Measuring stick

[LivingAlmostLarge]

A friend went to a financial planner who said they are doing great. In excellent shape and would retire with millions if they continued on their path. But what he said made me a little wary, but she asked me if I thought his advice sound.

First advice, you can carry credit card debt as long as it's not more than 50% of your liquid cash. I don't get this at all, but she thought it sounded great. They only owe like $10k or something.

Second, you can borrow from CC to get a home down payment, again I don't get this advice.

Third, I asked her if they have 5x the amount of their income saved for retirement. Answer - no. They make $175k/year single income, one kid, and ages 42 and 36. I think they have $250k in retirement maybe, they have maybe $70k in cash and want to buy a home for $600k.

Are they on track? Is this advisor full of it?

[bjl584]

I'd tell them to find a new advisor. I wouldn't take any advice from someone that advised me to put a house downpayment on a CC or to not worry about carrying a balance around.

I don't know what their advisors motivation would be for making such statements or for having such beliefs. Strange.

[ltj2010]

I would look for another financial planner also. If your financial planner is telling you that you can keep a credit card or to use one to put a downpayment on a house is a bad planner. They seem like they are doing good otherwise but they should have no need for a credit card.

[kork13]

....wow. That guy's crazy. Yes, it is factual that you CAN carry 50% (and more) of your stockpiled cash, income or any other measure. Is it a good idea? NEVER! That's lunacy. And borrowing from a CC to make a home downpayment? Sure, you CAN do it, but you'll pay over 15% interest to do so. This guy needs to get shown the curb quickly. If that's the kind of "advice" he's giving, I'd consider him dangerous.

[asmom]

They definitely need a new advisor. I wonder what his fees are?

[krantcents]

I disagree with the advice! I would never borrow from my credit card because of the high interest rate. In addition to borrow for a down payment for a house is highly unusual. I agree with everybody else, find a new financial advisor.

[jpg7n16]

Originally Posted by LivingAlmostLarge

Are they on track? Is this advisor full of it?

Full of it - looks like any technique he can use to make sure they keep as much invested as possible.

CC debt? Sure! (as long as you don't sell your investments to pay them off)
Down payment? Just don't sell these investments to get enough for a down payment, why not use the CC instead? Please don't take assets away from our firm!


$20 says that his fee is based on assets under management, and he's doing whatever he can to make sure they keep those assets at his firm. Even if it means doing things that are not in the client's best interest.

No self respecting planner should EVER advise people that way.

What rationale did he give for his advice??

[jteezie]

Wow. How is this person a financial adviser?

At that income level, they should have a net worth of over 1 Mn by now, maybe 2 Mn.

[LivingAlmostLarge]

A guy their company pays with a brokerage I guess. Helps lots of drs.

[thekid]

Originally Posted by jpg7n16

Full of it - looks like any technique he can use to make sure they keep as much invested as possible.

CC debt? Sure! (as long as you don't sell your investments to pay them off)
Down payment? Just don't sell these investments to get enough for a down payment, why not use the CC instead? Please don't take assets away from our firm!


$20 says that his fee is based on assets under management, and he's doing whatever he can to make sure they keep those assets at his firm. Even if it means doing things that are not in the client's best interest.

No self respecting planner should EVER advise people that way.

What rationale did he give for his advice??

My thoughts exactly.

[photo]

Not only is the advisor giving lousy advice, but it almost sounds like he is totally incompetent.

With an annual income of $175,000, the couple should have a lot more saved up. But if they're wanting to buy a house for $600,000, it sounds like they have expensive tastes and don't live well below their means. They can afford to do that, but their long-term wealth will be a small fraction of its potential.

[alphadore]

I wouldnt also borrow from the credit card due to high interest rates.