Frequently Asked Questions
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Answer: I am a fiduciary. And you should care because that means I will put your interests first.
An independent Registered Investment Advisor (there is a good description at Investopedia) is a financial advisory firm which only provides investment advice (under the 1940 Investment Advisor Act) and does not sell stocks, bonds, or other securities (which would be a Broker-Dealer). Now, why should you choose a “Fee-Only” fiduciary as a financial advisor… well, choosing a fee-only financial advisor is the best way to ensure that the advice you receive is designed to help you (and not, for example, earn the advisor some sort of commission or trail fee). It doesn’t mean that a Fee-only advisor has no conflicts of interest, and it doesn’t mean the advice they provide is always going to be the best advice for you. But I think it is the best place to start in picking a financial advisor.
Being a fiduciary is both a key part of my philosophy and an ethical requirement of being a “Fee-Only” Registered Investment Advisor. This is also a significant distinction from financial advisors who work for Broker-Dealers (think Morgan Stanley or Ameriprise Financial) or Insurance Agencies (think Northwestern Mutual or Principal Financial Group) as “registered representatives”. Note that these registered representatives can still (and most assuredly do) describe themselves to the public as financial advisors. Those registered representatives are not fiduciaries, and until recently, were only required to ensure that an investment was “suitable” for you. In the last few years, a new SEC regulation (Reg BI, which is linked if you like reading FINRA and SEC circulars) strengthened the obligation of these representatives to act in a client’s “best interest”, but these representatives are still typically not “fee-only”, and describe themselves as “fee-based”. Now this may sound like a subtle distinction but, from my perspective, it is a crucial difference in the economic incentives that motivate your financial advisor. “Fee-only” advisors (like Fangorn Wealth Management) are paid exclusively by clients. “Fee-based” advisors receive compensation from others - e.g. they receive a commission or other payment from a third party in exchange for selling you a particular mutual fund (or new issuance of stock, or structured note, or insurance policy, or annuity). Although clients may still receive solid financial advice from registered representatives affiliated with a Broker-Dealer or Insurance Agency, I chose to open my own independent RIA because it bothered me that those financial advisors (i) were historically subject to a lower ethical standard (“suitability”) and (ii) are still susceptible to conflicting economic interests with their clients. Of course, I have to admit that my decision was made possible because of the changing technology landscape and growing number of firms that provide tech stacks and other support to small, indepenent RIAs (for example I am using the XY Planning Network (which requires all advisors to be “fee-only”) for a number of my technology solutions and I am using Altruist as one of my custodians).
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Answer: Although I don’t have standard “financial advisory” experience, I have significant experience with major financial decisions in the corporate and legal world. Perhaps more importantly, I also have life experiences that can provide me with the broader context to understand your situation and collaborate with you on individualized solutions. My experiences and path to becoming a financial advisor ensures that you will not be pigeonholed into a particular “client type” or “sales target” (or whatever terms they use now), but rather I will engage with you as a person with your own unique variety of interests, concerns, and life experiences. I also suspect that starting in the financial advisory business at a younger age might have, unfortunately, stifled my creativity in finding the right solution for you.
To be frank (and possibly cross the line into being a little obnoxious) I think the better question is why would you prefer using a financial advisor with substantial previous industry experience. Because after all, the financial advice industry has a well-earned reputation for high fees, high pressure-sales tactics, commissions-based compensation, and under-performance. And as described above, up until recently a substantial number of financial advisors did not have an obligation to act in your best interest. As recently as 2018, it was estimated that only 2% of financial advisors were truly fee-only fiduciaries for their clients (see WSJ article here). Now I can happily admit that the industry is obviously changing, for a variety of reasons (which I will gladly talk about for hours), and there are more and more financial advisors who are re-inventing the industry and making available a sophisticated approach and a variety of competitive, fee-only pricing models (facilitated by companies such as the XY Planning Network and Altruist, also highlighted above). But it raises the question of why previous experience in the industry is really beneficial to the client, if the financial advisor gained work experience surrounded by older “successful” advisors who were steeped in the industry’s previous weaker ethical requirements, conflict-laden compensation models, and “sales” approaches.
