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14 Jun

Ever since the Great Recession, interest rates have been at rock bottom. That’s great for anyone who wants to borrow money. But for savers? Not so much. The average savings account rate today is a measly 0.10%, according to the Federal Deposit Insurance Corp. So if you’re trying to save money, don’t expect a ton of help from your bank.

Even so, there are some banks offering above-average savings account interest rates. In fact, you can find rates upwards of 2.00% ― if you take your money online. The best part is that many don’t require you to deposit a ton of cash in order to get these rates.

Online Banks: Where The Money Is

Though you’re not going to find jaw-dropping savings account rates anywhere, online banks definitely have a leg up on brick-and-mortar institutions. That’s because online banks have much fewer overhead costs thanks to having no physical locations, less staff and fewer administrative costs overall. They can then pass those savings on to customers in the form of higher rates and lower fees.

The trade-off is that you’re likely not going to find a comprehensive suite of services. Most online banks are fairly bare-bones when it comes to the products and services they offer. They can be a great place to park cash at a higher rate, but not so awesome if you conduct many transactions or expect a lot of personal attention.

So if you have a chunk of savings that’s sitting around and not earning interest, but you don’t want to lock it up in the stock market, consider putting it in an online savings account. Most allow you to make up to six withdrawals per month without incurring a penalty, and transfers only take a couple of days, so your emergency fund or home down payment will always be accessible when you need it.

Best High-Yield Savings Account Rates Today

If an online bank sounds like the ideal place to put your savings, there are lots of options. The 13 banks below all offer savings interest rates above 2.00% APY while also requiring a minimum opening deposit and minimum balance of $100 or less (in most cases it’s $0). Some also offer other perks, such as free checking and robust mobile banking.

It’s important to note that all interest rates are accurate as of June 12, 2019, but are subject to change any time at the discretion of individual institutions. Before opening an account, contact the bank to verify rates.

  • Savings account rate: 2.52% APY
  • Minimum opening deposit: $100
  • Minimum balance: None

The highest savings account rate on the list comes from Vio Bank. It’s not exactly a household name, but you should rest assured that Vio is the online bank division of MidFirst Bank, one of the largest privately owned U.S. banks. It’s also FDIC-insured, meaning your deposits are protected up to $250,000 if the bank were to fail. The high-yield savings account from Vio requires a minimum deposit of $100 ― one of the highest on this list, but still reasonable for anyone who’s serious about starting to save.

  • Savings account rate: 2.51% APY
  • Minimum opening deposit: $100
  • Minimum balance: None

The eOne savings account from Salem Five Direct offers an impressive 2.51% APY on balances up to $1,000,000 (if you have more than that, you’re in the wrong place). It also requires a minimum opening deposit of $100.

  • Savings account rate: 2.48% APY
  • Minimum opening deposit: $100
  • Minimum balance: None

The high-yield savings account from Comenity Direct Bank is a new product, launched earlier this year. There’s no ATM or debit card for this account, but you can use the Comenity Direct mobile app to make deposits and withdrawals, as well as check your balance, contact customer service and more.

  • Savings account rate: 2.40% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

MySavingsDirect is the online banking division of Emigrant Bank, the oldest savings bank in New York. Note that the MySavings Account from MySavingsDirect doesn’t offer ATM access or a mobile app. You’ll need to link another account in order to make transfers, deposits and withdrawals.

  • Savings account rate: 2.36% APY
  • Minimum opening deposit: $0
  • Minimum balance: None (with a catch)

As a major bank that’s usually associated with credit cards, it might be surprising to find Citibank on this list. The Citi Accelerate savings account from Citibank must be opened as part of one of its banking packages. It also charges a monthly fee of $4.50, which could take a pretty big bite out of interest earnings. To get around this fee, you have to maintain an average monthly balance of at least $500. This particular account is also only available in 41 states.

  • Savings account rate: 2.30% APY
  • Minimum opening deposit: $1
  • Minimum balance: None

HSBC allows you to make deposits and withdrawals at any physical retail location, or you can transfer funds to another account. Keep in mind that if you close the account within 180 days of opening, you’ll be charged a $25 fee.

  • Savings account rate: 2.25% APY
  • Minimum opening deposit: $1
  • Minimum balance: None

Marcus is the consumer banking and lending side of investment bank Goldman Sachs. There are no bank branches, ATMs or mobile app, so in order to use this account, you’ll need to link another bank account for transferring money.

  • Savings account rate: 2.25% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

Synchrony Bank is an online bank that offers a variety of savings options. It’s known for its high rates that require no minimum balance or fees. Currently, you can earn 2.25% APY with the high-yield savings account.

  • Savings account rate: 2.25% APY
  • Minimum opening deposit: $1
  • Minimum balance: None

FNBO Direct, the online division of First National Bank of Omaha, offers an impressive 2.25% APY on its savings account. The account relies on Popmoney, a peer-to-peer payment app, to send and receive money.

  • Savings account rate: 2.20% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

Ally Bank, which operates exclusively online, offers quite a few financial services, including deposit accounts, loans and investing. By opening a savings account, you also get a free checking account, though checks and debit card aren’t included. You can make deposits via direct deposit, online transfer, wire transfer, mail and remote check deposit through the app.

  • Savings account rate: 2.20% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

Though the interest rate is competitive and there are no fees or minimums, the banking services offered through Barclays are somewhat limited. There are no checking account options, no ATMs and no branch locations. However, Barclays offers a mobile banking app that allows you to deposit checks, send money, check your balance and more.

