Season 1, Episode 7: Do I need a financial wing person?

Reasons you might want to call an expert and how to make sure they don't cheat you

When does it make sense for a "normal" person to check in with a financial advisor? Do you have to be a millionaire or can you be an aspiring thousandaire? And how do you know what questions to ask and if you'll be tricked into shady investments?

So many questions, and Sara has so many answers that lead to finding someone you can trust, even if it's just for one meeting to get on track.

Do you know that you can choose a financial advisor based on whether they have a sense of humor? Well, sort of. But you have to like them.

And we learn that a custodian isn't just a school staff member.

This week the one thing Women on the Verge of a Financial Breakthrough can do TODAY to take the first, or next, step towards building a strong financial future is practice the two questions Sara says we need to ask our financial advisors.

Ask us your dumb investing and finance questions on our contact page!

This episode was edited by Jes Rowe. Music by Bad Bad Hats and Devmo.

Transcripts for Episode 7: Do I need a financial wing person?

Music intro by Bad Bad Hats

Caitlin Welcome to Women on the Verge of a Financial Breakthrough where we are going to figure out finance, one dumb question at a time. I'm the dummy, Caitlin Meredith, and

Sara I'm Sara Glakas, investor advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup.

Caitlin When I first met Sara years ago, I thought investment advisors were for people that had like a helicopter landing pad on their yachts, not for freelance writers with new babies as I was at the time, and then I met with Sara. She was my teacher for a class called Investing for Beginners, and I realized how amazing it was to have someone help me start out thinking about my financial future. So that ultimately led to this podcast, where I get to ask her all these dumb questions, and it's like a weekly financial advising session, but in the form of a podcast. So welcome.

Music transition by Bad Bad Hats

Caitlin So as I just said, this podcast is about learning about finance, one dumb question at a time. And one of the problems with even asking the dumb questions is who we can ask them to and how to get help in our financial journey. So I feel like we need to talk about like, who needs financial advisors and who doesn't. Like that average Jane - does she need one? How do you know if you need one? So what are the categories of people that are seeking out your services as a financial advisor?

Sara Yeah, I mean, I am a financial advisor, right? So I think I have in my mind what the different categories are, but I'm going to be really interested to hear your perspective on some categories that I haven't thought of. One of the main categories of people that I think need a financial advisor is someone who is going through a big financial transition, right? Someone who just got a bunch of money or got a big raise or is going through a divorce is going through some major life event where maybe before they were going down one path and then something happens, and all of a sudden it just feels like they need to loop in someone else to help them navigate their new financial reality.

Caitlin So that's like a question of a lot of extra money or a lot of un-extra money. How do you say that? Losing a lot of the money or having to rearrange your remaining money in a new way that's going to be sustainable for your future or build a better future? I mean, the obvious case is a divorce. It could also be the death of a spouse or a death of your financial backer or something like that where you have resource, but you need to rearrange them in a new way or the happier situation where you come in to money, which seems like so amazing that would be so happy. But that can be super stressful to to have it and not know what to do with it.

Sara Right? A lot of people have a lot of anxiety about getting a windfall of some amount because most people who get a windfall and this is not their area of expertize, the first place their mind goes to is, I really don't want to screw this up. And so they start off right off the bat with a lot of anxiety. That's a pretty good indicator that you really should ask someone start looping someone in who can help you develop a strategy for your new financial reality.

Caitlin And all of a sudden, you have a lot to lose like, whereas before you just feel like you're plugging along like you're graded on a curve. And then all of a sudden, you are really dealing with a big amount where the mistakes are much more obvious. I always think it's funny to think about good things that happen that actually create more stress. Anyway, so what is... OK, so that's a person going through a transition. What's another kind of person that comes to see you?

Sara I have people who just want to check in with a financial advisor, right, who are basically DIYers. And I will say like because, you know, we're in the Austin Women's Investing Group and I'm active there and I teach a lot of classes now that I'm doing this podcast like, especially at the beginning of my career. I met a lot of people who fell into this category of people who are basically comfortable DIYing, but really want a second opinion. And so those people tend to want someone who will work on an hourly basis or maybe a retainer fee and just kind of be there as a as a support person or a wing person. And they just want their questions answered by an expert, but they don't need a whole lot of extra support.

