Most people recognize that a 401(k) is one of the very best retirement programs available. If your company offers one, you should definitely take advantage of it. It allows for more generous contributions than most other plans available to employees, and often comes with an employer matching contribution. But what most people are less aware of is that there are 401(k) limits for highly compensated employees.
Understanding 401(k) Contribution Limits
The main attraction of 401(k) plans is the amount you can contribute. For 2018, that $18,500, up from $18,000 in 2017. You can also make a “catch up” contribution if you’re 50 or older. That adds another $6,000 to the contribution. If your employer has a matching contribution, it turns into a serious wealth accumulation scheme.
For example, let’s say you make the full $18,500 contribution. But you’re 50 years old, so you can add another $6,000. That’s $24,500 coming from you. Your employer has a 50% match, and contributes another $9,250, and you’re already fully vested in the plan. That brings your total contribution for the full year up to $33,750.
That’s the kind of money that early retirement dreams are made of. It’s also why 401(k) plans are so popular.
Additional Limits for Highly Compensated Employees
As attractive as that looks, there are serious limits on the plan if you fall under the category of highly compensated employee, or “HCE” for short.
The thresholds defining you as an HCE are probably lower than you think. I’m going to give the definition in the next section, but suffice it to say that if you fall into this category your 401(k) plan suddenly isn’t as generous.
In the simplest terms, contributions made by HCE’s can’t be excessive when compared to those of non-HCE’s. For example, if the average plan contribution by non-HCE’s is 4%, then the most an HCE can contribute is 6%. We’ll get into why that is in a bit. But if you make $150,000, and you’re planning to max out your contribution at $18,500, you may find that you can only contribute $9,000. That 6% of your $150,000 salary.
This is how the HCE provisions can limit 401(k) plan contributions by highly compensated employees.
If you’re determined to be an HCE after the fact – like after you’ve made a full 401(k) contribution for the year – the contribution will have to be reclassified. The excess will be refunded to you, and not retained within the plan. An important tax deduction will be lost.
Here’s another little wrinkle…an HCE isn’t always obvious. The IRS has what’s known as family attribution, which means you can be determined to be an HCE by blood. An employee whose a spouse, child, grandparent or parent of someone who is a 5% (or greater) owner of the business, is automatically considered to be a 5% (or greater) owner.
Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
For the preceding year, received compensation from the business of more than $120,000, and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.
Boiled down then, there are three numbers to be aware of – 5% (ownership), $120,000 (income), and 20% (as in, you are in the 20% highest paid people in your company).
Right away, I think I know what’s going through your mind: $120,000 is highly compensated? I know, right? In much of the country, particularly the big coastal cities, like New York and San Francisco, that’s barely enough to get by. But this is just where the IRS drew the line, and we’re stuck with it. If I were to guess, I’d say the base is probably a number set years ago, it’s never been adequately updated.
The whole purpose of highly compensated employee 401(k) (HCE 401(k)) is to prevent higher paid workers from getting most of the benefit from employer-sponsored retirement plans. After all, the higher your income, the more you can pay into the retirement plan. An employee being paid $150,000 per year can contribute a lot more than someone making $50,000. The IRS regulation is designed to reduce this imbalance.
I may be guilty of giving you more information here than you want to know. But this gets down to the mechanics of the whole HCE thing. If you’re an employee, you don’t have to worry about this – your employer will perform these tests. But it might be important if you are the owner of a small business, and need to actually perform the test yourself. If you don’t have an appetite for the technical, feel free to skip over this section.
401(k) plans must be tested to make sure the contributions made for lower paid employees are “proportional” to those made for owners and managers who fit under the category of highly compensated employees.
ADP and ACP Tests
There are two types of tests:
Actual Deferral Percentage (ADP) tests, and
Actual Contribution Percentage (ACP) tests
ADP measures elective deferrals, which includes both pretax and Roth deferrals, exclusive of catch-up contributions, of both highly compensated employees and non-HCEs. Using this method, the participants’ elective deferrals are divided by their compensation, which produces the actual deferral ratio (ADR). as calculated for both HCEs and non-HCE employees. (Stay with me now!)
The ADP test is met if the ADP for eligible highly compensated employees doesn’t exceed the greater of:
125% of the ADP for non-HCEs, OR
The lesser of 1) 200% of the ADP for non-HCEs, or 2) the ADP for the non-HCEs, plus 2%.
Then there’s the ACP test. It’s met if the ACP for highly compensated employees doesn’t exceed the greater of one of the following:
125% of the ACP for non-HCEs, OR
The lesser of 1) 200% of the ACP for the group of non-HCEs, or 2) the ACP of non-HCEs, plus 2%.
Are you still with me???
Notice that on each test, there’s the provision of “plus 2%”. That’s significant. The average 401(k) contributions of HCEs in the plan cannot exceed those of non-HCEs by more than 2%. In addition, collective contributions by HCE’s cannot be more than twice the percentage of non-HCE’s contributions.
One of the biggest problems with non-discrimination tests is that the results can be exaggerated if non-HCEs make relatively small percentage contributions, or if few participate in the plan.
As a highly compensated employee, you might max out your contributions every year. But employees who earn more modest incomes may go for minimal contributions. That can skew the results of the testing. Unfortunately, there’s no easy way around that problem.
What Happens if Your 401(k) Plan Fails the Test?
This is where the situation gets a bit ugly. The test can be performed within 2 ½ months into the new year (March 15) to make the determination. They’ll then have to take action to correct it within the calendar year. If the plan fails the test, your excess contribution will be returned to you. You’ll lose the tax deduction, but you’ll get your money back and life will go on.
There’s a bit of a complication here too. The excess contribution to the plan during the last tax year will be refunded the following year as taxable income to the HCE. That means that when you get your excess contribution refund, you’ll need to put money aside to cover the tax liability. Better yet, make an estimated tax payment to avoid penalties and interest. That’ll be important if the excess refunded is many thousands of dollars.
What happens if the problem isn’t identified and corrected within that timeframe?
It gets really ugly.
The 401(k) plan’s cash or deferred arrangement will no longer be qualified, and the entire plan may lose its tax qualified status.
There’s a bit more to this, but I’m not going to go any further. This is just to give you an idea as to how serious the IRS is about an HCE 401(k).
If you’re a highly compensated employee, are there any strategies to reduce the impact? Yes – none as good as being able to make a full tax-deductible 401(k) contribution, but they can minimize the damage.
Make nondeductible 401(k) contributions. You can still make contributions, you’ll just lose the tax deduction. That’s isn’t a complete disaster though. Those contributions will still generate tax-deferred investment income.
Make a 401(k) catch-up contribution. 401(k) catch-up provisions aren’t restricted by highly compensated employee rules. This offers potential relief – providing you’re 50 or older. 401(k) plans come with a catch-up provision of $6,000 if you’re 50 or older. If you’re determined to be highly compensated, you can still make this contribution.
Have your spouse max-out his or her retirement contribution. That is, if they’re not also considered a highly compensated employee.
Set up a Health Savings Account (HSA). This isn’t a retirement plan, but it will provide tax-deferred savings. That will help you build up a plan to pay health costs in your retirement years. For 2018 you can contribute up to $6,900 (married) or $3,450 (single). You get a tax break on your contribution.
Save money in taxable accounts. Naturally some sort of tax-sheltered savings plan is always preferred, especially if you’re seriously limited in your 401(k) plan. But this option should never be ignored. If you’re a highly compensated employee, but your retirement contributions are limited, you’ll need to do something to make up the difference.
Saving money in taxable accounts is a solid strategy. There are no limits on how much you can contribute. And even though you don’t get a tax break on the contributions or the investment earnings, you’ll be able to take money out as you need it, without having to worry about paying taxes on it.