American Express National Bank

  • Savings account rate: 2.10% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

You can link up to three online banking accounts to the Amex platform, which allows you to transfer funds 24/7. However, only credit card customers have access to a mobile app, so you won’t be able to deposit checks directly.

  • Savings account rate: 2.10% APY
  • Minimum opening deposit: $0
  • Minimum balance: None

Rounding out the list is the online savings account from Discover Bank, which offers a great rate with no minimum deposit requirements or maintenance fees. Discover also offers a few perks such as an easy-to-use app, mobile check deposit, account transfers and more.

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13 Jun

The 10-year anniversary of the end of the Great Recession is approaching. A decade after the housing bust, the economy is robust and the unemployment rate is at a 49-year-low. But not all Americans have recovered.

According to a new survey from Bankrate, 23% of Americans who were adults when the recession started in December 2007 say they are now financially worse off than they were before the recession hit. That’s just under 50 million Americans. Another 25% say they are doing the “same.” In all, just over half believe their “overall finances” are better than before.

“Americans were and continue to be in a degree of denial of the financial crisis and Great Recession,” said Mark Hamrick, Bankrate’s senior economic analyst. “One of the constant themes that presents itself in the data is that Americans are still digging out in many ways from that experience.”

“While some have managed to prosper in the decade since, there are still tens of millions who are struggling to even get back to where they were before the economy took a turn for the worse.”

Women not keeping up

Complicating matters, not all the gains of the current bull market, which is over a decade old, have been distributed equally. While almost a third of women said their overall financial situation is worse now, less than a fifth of men said the same.

“On every metric, women were not keeping up with the improvement with men,” Hamrick explained. “That’s everything from wages, to retirement savings, to paying down debt, or the value of their homes. It’s rather depressing in that regard.”

This is in part due to the lack of wage gains, says Hamrick. Women, along with lower earners and those with only a high school diploma or less were all more likely to say they had lower wages now than before the recession hit.

When asked about their salaries, less than half of respondents said their wages were better than before, while more than a third say that it is worse. But if you’re a millennial (29-38) you’re in luck: Only 16% of this demographic who were adults during the Great Recession say their pay is worse now. That’s compared to 26% of baby boomers (aged 55-73).

“If you take this data at face value ― where less than half of the adult population say that their pay is better ― and most indicate it is not better, that tells you enough and raises enough of a question about the true improvement that Americans have experienced,” Hamrick said.

And according to the Economic Policy Institute, the biggest wage gains since the recession were made by the top 1%. Between 2009 and 2013, the average income of the top 1% grew by 17.4%, while the bottom 99% only saw wage growth of a paltry 0.7% during the same time period.

“In sum,” EPI notes, “the gains of the top 1% have vastly outpaced the gains for the bottom 99% as the economy has recovered.”

A financial scar

The study notes that over half of all Americans (54%) who were adults when the recession began endured some sort of negative financial impact during that time.

More than 70% of those who had invested in the stock market saw their investments lose money while just under half of homeowners during the recession said their home lost value. A quarter completely spent their emergency savings, while a fifth took on “substantial” debt. More than 20% of those who had a partner who was working said either their partner or themselves lost their job.

Despite this, Hamrick doesn’t believe the recession will have a permanent financial impact for the majority of people.

“There’s no doubt it was a setback for many Americans,” he said. “You may recover from the injury but you may have a scar.”

And while the economy is doing well, Hamrick says improvements can be made through “good financial decision making” where people have options. And according to the data, Americans have adjusted their financial habits.

The study notes that “the most common post-Recession response among all U.S. adults is focusing on paying down debt.” Total U.S. household debt increased for the 19th consecutive quarter to $13.67 trillion, as of May, boosted by increases in mortgage, auto and student loan balances, and is now $993 billion higher than the peak of $12.68 trillion in the third quarter of 2008, according to the New York Fed.

Roughly a third of all American adults are trying to reduce their debt loads while 23% are saving more for emergencies. Nearly 20% say they are saving more for retirement. Others said they were trying to find better jobs, investing less in the stock market, and took on more affordable homes and mortgages.

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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10 Jun

Robo-advisors have exploded during the past few years, with the promise to manage and grow your money based on algorithms and technology while offering cheaper pricing compared to traditional human options.

Some critics have been suspicious of these automated, digital, and ETF-heavy offerings, pointing to their youth. They have been largely untested during times of severe market stress and economic turmoil.

With the market chaos at the end of 2018, many are expecting the current bull market – which began in 2008 – to be in its end phase. Nummo, a personal finance aggregation and education site based in Zurich, saw an opportunity to do some of the first independent analysis ever on robo-advisors. The company, which is unaffiliated with advisors, took public data from 17 of the top robo offerings, analyzing 300 portfolios from Dec. 1, 2017, to Dec. 1, 2018, a time that had big swings in the S&P 500, which ended slightly down.

The goal was to see whether these robos would stack up against traditional advisors, and how they scored against each other when it comes to features, costs, and to a smaller extent — since the past is no guarantee of the future — past returns during this period.

Nummo broke robo performance into two main categories, examining retirement accounts (traditional and Roth IRAs, 401(k)s) and taxable accounts for more shorter-term investing, and then further grouped robo portfolios by their risk. It also made three more categories for lowest total cost robos, best low-minimum robos, and best robos that offer socially responsible investing.

A wide array of the biggest names in robo-advisors earned top honors in various categories:

Despite evaluating robos by choosing a volatile time in the market, Nummo’s CEO Roi Tavor said performance only made up 20 percent of the score, not just because the past is no guarantee of the future, but because other metrics like total cost, which also made up 20 percent of the score, were far more important.