Caitlin Yeah, and that's how we were ever alone in a room together. Sara outside of your class was that I came for an hour just to sort of be like, Here's the situation, is that OK? And I mean, I had no major funds to organize or there was a very slim margin at that time, but to get reassurance that like my goals are on track for what I like and that I haven't just already screwed up something big. Yes, there's student debt, but there's also a mortgage. But yes, there's some income like it's all going to work out to get that reassurance. And I mean, even if you don't have a lot of money, I think that's where I would have never if I hadn't taken your class, I would have never, ever, ever thought like, you know what? I'm going to make an appointment with a financial advisor. Like, what are they going to advise? I wasn't going through a major transition.

Caitlin There wasn't a huge influx of cash coming in all of a sudden - it was just like a normal, low margin financial life. So it wouldn't have occurred to me, necessarily. And yet, it was super helpful both to get education, but also just confidence like, yep, I'm just plugging away on this path.

Sara So what happened that made you book that appointment and come in?

Caitlin It was free.

Sara I did offer free appointments to women in the Austin Women's Investing Group. But let's say it wasn't free. What would have made you go?

Caitlin Knowing what I know now, I should have paid for it. It was worth paying an hourly fee to see somebody for the confidence that I got from it. But I was sort of tricked into it by starting with the class, and so it was only through learning more about it. And hopefully that's what our podcast can achieve, that I realized, Oh, this applies to me too. And just like investing, that I didn't think applied to me, going to see a financial advisor wouldn't have applied to me either. So maybe it was more of an issue rather than paying for something or not wanting to pay for it, thinking that it didn't apply to me. It was like a service, like a tennis pro. Like, I don't know how to play tennis. I wouldn't go to a tennis pro. Why would I go to a financial advisor if I don't even know what investing is?

Sara Yeah, that's really good. What do you think are other categories of people who might be thinking it's time to loop in a financial advisor?

Caitlin I imagine someone who has - I always talk about unopened envelopes - but I just like, see that stack of mail. So, you know, like there could be collection agencies involved, there could be student loan debt that has snowballed, like just a financial picture that you're too afraid to look at alone and has triggered all of your worst fears and anxieties about your future. And so just needing someone else to open it with you, with open eyes and to say, like, Yep, this is a hole, and here's how you can dig yourself out of it.

Sara Yeah, I think you're right. And I will say, after being in this business, there are people who aren't in dire financial straits but are still paralyzed by anxiety around the decisions they need to make on their investments. Or, you know, money that's just sitting in a savings account, you know, when they can't figure out what to do with it and they've never really done an overall inventory of their financial picture. So I think that any person who's stuck and the anxiety is keeping them from moving forward in some way and developing a plan, whatever the plan is. I mean, that's a great reason to hire an advisor is just you have to move forward. And so if paying someone to move forward is the best option, you should do it and find someone you can trust to be vulnerable and walk through all of those, you know, unresolved issues and unopened envelopes with you.

Caitlin It's that deadline that you set by having a meeting with someone else to be like, OK, I have to open this account. I have to look at those numbers. And so it gives you an external motivation to get a handle on some of that stuff and just support for doing it.

Sara Yeah, I have a lot of people who will walk into my office, and the first thing they'll say is I'm so nervous to be here. And I think of myself as a person who's pretty easy to talk to you.

Caitlin Very scary. Very scary.

Sara I can be scary sometimes, but I'm always so proud that they've pulled all of their paperwork together and came to the office and just marched right in there.

Caitlin And I think of people that are like, Look, I'm learning, but I just need the external validation that I'm on the right path here. So sort of like building your own website. I just need to get started. Show me what that thing does and that thing does, and then I'll take it from there. But like a launching pad for building your own financial future could be really useful, too.

Sara Yeah, absolutely.

Caitlin Do we have anybody else?

Sara One other category that I have is people who are actually relatively comfortable in this sphere, and they just get to the point where they can do it and they know they can do it, but they just don't want to anymore. They would rather outsource it to someone else and focus on other areas of their life, whether it's personal areas or professional areas.

Caitlin Lady Boss.

Sara Yes, right? Like, so if you are an Austin realtor these days, you do not have time to deal with this right because you are just hustling to make it happen and you are out there in the world and you do not want to devote any of your downtime to this. So that's actually a relatively large category of people who come through my door as people like, OK, this is how far I've gotten. I think I've done a pretty good job, but I need to focus on other areas of my life, and I don't really need this to take up any more bandwidth. So can you just develop the strategy and you execute the strategy and then I will check back in on it.

Caitlin Yeah, I love that because it talks about how when women become educated about their own finances and investing and how to build the financial future that they want, that they can then choose professionals to execute their vision, to carry it out. And they know how to find that person because they have the vocabulary already. And I feel like so many of us do not even have the vocabulary to start a discussion like, OK, you're telling me the interview three? I don't know what to ask them, how would I know which is that one that's right for me? So I imagine the more educated you are about it, you can also find the person that's the best fit with your own vision and pulling that off.