The Humble IRA to the Rescue
An even simpler option is just to make an IRA contribution. There’s nothing fancy here, but if you’re a highly compensated employee, never overlook the obvious. There are three ways you can do this:
Make a contribution to a traditional IRA. Virtually anyone at any income level can make a contribution. But the tax deduction for a contribution – if you’re already covered by an employer plan – phases out at $121,000 for married couples, in $73,000 for singles . But if HCE status limits your 401(k) contributions, this will be a way to take advantage of tax deferral of investment income. Contributions aren’t nearly as generous as they are for 401(k) plans, at djust $5,500 per year (or $6,500 if you,re 50 or older), but every little bit helps.
Make a contribution to a Roth IRA. You can make a contribution if your income doesn’t exceed $135,000 (single), or $199,000 (married). There’s no tax deduction with Roth IRA conversions, but you will have deferral of investment income. Best of all, once you retire, withdrawals can be taken tax-free.
Make a non-deductible traditional IRA contribution, then do a Roth conversion. If you do, you can avoid the tax liability of the conversion. But you’ll be converting tax-deferred savings into tax-free with the Roth. One of the biggest benefits of this strategy is that there’s no income limit. Even if your income exceeds the thresholds above, you can make a nondeductible contribution to a traditional IRA, and then convert it to a Roth IRA.
Final Thoughts on 401k Limits for Highly Compensated Employees
If you’re an employee of a large organization, your employer has probably figured out how to avoid the HCE problem. It’s more of an issue for smaller employers. If you are the employer, this is a situation you’ll need to monitor closely. Your plan administrator should be able to help.
There are two of the ways to fix the problem. You can offer a safe harbor 401(k) plan, which is not subject to the discrimination tests. Otherwise, you can provide a generous employer match. The match can boost employee participation in the plan to well over 50%, which often fixes the HCE problem.
But if you’re a highly compensated employee in a small company, you won’t know it’s a problem until you get notification from your employer. That will come in the form of a return of what is determined to be your excess contribution, and a potential tax bill as a result.
Are you considered to be a highly compensated employee, or have you been in the past? Did you get hit with a refund and a subsequent tax bill? What are you or your employer doing to fix the problem?
The following is a real-life story submitted by a fellow blogger.
Creating long-term wealth in real estate investing is about understanding the rules and not going broke.
I owned seven houses by the time I was 24-years old. I was all-in on the dream of real estate riches and driving a Porsche Boxster. I was pulling in almost six-figures a year from rents and a full-time job.
I still believe wholeheartedly in the power of real estate as a long-term generator of wealth.
I haven’t quite built my real estate empire back to its former glory, but I’ve created a consistent source of cash flow that will grow over time.
If you’ve ever dreamed of starting in real estate investing, dreamed of making millions in property, you need to avoid the scams and myths sold by the infomercial salesmen.
You need to understand the seven real estate rules which will create long-term wealth.
How I Got Started in Real Estate
I started as a commercial real estate agent during my third year of college.
I had always been drawn to stories of real estate riches by developers like Sam Zell and Donald Trump. I loved the idea of taking a piece of raw land or a building and turning it into a cash register.
Selling commercial real estate was only the beginning. I wanted to be a developer, an investor, an owner.
The market for commercial properties had yet to rebound in 2002 but the residential market was booming. I saw the promise of fast appreciation and easy money through financing and decided to make the switch.
I started buying single-family houses with 10% down on money I saved while serving in the Marine Corps and when I got my first job in corporate finance. I focused on… ‘inexpensive neighborhoods’ where I could buy run-down properties for half the price I’d have to pay in nicer parts of town.
I figured I could still get decent market rents on houses which cost ten or twenty grand less, so the returns would be larger.
That would end up being my first mistake.
But I was hungry so I busted my butt fixing up properties, refinancing to cash out on the improved value and putting the money into another property.
I was going to be rich.
My Real Estate Empire Starts to Crumble
In the space of three years, I built up to six properties, plus my own home. At one point, I estimated my properties at just over half a million dollars with about a fifth of it in equity.
Maybe I wasn’t rich by some definitions, but it wasn’t bad for a 24-year old just out of college.
Then everything started to fall apart.
My six rental properties were producing consistent cash flow, but only because I was doing most of the work myself. I was my own electrician, painter, and property manager. You get the idea.
The Des Moines market is fairly small and it’s difficult finding a property manager to handle single-family properties.
I found a few companies, but all wanted to charge upwards of 15% on the gross rental income. This would have meant paying out almost all the cash flow from the properties since mortgage payments ate up most of the rents.
Property management was out so I was stuck doing it myself along with juggling a full-time job and night classes for my master’s degree.
The downside to less expensive properties on the other side of the tracks was constant tenant headaches, complaints by city housing inspectors when the properties were abused, and missing work evicts a tenant in court.
I started neglecting my properties.
Like a stock investor in a bear market, I avoided even thinking about my houses. When a tenant moved out or evicted, the property might sit vacant for a month before I spent the week necessary to remodel it and get it back on the market.
Empty houses meant I was paying out-of-pocket to cover the mortgage payments, and it couldn’t last.
I started missing loan payments and destroyed my credit score. That meant no more refinancing and no more easy money from the bank.
Burned out and completely disillusioned, I started selling properties for whatever I could get.
It was 2006 and the market was starting to drop out of the real estate bubble so sometimes it meant selling a house just to pay off the mortgage.
Real Estate Investing Myths I Learned the Hard Way
I still own a couple of rental properties and believe in the long-term value of real estate investing. Unfortunately, there are a lot of myths out there, too many 3 a.m. infomercials selling hot strategies to get rich quick.
First, real estate is not a get-rich-quick investment.
The real stories of real estate riches are created over decades, even generations. Donald Trump’s father was already a successful real estate developer and Sam Zell has been managing properties since the early 1960s.
The average annual return on commercial real estate equity is 12.6% according to the National Association of Real Estate Investment Trusts (NAREIT) on data back 40 years.
That’s a solid return, but not something that’s going to make you a millionaire overnight.
The only people getting rich quick on real estate investing are those selling the strategies to unsuspecting investors.
Another myth in real estate investing is that it’s a cash register, just ring the bell and watch the cash flow.
You might be able to hire a property manager, turning your properties into passive income, but this is out of the question for a lot of individual investors. There just isn’t enough cash flow during the early years of growing your real estate empire to afford professional management.
7 Rules to do Real Estate Investing (the right way)
Few investments have created as much family wealth as real estate but it’s easy to fall for the myths and scams. Making money with rental properties, I mean creating real assets that will make you long-term rich means avoiding these myths.
Real Estate Rule #1 – The first thing you need to do is learn how to find the fair value of a property before you buy it. Any investment can be a good deal for the right price but it’s not always easy finding that price for real estate.
Find at least five similar houses that have sold within the last year in the same neighborhood. You can usually find this through the county assessor’s office or through sites like Zillow.
Divide the sales price of sold houses by their square feet and then average the number.
Multiply this average price per square foot by the living space for the property you want to buy for a fair value estimate of how much it’s worth.
Real Estate Rule #2 – Estimate how much managing the property is going to cost down to every detail.
This means averaging out market rents in the area, deducting for vacancy and property management. Until you get a good idea of other costs like utilities and maintenance, be conservative with your estimates.
Prepare three estimates of your cash flow for each property. One estimate should calculate all costs at the worst-case scenario, the highest you think they could be over a given year.
Be realistic about the time you’re able to put into managing your own properties. Consider building in at least part-time help with maintenance or management.
Real Estate Rule #3 – Buy only quality properties in which you’d be comfortable living. You’ll get better tenants and will have lower vacancy. You never know, if things don’t go as planned, you might end up living in one of your rentals.