“We know over the long period of time, costs have a major impact on your ability to save up,” said Tavor.

Furthermore, many equity-heavy portfolios often contain similar assets — such as ETFs that track the S&P 500 index — making differentiation by return less interesting than fees and other services.

Still, some robos like many offerings from Schwab and Morgan Stanley didn’t make the cut in any categories because their performance was the worst during the review period.

“People often think a robo takes your money and they’re all the same… (T)here are crass differences depending on how CIOs of respective firms decide to invest.”

Besides fees and performance, the rest of the scoring measured a robo-advisor’s soft power, like access to a certified financial planner, tax services, automatic rebalancing, socially responsible investing, and automatic dividend reinvestment. These are the things people hire an advisor for, as much as a good portfolio return.

While performance was deprioritized, Tavor noted that robo-advisor strategies for the mixed portfolios — less equities, more fixed income — showed far more variation. For taxable accounts with 60 percent in stocks, SoFi Wealth led the category and posted a 9.52 percent return on its “Moderate Portfolio.” Ellevest Digital’s “Kids Are Awesome Portfolio,” which finished second in the category, had a 5.23 percent return. WealthSimple’s — respectable — fourth place posted a 0.15 percent 1-year return.

“People often think a robo takes your money and they’re all the same,” Tavor said. “The CIO intelligence behind it shows so clearly that there are crass differences depending on how CIOs of respective firms decide to invest.”

The point here isn’t that SoFi’s CIO is better than the rest, that could be luck. But it is a good reminder that there is both variation in strategies when it comes to mixed portfolios and that things other than performance should be considered, like cost and services. Those things, unlike performance, can be controlled, compared, and purchased. When stocks are involved, you can’t just go out and buy a return.

Looking at the study, Tavor found a few surprising things. One was a marked difference between taxable account robos and retirement robos, namely Fidelity’s outsized presence in the retirement categories and its absence in the taxable accounts.

Fidelity did very well on the retirement side,” said Tavor. “Taxable, not so much, once you compare qualitative elements — tax services, tax-loss harvesting, etc.”

In other words, it helps to know what you are looking for when shopping around.

“It’s very important to understand what offering is and what services you get,” said Tavor. “Do you want access to human advisor? Do you want auto rebalancing? For most relevant, for others it isn’t. Do you want SEC reg advisor?”

The other big surprise according to Tavor was the pricing models of some robos like Acorns, which offer a flat fee.

“People don’t know, but Acorns is prohibitively expensive for the retail average investor at $12 a year,” he said. “You think $12 is not a lot, but if the average minimum is between $500 and $750, you have a cost basis of roughly 1.2% [with $1,000 invested], which is crazy if you compare it to all the others.”

Ranking and comparing robos to each other is as complicated and personal as anything else, but one thing emerges as clear from Nummo’s analysis. According to Tavor, “If you look at performance data, you see some [robos] that have been very successful getting good.”

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, retail, personal finance, and more. Follow him on Twitter @ewolffmann.

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10 Jun

The government shutdown, which is already the second-longest in history, is a double-whammy for federal workers’ incomes.

Federal employees are already paid about 32 percent less than private-sector employees for doing the same work, according to the Federal Salary Council. Now, about 380,000 are on furlough while another 420,000 are being pressed into working without pay. And though government employees have received back pay for every previous shutdown, it’s not guaranteed that they will this time. And contractors working for the government have never been approved for back pay.

President Donald Trump has said he’s willing to let the shutdown continue for years if Democrats don’t bend to his demands to fund a wall along the U.S. southern border. If you’re one of the Americans affected by the shutdown, there’s no denying it’s an incredibly difficult position to be in. However, there might be a few steps you can take to stay afloat.

1. Apply for Unemployment

If you were sent home on furlough, the first thing you should do is apply for unemployment benefits. In general, furloughed government employees ― including contractors ― are eligible under the Unemployment Compensation for Federal Employees Program. Eligibility varies by state; you can look up your state’s contact information here. Most states pay out a maximum of 26 weeks of regular benefits.

Keep in mind that if you do end up receiving back pay, you’ll need to repay your unemployment funds to the state. In most cases, you can take care of it online.

2. Prioritize your bills

Whether you’re furloughed or working without pay, you’ll need to determine which bills have to be paid now and which can be put on the back burner.

For example, you might want to prioritize payments for utility services such as electricity and gas. However, you should call your service providers and let them know about your situation ― it might be possible to work out a deal so that your service goes uninterrupted during the shutdown while you defer payments.

Another priority should be payments on any collateral loans, such as your home or car, since you could lose them if you fall behind. Plus, your credit will take a hit for any payments late by 30 days or more. Again, you might be able to temporarily pause payments by informing your lenders of the situation (more on that below).

Food is another major expense that you can’t simply eliminate from your budget. However, there may be community programs you can take advantage of from food banks and churches. As of now, the federal Women, Infant and Children nutritional assistance program can be utilized by those who might temporarily qualify for it during the shutdown. But WIC also may have to stop its operations if the funding standoff drags on through February.

As for other expenses, consider freezing or cutting off services that aren’t essential, such as cable or streaming services, gym memberships, internet, cell phone data, etc.

3. Call your loan providers

If you have outstanding debt, your lenders may be willing to work with you during the shutdown. Call your lenders, explain your situation and ask about any financial hardship programs. Some lenders might temporarily modify the loan or allow you to defer payments.

The federal Office of Personnel Management provides letter templates you can send to creditors, lenders and landlords to inform them of your employment and income status during the shutdown and document the terms of any changes to your payments. However, OPM suggests speaking with letter recipients first, since it may take some time for them to see your correspondence. You should also make sure you have all the necessary information in your letter, including contact information and account numbers. Keep copies for your records.

