Invest for long term. Money that you need in 2–3 years for a known expense belongs in a money market fund even if it pays nothing. Investments for which principal is not likely needed for over 7 years generally belongs in a balanced or growth fund. Remember, while retirement may be a year away, the income from investments will (hopefully) be needed for decades. What hurt many people in 2008 was they had all their money in stocks/ stock funds for greater growth, and when market collapsed, they had no funds not affected to pay the bills.
As part of our series about what one should look for when hiring a financial planner or adviser, I had the pleasure of interviewing Ilene Davis, CFP® MBA. Ilene Davis has been helping clients prepare for a retirement they can afford to enjoy for over 35 years. She has Bachelor degrees in Mathematics and accounting, earned her CFP® designation in 1984, and her MBA in 2008. She is the author of the book “Wealthy by Choice: Choosing your way to a Wealthier future”, which provides fun and easy to implement ideas almost anyone can use to help them spend less and invest more, as well as showing readers the potential income such modest changes in lifestyle could create. In addition, she is the creator of much of the content at www.wealthliteracyinstitute.com, and created the tutorials provide at www.choosingwealth.com. While she still is working, it is because she loves to help others see how easy it can be to become a millionaire, and as long as clients are willing to trust her with their retirement funds, hopes to continue to do so
Thank you so much for doing this with us! Our readers would love to ‘get to know you’ a bit more. Can you tell us a story about what brought you to this specific career path?
Thanks to my mother, who got me started investing at an early age, combined with my background in both Math and Accounting, I loved reading financial statements. At the graduation party of a friend’s daughter, her mother and other friends were talking about interviewing to be stockbrokers, and I mentioned that sounds like something I’d like. They both looked at me and said “you’re the one who SHOULD be doing this”. I called my mom the next day, she called her broker, two weeks later I had been hired to become a stockbroker. Because of some negative personal experience investing with a broker who churned my account (with my permission but ignorance), I made a vow to focus on long term wealth building for both my clients, and myself. It works!!!! And over 30 years later, I’m still at it.
Can you share a story about the most humorous mistake you made when you were first starting in the industry? Can you tell us what lesson or takeaway you learned from that?
Playing with my own money. I wouldn’t let clients do that — I had them systematically investing in good mutual funds, but I was playing. When I switched firms 5 years later, I realize my clients were making money and I wasn’t. I decided to do what I recommended to clients, and it has worked beautifully for me.
Are you working on any exciting new projects now? How do you think that will help people?
I’m actively involved in helping develop content, seminars, etc for www.choosingwealth.com and wealthliteracyinstitute.com website. The goal is to go beyond “financial” literacy to teach “wealth” literacy — that is not just being able to make it from one paycheck to another, but to accumulate sufficient financial resources to have the option to stop working without a drop in lifestyle.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Is there a takeaway or lesson that others can learn from that?
Frankly, its been pretty good from the start. The only slowdown was when I left a major wirehouse to go on my own (the company had been found guilty of 2000 counts of mail fraud), and had to basically start over, but I found that by being willing to work hard, makelots and lots of calls, that I was able to rebuild my business and many clients have been with me for 20–30 years.
What three pieces of advice would you give to your colleagues in the finance field to thrive and avoid burnout? Can you give a story or example?
1. Love what you do.
2. Be honest and fair with clients. Truly want them to succeed in becoming financial independent. You may make less to start, but they are likely to stay with you and refer friends.
3. Don’t take the many ‘not interested” responses personally. If you truly believe what you are doing adds value to client’s lives, then for me, I just look at those who don’t invest as people who will likely have a very tough future.
Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As an “finance insider”, you know much more about the finance industry than most consumers. If your loved one wanted to hire a financial advisor (not you :-)), which 5 things would you advise them to find out about before committing? Can you give an example or story for each?
The assumption is not necessarily true. We may know more about investing than the general public, but to say we know more about the industry may not be true. We can only know what we read in many cases.
As for what I would advise:
1. Become educated about your options, particularly the “language” and industry specific terms so you have a better understanding of what is being discussed
2. As President Reagan said about Russia “Trust but verify”. Be sure to understand WHY an investment is in your best interests.
3. Understand the “lifetime cost” of an investment. There is a big push for fee-based accounts because otherwise the broker gets comission(horror of horrors!!!!). But if someone does the math, assuming the investments are for long term needs like funding retirement, an investor is generally better off paying commission up front than higher annual expenses. Example: I had a hypothetical done back in 2002 after the market drop comparing the same fund, but A shares versus C shares (like a fee based account). Net result: The investor who bought the A shares (in this particular fund, will vary depending on the fund) would have had $150,000 more than the person who paid no commission but higher fees.
4. Invest for long term. Money that you need in 2–3 years for a known expense belongs in a money market fund even if it pays nothing. Investments for which principal is not likely needed for over 7 years generally belongs in a balanced or growth fund. Remember, while retirement may be a year away, the income from investments will (hopefully) be needed for decades. What hurt many people in 2008 was they had all their money in stocks/ stock funds for greater growth, and when market collapsed, they had no funds not affected to pay the bills.
5. Have a plan, implement it, monitor it, and make adjustments as needed.
I think most people think that financial advisors are for very wealthy people. This is likely not actually true. Can you explain who would most benefit from hiring a financial advisor and why? Can you give an example?
Those who can least afford to make huge investing mistakes probably need an honest, qualified financial adviser more than those with great wealth who can afford to make even big financial mistakes and still be able to live comfortably. Many of my clients started with as little as $30 or $50 a month, and through the years with some nagging from me, increased their monthly amounts to the point that they now are able to comfortably retire without ever really having to “do without”.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
My mother. She was investing long before many women were doing so. She bought me my first stock back in 1968. As mentioned above, she is the one who started my interest in investing, and ultimately helped me get the opportunity to become a broker.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
For people to be responsible for their own future (because government can change the rules at any time — just look at taxation of social security!, and companies eliminating pension plans!). I would like to see a true “wealth literacy movement” where every person becomes responsible for their own future, and those that DO save and plan do not have to share the result of their efforts with people who choose otherwise.
Thank you so much for joining us. This was very inspirational.