Personal Finance

How to Find a Financial Advisor You Can Trust

Published

5 years ago

October 9, 2018

Jeff Desjardins

Part 1 Part 2 Part 3 Part 4 Part 5 Part 6

How to Find a Financial Advisor You Can Trust

More and more people are using financial advisors to help them navigate the complex journey to financial freedom.

But although more Americans are seeking advice on matters of personal finance, they are also less sure that the advice they are getting is trustworthy.

Unfortunately, a growing amount of Americans see advisors as serving their companies’ best interests rather than their own best interests. According to a survey by The National Association of Retirement Plan Participants (NARPP), 60% of Americans now feel this way compared to just 25% of respondents in 2010.

Who Can Be Trusted?

Today’s infographic is from Tony Robbins, and it covers key points from his #1 Best Selling book Unshakeable: Your Financial Freedom Playbook, which is now available on paperback.

The book dissects the investment advisor landscape to show the value of a relationship with an advisor, the legal distinctions between different advisor types, and how advisors are incentivized.

Ultimately, it helps give you the ammo you need to find an investment advisor that will provide you with better service than the rest.

The Value of the Right Advisor

The right financial advisor can help you make better decisions, address your cognitive biases, and use their expertise to save you massive amounts of money.

A recent Vanguard study helps quantify the value a good advisor can bring:

Lowering expense ratios: 0.45%
Rebalancing portfolio: 0.35%
Asset allocation: 0.75%
Withdrawing the right investments in retirement: 0.70%
Behavioral coaching: 1.50%

Total: 3.75% of added value!

That’s more than 3x what a sophisticated advisor might charge, and doesn’t include the benefits of reducing taxes or other areas.

Advisors vs. Brokers

There are roughly 310,000 people in the U.S. who call themselves financial advisors – but they actually fall under two different legal frameworks.

About 90% of this group are brokers, while 10% are registered investment advisors. Confusingly, there is also a significant portion who are dual-registered as both brokers and registered advisors, as well.

What’s the difference?

The two have different legal obligations, as well as differing ways of receiving compensation from clients:

Investment Advisor (RIA)

RIAs are registered with the SEC and with the state they are working in
Like doctors or lawyers, investment advisors have a fiduciary duty and legal obligation to their clients
In other words, they must serve your best interest at all times
They also must disclose any conflicts of interest
They don’t accept commission from third-parties for their products

How they get paid: They charge a % based on assets managed, or a flat fee for financial advice

Brokers

Brokers are usually employed by banks, brokerage houses, or insurance companies
The products they recommend have to pass a suitability standard, based on your personal circumstances
However, they do not have to necessarily recommend the best product for you

How they get paid: They get commissions for selling certain products to you. They may also charge based on assets under management, as well.

Picking the Right Advisor

Remember, the right advisor can add 3.75% of added value to a portfolio, and that’s before taxes and other areas! With the stakes so high, how can Americans pick the right advisor for them?

Here are the 7 questions Tony Robbins would ask a potential advisor to work with:

1. Are you a Registered Investment Advisor?
If the answer is yes, he or she is required by law to be a fiduciary.

2. Are you (or your firm) affiliated with a Broker-Dealer?
If yes, he or she can act as a broker and receive commissions for guiding you into specific investments.

3. Does your firm offer proprietary mutual funds or separately managed accounts?
These products will likely compensate them with additional revenues, at your expense.

4. Do you or your firm receive any third-party compensation for recommending particular investments?
This is the ultimate question you want answered. You want products to be recommended because they are right for you, not because they give the best kickbacks.

5. What’s your philosophy when it comes to investing?
This will help you understand whether your advisor believes he/she can beat the market.

6. What financial planning services do you offer beyond investment strategy and portfolio management?
Financial planning is much bigger than just investing – it also involves planning for your child’s education, handling vested stock options, estate planning, and tax advice. You want someone that can help you in all stages of your life.

7. Where will my money be held?
Having your money held by a trusted third-party custodian will mean your money is in a secure environment.

Like most financial endeavors, picking an advisor is an area lined with potential pitfalls.

But choosing the right investment advisor can be a difference maker – it can even possibly even set you up with many years of extra retirement savings.

Related Topics:personal finance financial advisor investment advisor ria

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Personal Finance

Mapped: What You Need to Earn to Own a Home in 50 American Cities

What does it take to own a home in the U.S. in 2023? Here’s a look at the salary needed for home ownership in the top 50 metro areas.

