Getting financial advice can be confusing. There are so many titles, certifications and types of services, it’s hard to know if what a person is offering is what you need. There are financial planners, financial advisers, insurance salespeople, investment advisers, etc. Some of these titles may represent subtle distinctions in types of services offered and, sometimes, these titles are used interchangeably.
The business structure can be very confusing to outsiders, and I say this as a discredit to the industry and not the general public. It seems no matter how clear we attempt to be, things like the compensation structure, jargon and people’s insecurities about money get in the way of effective communication. This page is an effort to be a clear up some of that. It will probably still leave some things unanswered, but, hopefully, it is a start. Below are some frequently asked questions.
What does CAM do?
I (Doug Connolly) provide investment management,, advice and financial planning through Connolly Asset Management. Additionally, I can sell life and disability insurance (under my own name). Technically, those are two different arms of business each with their own set of regulations.
Is there a difference between investment advice and financial planning?
Yes, they are potentially overlapping, but different. Financial planning is about projecting income and spending. Additional, it deals with managing things like taxation, estate planning, social security and insurance needs (while not crossing over the line into giving actual legal and tax advice). Investment advice/management deals with growing your money, though there is also the protection aspect to consider there, too. Many people in the industry offer both services, myself included. Some specialize.
Do you get paid on insurance sales?
Yes, but I can shop many carriers to get you the best rate. In my experience, most people don’t have a problem with a commission for giving a service, provided they are giving the customer what they need and are being transparent. Insurance can get expense, depending on type of policy and their health. However, many middle income families can meet their life insurance needs with basic term insurance policies which are often pretty affordable.
How do you get paid on investment advice/management?
CAM charges a percentage of assets under management: .80%. So, this means that, at the end of each quarter, .20% is deducted from your account. So, if you have $100,000 invested, the fees would be $800 a year, or $200 a quarter.
Do you invest in individual stocks?
No. A very good investment plan can get implemented with things such as mutual funds and exchange traded funds. Many of the ones CAM uses top out at about .60% a year in fees (in addition to the .80% CAM charges for it's role) and some are a great deal cheaper. Fees can kill a portfolio and CAM tries to keep them low so that your total fees are about 1.5% at the most.
Does it cost anything to meet?
No, the first meeting is free with no obligation. This is nothing special, as most firms in the business offer the same deal. From there, a few things could happen:
-We decide you have no need for CAM’s services on a formal basis. You get a few tips and pointed in the right direction and we part as friends, and possibly re-connect in the future.
-We decide you could benefit from investment advice and/or life insurance. In my experience, most people could use at least one or the other. Many people who don’t have the disposable income to invest likely at least need life or disability insurance.
-We decide to limit to scope of engagement to a financial plan to be constructed for an hourly rate.
Can’t I just do this stuff myself?
Having your finances in order isn’t a binary thing, it’s a spectrum. The people who put in the time and effort can effectively manage their own finances very well, perhaps even better than with an adviser, depending on the adviser.
But, again, this takes time and effort. And oftentimes, it can take years, not so much to acquire the knowledge, but to sift through what doesn’t work, internalize it what does and then act upon it with conviction. Years ago, I tended to look down on index investing (instead of trying to beat the market, index investing is just trying to get “market” returns). The reality is that most people, with or without an adviser, would be well served to get these market returns. It’s a perfectly valid approach and simple. If you can ignore the highs and lows and stay consistent, you can do this (along with some other investing methods). But there are a variety of indexes, or markets, so you still need to decide which one(s) to choose. Even deciding not to decide is a choice. There’s no way around that.
So, if I can do this myself, why should I pay anyone else?
That’s a valid question that deserves answering, but I would say if you are approaching it with extreme skepticism (as opposed to legitimate curiosity), then maybe it’s better that you don’t get an adviser. Both you and the adviser would likely be happier not doing business if there is a lack of trust from the get-go. It’s no one’s fault, but it’s best for all involved.
I would say the biggest value add is behavioral coaching. A competent adviser is going to enforce good behavior by doing things like talking clients out of panic-selling, and a big part of good behavior is implementing a valid plan and then being judicious about when to make changes. Doing nothing is often the best thing to happen to a portfolio. Reacting to the market might sound like a good thing at first blush, but in this business, it’s often a sign that the initial plan was insufficient. Portfolios go up and down, sometimes by a lot. Investment plans should take that into account.
Additionally, on the financial planning end, they should be able to make reasonable savings projections and point you in the right direction on things like choosing the right retirement plan and/or college savings plan, should you have more than one option.
Can you help me beat the market?
CAM favors a few strategies, some conservative, some more aggressive. They are pretty simple at the core, are based on solid research and are widely available to the general public in some form or another. The "secrets" of investing aren’t really secrets and the lack of specificity has more to do with liability issues than fear of giving the milk away for free.
That being said, it would be foolish to claim to be able to consistently beat the market, though some of the methods CAM uses could perform quite favorably compared to it. It would be better to concentrate on putting together a portfolio that diversifies across a few investment methods and attempts to give a good return in accordance with the client’s risk tolerance. Additionally, CAM tries to concentrate on a smoother overall return as opposed to beating the market at all costs. Smooth returns make bad decisions less likely. But, if a client has a high ability to tolerate risk, there are strategies that attempt to give a high overall return and have backtests (these are mathematical simulations of past returns) and broad research that perform quite favorably relative to that of the market.
Caveat: those backtests (as well as actual returns) represent the past, they can’t predict the future and they don’t take fees into account. Be aware of what both the models and the past have to say, but take it all with a grain of salt. The past and the future can vary widely. Markets are dynamic and while certain principles hold over time, some advantages deteriorate as more and more people learn about them and exploit them.
I don’t have much (or any) money. Should I still talk to you?
CAM is willing to work with a variety of client types, but tries to target families in their 30s and 40s. Some of these families don’t have a bunch of discretionary money, but many still have an insurance need. If you have a family that depends upon you financially, you likely need life and/or disability insurance, so contact me. If you can't get sufficient coverage through your employer’s insurance plan, please reach out.
What should I expect if we work together?
It would depend on your needs. For insurance only, we could probably determine an amount of coverage and gather the relevant initial info in one meeting. Then, there would be a more extensive interview with the insurance company as well as a medical exam. After that, we would wait for approval and policy issuance.
For investing/financial planning , there are more steps involved. There would be a one or two meetings, either face-to-face or online. After that, you would be directed to an online portal where you would verify and provide any of your personal data that we couldn't cover in those meetings.
Then, there would be some paperwork to sign that could be taken care of over Docusign. Additionally, there would probably be another meeting to finalize the investment plan and/or go over the financial plan.
Thanks! If you have any questions or want to sign up for the monthly newsletter, please go here.