Real Estate Rule #4 – The 3 a.m. infomercials will tell you the secret to real estate riches is to put on as much debt as possible and buy as many houses as quickly as possible.
This strategy makes for exciting PowerPoint presentations but only leads to burnout and bankruptcy.
Real Estate Rule #5 – Take it slow, buying a couple of houses in your first year and getting a feel for how much it takes to manage real estate. You’ll build a long-term business and avoid getting in over your head.
Find other property investors through real estate agents, contractors and online.
Try to find people with skills in different aspects of real estate from agents to contractors, lawyers, and property managers. Putting your skills together means everyone doesn’t have to be an expert in everything.
There are different ways to set up the group from formal associations where you pool your money for investments to informal groups where you simply trade ideas and help each other with services.
Real Estate Rule #7 – Finally, diversify your real estate investments as much as possible.
The cost of a single property means many individual investors are stuck owning one property type in one market. That means all the risk of a downturn in the type of real estate or within the local market.
Buy different property types including residential, office, storage, leisure and warehouse.
Buy in different markets across the United States if possible.
One way to diversify your direct real estate portfolio is through owning REITs or real estate crowdfunding which allows you to buy an equity position with a few thousand rather than tens of thousands.
Like any investment, real estate can make you wealthy if you know how to avoid the biggest traps.
Being a long-term investor in property is about understanding the rules that will keep you from losing your money like I did. Don’t let the story keep you from following your real estate dreams though. I still invest in rental properties and will be rich again, someday.
Joseph Hogue worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs five websites in the personal finance and crowdfunding niche, makes more money than he ever did at a 9-to-5 job and loves building his work from home business.
You might be under the illusion that financial success is all about smarts.
Nope. Think again.
You can be the smartest mathematical guru in the world and find yourself broke.
Why is this?
Don't all the smart people get the best-paying jobs and a Lamborghini or two?
Isn't it the smart people who can shrug their shoulders at briefcases full of cash because their portfolios are too big for the hassle of making the deposit?
Well, not exactly.
I'll let you in on a little secret.
You know what the secret sauce is to financial success?
It's grit, and I'm going to show you how to get it.
Why This 4️⃣ Letter Word Is the Most Important Trait You Need to Succeed - YouTube
What's Grit Anyway?
Look it up in the dictionary and you'll find words like courage, resolve, strength, and character.
I don't know about you, but when I hear that someone has grit, I picture a tough, rough war hero pressing forward despite unspeakable odds.
I picture a weathered sailor in the perfect storm riding the crest of a 100-foot wave destined for glory. I picture someone who doesn't stop even in the face of danger or failure. I picture a Soldier of Finance.
That's grit, my friends.
The Importance of Grit
The interesting thing about grit is that it's actually one of the most important qualities to have in academics. Smarts only takes you so far – grit takes you beyond the limits of your mental abilities.
In one study, Duckworth found that smarter students actually had less grit than their peers who scored lower on an intelligence test. This finding suggests that, among the study participants — all students at an Ivy League school — people who are not as bright as their peers “compensate by working harder and with more determination.” And their effort pays off: The grittiest students — not the smartest ones — had the highest GPAs.
Hard work. Determination. These are ideals that have proven themselves to be valuable over and over again.
If you want to do anything notable in life, it's probably going to require some grit. Click To Tweet
Tenacity is highly valuable. And when it comes to finances, you're going to need a huge helping of it.
Financial Success and Grit
I believe there is a strong correlation between financial success and grit. Let me explain.
Americans are up to their eyeballs in debt. You should hear some of the stories I hear on a regular basis. While many of my clients come into my office to talk about their investments, inevitably we get on the subject of debt – which genuinely needs to be addressed as part of their overall financial strategy.
Student loans, credit cards, mortgages, business loans – every piece of debt my clients hold is a liability that takes away from their ability to invest and make money on their money. Many times, debt becomes an overwhelming burden in the lives of my clients, and they can't see a way out.
The problem with debt is that while it's pretty easy to learn how to get out of it, doing so is another matter altogether. It takes well-estabilished grit to sacrifice the majority of discretionary expenses and put in the extra hours at work to have enough money to make a real dent in the problem of debt.
Whether you're trying to overcome burdensome debt, find a suitable career, or develop a well-balanced investment portfolio, you're going to need some serious grit.
The truth is financial success requires a deep commitment to a set of ideals not just at the beginning of the journey, but over the long haul through everything that life throws in one's path.
How to Grab Some Financial Grit
How do you develop grit in your financial life? I have a few suggestions . . . .
1. Work up to larger goals.
If you want to develop some financial grit you can't start out by tackling nearly impossible goals. If you do, failure will stomp on your dreams and you might slip into inaction.
Instead, start on a few small, attainable financial goals. For example, you might begin by creating a budget that actually works. Don't try to become an overnight millionaire, start wherever you're at on your financial journey.
If you feel you're timid and don't take many risks, it's time to change how you view yourself. If you tell yourself day after day that you're a nobody and you're not going to amount to anything, well, you'll probably fulfill your own prophecy.
Decide who you're going to become. Who do you want to be? If you could start fresh, what would you do?
Never let who you've been determine who you become. Do you think I was born with my own business and a career I love? No way! I had to fight to get to where I am today. The good news is you can do the same.
3. Practice getting back up after failures.
If you can learn to get back up after failures, you'll find some grit.
Failure is often found on the path to success.
Theodore Roosevelt once said:
Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure . . . than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.
Don't be afraid of failure! It will happen. Develop some grit by pressing on.
4. Develop a strong support system.
Sometimes the only way you can get through a difficult situation is with the help of others. Your grit coupled with the strength and wisdom of others might just be the recipe to get you through rough times.
That's why I highly recommend developing a strong support system. Regardless of how much grit you can muster up, there will be occasions you're going to need to rely on a friend or loved one.
When you do, you'll realize that not only can others help you get through a difficult financial situation like going through a costly divorce, enduring a stock market crash, or watching your business dissolve into nothing, but people can encourage you to get gritty and march forward.
Financial grit will help you find a great deal of financial success. Remember, it's not about smarts, it's about how determined you are to reach your goals and stick with the plan even when trials and tribulations come your way.
If you’ve ever shopped for insurance, you know it can be a momentous task. There are a handful of different policies you need to buy; auto insurance, life insurance, health insurance, and others.
Not only do you need several plans, but there are so many companies to choose from; how in the world are you supposed to sift through all of them?
Luckily, there are some tools you can use to make the process as simple as a few clicks. This is where PolicyGenius comes in.
They let you get dozens of quotes from different companies for all your insurance coverage needs, all in one place.
There are plenty of websites out there which let you get access to a lot of quotes, but you also give a ton of phone calls as well. Feel free to put your number in, but expect to get several phone calls a day from pushy sales salespeople.
This is one of the things which sets PolicyGenius apart from the other sites out there. You can get your quotes without having to listen to countless sales agents.
They are becoming a one-stop-shop for insurance needs. They can help you find just about any possible plan out there.
Behind PolicyGenius: A Brief History
PolicyGenius is relatively new to the insurance market.
They were founded in 2014 with the goal of making the insurance purchasing process as simple as possible.
According to their website, their business started with the question:
why is buying insurance such a frustrating experience?
To this point, they aimed to answer the question. PolicyGenius works with over 25 insurance companies and can bring all of the quotes directly to you.
All of their brokers are licensed, and they can sell insurance in all 50 states. Regardless of where you live, PolicyGenius can help you find what you're looking for.
When you log onto the PolicyGenius, they make it very easy to get quotes.
Their website is clean and comfortable to use. Even if you have minimal technological skills, you'll be able to get quotes. If you have any problems, they have a chat feature you can use to walk you through the process.