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Answer: That’s a good question, as the breadth of what “financial advisors” do is pretty extensive. But one thing that financial advisors don’t do is “beat the market” for you; e.g. you should not look for a financial advisor who guarantees market out-performance or claims to be able to pick the winners (even if he/she shows you historical out-performance) or explains they have a method to make sure you get in on early on the next NVIDIA). If you want that, you need a hedge fund or venture capital fund or private equity fund (but you will pay handsomely for the experience, and you will receive no guarantees of that mythical market-beating alpha). What I will do as a financial advisor is (a) help you to invest your earnings (minimizing the financial and psychological costs to you) and (b) ensure that you are comfortable (both financially and emotionally) with where you end up when you decide to stop working. It is up to you, however, to decide if I will help you the best through my portfolio management services or through working with you on financial planning.
Some of you may be surprised that “Financial Advisor” isn’t really a defined term, nor a particularly closely regulated profession (compared to, for example, surgeons). There are requirements for who can “hold themselves out” as a Financial Advisor, which is why you also see some individuals and social media influencers claiming to be “financial coaches”, “investment gurus”, “crypto kings” etc. (perhaps it goes without saying, but those are completely unregulated parts of the financial advice industry). And certain aspects of what an advisor can do are regulated (some more strictly than others). So financial advisors can act like sales people, trying to get customers to purchase certain funds or structured notes or stocks that will earn the financial advisor a commission. Others can be, effectively, insurance salesmen with a variety of life insurance policies and annuities that, again, pay a hefty commission. There are many “financial planning” financial advisors; where advisors focus intently (some exclusively) on delivering written plans (or recipes) for their clients to follow religiously, with the hopes that the cake turns out great at the end. There are also many financial advisors who exclusively do portfolio management, where the client entrusts the financial advisor with a portfolio and trusts them to make appropriate decisions with selecting asset classes, funds, as well as individual stocks and bonds. Realistically, many advisors are a bit of a mix (though see above about why you should choose a fee-only fiduciary). What I will do for you as your financial advisor depends on how you best believe I can help, either through portfolio management services of financial planning services. Either way, my goal will remain the same (a) help you to invest your earnings (minimizing the financial and psychological costs to you) and (b) ensure that you are comfortable (both financially and emotionally) with where you end up when you decide you have “enough” or stop working. (Also, for those of you who were waiting for the punchline… “I have people skills. I am good with dealing with people. Can’t you understand that! What the hell is wrong with you people?)
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Answer: I completely understand you. Luckily, right now we are accepting new clients from anywhere in the United States (see caveat below about Texas and Louisiana). Unfortunately, we are not accepting clients outside of the United States right now.
The vast majority of states (other than Texas and Louisiana) allow for de minimis exclusion to their State registration requirements, although we will obviously have to interact mainly virtually (depending on where you live). If you live in Texas or Louisiana and really, really, really want to use me, I will investigate getting registered in your state. Once we have more than 5 clients in any state, the firm will register with the authorities in that State, so there may be some small delays in starting work with you. But that is probably a good problem to have.
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Answer: You might benefit from a robo-advisor (Wealthfront and Betterment are probably the most well known), or a low cost robo/hybrid-advisory service offered by your broker (for example, Vanguard Private Advisor charges about 30bps (or 0.3% of assets) and Fidelity Go charges about 35bps (or 0.35% of assets). These are valid and respected options; but they are limited in their services. One downside of these and other robo-advisors is that you will not have a trusted advisor who knows you, your family, your unique situation, your goals, your concerns.
But we certainly can discuss and consider whether you might, nonetheless, benefit from using one of these options in addition to using Fangorn Wealth Management on an hourly basis for more complicated issues; then you can still have the trusted advisor available for when the robots look at you blankly. A second, though possibly less significant downside, is that you shouldn’t expect the fact that you do use a robo-advisor will ensure that the machines spare you when the inevitable AI apocalypse comes.
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Answer: I am not yet a Certified Financial Planner(CFP) or a Chartered Financial Analyst (CFA). I will be eligible to, and intend to, apply for a CFP license after working for three years as a financial advisor (and passing the CFP exam). I currently hold the Series 65 License, which indicates that I passed the Series 65 - Uniform Investment Advisor Law Exam, an exam administered by FINRA. I also hold a Juris Doctor (Law) degree, which I received from Columbia University, and am a currently a member of the NY and WA State Bars. Generally speaking, however, individual investors don’t need a financial advisor who is a CFP; after all, eligibility for obtaining a CFP certification is predicated on a financial advisor having multiple years of experience in the financial advisory industry.
