• Margaret Curtis, MD

What I Learned From Working With A CFP

Updated: Jan 8, 2019

I learned a lot from working with a Certified Financial Planner (CFP), about setting financial goals, insurance and college savings. I also learned how murky the world of financial advice is.

My husband and I worked with a Certified Financial Planner for about three years. Our initial meetings with him were very productive. He charged us a flat fee, first hourly and then annually. I consider this money well spent, but I will save you the trouble and share what I learned:

  1. Keep good records. It was sort of like inviting people over for dinner and then cleaning your house so no one knows how you actually live. Before our first meeting we consolidated several bank accounts, dredged up all our old tax records and downloaded statements. This process in and of itself was incredibly useful. Now that we have systems, keeping our records current is easy. This is a necessary but not sufficient first step to managing your own money.

  2. Set goals first. We used to make big decisions (such as buying a car) based on our circumstances (old car died). and then figure out how to pay for it (take money from taxable account). Now, we have a list of wants and needs (replacing a car within 5 years), and we dedicate savings to that goal. Money is kept in appropriate accounts for short-, medium- and long-term needs, so we don’t have to scramble or sell a long-term investment to meet an immediate demand. We save money and stress, and we have a framework for decisions.

  3. Pay attention to fees. Our CFP pointed out that our college savings were kept in a high-fee fund, and pointed us to a lower-fee state 529. Ironically, we later left this CFP because of fees (see below), but this advice got me to examine what we were paying for what we were getting.

After two years of this, our planner offered to take over management of our investments. I was changing jobs and had some retirement money to move, so we transferred those accounts to the mutual fund company our CFP recommended. Today I wouldn’t agree to this, knowing what I now know, but some of us are slow/experiential learners. Now I will save you more money:

  1. Pay attention to hidden fees. Our investments did fine, but we paid about 1% in total fees. These were not obvious in any of the statements we received, but showed up on our tax forms. If you haven’t already heard, these kinds of fees are an incredible drag on investments.

  2. Ask “what is in this for you?”. Our CFP wasn’t actually managing our investments. He had referred us to a mutual fund company which then paid him a percentage. He had a conflict of interest (he explained this by saying that his “planning” gig was separate from his “investment management” gig. Whatevs).

As an aside: being paid a fee for “assets under management” is a common practice for financial planners, but it seems to me that this creates a conflict of interest. AUM fees create an incentive for a planner to recommend investments that benefit the planner, rather than investments that are optimal for you.

By this point we felt we had a good plan going, and we sure as heck didn’t want to continue to pay all these people to watch our money grow. We pulled the money out and invested it in low-cost index funds. We would go back to a CFP if we needed specific planning advice. Mostly, though, we are putting our education to good use.

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