To get quotes, all you have to enter is some basic information, like
your first name
Depending on the type of plan you're looking for, they may ask you some additional questions.
Then they will ask you a short set of questions. These questions are going to help them give you more accurate quotes. They are basic questions like tobacco usage, your health, and other simple questions.
After you've entered all the personal info and answered the questions, you will get access to the personalized quotes.
Your insurance matches will pop up, and you can access those plans through their website. If you aren't ready to go through with the process, you can save you results, or you can adjust your coverage amounts or policy type.
If you're going to buy health insurance through PolicyGenius, the process is going to be a tiny bit more complicated (don't worry, it's still very simple). You'll still have the same basic personal questions (name, ZIP code, etc.), but they will also need some additional information, like your spouse info, if you have children, budget, and much more.
PolicyGenius wants to know what your “must-haves” and “nice to haves” are. This could be different things from deductibles, coverage limits, and much more.
Your life changes constantly. Your insurance needs can change as well.
You could have some holes in your insurance coverage. Not having proper insurance protection could leave you with some massive debts or expenses. You never know what's going to happen, which means you should take the time to evaluate your insurance products or your insurance needs.
PolicyGenius understands the importance of insurance plans and how confusing the process can be.
That's why they created the Insurance Check-Up Tool.
This tool will ask you a dozen different questions and can give you a blueprint of your insurance needs and the areas you already have covered. They will give you an insurance “to-do list,” and they help you check off the things on the list.
If you're worried about giving PolicyGenius your information, don't worry, they have a “No Shenanigans Guarantee.”
They promise they will only use the information to give you insurance advice and will keep your information secure.
After you've answered their questionnaire, PolicyGenius will break up your to-do list into three separate categories:
You Don't Need
You can probably guess which each category means. They make it simple to decipher their to-do list, and they also make it easy to get the insurance plans to complete the to-do list.
Advantages of Using PolicyGenius
There is a reason PolicyGenius has such excellent reviews from their previous customers. While I was researching the company and looking at reviews, I saw consistent five stars and rave comments about PolicyGenius.
One of the main advantages of PolicyGenius is how quick and easy it is to get your quotes.
You can receive your personalized quotes in a matter of minutes. If you tried to do all of this yourself, you could spend hours and hours on the phone.
Unlike working with a traditional insurance company, you don't have to worry about working with a biased agent.
Traditional agents work for one company, which means they are going to say whatever they have to get you to buy a plan from them, which could lead you to higher rates.
With PolicyGenius, you're going to impartial advice. They aren't working for a specific company; it's their goal to get you the most affordable insurance policies out there.
Not only do you get the unbiased quotes and advice from their quote tool and agents, but you also won't have to sit through the sale pitch.
Let's say you're looking for life insurance or auto insurance quotes. If you purchase the plan through a traditional insurance company, some agents are going to try and sell you additional plans or extra coverage you don't need.
Should you Use PolicyGenius?
Now for the big question: should YOU actually use PolicyGenius?
Before I answer this question, you should realize the importance of comparing insurance quotes. Regardless of how you do it, with PolicyGenius or one of the other options, you want to make sure you're surveying the entire marketplace.
Every insurance company is different, and all of them have different rating systems, which means you'll get drastically varying rates depending on the company you choose.
Finding the best company for you is the difference in getting an affordable plan or one which will break your bank every month.
With life insurance, for example, the rates you get could rates which are hundreds of dollars apart. If you're looking for several insurance plans, you're about to take on a couple of serious investments.
Now, back to the main question, should you use PolicyGenius?
The short answer is, maybe.
Yes, they help you compare dozens of insurance companies at once, but the problem is there are plenty of insurance companies they don't work with.
PolicyGenius works for some of the highest rated companies out there, and they can give you excellent coverage. Their algorithm for searching through insurance companies is much better than the competition, but as an algorithm, there is only so much it can do.
One of the pitfalls of PolicyGenius is if you're looking for life insurance. You may not be in the best health, which can lead to some expensive rates if you go through PolicyGenius.
The main disadvantage here is they don't work with some of the more “specialized” companies.
There are a lot of applicants who assume they can't get affordable life insurance because of their health and the quotes the received, but it isn't true. There are plenty of insurance companies who work with high-risk applicants and offer cheaper coverage.
Another area where PolicyGenius falls shorts is with key person insurance. PolicyGenius can connect you with just about any kind of insurance, but they don't offer life insurance geared towards businesses owners or any key man insurance.
These plans are becoming more and more popular, but PolicyGenius won't be the best route for finding your plan.
Even with all of these disadvantages and drawbacks, there is nothing wrong with using PolicyGenius. They are a completely legit company which has helped serve thousands and thousands of people.
According to their website, they have helped over 4.5 million people shop for insurance and sold more than $20 billion in coverage. As long as you're the “average” customer, then you probably won't have any problems getting quality and affordable insurance policy.
Using an Independent Insurance Agent
PolicyGenius is not the first company to work with more than one insurance company.
In fact, people have been doing this for a dozen years. There are hundreds and hundreds of independent insurance agents out there.
Some agents work with a lot more companies than PolicyGenius, and the more companies you get quotes from, the more likely you are to get lower insurance rates.
Instead of using PolicyGenius automated tool, I would suggest using a real live independent insurance agent.
Sure, it's not going to be as fast as using their tool, and you'll have to actually talk to someone, but a live agent can get some of the details and information they need to pick the perfect company for you.
There are limitations to a quoting tool, which live independent agents don't face.
As a kid, I had no aspirations of being a business owner or entrepreneur.
I was a baseball card collector investing way too much money in Jose Canseco baseball cards. (That probably ranks as one of the worst investments I’ve ever made but, hey – I was just a kid).
Even going into college, I really didn’t know what I wanted to do when I graduated.
I majored in finance because my dad thought it would be a good major, and I kind of liked numbers.
The self-employment revelation hit me when I read Robert Kiyosaki’s Rich Dad Poor Dad. That really changed my whole mindset, and got me to thinking seriously about becoming an entrepreneur.
7 Crucial Lessons I Learned Starting a Business (How I Survived) - YouTube
After graduation, I was attracted to the financial services industry, because I felt that the income potential there was unlimited. I put in my time doing cold calling seminars – and doing anything else I needed to do to get clients. All went well for the first five years – or so it seemed.
Then another revelation hit me: Even though my income was unlimited, I was still a W2 employee.
That wasn’t exactly the message of Rich Dad Poor Dad, but it did have certain advantages. After all, I didn’t have to worry about who was paying the rent, how much the phone bill was, or what happened if my computer became outdated. My old brokerage firm took care of all that responsibility.
But in the end, that arrangement wasn’t as cozy as it seemed.
My brokerage firm was bought out, creating one of those moments that almost forces you to change direction, and that‘s what I did. Me and three other coworkers took the leap of faith of actually starting our own financial services firm. I was finally – and officially – crossing over from W2 employee status to legitimate business owner.
I was finally self-employed.
It definitely was very exciting, but it was also very scary. I quickly realized I knew nothing about running a business. Sure, I knew how to make cold calls, get new clients, and schmooze with the best of them. But actually running a business was something that I had never been taught in school and really had no experience with.
I’m proud to say that it’s been six years since I made that bold and daring move, and things have worked out like you wouldn’t believe. This is one of those situations where you ask yourself why didn’t I start my own business sooner?
Here’s what I’ve learned in starting and running my own business – maybe these lessons will help you to start your own venture…
1. You wear a lot of hats.
I think I first became aware of this from Michael Gerber’s book, The E-Myth. Gerber talks about how difficult it is for anyone to run a business, and that it goes way beyond just being “good“ at what you do. For example, let’s say that you’re a plumber, and a great one at that – what do you know about marketing your business, pricing your services, ordering equipment, and manage employees?
