Brokers vs. Fiduciaries : A Whiteboard Animation


As part of the community of fee-only financial advisors, we have struggled for years to help the public understand the difference between what we do and what brokerage house employees do (UBS, LPL Financial, Merrill Lynch, Goldman Sachs, bank employees, etc.). Those folks call themselves “Financial Advisor” and “Financial Planner”, too, so there is almost no distinction in title.

The only difference is who employs them. We fee-only financial advisors are held to a fiduciary standard, which is the highest standard of duty and care. We put the client’s needs before our own. We work for ourselves, are registered directly with the SEC (or state organizations), and have no product to sell. So what does that mean to the client? Continue Reading…

The Freshman Fifteen is now the Freshman Fifty-Five Thousand

This week I’m on vacation in San Jose del Cabo, Mexico (rough life, I know!) so my sister, who is studying to take the CFP exam, wrote this week’s insightful blog post. It’s nice to be in this great business with so many members of my family! And it lends a unique and valuable voice to our Healthy Wealthy Families blog. Thanks so much for reading, or as they say in Mexico, “Muchas Gracias!” Continue Reading…

Goldman Sachs Confession: “Client-Last” Advice

I am pleased to present a timely guest post today. This professional commentary about a powerful op-ed piece published yesterday by the New York Times was written by Bob Veres, who is on the very short list of people considered to be an oracle of the financial planning industry.

Of the op-ed, which is an overwhelming indictment of the commission-earning world of brokerage house folks who call themselves financial advisors, I will only say this: Please tell a friend or family member about your independent, fee-only financial planning team. Continue Reading…

The Quandary of the Facebook Pre-IPO Employee

This is the 2nd in my series written to Facebook’s Pre-IPO Employees, the title of which is only partially tongue-in-cheek. I am a fee-only financial planner, and series offers new insights to Gen-X financial windfall recipients, whether that windfall came from stock options (congratulations on your IPO this week, Yelp Employees!), an inheritance, a big sports or entertainment contract, divorce, or lottery winnings. 

February 26, 2012

Dear Facebook’s Pre-IPO Employees,

Sometime after Facebook’s IPO, pending some tax or market disaster, you’ll exercise your options, sell your shares, and be presented with a check. On that day, you’ll begin your exciting journey into the world that many consider the American Dream. Uncle Sam is throwing a big party for you next April 15th, and he’ll lighten your purse at that soiree, but you’ll likely recover from your hangover still a passport-carrying citizen of this new world.

Here, the game changes entirely. Money doesn’t often double or triple in an instant, but it can disappear faster than I can say “bad investment choices”—and for many, it does. In fact, the data on windfall recipients tells us that for the majority, it does.

You won’t feel it, but your new legs will be wobbly. You will make missteps, but they won’t seem like missteps at the time. You see, being rich consists of two distinct skill sets—the skills to get rich and the skills to stay rich. These two skill sets are very different, they require very different mindsets, and they rarely occur naturally in the same person.

If you plan to keep your passport to this new world, you will need to master the staying rich piece. Those who get rich slowly do so over time, learning lessons along the way. They research strategies and earn confidence based on success. They suffer regret and take responsibility for small-sized failures, so when the numbers get large and interesting they don’t repeat the same mistakes. They try out advisors, fire bad ones and hire better ones.

You don’t have this luxury, and to make matters worse, your brain is not your friend. You, like all of us, suffer from a myriad of cognitive biases, and because you’ve received a large financial windfall, now instead of making a $100 or $1,000 mistake, you’re likely to make a $100,000 mistake.

You’ll be more inclined to make large extravagant purchases or “investments” because you can, after all your discretionary spending budget just had 5 zeros added to the end of it. You’re likely to learn lessons more expensively than others. Don’t get me wrong, I’m all for learning life’s lessons. What I want to protect you from is learning these lessons at the expense of your long-term financial success.

Without the hard-earned skills to manage your wealth and stay rich, you won’t know the difference between discretionary spending and what should be untouched principle. You won’t understand the dollars and cents of what your financial windfall makes possible for you in terms of retirement, taxes, gifting, cash flow, purchases, spending and investing.

And I promise you—money is all dollars and cents.

And that’s the difference – right now that financial windfall lives in your mind like pictures of success and vacations and perhaps the envy and celebration of your friends and the public, but not simple dollars and cents.

Thanks, Facebook Employees, for listening. I plan to be your pen pal for a little while longer—there is much I would like to tell you. If you feel like you can I could be copasetic, become a subscriber and I’ll send my letters straight to your mail box.



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WHY Investors Make Mistakes

WHY Investors Make Mistakes on Prezi

Want a copy of my FREE eBook “10 Steps to Ensure You Won’t Outlive Your Money” which teaches you the secrets of wealthy investors? Sign up here to get your complimentary copy!”

On Love, Money, Investing, and Taking His Advice

A lot of being in a good relationship is just going with the flow. Be generous and thoughtful and bend when you need to bend, and cross your fingers your partner will do the same when you need it. This Valentine’s Day, however, I have been giving a lot of thought to how my money-savvy clients and friends negotiate the delicate area of money and investing inside relationships, and how going with the flow sometimes leads to troubled waters.