Sara Yeah, absolutely. And I think that asking your advisor to help educate you on those topics, whether you're interviewing advisors or working with someone already using them as a resource to fill in some of the knowledge gaps so that you can be more comfortable with the vocabulary and with the terminology and knowing what questions to ask. That's something that your advisor can definitely be a financial resource for you. Yeah.

Caitlin Your tutor.

Sara Yeah. And I'm sorry. Not a financial resource and educational resource for you.

Caitlin Will they give you money? Are you saying you'll give us money if we go to you? I take back everything. I need a financial advisor. OK. So the next part is to figure out how you choose one. So should we talk about that?

Sara Absolutely.

Caitlin Can you talk a little bit about for people who are looking for a financial advisor who say, I'm going to listen to your podcast, I want to learn all this on my own. But also I'm in a little bit too deep for what I need to manage. What should people look for in a financial advisor?

Caitlin I think the two questions you can ask, which are good places to start, is when you're talking to a financial professional, you kind of ask these two questions. They seem like they're a little bit intrusive, and for some reason, people aren't very comfortable asking them. But the first one is how do you get paid? So this question of compensation.

Caitlin Wait - the client asks the financial professional, How do you get paid?

Caitlin Yes, the client asks the financial professional, How do you get paid? Because it will tell you whether or not the person works on commission or whether they are paid by the client for giving financial advice. So those are the two main ways that financial professionals get paid. They either get a commission or something like a commission for recommending certain financial products, or the client pays the advisor in some way for giving the client financial advice.

Caitlin So this first commission one is like you come to someone a financial advisor and they say, Oh my God, there's going to be this whole new mixed use living complex with great restaurants. You should definitely invest in that. And then later you could find out that they actually get a cut. They get a commission like a percentage by more people they have investing in it.

Sara Yes.

Caitlin So you have no idea whether they're telling you like they've done a very sober financial analysis about whether this is a good investment opportunity or they just are short sighted and want their cut and don't really have to think about the long term.

Sara Exactly like asking the question allows you to identify conflicts of interest. Right? That's really, I think one of the things when you're looking for a financial advisor building that trust, you want to know what the potential conflicts of interest are. Some people don't give any thought to this. They're just working with a person, and only later does it occur to them. Like, does this person have my best interest in mind? Or is there something going on in the background that I'm not aware of or didn't consider ahead of time?

Caitlin So the way they cut right to that is, how do you get paid?

Sara Yes. And the second and related question is, are you a fiduciary? OK, so the word fiduciary means that the advisor puts the client's best interest in front of her own. And it comes from this idea that in a relationship like client and attorney or client and advisor, the attorney and or in this case, the advisor is coming into the relationship with way more knowledge of the subject matter, right? That's why you're hiring the expert, right? You want to know whether or not the advisor or the attorney that you're talking to is not putting their own interest first because they know more about the subject matter and they know more about how things work. So it's kind of like, are they taking advantage of their increased level of sophistication in order to take advantage of someone who has less knowledge in this field?

Caitlin So are they an advocate for you as part of their professional ethics or not? That's the fiduciary test?

Sara I don't know if it's as much advocacy as it's the advice that I'm giving you to. The best of my knowledge is in your best interest, and I'm not taking advantage of the discrepancy between our subject matter expertize in order to make myself rich

Caitlin A codified way to account for the power imbalance, exactly the client and the professional.

Sara The other standard in financial services is the suitability standard, so suitability it's a lower standard of care, the suitability standard of care. OK. The suitability standard. Is Caitlin, you know, for people who are like you who are kind of in your income bracket and your age group and your risk tolerance, this type of product that I'm recommending is suitable for people like you.

Caitlin I gotcha.

Sara Which is a little bit different from, Caitlin, this investment product that I'm recommending, I think is in your best interest. Right. So it's a lower standard of care. There's no standard in which it's OK for anyone calling themselves a financial advisor to take advantage of their client, right? Like there are lots of rules against fraud and misrepresentation and all those things, right? When I'm actually giving you advice, do I have to meet the higher fiduciary standard or do I only need to meet the lower suitability standard? It's really hard to argue that if I'm recommending a mutual fund to you, Caitlin, that pays me a commission, it's really hard for me to argue that this product that pays me a commission is in your best interest versus all of these other products that are available that don't pay me a commission,.

