An Offer for You: A Free, Comprehensive, Online Financial Plan

The bottom line up front: I’m part of a team that is launching a new, online, comprehensive financial planning service. You can sign up and get a plan for free at http://www.myfinancialanswers.com by entering in your e-mail address and getting started. We are only offering this free, 60 day trial to the first 1,000 users who sign up. After the 60 day trial period ends, and after we reach 1,000 beta users, we will be charging $99/year. You can read more below or head over to myFinancialAnswers and get your free plan.

Let’s face it: the vast majority of Americans have been largely ignored by the traditional financial planning industry.

Most planning firms provide services only to high-net-worth individuals and families, setting an asset minimum of anywhere from $250,000 to $1 million or higher. The problem? 70% of the population of the U.S. has less than $250,000 in net worth, let alone in investable assets.

Even those who meet the thresholds don’t necessarily want to pay someone else to manage their money—they might want to manage it themselves, but still need guidance on some of the finer points of financial planning. Where should they turn?

Wire house brokers and insurance companies are a common option, but they come with their own limitations on expertise, not to mention potential conflicts of interest. Hourly and flat-fee financial planners are supposed to help fill the gap, but it’s hard to know which planners to trust, and their fees can often be too high to lure the casual client. Unsure what to do, most of the “underserved” population simply shrugs their shoulders and tries their best to do it themselves, making use of whatever online tools and DIY/help-yourself bloggers are out there.

I know, because I’ve seen you. In 2014, over 200,000 of you visited my website—200,000 people who were looking for answers to financial questions. But only about 100 of you ever decided to even contact me about working with you. That means that 199,900 of you who came here last year left without taking action with me. Some of you might have a plan. Some might be retired. I’d bet a lot of you are still looking for answers.

The biggest problem standing between reading websites and boards and execution is that you still have to apply what you’ve learned to translate it to your personal, specific situation. Even then, you may be trying, as we used to say in the Army, to stuff 10 pounds of stuff into a 5 pound bag, and you’re going to have to consider some difficult trade-offs. Sometimes it takes a professional to sort through it all. Retire later? Spend less? Pay less for the kids’ education?

That’s why, when I was approached in May 2014 by my now business partner Ben Pitts about joining him in a new business, I jumped at the opportunity.

What was that business?

Online comprehensive financial planning. Thus, myFinancialAnswers was born.

What is online comprehensive financial planning?

The concept behind myFinancialAnswers is pretty simple.

We take in your relevant personal and financial information, and just like I’d do with any of my personal clients, and run a ton of calculations to determine what steps you need to take to meet your financial goals. In fact, we run more than a billion calculations to get there.

Then, we make recommendations based on what we’ve learned. Those recommendations vary from how much you should be spending and investing to how much insurance you should own to how much you should be putting aside for your kids’ college education.

We also answer whether or not you can retire when you want to retire with the lifestyle that you want to have—the question of whether or not you’ll have more heartbeats or money.

It takes between 30 and 90 minutes to go through the process and come up with your comprehensive plan and set of recommendations, depending on how organized and accessible your information is.

The software we use is based on the same software used by leading private wealth management firms when they advise their high-net-worth clients; it’s just been reformulated and optimized as a web-based tool for wider consumption. We’re trying to expand the scope of the traditional financial planning industry, to fill in the gaps that have existed for so long and left so many people without a plan.

Everyone deserves a financial plan; with myFinancialAnswers, it’s possible.

Is this for everyone?

myFinancialAnswers will help a lot of people, but it will not help everyone. If you have a complicated situation or a complicated estate, then you’re going to want to connect with a financial planner who can use his or her specialized knowledge to assist you. However, the underlying technology behind our tool has been in use for financial planning clients for several years, and it has served those clients very well.

Another group that this service will not serve well is the self-employed. Because the tax accounting for the self-employed is so complex compared to rank-and-file employees, our tool’s tax and other assumptions are not well-suited to the self-employed.

What will this cost me?

As we launch our product for the first time, we’re eager to learn more about how users are engaging with the product. We want to hear how you like it, how it’s working, and what you do and don’t like about it (or maybe what you’d like to see that you’re not already seeing). We also need to work out any final bugs that we might not have been able to catch in our testing, so if you find one for us, please let us know and bear with us as we work to fix it.

To help meet that goal, we’re offering this service for free for 60 days to the first 1,000 users who sign up. We want you to be our partners in helping to bring comprehensive financial planning to “the 70%”—all those who have previously wanted a financial plan but didn’t know how to get one. After the first 1,000 users sign up, we are going to charge $99 per user per year. Once your 60 day trial is up, you will be requested to subscribe in order to continue accessing your account.

