Wild Beast, our new pop up at SAMA

June 24, 2014

wild-beast-monterey
Wild Beast, our new pop up at SAMA

I’m a big fan of the Tim Ferriss Show podcast, which I frequently use to motivate myself in the morning on my commute into work. One of his recent sponsors was the Paladin Registry, a company that has compiled a database of highly ranked financial advisors and attempts to pair you with one of them who will meet your specific needs. In this post, I’ll explain our experience with Paladin, and how we decided whether or not we needed to work with our own advisor. (Side note: WordPress keeps telling me I am spelling advisor wrong but I’m pretty sure you can spell it with an “e” OR an “o”!)

I’d like to preface this discussion by saying that I don’t believe most people need financial advisors, but there are some cases where having one makes sense. In my case, my interest came mainly from the need to reduce stress. In the past I have had a few run-ins with the IRS, which in turn now cause me to have near clinical levels of panic when it comes time for filing taxes each year. One year in graduate school while on a fellowship, the department whom was sponsoring my fellowship accidentally reported my income twice, which resulted in the IRS sending me a (quite pleasant, really) letter suggesting that I may owe them upwards of $10,000. I went over everything I had filed in the last several years to make sure I had done it correctly, which was when I realized an entirely separate problem: fellowship income alone does not qualify you to be able to contribute to a Roth IRA. Don’t make the same mistake I did. There are some pretty nasty penalties for contributing to a Roth when you aren’t eligible. Pulling out three years of Roth contributions caused some more IRS issues for me, as I didn’t fill out quite all the right forms to report it. And believe it or not, later I screwed it up again based on an entirely different rule which is that married couples filing separately are almost never eligible to put money in a Roth. IRS, if you are reading this, I swear I tried to do it right! In the middle of clearing all this up, Mr. Paradise and I moved to a different country (actually Mr. Paradise’s home country) for a little over a year and got married, further complicating our tax situation and also landing us with locked-in retirement funds that can’t be moved to the US for another six months. Blarg.

Anyway, to end this long story that is spiking my anxiety just to type out, most people are fully capable of investing and doing their taxes on their own (or with Turbo Tax) with a little research online. Then there are those of us who may have made a few mistakes in the past, and/or are so overwhelmed by the complexities of their own situations that paying extra money for help to reduce stress is worth it. This is why the potential of having someone take over our investments seemed so promising to me. Ok, back to the Paladin story!

When you sign up for Paladin, you fill out a short questionnaire including your location, whether you want financial planning or investing services, and your available assets. It’s free to sign up, so we figured why not give it a try and see if we meet someone we like? Paladin makes money by collecting dues from the advisors in the registry, so you can infer what you will about that situation, but it doesn’t appear that someone could pay just to be on the registry. A few details about their ranking system are included on their website. Within one day we had been contacted by 5 different financial advisors. Three of them left phone messages and two followed up by email.

Mr. Paradise and I spent a couple of hours researching the websites of the people who contacted us. We were disheartened when we realized that the fees for financial management were not insignificant. One institution was 1.5%, one was 0.5% quarterly, and another was on a gradient scale with a fee of 1% up to 1 million dollars (it was reduced after that). Compared to our Vanguard expense ratios of around 0.1%, we felt like were getting in over our heads. We called all three companies to say thank you but that we didn’t feel comfortable with the fees and we didn’t want to waste their time if it wasn’t going to work out. To my surprise, two of them actually still insisted we meet (in retrospect maybe I shouldn’t have been surprised) and just “chat” anyway. We figured we couldn’t go wrong with a little free advice, so we went ahead and set up the meetings.