Similarly, individual investors don’t need a financial advisor who is a CFA. (Just in case you are curious, I would be eligible to become a CFA after working for four years as a financial advisor and passing three different CFA exams, each significantly harder than the CFP exam). As noted above, I plan on obtaining a CFP certification as soon as I have completed the requisite years of experience for two reasons: 1) I readily acknowledge that both of these designations can be helpful to identify advisors who have a minimum level of competence and 2) although I am part of the XY Planning Network currently, I will not be eligible to be included in their “Find an Advisor” tool until I am a CFP. I will note, however, that my philosophy about investing and providing financial advice is that the first step is understanding the client, and the next steps are keeping things simple, keeping things steady, and not missing the forest for the trees. I don’t believe either of these two designations are necessary to implement that philosophy. To the extent I continue to focus my practice on individuals (and primarily professionals), I am not planning, at this time, on becoming a CFA (as the focus of the CFA might, in fact, conflict a bit more with my philosophy, as I worry I would be tempted to add unnecessary complexity to my client’s portfolio or try to “beat the market” using all of the more sophisticated analysis tools I’ve mastered!). I imagine that becoming a CFA would be more appropriate for advising endowments, pension funds, or (possibly) substantial family offices. And if you want me to run your family office, then I am sure I could be enticed to get my CFA as well. I do like taking tests, so who knows?
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Answer: No. The services our firm provide are always delivered in a thoughtful, sophisticated, empathetic, and professional manner. They are designed to minimize the overall cost to you, and that is because high costs are significant drags on lifetime financial performance.
You are correct that my portfolio management fees are relatively low (you can compare my fees with the distribution of portfolio management (i.e. AUM) fees shown in a Kitces study here). But I can assure that one of the biggest benefits of using a small, independent Registered Investment Advisor (as opposed to either a large broker-dealer such as Morgan Stanley or a large independent RIA, such as Hightower Advisors, based in Chicago) is that the service level you will receive will be more personalized and bespoke than anything from a large firm. As I have mentioned a few times in the FAQs above, I have become part of the XY Planning Network and am using Altruist as my custodian which together provides me a suite of sophisticated tech, tools, and other resources that will replicate (and, in many cases, improve upon) many of the resources at larger firms. And with lower costs than these firms, I can easily offer lower fees.
There are various reasons that the typical portfolio management fees are much higher than my fees. Some reasons are historical; for example, although a portfolio management fee of 1-2% of assets under management was charged to clients historically, those clients were frequently unable to access the markets efficiently or effectively without an advisor (i.e. purchases of stock were in “round lots” of 100 shares and significant fees were charged for each purchase or sale (I remember using Scotttrade years ago, who only charged $7 per trade - a revelation at the time). Now, however, brokers have democratized access to the markets and competition has driven the price for stock trades to $0, and lowered the expense ratios of ETFs and some index funds to near-zero levels (some index funds even have $0 fees). Similarly, portfolios originally had to be “created” by financial advisors as there were no (or only few and expensive) mutual funds available (not to mention the low-cost/free index funds and ETFs that are so prevalent). Other reasons are structural; many financial advisors’ business models require higher fees as they attempt to be one-stop shops (e.g. with separate tax professionals, estate attorneys, portfolio managers (or outsourced portfolio management partners), insurance brokers, and individual advisors on staff). Some people prefer that model (which necessarily entails higher overhead, along with fancy offices and, typically, more extensive entertainment budgets); but my approach is more similar to concierge medicine. We will collaborate on guidance and approach (i.e. explanation of a diagnosis and plan of care), but I am not going to prepare your taxes or draft your trust documents (i.e. perform the surgery)! Moreover, the one-stop-shop model appears, to me at least, to be charging clients every year for services that they only rarely or occasionally need. Finally, many financial advisors publish fees which are higher (for historical reasons, as noted above), but when sophisticated clients come to them and push for lower fees, they depart downward (sometimes significantly). If you ultimately decide not to work with me and to remain with your current financial advisor (if you have one) or pick an alternative service provider, I still encourage you to negotiate a lower rate using my rates as comparison.
