Regular listeners of the Motley Fool Answers podcast will know that Alison Southwick and Robert Brokamp are full of excellent investing and personal finance advice. But for this episode — which they are dedicating totally to listener questions — they’ve called in reinforcements: Ross Anderson, a certified financial planner from Motley Fool Wealth Management, a sister company of The Motley Fool.
In this segment, they take on a query from a listener who hasn’t been successful in finding a human financial advisor she likes at a good price, and now wants to just do the task herself with the aid of financial planning software. The question, then, becomes: What software is the best available — from a Foolish, perspective, of course.
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A full transcript follows the video.
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This video was recorded on Feb. 27, 2018.
Alison Southwick: Ross, this one’s for you and it comes from Holly. “After interviewing financial planners and getting frustrated with the type of service they offer and the cost, I have decided I need to explore finding financial planning software to help me manage our family’s financial plan. I’ve used Quicken for years, but don’t feel it offers an overall look at your financial picture. What have The Fools found that works for tracking your budget, investments, and allows for a family to run scenarios for what if decisions, like buying a new house or car? Listening to The Fools for years gives us confidence we can manage our finances without paying someone 1% of our assets. Thanks for all your great information.”
Ross Anderson: All right, Holly.
Robert Brokamp: She’s basically asking if a computer can replace us.
Southwick: How can I get rid of you guys in my life?
Anderson: Yes. While I’m only mildly offended by the question… No, I’m just kidding.
Southwick: We’re replacing you with machines.
Anderson: I think it’s tough to do right now. Luckily, I feel like our role is a little bit safe. I can tell you personally that for budgeting I really haven’t found anything that works better for me than Mint.com. I have all my stuff linked to Mint. Everything that I basically spend money on runs through a card of some sort, and so that, for me, is the easiest thing. I find them to be very difficult for looking at future scenarios or investing. I think they really struggle in that, but for budgeting they’re a great tool.
On the actual software side, what we use is really a market-leading financial planning software called MoneyGuidePro. It is not consumer facing in terms of its intent, so it is for professionals, but if you want to do some really deep dive scenario analysis, it’s very good at that, but that may be more horsepower than you need.
Bro, I know you’ve featured other Monte Carlo engines and things like that. Are there other tools that you’ve shared with RYR readers?
Brokamp: Here and there. Personal Capital is another one that I know people here at The Fool use and like. I’m a little surprised that she doesn’t find Quicken to her liking because a lot of people really love Quicken.
The calculator that I have mentioned online, a retirement calculator, is with CalcXML and it’s kind of a long URL, so here we go. Ready?
Southwick: Here we go.
Brokamp: www.CalcXML.com/calculators/retirement-planning?SKN=606. Duh, duh, duh! Anyways, that’s a good retirement calculator. I would say to Holly that…
Southwick: I feel bad.
Brokamp: You don’t like that? I would say to Holly that there are other ways to get financial planning help that you don’t have to pay 1% for. There are fee-only planners who will charge by the hour or by the project. Let’s say you have a what if scenario. You don’t know if you want to buy this house, or you don’t know if you’re on track for retirement, you can hire them for just a few hours and they will have access to these higher-powered tools like MoneyGuidePro and some of these other professional-level tools to help you analyze that single question, and then you might be fine being on your own for a few more years until you have another situation where you want help.
Anderson: We were talking about this right before the show started. Some of the tools, if you ask them a specific question, might give you a really specific answer that doesn’t take into context the rest of your picture.
Anderson: Some of these Social Security tools, for example, will help you get the maximum from Social Security, but they don’t take into account that there’s a drawdown from your portfolio while you’re waiting. You’ve solved one problem and created another, and they’re not looking at it in context.
So, be careful with them. Part of what we do is try and help people see those blind spots and certainly if you’re doing it on your own, you’re taking that into your own hands.
Brokamp: There was a couple of studies that came out in 2016 looking at various free calculators online, and one of them looked at 36 free calculators. They ran a scenario through the calculator, and the scenario they created was of a couple that was not on track to meet retirement, but 70% of the tools said they were on track because they used faulty assumptions and unrealistic returns in terms of their investment returns. Unrealistic projections of what they’d get from Social Security. All kinds of reasons. I really do think when it comes to big life decisions [can I retire, am I on track], it actually is worthwhile to pay a few hundred dollars [even a thousand dollars] to get a good assessment on where you are.
Southwick: But it sounds like Holly has the desire and the smarts to manage a good bulk of her financial life.
Brokamp: I think so. It certainly is a situation where if you are making most of your investment decisions, there’s really no need to pay someone 1% to do that. You just need to pay someone to do some of the other financial planning things.
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