I’m often called on to be a buffer between friends and family members and the brokers and financial advisors that are marketing to them. They like it because they can say “I need to talk to my adviser”, which is a great way to get someone to stop calling. I like it because it gives me a window into what is going on with their financials so that I can help identify the next steps to pursue their goals.

Recently a former college classmate asked me “Should I switch money managers?” She was a client of a local brokerage firm and had recently been approached by a more traditional investment adviser who said he thought he could save her a lot in fees.

To answer the question, I needed to get a sense of where they were with their investments. After reviewing what she and her husband had, the answer to her question was pretty easy, “Yes, you should switch. This is a lower fee, more comprehensive kind of a service where they’re looking at the whole picture and that’s going to help you.”

A broker approached her and said, “I think I can save you a lot of money on your investments and I see some things you’re not doing.”

Yet the review also uncovered that they were under-saving in qualified retirement accounts.  When I pointed that out, especially the benefits of saving tax-free in these accounts until the funds are withdrawn in retirement, she immediately agreed they could make those savings more of a priority.

The other thing I noticed was that they had been generating a good deal of savings every year, and dedicating 100% of those savings on paying off her mortgage ahead of schedule. A quick calculation showed that she and her husband, both of whom were self-employed, would likely be better off saving more in their SEP accounts each year, providing a more well-rounded financial picture.

She told me that the rule of thumb of “maxing out qualified retirement accounts” first, before doing other kinds of savings, felt easy and intuitive to her and her husband. The last time we spoke, she reported that they had been maxing out for the last few years and feeling great. She said they also love saving on fees!

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