Published

2 months ago

October 16, 2023

Pallavi Rao

A cropped map of the U.S. with the median home price as well as the salary needed to own a home 50 American cities.

What You Need to Earn to Own a Home in 50 American Cities

Once a fundamental part of the American dream, the ability to own a home is drifting farther and farther away for many Americans.

Between skyrocketing prices, stagnating wages, and now rising interest rates, the deck seems to be increasingly stacked against home ownership.

Using May 2023 data tabulated by Home Sweet Home, we map out the annual salary needed to afford a 30-year mortgage (at 6.37%) to buy a home in America’s 50 most populous metropolitan areas.

The monthly minimum mortgage payment includes taxes and insurance as well, and is capped at roughly one-third of the income. This analysis also assumes that the homeowner will put down a 20% down payment.

The Least and Most Affordable American Cities to Own a Home

At the top of the list, and at the very west of the country, San Jose is the least affordable city to own a home for the average American.

One would have to earn at least $374,000 a year to afford a $1.6 million dollar home in the city.

To put those numbers into perspective, the median American annual income is $75,000, about one-fifth what’s required to buy a home in San Jose.

Here’s a look at the annual earnings needed to afford a home in all 50 largest cities in the U.S., ranked from least to most affordable.

Rank	Metro Area	State	Median Home Price	Annual Salary
1	San Jose	California	$1,618,400	$373,696
2	San Francisco	California	$1,192,600	$282,167
3	San Diego	California	$880,000	$209,110
4	Los Angeles	California	$746,800	$181,106
5	Seattle	Washington	$699,300	$170,340
6	Boston	Massachusetts	$644,400	$165,239
7	New York City	New York	$577,300	$160,233
8	Denver	Colorado	$636,100	$150,622
9	Washington, D.C.	N/A	$557,200	$139,911
10	Miami	Florida	$560,000	$137,574
11	Portland	Oregon	$556,800	$136,147
12	Riverside/San Bernardino	California	$550,000	$133,607
13	Austin	Texas	$467,900	$128,995
14	Sacramento	California	$500,000	$125,304
15	Salt Lake City	Utah	$522,700	$122,717
16	Providence	Rhode Island	$417,000	$112,281
17	Orlando	Florida	$419,900	$104,772
18	Dallas	Texas	$372,400	$103,460
19	Phoenix	Arizona	$439,700	$103,112
20	Raleigh	North Carolina	$420,000	$102,572
21	Las Vegas	Nevada	$431,400	$101,310
22	Tampa	Florida	$390,000	$97,387
23	Minneapolis	Michigan	$361,500	$94,466
24	Hartford	Connecticut	$314,900	$93,861
25	Charlotte	North Carolina	$387,200	$93,735
26	Jacksonville	Florida	$370,000	$93,422
27	Baltimore	Maryland	$357,800	$93,378
28	Nashville	Tennessee	$385,800	$93,168
29	Chicago	Illinois	$321,000	$92,868
30	Houston	Texas	$327,000	$91,826
31	Milwaukee	Wisconsin	$339,600	$89,752
32	Atlanta	Georgia	$354,300	$89,198
33	Richmond	Virginia	$362,300	$88,769
34	San Antonio	Texas	$320,500	$88,683
35	Philadelphia	Pennsylvania	$315,300	$87,293
36	Virginia Beach	Virginia	$313,200	$79,336
37	Kansas City	Missouri	$291,000	$76,147
38	Columbus	Ohio	$284,700	$76,133
39	Indianapolis	Indiana	$289,300	$71,409
40	New Orleans	Louisiana	$265,200	$68,946
41	Memphis	Tennessee	$268,600	$68,005
42	Birmingham	Alabama	$276,500	$67,773
43	Cincinnati	Ohio	$252,200	$66,260
44	Buffalo	New York	$206,800	$63,386
45	St Louis	Missouri	$231,100	$63,260
46	Detroit	Michigan	$227,000	$62,758
47	Louisville	Kentucky	$246,000	$62,741
48	Oklahoma City	Oklahoma	$227,300	$62,161
49	Cleveland	Ohio	$191,400	$55,515
50	Pittsburgh	Pennsylvania	$175,000	$50,316
	National		$371,200	$97,204

Other Californian cities, San Francisco (ranked 2nd), San Diego (3rd), and Los Angeles (4th) all require an annual income of at least $180,000 to attempt home ownership within their metropolitan boundaries.