4. Deal with your credit cards

You might have started off the shutdown with existing credit card debt, or racked up a balance trying to keep up with expenses since the shutdown began. Either way, those payments are one more cost it’s tough to cover with no income. And if you’re only able to make the minimum payments, credit card interest will add up fast.

Try asking your card issuer about extended grace periods or a temporary reduction in the minimum payment. Alternatively, you might want to try a fairly simple solution if your credit is in decent shape: Perform a balance transfer.

Credit card companies will often entice new customers by offering promotional interest rates on balances transferred from competitors. If you can qualify for a balance transfer credit card, you can enjoy 0 percent APR on that balance for about 12 months in most cases ― maybe longer. Usually, there is a balance transfer fee of around 3 to 5 percent, but that is likely worth the interest savings.

5. Seek out low-interest loans

The longer you go without pay, the more difficult it is to stay on top of basic living expenses. But unless you’re able to score a 0 percent APR deal, adding to your credit card debt will probably create a bigger mess for you to deal with later.

Fortunately, many banks and credit unions across the country are offering low-interest loans to borrowers affected by the shutdown. For instance, Launch Federal Credit Union is offering 12-month loans of up to $3,000 at 0 percent interest. Navy Federal Credit Union is also offering interest-free loans of up to $6,000.

If you need to borrow money to make ends meet, this could be a more affordable way to do it. Contact your local banks and credit unions to find out what options you have.

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10 Jun

What a wild ride the last couple of months have been.

On Dec. 4 the Dow Jones Industrial Average tumbled by almost 800 points, only to rally nearly 800 points three days later. That following Monday, it fell again by close to 500 points, but then recovered to end positively for the day.

A few weeks later, we entered into what is now the longest-running government shutdown in history, with no end in sight.

These events and others have many people wondering if the next recession is looming. The short answer: maybe. Here’s what you need to know about a possible recession and how to prepare for one.

Are We Headed For A Recession Soon?

Here’s the thing: There’s essentially always a recession on the horizon. That’s because recessions, which are often defined as periods of significant economic decline that last at least two consecutive quarters, are a natural part of the economic cycle, according to Zhi Li, owner and financial planner at Twelve Two Capital. “It is reasonable to anticipate that a recession will happen sometime in the future and reasonable to think one might happen soon given the long expansionary period that we are in,” he said.

But as far as predicting when, exactly, a recession will happen, you might as well consult your magic eight ball. Although there are a few data points we can look to when predicting an approaching recession, nailing down a specific time frame isn’t possible. Even so, plenty try.

According to Li, most economists don’t predict a recession will happen this year, but they do think one is likely to happen within the next two. Here’s why.

Signs A Recession Is Coming

Whether or not a recession will occur soon depends on who you ask.

Take the Conference Board’s Leading Economic Index, for instance. It examines 10 leading economic indicators to arrive at a growth or decline rate for the economy, and it helps predict recessions in the months leading up to the downturn. In November, the LEI grew by 0.2, which signals that our economy is still humming along though growth has slowed a bit.

“The LEI has historically dropped below its six-month moving average anywhere between 2 to 15 months before a recession,” according to Advisor Perspectives.

Then again, other common economic measures say otherwise. Here are a few reasons why we might actually experience a recession soon.

Stock market performance is often considered a strong indicator of overall economic health. And historically, stock market peaks have preceded economic downturns by an average of seven to eight months (the actual range is a lot wider). On Oct. 3, the Dow Jones hit its highest closing record for the 15th time in 2018 at 26,828.39, following the record-setting day prior.

Less than three months later, the stock market experienced the worst December since the height of the Great Depression.

Even so, you should take these “signs” with a grain of salt. As the late Nobel Prize-winning economist Paul Samuelson joked decades ago, “the stock market has predicted nine of the last five recessions.” Certain stock market behavior can signify a recession is coming, but by no means heralds one.

A somewhat more reliable indicator is the yield curve on U.S. Treasury securities. “Historically, when the yield curve inverts ― the interest rate on shorter-term treasury bonds is higher than the interest rate on longer-term Treasury bonds ― a recession can sometimes follow,” said Rockie Zeigler III, a certified financial planner and owner of RP Zeigler Investment Services.

How closely are the two correlated? Let’s just say the curve was inverted prior to the past seven recessions. In early December, the front-end of the yield curve inverted for the first time in more than a decade, meaning the yield on 5-year Treasury notes dropped below the 2- and 3-year notes.

Another major number that could point to an imminent recession is unemployment. And counterintuitively, it’s a low rate of unemployment that often signals a slowdown.

Recently, unemployment dropped to 3.7 percent ― a nearly 50-year low. Wages are also growing at the fastest rate since 2009. According to Forbes, strong job market statistics like these indicate that we’re reaching the end of the latest economic cycle rather than the beginning. In fact, an unemployment rate below 4 percent ― which is quite rare ― has often immediately proceeded past recessions.

Finally, as mentioned above, recessions are a normal part of the economic cycle. “While it’s not a very technical indicator, a long run of economic expansion can tell us something, too,” Zeigler said. “We haven’t had a recession or bear market since 2008-2009. The economy has been expanding (albeit slowly) since then. So have the stock markets.”

For these reasons, Zeigler said, we might actually be overdue for slowing economic growth, if not a recession.

What Does This Mean For You?

Zeigler added recessions impact the average person in two major ways. The first is unemployment: “When a recession hits, generally it’s accompanied by rising unemployment,” he said.