Caitlin Right.

Sara So whether it's I'm recommending a Vanguard fund, no load pays, no commission versus a mutual fund that maybe invests in the same stuff, but pays a five percent commission to me for recommending and selling it to you. It's hard to argue that the other fund is in your best interest versus the Vanguard fund, which is basically not necessarily free for you to buy, but lower cost for you to buy.

Sara OK, so another aspect of choosing a financial professional that I feel like would be underplayed in this realm and really would exploit gender dynamics is chemistry with your financial advisor. Like, I feel like if you said to someone, I'm just looking for a financial advisor that I really like and that I can laugh with that, you would be looked at as like a fool who doesn't understand money. But from my perspective, it's like the most important thing that you can call that person and feel like a fool and ask your most embarrassing questions and not feel like you're not invited to that special, you know, Wall Street club. What do you think about personality?

Sara I mean, I think ultimately when you choose to work with someone like once you get a handle on the suitability vs. fiduciary standard part, right? You know, it's like checking some boxes. Yes. Of equal importance, I think, is this idea of chemistry or trust building. I mean, going back to fewer people talk about their money lives than talk about their sex lives. Right?

Caitlin Right.

Sara You need to have the trust with your advisor or they can't give you good advice if they don't really know you are really know what you're trying to do. That happens all the time. One of the reasons I think people call female advisors, like when they're female is, you know, our industry is full of people of maybe advisors who came up in the male-dominated world and aren't very conscious of their tone, the tone they take with their clients. Yeah. So it's easy to find yourself in a relationship with someone who's condescending or someone you don't like talking to or someone that you don't want to go in for the annual review or you don't want to hear what this person has to say because the communication style is just not working for you, right? If that's the case, you need to find someone who has communication style works for you.

Sara And I feel like who thinks that it's really important that you get educated on this stuff so that you're a partner, maybe not an equal partner, but that part of it is they're invested in your understanding of what's happening with your finances and that a very paternalistic approach like, don't worry, I'm the professional, I've got all this, is a little bit of a red flag because it gives them a great cover for doing whatever they want, whether it's like too lazy or too risky, or too something that wouldn't actually be in line with your values and you have no way to cross check. You don't have the vocabulary to ask them, and they certainly don't invite it. So I feel like finding someone who is excited about you learning, too, is a good check too to make sure you can. It's part of the trust thing.

Sara Absolutely. Absolutely. I do think that the industry is changing, especially as like the younger kids are coming up in the world and they value education and they value putting in the time to educate people. Right? There are some advisors who are willing to take that time, and there are some advisors who aren't, right? And I think that by finding that person you can trust, you can see who's in the business just to make money and who is in the business to create relationships over time and really be your advisor and your partner going forward.

Caitlin And I imagine it's a two way street that a few years ago, I myself, if I had found a bunch of money, would have come in and been like, Look, I don't know anything about money. I just want. You to make the choices. I mean, I would have absolutely done this like you do it. That's why I pay you. I don't want envelopes coming to my house. I like, yes, I will come meet with you once a year because I know you have to check that off. So I feel like a lot of us could come into that relationship, setting the terms very clearly. So you're already in that relationship and that's what you asked for. But that it's never too late to say like, Hey, I'm ready now to learn a little bit more. So that test could come later for is this person? Do they have the patience and interest in holding my hand a little bit to understand what's going on there after I set these very strict boundaries, can I undo them with this person?

Sara Yeah. I mean, I think people's relationship with money and investing changes over time. Your relationship with your advisor can change over time, and if the relationship changes so much that the fit isn't a good fit anymore. Just find a new advisor who does fit your new reality and or give your current advisor a chance to change their level to the new level of service that you want. Hiring an advisor is not the last decision you ever need to make. You don't have to go into it thinking, I'm just going to find an advisor, and then this person is going to be my advisor for 30 years. You can change advisors. It's OK.

Caitlin Will they steal your money if they're mad at you for giving your business to someone else?

Sara No.

Caitlin How does that work?

Sara Yes. So one of the things kind of going back to finding an advisor. I feel like this is kind of the Bernie Madoff question. OK? Like, how do I know that you're not going to be like Bernie Madoff and steal all my money? One of the things you can look for is when you're working with an advisor, ask the advisor who the custodian is. So the custodian is the company that sits in between you and the advisor. So in my case, it's TD Ameritrade Institutional. So if Caitlin is the client, you have a account set up in your name at ETRADE

Caitlin Billions, Sara.