In my fee-0nly financial planning practice, in San Jose, California, about 1 in 4 of my clients is a woman who brings significant assets or income to her relationship.

Women tend to be very relationship-oriented. Women are more inclined to be malleable and sacrifice our immediate pleasure for the sake of the relationship. Plus, if you love your honey, you think he’s fantastic and capable—you respect his opinion and want the important aspects of the relationship to be simpatico.

And men are action-oriented, they want to be valuable, they are (sometimes unjustifiably) confident in their opinions, and they love to give advice.

It’s here where we begin to get ourselves in trouble. In my practice, I have seen women deal with all sorts of advice, persuasion and even coercion from their partners in the area of money.

I have never had a male client come into my office and tell me that his wife or girlfriend was pushing him to change his portfolio allocation or make a particular investment, but it has happened with at least 90% of my female clients.

And this problem isn’t just limited to traditional couples, either, it occurs in same sex couples, business partnerships, and even parent/child relationships.

I have counseled women against a host of remarkably bad financial recommendations from their partners—everything from using student loan money to invest in penny stocks, or selling her diversified portfolio and buying gold, to making large seed-round investments in his buddies’ startup companies.

Men & Overconfidence

Here is the evidence that listening to your honey in the area of money and investing is probably a very bad idea. It is well known that men are more likely than women to exhibit a cognitive bias called over-confidence. Basically, men are more likely to believe strongly that they are right when they’re not. According to Scott Plous, a psychologist and author of The Psychology of Judgment and Decision Making, overconfidence can be considered the “most pervasive and potentially catastrophic” of all the cognitive biases. Our brains are designed to make decisions with as much certainty as possible, while working with relatively little information. For example, 93% of Americans rate themselves as better-than-average drivers, when obviously only 49% can possibly be better than average. When asked, on a quiz, how accurate their answers were, people rate their own answers as 99% certain, when, in fact, they are 40% wrong.

Overconfidence Leads to Bad Investing Decisions

Jeff Sommer spelled out in his 2010 New York Times article how overconfidence leads men to underperform women in the market. Because they are overconfident in their ability to predict market movements and trade appropriately, men trade more often, thus increasing costs, and are far more likely to buy high and sell low. Women, who tend to interact with the market out of fear, are more likely to buy and hold, which in the long run tends to produce better returns. Some studies have found that the average woman produces an annualized return in her own portfolio that is up to 3% higher than her male counterpart.

If everyone is inclined to give advice, we need to be deft at sifting though it for the valuable pearls. My recommendation is that you consider only taking advice from experts. Take life advice from people whose lives you aspire to emulate. Take workout and diet advice from a personal trainer with a gorgeous body. Take investing advice from professionals who are formally educated on the subject and can show you actual returns (evidence of their prowess!).

This Valentine’s Day, while you might think that taking his advice about your money will preserve the harmony between you, I give you permission to proceed with caution. Let your inclination to bend his way lead you in matters of the heart. But when it comes to money, don’t be afraid to stand on your own.

P.S. Forward this article to a few money-savvy women you know, I bet they’ll thank you for it.

Want a copy of my FREE eBook “10 Steps to Ensure You Won’t Outlive Your Money” which teaches you the secrets of wealthy investors? Sign up here to get your complimentary copy!”

My Worst Financial Mistake

Real investors share their worst financial regrets. This film was made by Loring Ward, a partner firm of Healthy Wealthy Families.

Want a copy of my FREE eBook “10 Steps to Ensure You Won’t Outlive Your Money” which teaches you the secrets of wealthy investors? Sign up here to get your complimentary copy!”

Dear Facebook Employees, Be Careful Not to Blow This.



As the news heats up about Facebook’s pending $75B – $100B IPO, and near public pandemonium sets in, Facebook’s stock-option rich employees are on the inside looking out. They are probably awash with emotion—including elation, excitement, and anxiety. Anxiety, you ask? Oh yes, most certainly, for a host of reasons. None of them can cash out the day of the IPO, so they won’t be rich then. They have to hang in with the firm until their options are vested and their lockout period has expired. Continue Reading…

Doing Well, While Doing Good

The Healthy Wealthy Families team of fee-only financial planners is proud to present to you a guest blog post by a trusted colleague, Clay Klein, a Chartered Financial Consultant (ChFC). Clay has been working in financial services for more than 40 years, with a specialty and passion in helping individuals and families articulate, and then live by, their most closely held values. Clay lived in Los Altos, CA for 42 years, and now resides in Rancho Mirage. He is a co-founder of the Family Wealth Consulting Group. Continue Reading…

The Mutual Fund Company that Shaped a Profession

by Hilary Martin, MBA, CFP® and Craig Martin, MSFS, CFP®, CLU, ChFC

“Nothing is stronger than an idea whose time has come.” —Victor Hugo

In 1964, there were approximately 70 mutual funds in existence. As the general public’s interest in mutual funds as a diversified investment vehicle grew, so did the number of mutual funds available. Continue Reading…

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