The second is spending. “If a person is able to keep their job, they probably won’t be completely confident in spending their money on things like TVs, cars, homes and services because of all the negativity that accompanies a recession,” Zeigler said. “Our economy is very dependent on consumer consumption of goods and services and folks tend to ‘hunker down’ during recessions because they fear losing their job.”

That means regardless of when the next recession hits, it pays to be prepared.

Build up your emergency fund. According to Bradley Nelson, president of Lyon Park Advisors, your top concern during a recession should be staying on top of your bills and ensuring you have a reliable source of income.

“Everyone should have an emergency fund of three to nine months of mandatory expenses, depending upon their circumstances,” Nelson said. “A money market account is a good place to have this stashed.” He also suggested thinking about what skills and resources you have at your disposal in case that fund isn’t enough, including spouse employment, side hustles and part-time jobs.

Know your risk tolerance. Though it can be difficult to predict your own behavior during certain situations, you should ask yourself what you’d do if the market were to drop by 10, 20 or even 50 percent. “If the answer sounds like ‘I’d sell everything to preserve what’s left,’ alarm bells should go off,” Nelson said. “It’s a sign your portfolio doesn’t match [your] risk tolerance.”

If that’s the case, you should reexamine your asset allocation. “Better to come up with an allocation you can live with through thick and thin now, rather than wait for markets to drop and sell your assets at fire sale prices,” Nelson said.

Take advantage of rock-bottom prices. Even though continuing to invest during a major market downturn might feel like lighting money on fire, it’s actually the smart thing to do in most cases. “Investors should have a shopper’s mentality. This means… having a shopping list of quality products to buy at bargain prices,” Nelson said.

In other words, you should aim to sell high and buy low. And though it’s probably hard to think of a recession as an opportunity, for the savvy investor, that’s exactly what it is.

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09 Jun

Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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09 Jun

Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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09 Jun

The tax filing season has officially begun -– as of Jan. 28, the IRS started accepting returns for the 2018 tax year. Thanks to the major changes that rolled out with the Tax Cuts and Jobs Act, taxpayers are bracing for a chaotic season.

Here’s a list of some of the changes you can expect as you file this year.

1. In an effort to simplify the tax filing process and match the changes to the tax code, a new 1040 form was released last year. The new version is about the size of a large postcard, which doesn’t really matter for most Americans filing electronically.

What does matter for most individual filers is that there is now only one version of the 1040 – up until now there were three versions, the 1040, 1040A and 1040Z, that you could use based on your financial situation. Now we’re all filing this one standard form, with six new add-on forms the IRS likes to call schedules used for certain deductions that may apply.

2. On the new 1040, you’ll see there are no more personal exemptions, meaning you can no longer claim and deduct money for every person in your household – which was $4,050 per person up until 2017. But since you can’t do that anymore, two things were done to make up for it:

  • The standard deduction went up: For single filers: it used to be $6,350, now it’s $12,000. For married couples filing jointly it used to be $12,700, now it’s $24,000. For heads of household, it used to be $9,350, and now it’s $18,000.
  • The IRS tweaked the tax brackets and lowered income tax rates. The average American household with a median income of $62,175 would’ve been taxed at the 25 percent rate in 2017. For 2018, they’ll be taxed at a 22 percent rate.

3. Among the most controversial tax law changes is the elimination of state and local tax deductions (SALT). Prior to 2018, taxpayers were able itemize state and local property, income and sales taxes. Today the total deduction for all of these taxes is capped at $10,000. Taxpayers who live in high-tax states like New York, Connecticut, New Jersey, California, and Massachusetts will be affected the most because filers in these states typically took the biggest SALT deductions.

4. Last but not least, your taxes are due on April 15 this year, a couple of days sooner than last year’s filing deadline. If you don’t think you’ll get to your taxes in time, make sure you file an extension for both federal and state. Remember, you’re only given an extension to file – not to pay – that’s still due by the deadline, otherwise you can expect to pay interest and penalties on top of what you owe.

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09 Jun

Even before he became president, Donald Trump was never shy about sharing what’s on his mind. Since moving into the Oval Office, however, his voice has certainly been amplified ― for better or worse.

So leave it to us to highlight the ridiculous ― and untrue ― statements he’s made about finances. From the stock market to the actual market, these six quotes show he doesn’t really get how money works for regular people.

1. He celebrated market fluctuations like milestones

In January, Trump tweeted that the Dow Jones Industrial Average broke 25,000 points. Tremendous news indeed, considering the previous month marked the worst December in stock market history since the Great Depression…

…except that he had already congratulated someone ― we can safely assume himself ― for the same milestone more than a year earlier…

…and also in July 2018.

For most of us who invest, it’s with the expectation that doing so will result in our money growing over time. Market ups and downs are to be expected, but more than a year of flatlined growth isn’t exactly something to brag about.

2. He thinks you need ID to buy groceries

It’s no secret that Trump has been pushing for stricter voter identification laws, claiming ID is necessary to prevent voter fraud (it isn’t). But one thing that anyone who lives in the real working world knows is that you don’t need an ID to buy groceries. Yet Trump claimed just the opposite to a crowd gathered for a rally in Tampa, Florida, last year:

You know, if you go out and you want to buy groceries, you need a picture on a card, you need ID. You go out and you want to buy anything, you need ID and you need your picture.

We’re not sure when Trump last had to buy groceries for himself. And according to press secretary Sarah Huckabee Sanders, neither is she. However, we do know formal identification is not required to buy basic goods like food.

