Transcription:

Episode 15 – Why You Need A Financial Advisor

00:12:26

Announcer: This is Blue Money, a finance podcast made for cops by cops. With us you know your money safe. Lieutenant Jim Donnelley of the Ben Salem Police Department and cohost Kevin McGarry of Valley Financial Group, come together to help protect and serve your financial needs. This is blue Money.

Jim Donnelly: I want to welcome everyone back to the Blue Money Podcast. This is Jim Donnelly. I’m here with my co-host, Kevin McGarry.

Kevin McGarry: Jimmy.

Jim Donnelly: Hey Kevin. On this episode we’re going to talk about financial advisors. Why should someone hire one? The pros, one the cons. So Kev, we’re doing a lot of portfolio views, or what do you think by police officers need him or why people generally in the public, are financial advisors worth it?

Kevin McGarry: So, I mean, first of all, I mean, Jimmy, when they come in here, prospects come in or clients come in for reviews, especially a newer client. How do they seem in the meetings?

Jim Donnelly: They get nervous. 

Kevin McGarry: Nervous and they get nervous for many reasons. They get nervous because they nightmare stories from the news, their friends, family members, there’s a lack of trust. And there’s also, not the client’s fault, but there’s a lot of lack of education on financial planning. So, the first thing is, do people need them? Law enforcement personnel need them. Absolutely. I mean, I truly believe working with a professional can help you achieve your long-term financial goals. And John Hopkins did a study saying that 70% of those who work with financial advisors were on track or ahead in retirement compared to 33% that don’t. So, the numbers tell you that hey, working with somebody, a professional is pretty important.

Jim Donnelly: And you hit a key word there, trust. And I think that’s why a lot of police officers out there struggle with hiring a financial advisor or even speaking to a financial advisor. One, because we just don’t trust anyone. We’re not from the academy. We need to build trust with someone. And you walk into a PBA meeting and might have their best interest and you want to help these people in the police department, better invest, give them better options. But we don’t know you. We’re looking at you, you get this shirt and tire on. We see the news, you see all these scams. When you FTX right now, well, as cryptocurrency get blown away. So, we think you just want our money, you want to make money off us, you going to invest our money, embezzle it. Like we don’t know what’s going on. We don’t trust you. So, it takes a while. And I think another problem is a lot of officers out there we’re just uneducated in investing. So, if we’re uneducated, we just don’t feel like asking someone, because as police officers, we always know the answer. Everyone comes to us. So, if I need to come to someone else and ask them for their opinion, it’s different for us. It’s totally different. So, Kevin, historically, do you think financial advisors get a better return, better investment for their clients than if I just did it myself?

Kevin McGarry: I mean, the one thing we can’t say, hey, we’re going to give you a better return than you doing them by yourself. We don’t know that. There may be great investors out there, but what I can tell you is we can give you clarity. And historically, there have been studies by Vanguard and Fidelity, saying that working with financial advisor has led to investment success or positive results. For instance, Vanguard has done a study that says, hey, working with an advisor has increased your annual net return by 3% per year, net of fees. Net of the advisor fees and the cost of the investments. So, but think about it on a different scale. Hey, I’m 55, I have $500,000 in my account. I get 10 more years on a job. 3% on that over a decade on 500 grand is around $171,000 of net worth that they could cost themselves by doing it themselves.

Jim Donnelly: That’s a big number. 

Kevin McGarry: Big number.

Jim Donnelly: So, I tell people about working with financial advisors, the pros and cons know so many more pros, some of them right from the get go, you’re paying, but you’re getting the experience and the investment knowledge of an investment team, which is huge. They know the new laws, they know new regulations, and they’re aware of that. They’re craft. I mean, Kev, there’s a bank across the street and there’s a hostile situation. And I said, hey Kev, give me an ops plane. SWAT teams responded. And I give you all scenario. You’re looking at me like you have no idea what I’m talking about.

Kevin McGarry: My plan would be easy 911.

Jim Donnelly: But because you don’t know, you’re unexperienced, you don’t have it. 

Kevin McGarry: That’s correct. 

Jim Donnelly: So, police officers feel that way. Hire someone that has the expertise is schooling that keeps up on all the latest trends. Another great pro is the emotional guardrail. We see this with the midterms a lot. A lot of people are afraid if the Republican win…

Kevin McGarry: Very, very emotional,

Jim Donnelly: The Democrats win or who wins the presidency or does crypto scare now, should time the market. Should I pull my money out? We’re talking about a recession soon. Time that market, you can’t time it.

Kevin McGarry: Well, Jim, it’s not even that. Like, I mean, how many people came in here and say, let’s buy crypto.

Jim Donnelly: I lost count.

Kevin McGarry: And it’s hard telling somebody, hey listen, we understand it. We get crypto, but for you and your financial goal, it doesn’t meet your plans. And telling someone no is a lot harder than telling someone yes. 

Jim Donnelly: It’s the right answer. Another one. Kevin’s a comprehensive financial plan for an individual that’s a big pro. What I mean by that is it’s tailor made, like custom made for somebody. This portfolio is going to be custom to their family, their wants, their needs, their dreams, everything is in there. So, if you just do it yourself, if you don’t have that experience and the knowledge, it’s not going to be as great as it should be or sound. It’s going to have some hiccups in there.