We want our users to take the actions they need to take to meet their financial goals and be happy with the outcomes after they’ve gone through our service. We want you to tell your friends about us and for your friends to be happy as well. If we provide information that doesn’t provide you with the best financial plan possible, then that happiness, satisfaction, and sharing the word is not going to happen.

Don’t miss your chance to be a part of something special; head on over to myFinancialAnswers now to get started.

What about Hull Financial Planning?

Because I am now the CTO of myFinancialAnswers, I will no longer be directly offering financial planning services. I am going to keep this site up because, hey, if I can get 200,000 people to go use myFinancialAnswers in the next year, that’s going to be a great start for us!

Because of this venture, I will no longer be operating as a fee-only, hourly financial planner.

What about you?

What are you waiting for? Go to myFinancialAnswers and sign up to get a free comprehensive financial plan! And please, take the actions that the software recommends. If you’re not going to act on its recommendations, please don’t use our tool—it costs us money for each user who goes through the system, so we need people who are going to act on what the software recommends.

This offer of a free 60 day trial expires after the first 1,000 users have signed up. After that, we are charging $99/year for the service. So, if getting a full financial plan is something that you’re interested in, and you’ll actually act on what the plan tells you that you need to do, then get your information together and head over to myFinancialAnswers. Have more questions? Go to the myFinancialAnswers FAQ Page and take a look.

Thanks for all the fish. We’ll see you at myFinancialAnswers!

Six Areas Where I Disagree with Dave Ramsey’s Investing and Retirement Withdrawal Advice

Boxing Ring

Not necessary to settle differences.

“A good financial planner is going to do more than pick your funds.”
–Dave Ramsey

Very recently, personal finance guru Dave Ramsey engaged in a heated discussion on Twitter with several financial planners regarding the appropriateness of his investment and retirement withdrawal advice. The questions were (and are) very legitimate ones, namely:

Why does Dave Ramsey keep telling people to invest 100% in equities and that they can expect 12% returns?

and

Why does Dave Ramsey keep telling people that they can safely withdraw 8% of their net worth each year in retirement?

Dave Ramsey’s responses?

Here’s what he has to say about people who question him.

Instead of actually addressing the questions with a cogent, thoughtful, defensible response, he resorted to ad hominem attacks against financial planners who hold a fiduciary duty to their clients, Carolyn McClanahan and James Osborne.

I’m a fan of Dave Ramsey’s debt advice. I regularly tell people to go to the local library and check out The Total Money Makeover if they’re deeply in debt because there’s no point in paying me to get the same advice that they can get for free by checking that book out of the library.

But, I have serious and deep concerns about the investment and retirement asset management advice that he gives to his listeners.

Six Areas Where I Disagree With Dave Ramsey’s Advice

There are six areas of disagreement I have with the investment and retirement advice that he provides to his listeners and to his readers.

Investment advice disagreement #1: You can expect a 12% average return

Even if the average returns of the market were 12%, which they’re not, he’s making a very simple, basic mathematical mistake. He is confusing average returns and compound returns. In average returns, the sequence of returns doesn’t matter. In compound returns, the sequence of returns does matter.

Let’s look at an example.

Say you invested $1,000 in Widgets, Inc. The first year, Widgets Inc. loses 10%. At the end of the year, you have $900 of Widgets, Inc. stock. The second year, Widgets Inc. gains 20%. At the end of year 2, you have $1,080 of Widgets, Inc. stock.

The average return during that two year period was 5%. But, applying an average 5% return over a two year period would mean that you should have $1,102.50 in Widgets, Inc. stock. You don’t. You only have $1,080 of Widgets, Inc. stock.

Your compound average growth rate (CAGR), or compounded annual return, was 3.92%.

If you report the average annual return, you get to say that you averaged 5% per year.

If you return the annual return that you see in your personal holdings, then you averaged 3.92% per year.

Compounded over time, that’s a big difference.

I don’t believe that Dave Ramsey is trying to mislead anyone here. I think he really thinks that the average annual return is the correct number to report when it’s not.

He does argue two counterpoints to this issue. The first is that saving 15% per year during your working lifetime for retirement is more important than the returns that you’ll get. He’s right, but not by the wide margin that he tells his audience. Furthermore, his newsletters encourage working backwards from a 12% return rather than saving 15%. That advice is contradictory.