That’s where most business owners fail.
When it came to starting our business, we had to find a suitable place to rent, and choose and buy office equipment at affordable prices. We had to learn to market ourselves – no small feat since we were a brand new company that no one knew existed. We also had to hire staff and train them to learn our processes.
And we had to do all of this while servicing our existing clients in a way that would make the transition smooth and painless.
Every business is different, including the initial roll out. But the point is, self-employment requires wearing a lot of hats that you don’t need to concern yourself with when you’re on someone else’s payroll. There’s a learning curve involved, and you have to master it in order to succeed. That means learning the various jobs, skills and tasks that you need in order to make your business work.
2. Overhead can kill you.
At my old brokerage firm we had impressive features, like premium office space, high end furniture, expensive pictures on the walls, and a streaming live quote system that could show what 100-plus stocks were doing at any time of the day. All that stuff costs money, and when you start a new business, that’s something that’s in short supply.
But here’s what I learned: Frugality is a virtue when starting a new business.
When you start a business you have to think “shoe string”, and that means finding less expensive ways to do everything. It might even mean doing without a few things. It’s your basic business service that matters most and draws in clients. The rest is mostly window dressing that clients and potential clients may not even notice. Let me give you some examples.
We looked into that streaming stock quote system from the old broker; it cost $300 per month, and that would create instant overhead. But the exact same information could be had on Yahoo Finance for free!. Needless to say, we didn’t sign up for the streaming stock quote system.
We needed a sign for our building. We found one with flashing LED lights that would be really perfect – but it cost roughly $30,000. Not gonna happen! Instead we settled on a sign that could light up at night only, but cost just $3,400. That‘s roughly 10% of what the deluxe sign would have cost.
In the end, it didn’t matter all that much. People aren’t buying your sign – they’re buying your service.
Businesses fail for a lack of positive cash flow more than anything else. The sooner your business starts generating that positive cash flow, the greater your chance of business success. You can give yourself a big, fat advantage by determining from the get go that you won’t spend money on stuff you don’t absolutely need.
3. Select your partners carefully.
We went into our business as a partnership, and that always presents special challenges. My partners were three financial advisors from our former brokerage firm, so we all knew one another on a professional basis. We agreed on how the partnership would be run in advance, including that any major business decisions would require a unanimous voting process.
These weren’t necessarily people I would hang out with after work, but all were individuals I felt I could trust, and who I felt comfortable with on a professional level. It is, after all, a business, so the reasons for having these people as partners was more about business concerns than social factors.
We also committed our partnership agreement to writing. Partnerships don’t always work out, so you have to have written procedures on how to run the business, how to settle disputes, and if necessary, how to handle the departure of one of the partners.
If you’re a sole proprietor, the partnership issue won’t apply to you directly. But anytime you start a business, you will be involved in all kinds of loose and informal partnerships with people you need to rely on. They can be suppliers, vendors, contractors or even major clients. Choose them all wisely, understanding that a bad relationship has the potential to sabotage your business.
4. Work on being efficient. Start processes.
The biggest key to running virtually any business successfully is your ability to concentrate most of your time and effort on the activities that will bring in the most money. That means that you have to minimize the time spent on routine functions.
This is especially true for any service-related industry. Any tasks that are repetitious have to be streamlined so that you won’t be performing them over and over again. We had to come up with processes in our office that would minimize paperwork and administrative tasks.
Personally, I hate doing that kind of work, so we had to create a process flow that would make these as simple as possible. Some of the functions include accepting client checks, making bank deposits, opening new accounts, and conducting annual reviews with existing clients.
You need to identify repetitious functions early in your business, and streamline them immediately.
This is particularly important when starting your business, because building a cash flow has to be your top priority. You have to create a workflow that maximizes efficiency, and enables you to establish that process throughout your business from the very beginning.
5. Make sure you have some paying customers first.
I get dozens of emails from financial advisors across the country who want to start their own practice, probably from reading my posts about the steps I went through in starting my own financial planning practice. What many of these advisors might not realize is that I was in the business for five years before I decided to go out on my own.
Could I have accomplished it sooner?
Perhaps – but having an established client base was huge.
Before you actually start a business, you might want to test it and treat it more like a side hustle. Keep your day job and just see if your business idea has roots. Test it out with family and friends. Test it out with your network. Find out if you actually have something that people are going to pay money for on an ongoing basis.
If you can do that, then at least 51% of the risk will be removed from your business. Not only will you have a cash flow going in, but you’ll also have the benefit of having the confidence that comes from knowing you have it. That may be the single best piece of advice I can give!
American Insurance Group, also known as AIG, is considered to be the world's largest insurance organization. The company has approximately 88 million customers worldwide – both personal and business – including those in the area of life insurance, property casualty, mortgage insurance, retirement services, and aircraft leasing. The company has in excess of 64,000 employees who work in over 90 different countries. Need help finding other forms of coverage, such as burial insurance, auto insurance or health insurance, we can help you find the best companies for your needs.
In 2013, AIG had revenues that exceeded $68.5 billion dollars, and it is estimated that just the firm's property and casualty division alone pays out approximately $100 million in claims each and every business day.
AIG began nearly 100 years ago back in 1919, when Cornelius Vander Starr started a general insurance agency called American Asiatic Underwriters. The company actually had its beginnings in China, however, in the 1930s, the company expanded its operations into Latin America.
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Throughout the years, the insurer further expanded to new markets around the globe, including Germany and Japan, and eventually in the 1950s, it continued its move to the United States via the acquisition of a general insurer.
Throughout the years, AIG expanded into additional product lines – and in the 1970s, the company introduced new transportation, energy, and entertainment product lines in order to serve the needs of various specialized industries.
In the 1980s, the firm further expanded, listing its shares on the New York Stock Exchange (NYSE), and expanding its business lines even further to include mortgage insurance. By the early 2000s, AIG was a leading provider of life insurance and retirement products in the United States. However, by the time the global financial crisis hit in 2008 and 2009, AIG was struggling, and the U.S. government stepped in to support the company.
Over the past several years, AIG has been able to restructure itself – as well as to fully repay its financial assistance from the United States government. It has also been able to re-launch its product and service brand in the insurance and financial marketplace.
Products Offered by AIG
AIG offers a wide range of products and services to both the individual and business markets. In the individual market, insurance coverage products that can be found through AIG include the following:
Accident and Health Insurance – Accidental death and dismemberment insurance can help to offset the financial burden that is faced when a loved one passes away suddenly and unexpectedly in an accident. This type of coverage will typically pay out an additional sum of money if the insured's death is due to an accident, as versus sickness or other natural causes.
Term Life Insurance – Term policies will cover an individual for a set amount of time, such as for 10 years, 15 years, 20 years, or even 30 years. In most cases, term life insurance is very affordable coverage – especially if the insured is young and in relatively good health when applying for coverage. If you are not in the best health and feel that a no medical exam life insurance policy would be best for you, we can help find the carrier to best suit your needs. This is because term life provides only pure death benefit protection, without any type of cash value build up. Term life insurance can be a great way to obtain a high amount of coverage for a low premium cost.
Whole Life Insurance – Whole life is a form of permanent protection. This type of coverage provides a death benefit, along with a cash value component. As its name implies, whole policies are designed to cover an insured for the “whole” of his or her life. This means that, as long as the premium is paid, the coverage will remain in force. The cash value that is associated with a whole life policy is allowed to grow on a tax deferred basis – meaning that there is no tax due on the gain until the time of withdrawal. This can essentially allow the funds to grow and compound exponentially over time. The whole policy holder is allowed to withdraw or borrow cash from the cash value component for any need that he or she sees fit. It is important to note, though, that any unpaid balance at the insured's death will go against the amount of the death benefit that is paid out to the beneficiary.