“If stock market experts were so expert, they would be buying stock, not selling advice.”
“Where are the customers’ yachts?”
“We’ll go down in history as the first society that wouldn’t save itself because it wasn’t cost-effective.”
“The investor’s chief problem – and even his worst enemy – is likely to be himself. ”
“The two greatest enemies of the equity fund investor are expenses and emotions. ”
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Answer: I have no asset minimums, and I have discounts available for clients starting out in their careers. (Of course, the initial conversation is completely free to you). Most importantly, however, is the fact that I am in the business, not to buy a yacht for me, but to make sure you are successful. And maybe you don’t need very much help right away, and you don’t need any portfolio management. But you might need a few timely pointers to ensure you are on the right path. If I can start you off on the right path (in a cost-effective manner), I will feel satisfied (and perhaps earn future business from you when you need more extensive help).
The math of compounding means that every dollar invested early in your career has an outsized impact when you retire. Plus, it’s always better to start good habits when you are young. You’ll have plenty of time to enjoy bad habits when you are older and wealthier! So let’s chat, and figure out what works for you.
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Besides the obvious lower cost structure of foregoing a fancy office (which also permits me to charge you lower fees), my goal is to (i) meet clients where they are most comfortable and (ii) make the experience of meeting with me as low stress, un-threatening, and easy as possible. I think that many meetings can be done virtually, but ultimately it depends on you and what is easiest and most comfortable for you and your family!
And although I think many meetings can be done virtually (I would never have survived Amazon’s 5 days per week RTO mandate!), I will enjoy meeting you at or near your office for lunch or coffee. We even could sit down at your house (around that most common site for financial discussions - the kitchen table) and, of course, you are welcome to take the King County Water Taxi from downtown Seattle out to visit Vashon and join me around our kitchen table or, weather permitting, our on our the deck. If necessary, we will also be able to meet at office space in the city (think WeWork, if it is not bankrupt at the time), with sufficient advance planning.
You may also know that I am a big fan of wining-and-dining, but you really shouldn’t be choosing your financial advisor because they have good tickets to the Seahawks or a big boat on Lake Washington. After all, I want my clients to have the yachts! (That’s a joke from the sidebar). And maybe you don’t want to watch the Seahawks insist on throwing it from the 1-yard line instead of just giving the f-ing ball to Marshawn Lynch! In any event, let’s make sure your hard work and your investments ensure you have the resources (and time) to go to any game or concert you want, not just the ones your financial advisor invites you to. -
Answer: This is really a key question that, truthfully, can’t be addressed in some FAQs that are designed to be broadly applicable and into which I have liberally sprinkled jokes and rants. But, fundamentally, I believe that a lot of clients will be better off engaging with me for hourly financial planning, from a purely financial perspective.
Of course, as Hamlet says: “ay, there lies the rub”, for this is not a purely financial decision. Or rather, there are factors in this decision beyond simply “what is the cost of X vs. Y?”. And there are various scenarios which would suggest to me that portfolio management might be right for you, despite my overall belief that hourly financial planning can work for many clients. Here are some examples of clients who might be better off with portfolio management: clients who may be susceptible to “paralysis by analysis”, clients who are excessively conservative or risk-averse; clients who are inclined to take excessive risk or act impulsively (or worse, vacillate between the two!); clients who (for various reasons) want to purposefully handcuff themselves (i.e. to prevent tendencies they recognize within themselves or prevent others (family members and friends, most commonly) from being able to influence them). I do want to highlight that (with obvious exceptions) “not having enough time” is likely a surmountable problem and there may be approaches that will work for you which are more “set-it-and-forget-it”, allowing you to perhaps avoid full portfolio management (and the fees that go along with it). But in any event, I would be happy to discuss these concerns (or others) with you and am always happy to work with you to find the best way to address your needs at the lowest total cost (financial and otherwise) to you. Even if that means I suggest that we may not be the best match!