Kevin McGarry: I think the big thing there too, Jim, is to remember, because people talk, not everybody has the same plan and same life. That’s right. You know, so everyone said, why not own this? Why don’t you do this for me? Because you’re different than the other person.

Jim Donnelly: And one of the biggest things that he came up with a price tag on Kevin, is the financial piece that individual has. When you lay there in bed and you know that you’re on the right path, you have a financial team behind you, leading you towards your goals, going to try to get as much money as you can in an investment portfolio for you, it’s peace of mind. It really is. It’s great.

Kevin McGarry: Fidelity, there are custodian, they came out with a study with their program participants and 77% of those participants said they don’t have enough time or knowledge to pick their own investments.

Jim Donnelly: That sounds pretty accurate. So negatives, people always talk about. One is the challenge of finding a financial advisor that you’re comfortable with. And I think that’s a big challenge. And that’s why we tell everyone that we sit down with any potential clients. They’ll interview five financial advisors. There’s thousands of them out there. As police officers, you can read people, you can know if you have a bad feeling about that person, let’s go to the next one. They’re all over the place. You can Google it. So, take your time, meet a few. We tell everyone go meet someone else, comparison to someone. Be patient. Don’t rush. None of the one, everyone always talks about work with a financial planner is the cost. It’s probably going to cost too much. How much you guys cost? And Kev, how much it usually cost to work with a financial planner?

Kevin McGarry: I mean, it varies for all different clients, the amount of assets they have with us. But on standard, you’re looking around 1%.

Jim Donnelly: And that’s 1% of what Kev?

Kevin McGarry: The assets you have at Valley Financial group.

Jim Donnelly: Okay, so that means like if I have 500,000 on paying 1 on my account. Now 1% sounds like a lot to people. I don’t think they realize that the account that they have at their work one is very similar and we don’t get much for that. And I think when we break that down to police officers, they understand like what the value of the financial planner is. Now Kevin, here at Valley or other financial industry, share what are they getting with that 1%? What are they getting for buying?

Kevin McGarry: Well, the first thing is, if you looked at the Vanguard study net of fees working with a planner, financial advisor, it’s 3% more a year net return. But it’s the ability to bring value. It’s the ability to say, hey, you get multi levels of service, you get income planning, estate planning, tax planning, education planning, debt consolidation planning. There’s multiple services here that fee covers. So, it’s not just everyone thinks they come in and you’re going to invest your money and that’s it called a day. No, it’s not what we do, what we do is we created a financial plan that meets you and your family’s personal needs. Want to make sure that your family’s protected. Make sure you’re protected. And we will review that plan three to four times a year.

Jim Donnelly: And we always say here Kevin, making a financial portfolio for someone, doing a portfolio review portfolio making a portfolio, that’s the easy part.

Kevin McGarry: That’s the easy part.

Jim Donnelly: That’s the easy part. That can be done instantly. But it’s getting all the other things and everything else that we do.

Kevin McGarry: But the thing is, Jim, like, your plan today is going to change, your life changes. Think about where you were 10 years ago. Think about where you’re going to be 10 years from now. It’s probably going to be a little different. But if we’re planning on it and we’re focusing on it three to four times a year, you’re most likely going to get there.

Jim Donnelly: And in one word that I would share with police officers, when you’re dealing with financial advisors or anyone in the industry, fiduciary, how big of a key word that is, Kevin, I tell people always make sure you’re dealing with people that are fiduciary. So, hit upon that a little bit, Kev, about the audience. What fiduciary is here at Valley?

Kevin McGarry: That’s the big word. Are you a fiduciary? And we are, we’re a registered investment advisory firm. We do mostly only fee based planning, which we charge our clients a fee. We don’t do commissioned here. But what is fiduciary mean is we have your best interest at all times. We don’t do commissions, commission brokerage is mainly suitability, is the investment suitable for you? We’re not suitable. We’re best interest. Always have to have our clients’ best interest.

Jim Donnelly: And that’s key. I think a lot of people should look out for that and familiarize themselves with that term. So, Kelly’s going to wrap up the podcast. There’s a couple things that you want people to walk away from this podcast to remember.

Kevin McGarry: Yeah, I think number one, start the process. If you’re not working with a financial advisor, start interviewing financial planners, number one. Number two, start planning now. Build a relationship. Because what I was taught when I got in the industry is don’t work with friends and family. I’ve been taught that. But what happens is our clients become our friends and they become part of your family. Because you’re spending 15 to 30 to 40 years with these people over time. And the last thing is, I would say is, if you have any questions on this, reach out to us. Doesn’t cost you anything but your time.

Jim Donnelly: Absolutely Kevin, some great advice there. That’s going to wrap up the Blue Money Podcast for today. I want to thank the listeners for listening. If anyone has any questions about this podcast or any previous podcast or anything in general that you need some information on, do not hesitate to reach out to Kevin or me. Our contact information is going to be on the show notes. Thank you for listening and stay safe out there.

Kevin McGarry: Be safe.

Announcer: Thanks for listening to Blue Money. To learn more about Jim and Kevin or for a free financial assessment, visit valley financial.com or click on the link in the podcast description or show notes. Until next time, safe investing. 

This material is intended to be educational in nature and not as a recommendation for any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended for any form of substitute or individualized investment advice. This discussion is general in nature and therefore non intended to recommend or endorse any asset, class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment clients, as well as all other readers are encouraged to consult with their own professional advisors, including investment advisors and tax advisors. Valley Financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.