Universal Life Insurance – Universal life insurance allows policy holders both death benefit and cash value – however, these policies are much more flexible than whole life in that policy holders can choose when to pay their premiums, as well as how much to pay. (This can, however, affect the amount of the death benefit and the cash value within the policy).
Variable Universal Life Insurance – Variable Universal Life Insurance also provides flexible premiums and death benefits like regular universal life insurance policies do. However, the cash value in a variable universal life plan will be tied to the performance of underlying market “subaccounts.” This can make these policies more risky, however, they may also be able to obtain more growth than regular universal life or whole life policies.
Index Universal Life Insurance – With an Index Universal policy, the policy holder will also obtain both death benefit protection and cash value. The cash value's growth will be based upon the movement of an underlying market index such as the S&P 500 or the DJIA (Dow Jones Industrial Average).
Annuities – AIG also provides a variety of different annuities for those who are either in or approaching retirement. These include fixed, variable, and index annuities. Annuities can provide a great way to set aside money for retirement. They can also provide income for retirees – and, depending on the income option that is chosen, they may provide an income that cannot be outlived by the recipient.
Mutual Funds – AIG offers a variety of mutual funds as well. These funds can offer a way to invest in a diversified mix of stocks, bonds, and / or other professionally managed investments with different focuses, depending on the goal, risk tolerance, and time horizon of the investor.
AIG holds high ratings from the insurance company ratings agencies. These include the following:
Standard & Poor's
A company that is rated as A has strong financial characteristics. However, it is somewhat more likely to be affected by adverse business conditions than are insurers that posses higher ratings.
Moody's Investor Services
Insurers that have A ratings provide Good financial security, however, elements may be present, which suggest a susceptibility to impairment at some time in the future.
A ratings are given to companies that have, in the opinion of A.M. Best, an Excellent ability to meet their ongoing insurance obligations.
A+ rated insurers denote a low expectation of ceased or interrupted payments. They indicate Strong capacity to meet policy holder and contract obligations. This capacity may, nonetheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.
Although AIG does offer a nice array of products, and the company has good ratings from the insurer ratings agencies, there are some factors to consider prior to moving forward with applying for coverage through this insurer, as there are a few areas where the company falls short.
First, for applicants who have various types of adverse health conditions, it may be more difficult to be approved by AIG for coverage. Unfortunately, this can be frustrating – especially if you've gone through the long application process, undergone the medical exam, and waited for several weeks for your policy application results.
How and Where to Obtain the Best Life Insurance Coverage
In order to obtain the best coverage for your needs – regardless of your health condition – it is always best to first make comparisons. Any time you are making a major purchase, you want to ensure that you are getting the very best deal – and the same holds true with life insurance. After all, this is a product that you will be counting on to protect those that you love for the long term – so you want it to be the best.
When you're ready to compare policies, benefits, and premium quotes, we're here to help. We work with many of the top carriers in the market place today, and we can get you all of the information that you need quickly and conveniently. We can also answer any additional questions that you may have.
If you're ready to begin seeking the policy and the premium that will work best for your specific needs, just simply use the form on this page.
Purchasing life insurance is a big decision – and you want to have all of your information in place before moving forward, but not making this purchase is a mistake that can hurt your loved ones. So make sure to get this important part of your financial plan taken care of immediately.
Ally Bank, one of the most popular online banks offering some of the highest interest on savings anywhere, purchased TradeKing in 2016. The investment brokerage was renamed Ally Invest, retaining much of what’s good about TradeKing, while putting Ally Bank’s own winning spin on the new entity.
Ally Invest serves 250,000 customer accounts, with $4.7 billion in assets under management. Ally Bank has $70 billion in customer deposits, and is also one of the most important auto lenders in the country, serving more than 4 million customers.
Ally Invest offers both self-directed investing and managed accounts. On the self-directed side, they offer the full range of investment options, with one of the lowest commission fee structures in the industry.
Ally Invest Self-Directed Investing
Here’s a drill down of what they have to offer self-directed investors.
Account types available:IRA accounts and joint taxable accounts; traditional, Roth, rollover, SEP and SIMPLE IRAs; custodial and Coverdell accounts, and certain business accounts.
Investments offered: Stocks, bonds, options, mutual funds, exchange traded funds (ETFs), FOREX and futures. Checking and savings accounts, certificates of deposit and money market accounts available through Ally Bank (see “Ally Bank” section below).
Minimum initial investment: None(!)
Trading fees: There’s no annual fee, inactivity fee or IRA fees. Trading fees are as follows:
Stocks and ETF’s: $4.95 per trade
Mutual funds: $9.95 per trade on no-load funds only (No fee applies on load funds)
Options: $4.95 per trade + $0.65 per contract
Bonds: $1 per bond, subject to a $10 minimum/$250 maximum
US Treasuries: no charge
They also offer preferred pricing for high-frequency traders. With at least 30 trades per quarter, or an account balance of $100,000 or more, stocks are $3.95 per trade. For options, the commission falls to $3.95 per trade + $0.50 per contract.
There are no commissions for Forex trade; Ally Invest earns revenue based on the buy/sell spread.
Customer service: Available 24/7 by phone, email and live chat.
Account protection: Coverage through the Securities Investors Protection Corporation (SIPC) for the $500,000 in cash and securities, including $250,000 in cash. This is protection against broker failure, not against market losses.
Additional coverage is available for up to $37.5 million, including $900,000 in cash. However, Forex and futures accounts are not covered by this insurance.
Mobile app: iOS and Android.
Checking and debit card access: Apex Capital is the clearing agent for Ally Invest. Checking and debit card access to your account through Apex is offered. Annual fees are $20 for checking, and $35 for the debit card.
Ally Invest Self-Directed Investing Trading Tools
Ally Invest has one of the most comprehensive panel of trading tools. This is particularly true when it comes to options trading, not the least of which because it was a strong suit for TradeKing.
But it seems whatever TradeKing offered, Ally Invest improved on it, and added to the menu.
Some of the trading tools offered by Ally Invest include:
Streaming charts. Ally Invest provides six chart types, with more than 90 chart studies and drawing tools. These will help you analyze the performance of stocks, ETF’s and indices. You can also customize settings and utilize interactive charts for prices and studies.
Market and company snapshots. Stay on top of what’s happening with individual companies, as well as what’s happening in the market in general. You can get market stats, news and detailed metrics and insights into individual companies.
Watchlists. Use this tool to follow groups of securities, tracking their market data.
Market data. You can get quotes, charts, high/low prices, dividend dates, news, historical quotes, and peer performance comparisons.
Probability Calculator. With this tool you can use implied volatility to help you determine the likelihood of hitting your targets before making an investment.
Specific for options, Ally Invest has the following tools available:
Profit/Loss Calculator. This tool will help you to get a complete understanding of an option trade’s profit and loss potential. You can review outcomes based on fluctuations in volatility and time.
Options chains. Easily place options trades, even complex multi-leg spreads.
Ally Invest Forex and Futures
This investment option is less popular than individual securities or managed options. But the Forex is actually the most traded market in the world, with average daily turnover of $3.2 trillion.
It’s a specialized investment to be sure, but if you’re familiar with it, Ally Invest can provide you with a fully equipped platform.
Ally Invest enables you to trade more than 50 currency pairs, including gold and silver. What’s more, trades can be made in real time. Ally Invest offers comprehensive research and analysis to help you be a better trader.
Forex and Futures customer service: The hours available are more restricted than for the general platform, but still more generous than many other platforms. Customer service works on a “24/5” basis – 24 hours a day, five days per week. It begins Sundays at 10:00 AM, and ends on Fridays at 5:00 PM – all times Eastern.