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Answer: Yes! This is true (although obviously you should not be relying on investing advice from the wallstreetbets subreddit, despite the fact your nephew made $25,000 on Gamestop - just enjoy the memes). But it is true that the information is out there. I know you can read. And use the internet! After all, here you are, at the bottom of a quite verbose FAQ section of a hard to find website. And if you have the time and inclination to dive into those resources (as well as some other good and free resources on the web - for example, www.portfoliovisualizer.com is pretty amazing), then you are certainly going to be knowledgeable enough. But for most people, and certainly for most of my clients, problems do not arise because they are not smart or not knowledgeable enough.
But ultimately the reason I started an RIA is that I know that not everyone cares or is interested enough to dive in (in addition to their real job, raising their children, finding the best surf break in the PNW, taking care of their parents, etc.). The key is implementation…or consistency…or focus…or some other idiosyncratic thing which might interfere with your efforts and, therefore, ultimately interfere with you achieving your financial goals (in a comfortable and cost-effective manner).
And if I am recommending things, I would be remiss not to throw out some good books that you might want to read as well. Like Philosophy of Money by Morgan Housel. Or A Random Walk Down Wall Street by Burton Malkiel. Or Enough by John Bogle. Also, some other great reads, though now we are stretching the limits of “books about investing”, would be, Debt: The First Five Thousand Years by David Graeber, Capital by Thomas Piketty, or When Genius Failed: The Rise and Fall of Long-Term Capital Management, by Roger Lowenstein.
After all, I suspect that if you are still reading all the way down here, there is at least the chance you believe that you could benefit from some assistance; for example, you are looking for someone to help execute on a jointly developed investment plan or believe you might benefit from someone holding you accountable and providing the gentle “nudges” (Also let me recommend Nudge:Improving Decisions About Money, Health, And The Environment by Richard Thaler and Cass Sunstein) that you need so you can follow through and execute on your own plan. Or perhaps you are simply looking for an advisor you can trust who can double check your thought process, confer or strategize with you on some big decisions, keep you up to speed on all the relevant tax law changes, make sure your retirement plan is solid and, perhaps, be ready to step in to help your partner if the worst happens to you. If you need any of these things, or think you might benefit, I’d encourage you to give me a call. -
Answer: No. Although I am a lawyer, my estate planning assistance does not include preparing the actual legal documents that we need to put in place (e.g. wills, POAs, trust documents, etc.). You will need a Trusts & Estates attorney to prepare the actual documents. However, I will assist in all the other aspects of the estate planning process, including coordinating closely with your attorney (and/or CPA) to devise and implement the estate plan.
I tend to believe that the most important part of Estate Planning is not the drafting of documents (experiencing the process of drafting legal documents countless time). Far more important than the documents is (i) actually deciding to do an Estate Plan, (ii) devising the correct approach for you, your family, and your preferred charitable activities, (iii) the initial implementation of the estate plan, and, not to be forgotten, the (iv) the continued evaluation and updating of the estate plan. Each of these aspects are more closely related to the overall financial advice I will provide; and this can save you substantial amounts of money when compared to having a trusts and estates attorney (who will be charging a much higher hourly rate) attempt to guide you through the entire process starting with zero knowledge of you, your finances, and your family.
Wow, that was a lot of reading…Do you have any more really long quotes about finance, investing or the stock market?
Answer: Ok, Ok. I think I can sense the sarcasm in that question. It seems that, perhaps, I’ve overdone it a bit with all my quotes and song lyrics. (If you are serious, we are going to get along just swimmingly!) I am going to be saving a lot of good quotes to include with my blog posts which (spoiler alert) are basically going to be the monthly newsletter that is referenced at the bottom of each page. By the way, two of my favorite (and very long) quotes about investing (or gambling) are at the bottom of this FAQ page and at the bottom of the “Contact” page. The latter one is from the very first book about investing and the markets, written in Spain in 1688.
“It’s a dangerous business, Frodo, going out your door. You step onto the road, and if you don’t keep your feet, there’s no knowing where you might be swept off to.”
“It is my belief that nearly any invented quotation, played with confidence, stands a good chance to deceive.”
“You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that’s your base, get me? That’s your fortress of fucking solitude. That puts you, for the rest of your life, at a level of fuck you. Somebody wants you to do something, fuck you. Boss pisses you off, fuck you! Own your house. Have a couple bucks in the bank. Don’t drink. That’s all I have to say to anybody on any social level.”