Fisher Investments, an independent investment adviser, currently manages $189 billion for individuals, families and institutions around the world. Who do they advertise to? Families with at least $500,000 in assets. Goldman Sachs typically requires clients to invest at least $10 million to open a private wealth management account. To qualify for Chase Private Client membership, you must maintain an average daily balance of at least $250,000 in any combination of eligible Chase deposit and investment accounts.
The reality is that comprehensive financial advisory services are either not available to the vast majority of the middle class or expensive. A new sub-industry called roboadvisors has been invented to serve some members of the middle class and include companies such as Betterment, Wealthfront and automated products from Vanguard and TD Amertrade. Their fees are much lower (typically about 0.25%) but they focus on generically investing assets and rebalancing rather than discussing individual’s plans and needs.
Common Sense Finance wants to bring planning services and more choices to the middle class. As part of creating individualized financial plans based on client’s personal needs, Common Sense Finance will discuss concepts including the following:
Too many people live and think paycheck to paycheck. They spend more when the paycheck hits and struggle to get by on the last day before the next paycheck. This mentality makes saving hard and makes smarter long term decisions impossible. How can someone realistically purchase a house without putting away money for a down-payment or signing up for an expensive loan? Common Sense Finance wants to help people think through their options, think about what they really want in the future and start planning for it now, not right before they need the funds.
Many people make discrete decisions on financing without thinking about the bigger picture or even knowing that the rate quoted is reasonable. For example, people effectively take out debt on a credit card at an 18% interest rate without realizing that they can take a personal line of credit from a bank at 6%. Or they may go to a car dealership and agree to a $300/month payment without even realizing that the effective interest rate is 10% rather than the advertised 1.99%. There are hundreds of such scenarios but they all result in the same thing: people paying more than they should and getting nothing in return. This money can instead go towards paying off more debt, saving for an emergency fund or future expense or for investing in their retirement. Common Sense Finance will help people identify inefficiencies, understand their options, and support their purchasing decisions.
It is shocking to learn how many people do not maximize their company’s 401K match. It is literally free money in many cases, making for a great return on the matched portion of the 401K investment. Other people put money in their 401K or savings accounts and then leave it all in cash out of fear of the markets. While the stock market can definitely be risky, over the long run, the long-term historical returns on the stock market are significantly higher than the return of leaving your money in cash. This difference can be the difference between living a comfortable retirement and having to work until you die. Common Sense Finance wants to explain the various options to people so that they make informed decisions.
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