If an average family, earning $52,762 (the national average family income), saves 15% of their income every year for 40 years and receives the compounded average growth rate of the market, adjusted for inflation, which is 6.69%, that family will end up with $1,556,686.83. Using a 4% withdrawal rate (which contradicts his advice, a point we’ll address below), that provides the family with $62,267.47 per year. The family will be in good shape, but not in the shape that a 12% return assumption would lead them to believe – $6,799,510.70 versus $1,556,686,83 – a 77% difference.

The second counterpoint is that he uses 12% as an educational example and that he can point to mutual funds which have made 12% over a long period of time. We’ll deconstruct his picks further down, but using 12% as an “educational example” brushes over an important aspect of the differentiator between a “guru” (which he undoubtedly is and deserves the title) and an actual, fiduciarily bound advisor. He’s not bound by a fiduciary duty. It’s not investment advice. That’s why he won’t tell people which mutual funds to invest in. I can’t either, unless you’re a client, but I can certainly tell you which ones to avoid, such as mutual funds that have exorbitant loads. Again, more on this later.

If you think that you’re going to get a 12% average return, then you’ll simply plug 12% into your numbers each and every year, and that’s wrong. The market has ups and downs. To simply say 12% per year every year is naïve and can lead you to significantly overestimate the value that your nest egg will hold when it comes time to retire. It is possible to become anchored (to read how the anchoring bias affects your retirement decisions, read “The Difficulty of Predicting Your Retirement Number”) to the 12% return and not follow the 15% savings rule, and that will lead to serious repercussions when you reach retirement age if you save less because you think that you can get a higher return than you probably will.

Which leads me into the second area of disagreement.

Investment advice disagreement #2: Continuing to be invested completely in stocks in retirement

Once you retire, you’re basically trading sources of income from wages to money produced by the assets you’ve saved up and invested in. While some of you may plan on working part-time in retirement, it’s quite possible to expect that you may not be able to work once you’re in retirement. Furthermore, as you age, the probability that you can get back to work declines, both because of mental and physical frailties and because the absence from the workforce will make it increasingly difficult to get a job.

Thus, unless you’re the rare person who will work until age 103 and die at the desk, you’re going to have to rely on your nest egg and Social Security to support you. In most cases, Social Security will not be sufficient to allow you to maintain the lifestyle you had during your working years (and hopefully, many of you will be able to retire before Social Security starts), so you’re going to need an additional source of income.

That income will come from your assets.

Now, it’s possible that you may never need to purchase bonds in retirement, but you will need some source of income. Relying solely on the dividends and capital gains provided by stocks is an extremely risky way of doing so unless your asset base and the dividends it produces far exceed your income needs.

It’s not wise to go completely in the other direction, either, and dump everything you have into CDs. If you choose that route, while you won’t lose money, you will lose purchasing power. Ultra-safe, income-generating investments like CDs and money markets do not beat inflation. This means that, over time, what you can buy for your money will decrease. Given that the biggest increase in expenses and the biggest inflationary cost in retirement is healthcare, this failure to match or beat inflation will mean that when you need more money to cover declining health or long term care, you won’t have the financial wherewithal to afford the care that you need.

That’s why I generally suggest that people aim to have 110 – age as a percentage of the portfolio to keep in equities and the remainder in income generating assets. If you are retired and have all of your investments in equities and the market tanks, then you’re going to be faced with a double whammy of a shrunken nest egg and having to withdraw from it when it’s been hit. Since bonds and equities usually are countercyclical, the impact of a down market year won’t be as bad.

USAA – The Not So Good

“It is easier to forgive an enemy than to forgive a friend.” –William Blake This is part three of a three part series on USAA. You can read the first part here and the second part here. Disclosure: USAA flew me to San Antonio for a three day conference from November 6-8, 2013, put me […]

Continue reading...

Five Things to Do If You Just Lost a Lot of Money

“I’m so poor I can’t even pay attention.” –Ron Kittle Continues Below Get a comprehensive financial plan now! Related posts: Thanks for Saving More Money! What’s the One Money Question You Wish Someone Would Answer for You? Do You Have Too Much Money In Fixed Income?

Continue reading...

How Much Should a Financial Planner Cost?

“Not everything that counts can be counted; and not everything that can be counted counts.” –Albert Einstein “Spending can be investing – if you spend on the right things and really use them.” —Ramit Sethi How are financial planners like vacation timeshare salespeople? Read on and you’ll find out plus you’ll learn how to actually […]

Continue reading...

6 Reasons I Sold My Car at CarMax

“If you own a home with wheels on it and several cars without, you just might be a redneck.” –Jeff Foxworthy There are people who view their cars as an expression or extension of themselves. Then, there are people who view cars as a means to get from point A to point B. I used […]

Continue reading...