Forex and Futures minimum initial investment: You can open account with as little as $250, but Ally Invest recommends a minimum of $2,500 to begin trading. That’s minimum you will need to be able to take full advantage of the account.
Forex and Futures Mobile App: Trade Forex and futures on the go, using your iPhone or Android. The mobile app provides charting tools, price alerts, real-time news and commentary, and the basic features of the web app.
Forex and Futures Tools
Ally Invest offers several tools to help you up your Forex and futures trading game.
Forex and Futures Pratice Account: Ally Invest doesn’t provide this service with the self-directed account, but it is available for Forex and futures. They provide you with a free $50,000 practice account.
They give you full access to the trading platform and tools for up to 30 days. It’ll give you a chance to test your trading skills before going live with real money.
ForexTrader Web: This is the basic trading platform available for both Windows and Mac. It offers real-time position an account information, as well as a fully integrated charting tool.
It also offers a variety of single and contingent order types, such as If/then, If/then OCO and Trailing Stops.
Forex Premium Charting: This is a set of professional grade tools that help you identify and decode Forex patterns and trends.
For example, you can decode multiple indicators for advanced technical analysis, view auto trend line indicator continuation on charts, and customize charts to your own individual preferences.
Ally Invest Managed Portfolios
If you’d like to have at least part of your portfolio professionally managed – or even the whole thing – you can. Ally Invest Managed Portfolios is the Ally Invest robo-advisor, providing algorithm based investment management, similar to what’s offered by other robo-advisors, like Betterment and Wealthfront.
The investment management methodology of Managed Portfolios is typical of Robo advisors. It’s based on modern portfolio theory, or MPT. All aspects of investment management are handled for you, including periodic rebalancing.
You begin the process by completing a questionnaire. This is used to determine your risk tolerance, investment goals and time horizon. Your portfolio is built using several diversified, low-cost index funds (ETFs). Everything is handled for you from that point forward, and all you need to do is fund your account.
Here are some of the basics of Managed Portfolios:
Minimum initial investment: $2,500
Fees: Annual management fee of 0.30% per year. A $10,000 account can be managed for just $30 per year, while a $100,000 account can be managed for $300.
Type of accounts available: Individual and joint taxable accounts; traditional, Roth and rollover IRAs; and custodial accounts.
Ally Invest Portfolio Make Up
Ally Invest offers five different portfolios:
Which portfolio will be used for your account will be determined by your answers to the questionnaire in regard to your risk tolerance.
One of the big advantages with Managed Portfolios is that you do have the option to change your risk profile from one portfolio to another. For example, if you’re in a Moderate portfolio, you can switch to Conservative, Moderate Growth, Growth or Aggressive Growth.
With some robo-advisors, once your risk tolerance is determined, you won’t have the ability to make the change yourself.
Each portfolio is comprised of a mix of US stocks, international stocks, US bonds, international bonds and cash. Naturally, if you are determined to be a more aggressive investor, your portfolio will hold a higher allocation in stocks.
If you are more conservative, you get a higher allocation in bonds and cash. In the example above, an aggressive growth portfolio consists of 93% stocks, 5% bonds, and 2% cash.
A more detailed breakdown of the ETF composition looks like this:
US Large Cap Equities – iShares Core S&P500
US Mid Cap Equities – iShares Core S&P Mid-Cap
US Small Cap Equities – iShares Core S&P Small Cap
Developed Ex-US Equities – Vanguard FTSE Developed ETF
US Government Bonds – iShares 7-10 Year Treasury Bonds
US High Quality Corp. Bonds – iShares Intermediate Credit Bonds
Global ex-US Bonds – Vanguard Total International Bonds
The performance of each portfolio within Managed Portfolios through the end of 2017 looks like this:
The Ally Bank relationship is one of the benefits that makes Ally Invest really stand out. Not only can you invest through Ally Invest, but you can also do much of your banking through the Ally Bank platform as well.
Ally Bank is well known for having some of the highest interest rates available on savings anywhere on the web. They’re also one of the top banks when it comes to auto financing.
Checking: Ally Bank offers interest-bearing checking, that enables you to deposit checks remotely. And even though the Bank has no local branches, you will have ATM access at more than 43,000 ATMs around the country.
Meanwhile, Ally Bank will reimburse you up to $10 per statement cycle for any fees charged by other banks’ ATMs.
Savings: Ally Bank’s Online Savings Account is a no fee savings account paying some of the highest interest rates on savings available. This account also features the ability to deposit checks remotely.
Money Market: Ally Bank’s Money Market Account pays high rates of return, and comes with no monthly maintenance fees. You can also get unlimited deposits and ATM withdrawals, as well as make remote deposits.
Certificates of Deposit (CDs): This is where Ally Bank really shines. They offer several attractive CDs, that provide some of the highest interest rates on the web.
Ally Bank Lending
Ally Bank has a mortgage lending operation that can meet all of your home financing needs. They also offer a cash back credit card, with unlimited rewards, including 2% back at gas stations and grocery stores, and 1% back on everything else. There is no annual fee, and the account can be added to either Apple Pay or Samsung Pay.
But probably the area where Ally Bank is strongest is with auto financing. They offer innovative programs to either buy or lease a vehicle. They even have specialty vehicle financing, that provides financing options to cover accessibility needs, like wheelchair lifts and right-hand drive capability.
Ally Pre-Owned SmartLease: This is the most interesting of their auto financing options. The SmartLease program enables you to lease used vehicles. They have just three requirements for the vehicle you’re leasing:
Have clean history reports
Are less than 4 model years old
Have fewer than 75,000 miles
With the SmartLease, you'll also receive automatic Guaranteed Auto Protection and the ability to purchase maintenance coverage similar to what’s offered for new models.
This is a perfect financing option for someone who would prefer to ease into car ownership by first leasing a used vehicle.
Low fees. Ally Invest’s fees are close to the lowest in the industry, at $4.95 per trade. But they’re lower still for high-frequency traders in large accounts, at $3.95 per trade.
Ally Invest offers both self-directed trading, and the Managed Portfolios. You can have some of your money professionally managed, while also trying your hand at trading on your own.
Customer service – Ally Invest representatives are available 24 hours a day, seven days a week.
The Ally Bank tie in. Ally Bank offers some of the highest interest rates on savings and CDs available anywhere on the web. You can also take advantage of the Bank’s wide selection of auto financing options.
With Managed Portfolios, you have the option to change your risk tolerance, and therefore your portfolio type, from one classification to another. This can enable you to make your portfolio more conservative or more aggressive.
No demo account provided. Some investment platforms offer a paper account to enable you to test your investment skills before going live with real money. Ally Invest doesn’t have this option, except with Forex and futures.
There are no local branches, if you like face-to-face contact.
There are robo-advisors that have lower management fees than Managed Portfolios, though the higher fee may be worth paying for the benefit of keeping your money with the same broker.
Should YOU Invest with Ally Invest?
When TradeKing was around, it was one of the very best trading platforms available, offering some of the lowest commissions anywhere. Ally Invest has built on that reputation, by maintaining a robust self-directed investment platform.
But they’ve taken it a step farther by introducing Managed Portfolios.
This is the perfect brokerage if you want to perhaps start out using the managed option, and then slowly work into self-directed investing. You may even decide that you want to balance the two going forward.
That said, if you're unsure whether Ally Invest is right for you, check out our other brokerage reviews before making your final decision.
Another of the major advantages with Ally Invest is that you can open a self-directed account with no minimum initial deposit. This is made to order for new and small investors, who were just breaking into self-directed investing. Meanwhile, the platform offers outstanding, round-the-clock customer service to help you along the way.