3. He also thinks grocery stores help people with no income

Man, Trump really doesn’t understand how grocery stores work. In January, Trump was asked for his thoughts on Commerce Secretary Wilbur Ross’ controversial statement that federal employees affected by the shutdown should not rely on food banks and simply take out loans to make ends meet instead. Here’s what Trump had to say:

Perhaps he should have said it differently. Local people know who they are, when they go for groceries and everything else. … They will work along. I know banks are working along. If you have mortgages, the mortgagees, the folks collecting the interest and all of those things, they work along. And that’s what happens in time like this. They know the people; they’ve been dealing with them for years. And they work along. The grocery store — and I think that’s probably what Wilbur Ross meant.

This should go without saying, but grocery stores sell groceries. Many of the 800,000 federal employees who were furloughed or forced to work without pay for more than a month did need to rely on food banks, unemployment benefits and credit card debt to survive.

4. He claimed your 401(k) is killing it

Trump loves to tweet about 401(k)s. And in August 2018, he promised more good news to follow for all of the Americans who surely became rich after a market upswing.

2018 was a record-setting year. Unfortunately, that’s because it was actually the worst year for stocks since 2008. Despite several upswings, the market also experienced severe drops, ending down overall.

What the president also failed to acknowledge is that most Americans don’t have a 401(k). Only 14 percent of all employers offer a 401(k) or other defined contribution plan to employees. Of those that do, only about a third of employees actually contribute. Hopefully, more employers will offer retirement plans soon, and more workers will be able to afford to participate.

5. The economy grew by an ‘amazing’ 4.1 percent

Gross domestic product, or GDP, measures the value of a country’s output and is a major indicator of an economy’s health. Last year, Trump boasted many times about the GDP’s growth over the second quarter.

“Amazing” isn’t exactly the appropriate word to describe a 4.1 percent rate of growth for the GDP. As The Associated Press explains, the economy is certainly healthy now, but the 4.1 percent figure was simply the highest since 2014. It represents nothing close to record growth in previous years.

6. He thought we’d be excited about his tax plan

In 2017, President Trump signed the Tax Cuts and Jobs Act into law. It included major changes to tax brackets, credits and deductions for both individuals and businesses. And as the House and Senate met to merge and finalize their two versions of the bill prior to passing it, Trump made strong claims about the impact of his plan.

People are going to be very, very happy. They’re going to get tremendous, tremendous tax cuts and tax relief and that’s what this country needs.

Americans are finally getting to see the results of the new tax plan on their returns this tax season. And the results are mixed at best. Many taxpayers who got refunds last year are discovering they owe hefty tax bills for 2018.

Part of this is because the plan actually imposed greater limits on tax deductions that were particularly valuable in affluent metropolitan areas, such as those for state and local taxes, mortgage interest and property taxes. The second reason is that despite major changes to the tax code, the IRS had to rely on the same W-4 forms to determine employees’ tax withholding. That means many people ended up underpaying for the year. And those people are very, very mad.

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09 Jun

In a nutshell, the personal finance industry can be explained with a can of tuna. Or more specifically, a metaphor involving a can of tuna that stand-up comedian Omar Ismail so brilliantly described in a post on Quora.

The gist is this: Imagine for a moment there are two men. They’re both hungry, and above them is a high shelf with a can of tuna on top. Without that tuna, they’ll both starve. However, one of the men is very tall and can easily reach the can of tuna. The other man is short and can’t reach it on his own.

The tall man has a clear advantage in this situation. But should he feel guilty for grabbing the can and feeding himself? No. Does it mean there aren’t also disadvantages to being so tall? Of course not. And it certainly doesn’t mean that the short man can’t also find a way to reach the can. The point is that the tall man inherently faces fewer obstacles to reaching that food that they both need and deserve.

That’s how privilege works. And privilege is a key ingredient to most of today’s personal finance advice. It assumes you have money. If you don’t, well, that’s your fault.

Why? The short answer is because helping the poor isn’t profitable. Those who hawk advice for a living ― advisors, self-help gurus, marketers ― are simply an extension of the financial industry. They’re often compensated by financial institutions looking to snatch up new, highly qualified customers. And you can’t make money off of someone who doesn’t have any.

Personal Finance Advice And The Culture Of Shame

If you think of the financial industry as a body, the advice side is its arms, reaching out to consumers in hopes of connecting them with a product (and enjoying a cut of the resulting profits). Rather than working to combat wealth inequalities and empowering the consumer, popular personal finance advice often reinforces those disparities while serving up a healthy dose of shame.

Just ask 42-year-old Atlanta resident Jessica, whose name has been changed to protect her privacy. For her, simply staying afloat is a struggle.

She and her husband of 18 years have two children, a 23-year-old college student and a 16-year-old who lives at home. Jessica became disabled in 2012, which forced her to abandon the college degree she was pursuing ― but not her student loans, of which she still has roughly $50,000 left to pay off. Between Jessica’s disability income and the salary her husband earns working in the restaurant industry, their household income is about $50,000 per year.

It took two years for Jessica to begin receiving disability benefits. During that time, she and her husband experienced financial hardship and ultimately had to give up their house. Though they had been paying down the mortgage for 12 years, the housing crisis left them with an underwater loan. “We ended up having a foreclosure and that really messed us up,” she said.

At one point, her husband was working two full-time jobs to make ends meet. The 80-hour work schedule eventually took its toll; one day, he fell asleep at the wheel and totaled their car. The family racked up thousands of dollars in credit card debt and had to cash out their 401(k), worth $14,000, which they haven’t been able to rebuild. “We can’t save anything ― we’re paycheck to paycheck,” Jessica said. “It all goes to interest and fees. Every time I make a [credit card] payment, I get a notice that I’m reaching my credit limit. It’s very frustrating.”

