to sell, but alerts me to potential capital gains taxes. Every sell recommendation is accompanied by a detailed reason why this investment is on the chopping block. In this case: Apple is one of my worst performers and I have too much individual stock for a portfolio of this size.

The Cost

The Jemstep pricing model isn’t surprising. You can access basic advice for free (this includes the asset allocation you should be using, plus the differences between your portfolio and the suggested one). The premium model, which includes continuous tracking, rebalancing advice, a detailed breakdown of recommended sale quantities and investments, is also free for people just starting out. Pricing begins at $17.99 per month for portfolios over $25,000, and increases based on the amount of money Jemstep is helping you manage. While some who are looking for a freebie might be turned off by the price, this is less than the 1% fee often charged by a financial pro. Want professional advice in your corner without having to sit in an office with some team of people? Great. Jemstep won’t call you with hot stock tips and is there when you need it. In exchange, you’ll pay a model comparable to those used by seasoned investors for less than half the cost.

What I Like, What I Don’t

Here’s what I love: this asset allocation is a proven winner that points you toward the low cost, high return investments in a balanced portfolio. If you’ve ever wanted to have a well-managed portfolio but didn’t know where to start, Jemstep is a great place to begin. Different than some generic asset allocation models that I’ve used, JemStep points you toward specific investment options. For the person who wants to make sure they have low cost investments with a proven track record, Jemstep is for you.

Jemstep partnered with Windham Capital Management to create their recommendations. When back-tested against the S&P 500, Jemstep’s recommended portfolio was impressive: all five of their model portfolios outperformed the S&P 500 over the last 14 years with significantly less risk.

Here’s what I don’t like: results. Yes, JemStep provides impressive results, but will you use them? As I’ve stated before, financial advisors exist for one reason: to make sure that the job is finished. When people left my office, the portfolio moves were complete and people could go about their lives, knowing that the important decisions had been made. A JemStep rep was excited to tell me that 12% of JemStep users actually made changes to their portfolio “because it’s so hard to get people to take action.”

She’s right on.

While 12% usage is a great number for an often-free tool used by people on the internet, you should examine yourself. Are you going to follow through and actually take the advice on JemStep? If you don’t trust yourself to do the job, pay more and hire a human being who’ll give you a shove.

Overall Impression

If you’re managing your own money and aren’t sure how to do it well, give Jemstep a shot and follow the recommendations. If you don’t like your advisor or wonder if the recommendations you’re receiving are any good, take the time to use JemStep to give yourself a “second opinion.” The tool is robust enough that you’ll know immediately if your advisor isn’t diversifying your portfolio in a way that makes sense for your goals.

Jemstep can be found at Jemstep.com. I am not an affiliate of Jemstep and was not compensated for this review.

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Filed Under: low cost investing, Planning Tagged With: Asset Allocation, diversification, Financial adviser, financial advisor, Investment, JemStep

What Do You Do When Things Go Wrong? – 2 Guys and Your Money

March 4, 2013 by Average Joe 12 Comments

Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

30 episodes and going strong! To celebrate, we’re bringing our best show yet.

OG lost a computer last week, forcing him to take a week off from the podcast (thanks to Doug for filling in!). That means that it’s a good week to talk about risk management… What can go wrong? What should you do about it? Joe & OG tackle some lessons gleaned from Hollywood stars who’ve lost fortunes, PK discusses credit, Lance from Money, Life & More and Greg from Club Thrifty join Joe to discuss covering your bases with insurance, and finally, we give you our Top 5 Ways to Protect Your Portfolio.

As usual, show notes will fill in throughout the day Monday

2 Guys & Your Money Show 30: Notes

<> Open

<1:50> H&R Block offer: Save 15% on your tax prep!

<4:56> Lessons learned from stars who’ve run into money trouble

<15:58> PK’s Fractional Sense: Credit

1 in 20 have a catastrophic error on their credit report

Link in PK’s segment: annualcreditreport.com

<23:54> Shortwave: Lance from Money, Life & More and Greg from Club Thrifty join us to discuss contingency planning.

Don’t want to sit at your computer and listen to the show? Take it with you! Use either iTunes or Stitcher to listen to the show on the go.

Link to the 2 Guys iTunes page here. Listen on the Stitcher app here.

<40:11> Let’s Give Something Away

Our March Giveaway is Here! This month win one of Laura Vanderkam’s eBooks.

Link to our Giveaway

<> Top 5 Ways to Protect Your Portfolio

OG Top 5

5) Create a system to monitor your portfolio

4) Options (writing covered calls)

3) Stop loss

2) Diversification. Proper asset allocation

1) Nothing. We are our own worst enemy.

Joe Top 5

5) Dollar Cost Averaging

4) Rebalance

3) Scheduled meetings

2) Options (buying puts)

1) Stop loss

 

<> End: Films

– OG – Flight

– Joe – House of Cards

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Filed Under: Podcast Tagged With: financial advice, financial advisor, financial radio, fun financial podcast, H&R Block, iTunes, podcast, radio, Risk management

Two Guys & Your Money #14 – The Worst 5 Ways to Hire a Financial Advisor

October 15, 2012 by Average Joe 7 Comments

Have shows come automatically to your iPod! Use the 2 Guys iTunes page here.

Listen to shows on your smartphone! Try the Stitcher app here.

 

“Top 5” is SO last week….this time we took a different approach.

With OG at Mickey’s house, my mom’s neighbor Doug co-hosts (even though he THINKS he’s just coming to the basement to help with the furnace….).

PK tells us how your vote ISN’T wasted, even if you live in an overwhelmingly blue or red state.

The roundtable gives us their best advice from the past month.

We’re giving away the classic The E-Myth, Why Most Small Businesses Fail and What To Do About It

(You have several ways to win: 5 entries to tweet about the show, 5 to like us on Facebook and 25 if you guess the voice on the podcast.)

Click Here For Our October Giveaway Page!

 

Show Notes

<> Open

<> Yahoo’s Top 13 Wastes of Money. Are you guilty of any of these? Joe and Doug weigh in on our favorites, and the ones we think might not really be a waste.

<> PK from DQYDJ.net: 3rd Party voting.

<> Let’s Give Something Away: Our October book giveaway is in full swing. You don’t even have to listen to the show! Click here for the three ways to win.

<> On the Shortwave: Our best advice from the last month

<> Worst 5 Ways to Hire an Advisor

<> Show End

Doug: Black Book (German film about the Dutch resistance. Rated R. Thumb up, but not for kids)

Joe: 6 Days to Air (Documentary about the making of South Park. Thumb up, but not for kids)

Filed Under: Podcast Tagged With: financial advisor, worst ways to hire advisor

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