In an ever more complex financial environment, only around 40 percent of Americans used a financial planner in 2015. While this figure represents a dramatic increase over the last five years (from 28 percent in 2010), it still means that more than half of Americans might not have a clear source for information about personal financial planning. With financial planner fees falling somewhere in the $150 to $300 an hour (or 1 to 2 percent of assets) range, it is easy to understand why many Americans opt out of this expense.
Many Americans are taking a do-it-yourself approach to personal financial planning with access to information readily available online. While the internet is a treasure trove of information on all topics, it does not discriminate between accurate information and misleading information. When seeking financial advice or information in the digital world, it is important for consumers to keep in mind that all channels and sources of information are not created equally. Let’s examine a few do’s and don’ts for finding digital financial planning advice.
Don’t Talk To Internet Strangers
It is a natural inclination to ask individuals for their opinions and perspectives. The average consumer wouldn’t trust a stranger on the street for critical advice, yet the internet is overflowing with forums where you can get advice on anything from fixing your furnace to parenting. The problem with these forums is that it is difficult to verify whether the advice giver is qualified or not.
Do Get Information Directly from the Horse’s Mouth
It is one thing to learn basic financial concepts online; it is another thing altogether to rely on online advice when you’re making a financial decision. Any reputable firm offering a financial product or service will provide multiple avenues for obtaining information ranging from toll-free phone lines to online chats. PERA, Social Security, and investment firms are the hands-down experts when it comes to their own products and services. While a planner or forum participant might be aware of the product in question, no one will have more expertise than the providers of the service or product themselves.
Don’t Rely on Financial Blogs
Starting a blog is simple. Providing accurate and timely insights on finance is not. While blogs are a starting point in the process of learning about personal finance, readers should take the information presented with a grain of salt. Blogs communicate with a broad brush and should not be taken as gospel. The nuances of each individual’s financial situation simply can’t be covered by a blog.
Do Consider Using Financial Apps and Calculators
Checking monthly or quarterly statements is no longer enough in a global financial system and consumer-driven economy designed to facilitate spending at any second of the day. Mobile apps such as Mint, Acorns, Robinhood, and proprietary banking apps deliver constant access to personal financial information and management. Consumers are using real time feedback to drive improved decision making and outcomes on everything from fitness to driving habits. Personal finance is no different. Knowing where you stand is an important step in planning for where you want to go.
Be Thoughtful
Modern technology is revolutionizing personal financial planning. Consumer access to a wide array of mostly free tools has simplified a complex system. Yet, it’s important to remember that not all tools are up to the task. Individuals managing their own financial wellbeing via digital means should take a moment to consider the value of the tools and the expertise of advice givers they use. In the real world questions and due diligence are common sense. In a digital world where a savvy user can appear at the top of a search list, information seekers must stop and consider where the results fall within their do or don’t list.
It comes down to this simple premise: no one manages your money for free and the buyer should beware.
PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees.
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