When Jessica sees financial advice on TV and online, she says, “I just laugh and move on.” She and her husband don’t eat out or buy lattes. They don’t go on shopping sprees. They’ve only ever gone on one vacation as a family, and haven’t been to the dentist in years.

“For people to say, ‘Just do this’ ― people who don’t experience it and don’t live it ― [they] don’t understand,” she said.

The advice isn’t all bad. After all, there’s nothing wrong with urging people to live within their means, follow a budget or invest wisely. Those are good things. But if you look at the kind of advice that’s out there today, you see very little that acknowledges the systemic reasons behind many people’s financial woes, or provides real solutions for those who have to choose between paying the electricity bill or putting food on the table.

And the belittling and shaming behind a lot of popular advice, Jessica said, makes her feel as if there’s something wrong with her for not being able to accomplish it.

Take Suze Orman, author of 13 best-selling books and host of “The Suze Orman Show,” which aired on CNBC for 13 years. Orman’s brand of self-help leans heavily on scolding people for their financial decisions. She is one of the most widely known personal finance “gurus” who make their living advising everyday Americans on everything from paying off debt to saving for retirement. Yet these gurus aren’t held to any fiduciary standard ― they’re working as entertainers, not advisors. At best, their advice is too generic to truly help many people. At worst, it’s rife with conflicts of interest.

Orman’s career, which she began as a financial advisor for Merrill Lynch, has been marked by controversy. She’s been a paid spokesperson for many financial products, including car financing programs offered by General Motors and term life insurance from SelectQuote.

In 2012, she launched her own prepaid debit card, a type of product marketed to the underbanked and notorious for charging superfluous fees. Her Approved Card, which charged a monthly maintenance fee of $3, among a host of other fees depending on how the card was used, was advertised as a tool for consumers who didn’t want the risk of a credit card but needed to build their credit scores. Credit bureau TransUnion had agreed to examine cardholders’ usage, but never factored it into their credit scores. Two years later, the card was discontinued.

Dave Ramsey, another radio personality with several best-selling books to his name, is credited with helping millions of people get out of debt. Ramsey’s advice is heavily based on Christian principles, and delivered in a style best described as Dr. Phil meets Southern preacher.

In addition to promoting his for-profit money management course Financial Peace University, Ramsey’s website also heavily endorses several companies, many of which have nothing to do with financial services (in fact, one is a mattress maker). Visitors can also enter their contact information and be connected with endorsed local providers, or ELPs, who provide investment advice that matches Ramsey’s investment philosophy.

That’s where things get hairy. There’s nothing especially harmful about Ramsey’s budgeting and debt payoff advice, but many of his investment recommendations have raised more than a few eyebrows. Among questionable assertions about stock market performance and how advisors should be paid, he also pushes the idea that investors should have a portfolio consisting of 100 percent stocks ― purchased through mutual funds with front-end commissions as high as 5 percent or more.

Ramsey says these funds, known as A Shares, take the guesswork out of investing and are worth the high cost. Interestingly, however, selling these expensive funds is also how his ELPs make money. And though Ramsey doesn’t state how much ELPs pay him to be featured on his site and mentioned during his radio program ― which reaches a combined 15 million listeners every week ― Time Money spoke with some advisors who said they fork over about $80 per lead.

Priced Out Of Quality Financial Advice

But you don’t have to be a famous radio or television personality to get rich off selling financial advice that may or may not actually benefit your followers. Thousands of people are allowed to do so without having to complete any type of specialized training or ongoing education.

“If you are practicing financial planning and you’re providing investment advice of any kind to your clients, regardless of whether you’re managing their money or not, you are required to file with the SEC as a registered investment advisor or investment advisor representative,” explained John Robinson, founder of Financial Planning Hawaii and co-founder of Nest Egg Guru, a company that creates client-facing software for independent financial advisors. However, he said, the rules that the Securities and Exchange Commission applies to financial planners and registered investment advisors include a few exceptions.

“One of them is if you’re in the business of producing newsletters. If you’re not dealing with clients individually, but you’re just a general newsletter publication, you don’t need to register it as an investment advisor or financial planner,” he said. “There are lots of investment newsletters out there that are reasonably well-known and are pretty, I would say, shady.”

The other exception, according to Robinson, is for those who provide financial planning advice that’s not related to investing, such as people who offer seminars on debt reduction or real estate at a few thousand dollars a pop. In this case, you can call yourself a financial planner but not have to register. This often leads to planners who present themselves as trusted, unbiased professionals but ultimately prey on consumers who can’t afford to consult an actual SEC-registered advisor.

“Our retirement plan is to basically die young.”

“It’s appealing to people who are overleveraged and, honestly, they probably are underserved by the financial planning community as well,” Robinson said.

The big problem here is that the advice of these so-called financial experts is inexpensive or free to access, but it’s ultimately driven by their personal financial interests. Receiving guidance from unbiased financial professionals, who are legally required to put their clients’ best interests first, is often cost prohibitive. And often, their expertise isn’t aligned with what lower-income clients need.

Jessica said she and her husband have actually met with two different financial planners, but could not gain any valuable guidance from the sessions. “They were not telling us how to get out of paycheck-to-paycheck living,” she said, explaining that there seemed to be a total lack of comprehension that her family had no money left over after paying the bills. “I know we are not the only people living paycheck to paycheck,” she said, “but right now, our retirement plan is to basically die young.”