Sara Yeah, TD Ameritrade might not even be big enough to handle your accounts, but let's just say it's one of your side accounts that you deign to let me advise you on. So you have an account at TD Ameritrade in your name, you sign paperwork with me that basically gives me access to your accounts, but I'm not allowed to change the contact information on the accounts. If I tried to withdraw a million dollars, TD Ameritrade would see that happening and would alert people like, Oh, we think fraud is happening here, so there should be checks in place that maybe not completely prevent but make it very difficult for an advisor to steal your money. Most advisors, I mean, the vast, vast, super vast majority of advisors are not going to steal your money. But I think if you end up with an advisor who is advising you on esoteric investments, so maybe something that's structured as like a hedge fund or a private fund,

Caitlin Their buddy has a deal that only a few people get in.

Sara Yes. Oil and gas royalties, cryptocurrency. Be more careful than you otherwise would be than with someone who's like, Oh, I'm going to advise you on a portfolio of stocks and bonds and mutual funds and ETFs. I think as you go into like the really, really niche parts of the market, it's easier for scam artists to operate there than it is in the like broadly diversified portfolio type of advice.

Caitlin So you just listed approximately 15 terms that we will through the course of this podcast, unpack diversified portfolio, index funds. I mean, almost everything that just came out of your mouth, rapid fire will be things that we unpack and discuss. So, if you just heard those and you're just totally scared, don't worry. That's the whole point about undoing this. OK, so the three most important things we got there are. Who pays you? And just - can I add that if they balk, if they are offended or act, not nice to you after you ask them who pays them, then that is a super big red flag. Like, it might be uncomfortable for us to ask, but they should be proud of the fact that they can tell you, you pay me. No one else pays me.

Sara Absolutely any advisors should be able to make it crystal clear how they get paid, because does anyone work for free? Are people in the business of working for free? Financial advisors are not, right? No one is in the business of working for free. So like whatever the structure is, the advisor should absolutely be able to tell you very clearly who pays them

Caitlin And if they are offended or treat you poorly for asking that question it is a very simple thing. You hang up and you go to the next person on your list that someone recommend.

Sara Yeah, absolutely.

Caitlin OK. We are going to stop talking because I'm. Going to need a chocolate milkshake if we delve any further into these topics, and I don't have one with me and I can feel that I need one now.

Sara That's how you know it's time to stop.

Caitlin Right? So that is it for today. Thank you, Sara.

Sara This was fun.

Caitlin Learning. So much learning.

Music transition by Bad Bad Hats

Sara So, Caitlin, I have a question for you. What is one thing a woman on the verge can do today to take another step on her financial journey?

Caitlin Well, I think we can keep it simple this week just because of talking about financial advisors. So asking the two questions that you say if you have a financial advisor and you don't know the answer to those questions, ask them and you can email, you can call, whatever. But just to ask those two questions. What are they again, Sara?

Sara Are you a fiduciary? Mm-Hmm. And how do you get paid?

Caitlin OK. Just those two. If you don't have a financial advisor but you think you might want one to ask around for referrals to friends that have them, word of mouth is really so key in this people that I've worked with people before. And then you already know your first two questions for them when you got started.

Sara Oh my gosh, that's so great. What a great tip. Thanks for sharing that one.

Caitlin Hey, I've learned from the best.

Sara Yeah, you have.

Caitlin Bye. Bye Bye.

Music transition by Bad Bad Hats

Sara Hey. Do you have any dumb questions about finance or investing? Send them to us at our web site womenontheverge.com

Caitlin Hey, so many thank you's to Kelly West, a woman on the verge in her own right who took the amazing photos for our album art and website helped with our website design, music, audio editing, cheerleading, mental health, everything. Emily Kleinsorge, our stylist that did our hair and makeup for our photos from Lucy Skyrocket. Lauren Gross and Taylor Gross, who helped us with our graphic design. And

Sara and our music is by Bad Bad Hats and Devmo.

Caitlin This episode was edited by Jes Rowe.

Caitlin If your partner is making you ask for money, giving you an allowance, taking your money or not letting you know about or have access to family income. This could be economic abuse.

Sara Learn more at thehotline.org or call one 800 799 safe.

Caitlin So Sara because you're a financial professional, when you have to read a disclaimer for this podcast,

Sara I would actually really love it if you could read the disclaimer and your best legal voice.

Caitlin OK. Doing it. This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

Music outro by Devmo

Devmo I know the first thing you notice is that I'm covered in gold, the flick of the wrist it could turn a hot bitch cold, to get what you want in life girl you gotta be bold. Now Imma die rich, and I know...