SHOW NOTES: 2020-10-29 MiM

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Last Week’s Question of the Week: What percentage of small business owners intend on selling their businesses to create future retirement income? Is it 25% or almost 80%?

ANSWER: 78% of small business owners plan to sell their company to fund 60-100 % of their retirement, according to CNBC and the Financial Planning Association.

HOST: I realize that Klaas Financial helps people plan for their retirements. Today you are going discuss the pros and cons of working with a financial adviser/planner.

KLAAS FINANCIAL: Yes, it is important to understand what a financial adviser may be able to help you with. There may be some reasons you may wish to seek one out, and other reasons why you don’t need one.

Fact: Back in 2018, Cerulli Associates estimated that there were over 300,000 financial advisers here in the United States. That includes the RIA (Registered Investment Adviser) space, broker dealer and insurance channels. In 2019, there were 12,993 RIAs working in the United States.

Pros of using an adviser:

  • Education & Experience: Most financial advisers have background education in either finance, personal finance, economics, business, or financial planning and may also have years of knowledge about investing. Some may also hold securities licenses or have credentials such as a Certified Financial Planner designation (CFP), or a CPA. With many years in the business they have most likely worked with many types of clients and worked through several cycles of bull and bear markets, adding to their depth of experience. They have helped many individuals successfully retire and stay retired. Is this what you are good at? Is this where your expertise lies? If so, you may not need an adviser.
  • Having a quarterback to help coordinate your retirement team: A financial adviser can work directly with your CPA and estate planning attorney to implement the most advantageous investment strategies for you from a legal and tax perspective. This can have a significant impact on the amount of wealth you accumulate, keep safe and leave as a legacy or have available for retirement.
  • Financial Confidence: Possibly the biggest pro of hiring a financial adviser is the reassurance they provide. While this doesn’t alleviate you from the responsibility of overseeing your wealth, working with a financial adviser can ease some of the worry knowing your investments are being managed by someone with expertise and experience. Many people who are busy with work or other aspects of life prefer not to spend the necessary time learning about and managing investments. This is often when having a knowledgeable and experienced financial adviser can make the most sense.
  • Working with a Human Adviser: In recent years, several software programs (commonly known today as robo advisers) have been developed to make investing easy for consumers. For some people this may be the right answer but know a couple of things:
  • The advice will not be as personalized as what you would get from your own financial adviser. For example, can you discuss a special needs child with an online app, for example? Or can you discuss aging parent needs with an online app? The answer is no.
  • Accountability to your plan: Are you more likely to stick to your investment plan if you work with a financial adviser, or if you use a robo adviser? I think most everyone would agree that working with a human holds us more accountable, assuming you have built a good relationship with your adviser, and you work together closely to reach your wealth goals.

HOST: What other good reasons should we consider if we are thinking of working with a financial adviser?


  • Adapting and adjusting your plan: Your financial adviser understands your current financial situation and future goals to create a plan tailored to your current needs and wants. Then when life’s path throws you a curveball, like being let go from a job, or a divorce or a death, they can help you make adjustments. They can provide you with advice to avoid any future financial mistakes and help you get back on track. If you have a certain need for financial planning (college planning, life insurance, retirement planning) a financial adviser can provide a plan that focuses on those needs. Your adviser can evaluate existing retirement plans and IRAs and make changes as needed.
  • Helps you avoid emotional investing: While emotional financial decisions can be overcome, acting repeatedly out of hidden fear and greed is often a good reason to hire a financial adviser. This is because advisers can keep you from emotional buying and selling. This is known as the most common mistake that individual investors make. While many dismiss this reality, deep rooted emotions drive your investing actions. This is real, so real that there is an entire field called Behavioral Finance. It studies how emotional reactions of investors affect stock market moves.
  • Helps motivate you to stay on track (Financial Avoidance): Most people avoid dealing with their finances for various reasons. A financial adviser can motivate you to do what you need to do to reach your financial goals. Financial avoidance is a very common and huge detriment to your financial security.

HOST: What are some of the costs associated with using an adviser?


Financial Adviser Costs: The biggest reason people sway away from using a financial adviser is the potential cost. But when shopping around, you may find that many of them offer reasonable fees given the competitiveness that has risen in this field, online and offline.

Again, the question goes back to this: Will I reach my financial goals sooner with or without an adviser, after fees are paid? For many the answer is yes and for many the answer is no. Only you know you, and what you need based on your own situation.

If you are only investing a small amount of money, you may find that even a small financial adviser fee will eat up a large percentage of your investment since smaller accounts typically have higher fees. Plus, many financial advisers use at least some mutual funds or ETFs in their client portfolios, which can mean paying more expenses in addition to their base wealth management fee.

While many ETFs and mutual funds have low fees, some advisers place their client’s money in comparable funds that have high fees for various reasons. This means you can end up paying for both the financial adviser fee of 1 to 1.5% plus the fund fees of .5% to 2% or higher. Doing the simple math on those costs we see that this could total 2% to 3% or more in investment fees. This means the returns the financial adviser generates on your behalf must beat the related benchmark (or low cost index fund) by at least 2% to 3% over time.

HOST: What if you are a self-doer?


Investing on Your Own: Investing is something you can do on your own with the right information. The information is out there but finding an unbiased independent resource is important. If you love investing and feel like the DIY (Do It Yourself) kind of person, then you can be great doing without a financial adviser. Here are some of the reasons why you may actually not need a financial adviser:

  • You love investing on your own: If you’re the type of person who gets thrilled monitoring the rise and fall of stock prices, you may just be fine going it alone.
  • You want to save the financial adviser fee: You’re probably investing in relatively small and simple investments and want to save the money that you’d otherwise pay the financial adviser. Under such a scenario, you’d be better off without a financial adviser.
  • You only need some help with taxes: If you are in simple investments and only need a little help with your taxes, you may need a tax adviser, not a financial adviser.
  • If a huge chunk of your income is from pensions: You have invested so much in your pension income and have a huge chunk of your income coming from social security and pension. Obviously, these types of investments cover most of your needs and a financial adviser may not be of importance.

If, on the other hand, you’d rather have your teeth pulled out than manage your own investments, learn what you’ll want to know so you can confidently interview, hire and monitor a well-chosen financial adviser.

HOST: So how can you find a trustworthy financial adviser?

KLAAS FINANCIAL: While there are various ways of finding a financial adviser, the best method is asking a family member, a trusted friend or a colleague for referrals. Or you can call us for a complimentary chat. A second opinion is always a smart move.

Look up the proposed adviser and firm at (Financial Industry Regulatory Authority) and use the BrokerCheck feature to see if there are any complaints on file. If they are regulated by the SEC (Securities and Exchange Commission), you can look at the SEC website to check them out there (

Note that some financial advisers, or financial advisory firms, may be dually registered with both regulatory agencies. Hiring a financial adviser, can help put your finances and investments in order. You should have the desire to invest and the willingness to allow someone to partner with you to help plan for your eventual retirement. It is important to understand that you’ll have to pay for the services. There are various ways of paying a financial adviser and it is advisable to choose a method that works best for you. Make sure you understand how you are being charged and what type of investments you are investing in. And make sure that you are comfortable with the person that you are working with. They need to be as concerned with your financial future as you are.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.