Jessica is right, they’re not the only people in this situation. Not by a long shot. But Robinson said historically, the financial planning industry has been biased against low-income clients due to the revenue model. “Traditionally, our industry has been either primarily commission-based or asset-based. Larger assets under management produce more revenue than clients who have no assets to manage,” he said.

Robinson noted that in today’s financial planning world, asset-based compensation is still the dominant form of compensation, meaning clients are charged a percentage of their portfolio every year. “But there is very definitely a strong trend away from that towards other compensation models, including flat fee planning, hourly planning, and more recently, even subscription-based planning,” Robinson said. (More on that later.)

How Affiliate Marketing Masquerades As Journalism

What’s maybe the most troubling development in the advice side of the personal finance industry is how it has come to leverage the internet in order to produce advertisements that masquerade as journalism.

Affiliate marketing is a form of revenue sharing that involves promoting a certain product or service on your website, and then receiving a commission every time you refer a lead to the business. This is how many bloggers earn a living from their writing, for instance. And though online advertisements must be disclosed, to the unsuspecting consumer, it might seem like the writers of these articles are genuinely recommending these products based solely on their expertise and the product’s actual worth.

The truth is that they’re recommending certain bank accounts or credit cards because those products belong to the institution that was willing to give the blogger a contract. I should know, because this was a major revenue model behind many of the organizations I’ve worked for in the past. And these financial institutions all had similar requirements to maintain a business relationship: Attract high-income consumers with good credit and stable jobs, and grow the number of those leads over time.

It’s not that the products being promoted were bad, but I was often discouraged from writing about anything that didn’t contribute to the bottom line (i.e., financial advice for anyone but the affluent) or could potentially piss off those advertisers (like what I’m writing now).

“The ROI isn’t as good as pushing the Chase Sapphire Preferred over and over again.”

This approach to pseudojournalism is pervasive among personal finance blogs and websites which, with a bit of digging, you’ll often find are owned by marketing companies. One of my colleagues, who wrote for a very well-known and popular personal finance education site for many years, said there was a specific strategy to focus primarily on “optimizers.” These, he explained, were people who were driven to improve their financial lives and had the means to do so easily.

“They didn’t even want us to cover secured cards that we didn’t have affiliate partnerships with, even if they were better for consumers than the ones we had on the site. It was maddening,” he told me.

“There are very few products out there that essentially let these people maintain their dignity while improving their financial lives. And when there are, they don’t get recommended enough because the ROI isn’t as good as pushing the Chase Sapphire Preferred over and over again,” he said.

Pamela Capalad, a certified financial planner and founder of Brunch & Budget financial coaching, said that online marketers and affiliate bloggers are often not much different than the insurance agent who sells you a commissioned product. “They’re giving you this advice, but they’re incentivized to tell you to go with a certain company or buy a certain product. … Ultimately, they’re presenting themselves as an expert and getting compensated by an entity or institution that isn’t unbiased and that doesn’t necessarily have the consumer’s best interest in mind.”

Capalad said it’s tough for accredited financial professionals to differentiate themselves from all the other individuals presenting themselves as financial experts. “I think it muddies the water, and for a lot of consumers, it’s very confusing to know who to trust because it can really look like someone who has a lot of followers on their blog is an expert when really, they have no credentials.” And though that doesn’t necessarily mean the advice is wrong ― heck, it could be very sound advice ― Capalad pointed out that if you are coached in any way that leads to financial trouble down the line, there is no recourse.

“There’s no way to make you whole if you received advice that ended up losing you money,” she pointed out. “And I think that’s a dangerous thing when you don’t have a third party regulating something as sensitive, personal and vulnerable as someone’s financial life.”

Financial Guidance For The Masses

Unfortunately, crappy financial advice will continue to exist as long as banks are willing to subsidize it and people are willing to pay for it.

Even so, there have been a couple of recent positive shifts in how lower-income Americans are gaining access to financial advice and services.

The first is the explosion of fintech, the branch of new technology designed to improve access to financial services. For example, “robo-advisors” such as Betterment and Wealthfront allow investors to receive automated portfolio management for as little as 0.25 percent annually ― a quarter of the standard 1 percent charged by traditional financial planners. And while some argue that robo-advisors don’t offer the same kind of personalized, one-on-one service, many investors find they really don’t need it.

“When I was starting out [as an advisor], the general perception was that you, the financial planner, were the expert and had all the answers,” Robinson said. “Now, clients are much more, to their credit, intuitive and curious. They want to be educated and informed, not just told what to do.” Technology and open access to information, he said, is what’s facilitating the transition.

“I think a lot of the informational asymmetries that used to exist between the financial advisor and their client are disappearing.”

For those who do want comprehensive financial planning that goes beyond simple portfolio management ― such as guidance on paying off debt and budgeting for college ― changes to the traditional “assets under management” model of revenue for financial planners are making that possible.

“In the last two decades, there’s been a huge shift in our industry away from the traditional big wirehouses to the independent [registered investment advisor] and independent financial planner,” Robinson said. He explained there’s been an exodus of financial advisors who don’t want to be constrained by the business motives of large brokerages such as Merrill Lynch or Morgan Stanley, and prefer to be able to deal individually with their retail clients on a much more objective level.

“So when you’ve got more freedom, more objectivity, those of us in the independent advisor space can pick and choose who we want to work with,” Robinson said. It’s also allowed advisors to decide how they want to be paid, whether that’s hourly, a flat fee or something else entirely.

“It’s hard to represent your clients’ interests when you’re getting paid a commission,” he said. “The move has been towards transparency, fee disclosure and better alignment of your interest with the interest of your client. All of these trends are positive trends. And they’re making financial planning accessible to the masses.”

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