Boston (ranked 6th) and New York (ranked 7th) represent unaffordability on the East Coast, both requiring at least $160,000 a year to buy homes there.

It’s not just the coasts that are expensive however. To buy a home in Denver (ranked 8th) and Salt Lake City (15th) means earning more than $120,000 a year.

However, cities in the Midwest and South, like Pittsburgh, Detroit, Oklahoma City, and Louisville, are far more affordable, requiring less than $63,000 a year to buy a home.

Interest Rates Rock Home Ownership Chances

Aside from the obvious price differences in housing markets, a key factor that has elevated income requirements across the board is the rapid rise in interest rates in the last year. In fact the average 30-year mortgage has pushed past 7%, the highest it’s been since the 2000s.

This means that while the median price of a house in San Jose has actually come down between 2022 and 2023, the minimum monthly payment has increased from $7,717 to $8,720 this year.

Rank	Metro Area	State	Median Home Price	Monthly Payment
1	San Jose	California	$1,618,400	$8,720
2	San Francisco	California	$1,192,600	$6,584
3	San Diego	California	$880,000	$4,879
4	Los Angeles	California	$746,800	$4,226
5	Seattle	Washington	$699,300	$3,975
6	Boston	Massachusetts	$644,400	$3,856
7	New York City	New York	$577,300	$3,739
8	Denver	Colorado	$636,100	$3,515
9	Washington, D.C.	N/A	$557,200	$3,265
10	Miami	Florida	$560,000	$3,210
11	Portland	Oregon	$556,800	$3,177
12	Riverside/San Bernardino	California	$550,000	$3,118
13	Austin	Texas	$467,900	$3,010
14	Sacramento	California	$500,000	$2,924
15	Salt Lake City	Utah	$522,700	$2,863
16	Providence	Rhode Island	$417,000	$2,620
17	Orlando	Florida	$419,900	$2,445
18	Dallas	Texas	$372,400	$2,414
19	Phoenix	Arizona	$439,700	$2,406
20	Raleigh	North Carolina	$420,000	$2,393
21	Las Vegas	Nevada	$431,400	$2,364
22	Tampa	Florida	$390,000	$2,272
23	Minneapolis	Michigan	$361,500	$2,204
24	Hartford	Connecticut	$314,900	$2,190
25	Charlotte	North Carolina	$387,200	$2,187
26	Jacksonville	Florida	$370,000	$2,180
27	Baltimore	Maryland	$357,800	$2,179
28	Nashville	Tennessee	$385,800	$2,174
29	Chicago	Illinois	$321,000	$2,167
30	Houston	Texas	$327,000	$2,143
31	Milwaukee	Wisconsin	$339,600	$2,094
32	Atlanta	Georgia	$354,300	$2,081
33	Richmond	Virginia	$362,300	$2,071
34	San Antonio	Texas	$320,500	$2,069
35	Philadelphia	Pennsylvania	$315,300	$2,037
36	Virginia Beach	Virginia	$313,200	$1,851
37	Kansas City	Missouri	$291,000	$1,777
38	Columbus	Ohio	$284,700	$1,776
39	Indianapolis	Indiana	$289,300	$1,666
40	New Orleans	Louisiana	$265,200	$1,609
41	Memphis	Tennessee	$268,600	$1,587
42	Birmingham	Alabama	$276,500	$1,581
43	Cincinnati	Ohio	$252,200	$1,546
44	Buffalo	New York	$206,800	$1,479
45	St Louis	Missouri	$231,100	$1,476
46	Detroit	Michigan	$227,000	$1,464
47	Louisville	Kentucky	$246,000	$1,464
48	Oklahoma City	Oklahoma	$227,300	$1,450
49	Cleveland	Ohio	$191,400	$1,295
50	Pittsburgh	Pennsylvania	$175,000	$1,174
	National		$371,200	$2,268

So to afford a median-priced home in the country, an American needs to earn closer to $100,000 a year, up from $75,500 in 2022. And even then, they would be priced out of owning a home in nearly half of the 50 largest cities in the country.

As a result Americans may yet further delay home ownership. Renting is now a far more attractive option, thanks to the biggest difference between rent and mortgages in over 50 years.

Where Does This Data Come From?

Source: Home Sweet Home (HSH).

Note: HSH used different sources for their median home prices, mortgage rate, property taxes and home insurance figures for their analysis. Please visit their website for more information.

Other: If other personal debts exceed 8% of one’s given monthly gross income, this may increase the salary needed to qualify for a mortgage.