The connection with Ally Bank is another major plus. The Bank provides some of the highest interest rates available on CDs and my markets, but they also offer an impressive menu of auto financing.
That’s not surprising, since Ally Bank is descended from General Motors Acceptance Corporation (GMAC). They maintain that business line, and even improve on it with leasing arrangements for used cars.
You can search the investment universe, but you’d be hard-pressed to come up with a better overall platform than what Ally Invest offers. If you’d like more information, or if you’d like to sign up for the service, you can visit the Ally Invest website.
You probably won't be surprised to hear there are over 6,000 banks and another 6,000 credit unions in the United States. You can't drive down the road without passing at least a dozen different banks.
If you're looking for a new bank, it can be an overwhelming search. Each bank or credit union is going to offer different products, accounts, and rates.
If you're like most people, you're going to start your search at the large national banks, but you could be missing out on some of the best choices by not looking at the top credit unions. If you don't have any credit unions on your list, you're making a serious mistake.
This article is going to look at Navy Federal Credit Union (NFCU) and help you decide if they are the best financial institution for you.
Who is Navy Federal Credit Union?
Navy Federal Credit Union has some old roots. They were established way back in 1933 as the Navy Department Employees' Credit Union of the District of Columbia (that's a mouthful).
They were created as a credit union for Navy Employees who were members of the Federal Employee's Union. A year later, in 1943, President Roosevelt signed the Federal Credit Union Act, which became the foundation for credit unions.
In 1947, Navy Department Employees' Credit Union of the District of Columbia was dissolved and reestablished as an official federal credit union, which they named Navy Department Employees Federal Credit Union. At this point, they also opened up membership to all Navy employees and personnel in the Washington area.
In 1954, 21 years after their establishment, they officially became Navy Federal Credit Union. At this point, they opened their memberships to enlisted personnel. Through the years, they have continued to change and evolve. They have continued to grow and improve their products and services. They have become one of the largest and most influential credit unions on the market.
Today, they have over 7 million members across the country, and they have over $78 billion in assets.
Banking with NFCU
If you're looking for a credit union with dozens of banking options, then NFCU is the best option for you. They have dozens of account options you can choose from. Each one is slightly different. I'm not going to outline all of the options, but I will hit some of the most popular ones.
The e-Checking account is one of the most popular accounts NFCU offers. This account has a monthly fee, but you can avoid it if you sign up for direct deposit. If you're like most people, you're going to be using direct deposit anyways.
These e-Checking accounts earn a modest dividend rate, and you can get rebates on ATM fees for up to $10 for every statement. As long as you don't plan on walking into a physical branch, this is an excellent choice for you.
The Flagship Checking account is one of the premier accounts at NFCU. This plan has a tiered dividend system which is based on your account balance. The APY is going to be significantly higher with this account compared to the other accounts.
There is no minimum deposit to open the account, but you might have to pay a monthly fee. There is a $10 monthly fee if your account balance is below $1,500. If your balance is more than the $1,500 threshold, you won't have to pay any monthly fees. This is an excellent option for anyone who plans to hold a significant amount in their checking account and want to earn money based on the balance.
As you can probably guess from the name, this account is designed for students to start saving. This account is available to any student between the ages of 14 – 24, and they won't have to pay any service fees, and there is no minimum balance requirement.
It's never too early to set your child up with a checking account. It's the perfect way to teach them the importance of saving money and wise spending.
Free EveryDay Checking
Free EveryDay Checking is the most basic option for banking you can find at Navy Federal Credit Union. There is no monthly fee and no minimum balance requirement you'll have to meet. If you want a straightforward checking account which won't be sunk by fees, then this is an excellent option for you.
With this account, you will earn a modest 0.05% APY (currently), and you'll have access to the same benefits of all the other accounts, like thousands of ATMs.
NFCU also has a few savings account as well. They have a basic savings account, education savings account, and a SaveFirst account.
The basic savings account is exactly what it sounds like. It offers competitive interest rates with no fees. If you want a straightforward savings account, this is it.
Their SaveFirst is one of their more exciting savings accounts. This account lets you set a maturity date for the account, open the account with a $5 initial deposit, and then have dividends compounded daily.
Borrowing with NFCU
Lending is one area where NFCU shines among its competitors. They offer personal loans, mortgage loans, auto loans, and credit cards. Obviously, their interest rates change frequently, but they continue to have some of the most competitive rates out there. If you want a bank which can not only hold on to your money but lend you money as well, NFCU is a great place to start your search.
Becoming a Member of NFCU
Every credit union has different membership requirements. For most of them, it's if you “live, work, or worship” in the city or county limits of the credit union. For some of the larger credit unions, they have expanded their membership requirements and have made it more accessible. Of all of the credit unions, Navy Federal probably has the most ways you can be eligible to become a member, but they don't let just anyone in.
Some of the ways you can qualify to become a member of NFCU are:
Active Duty military
Be a contractor to U.S. Government Installations
Retired DoD employee
Or be a family member of one of the above
Apart of the Delayed Entry Program
One of the interesting parts of NFCU is their family membership requirements. They offer more lenient requirements than most credit unions. Most of them limit it to “immediate family,” but NFCU expands on those. They allow:
Adopted Children and Stepchildren
Drawbacks of Navy Federal
There are a lot of benefits of becoming a member of NFCU. They great rates for their loans and their checking accounts. One of the problems with NFCU is their savings account. Their basic savings account only has a modest APY. Sure, it's still higher than you'll find with some of the major banks, but you can find credit unions with much better savings rates.
Another disadvantage of NFCU is the balance requirement to avoid fees on the Flagship checking. If you don't meet the balance requirement, you're going to pay the monthly fee.
There are dozens of other credit unions out there which offer high-yield checking accounts with no fees. As long as you plan to have the $1,500 in your account, there is nothing wrong with this account, but it's something to be aware of.
Before you become the member of any credit union or join a bank, take the time go go through the customer reviews. One of the best ways to learn about a company is seeing what previous or current members have to say.
One common complaint I saw with NFCU is their customer service. Several users were saying they have problems reaching their customer service department or they weren't able to get the help they needed. You should always take these reviews with a grain of salt. You don't know the full story and what actually happened.
Don't let these customer reviews keep you from joining the perfect credit union.
Like most other credit unions, we aware of the number of branches. Credit unions don't have the massive number of branch locations like national banks.
Final Verdict on NFCU
Unlike some of the other credit, NFCU doesn't have membership qualifications which allow anyone to join. Some of the other larger credit unions allow you to join organizations or make a donation which qualifies you to become a member of the credit union.
NFCU doesn't do that. If you don't have a family member in the armed forces or if you aren't in the armed forces, then you probably won't be able to be a member. If you do meet the qualifications to be a member, I would highly suggest doing so.
Every person is different, and everyone has different financial needs and preferences when it comes to banking. There are thousands of banking options on the market, and trying to wade through them can be difficult. It's important you find the best one for you.
If NFCU is not the best option for you, don't worry, there are plenty of other options.
I get asked pretty frequently about what the requirements are to become a Certified Financial Planner and what I went through to achieve the designation.
Knowing there are over 800,000 people who can be considered “financial advisors” to some degree, I knew I had to differentiate myself.
But, it wasn't all about being different; it was also about having a deeper understanding and appreciation of the financial planning process.
I knew becoming a CERTIFIED FINANCIAL PLANNER professional (CFP®) was the answer to enhance my career. I found it fitting to not only share my experience but to have a few other CFP® professionals chime in with their experience's, too.
But before we dive into how, let’s take a step back. Let me tell you more about how I got inspired to become a CFP.
I love my job. I can't tell you how lucky and fortunate I feel to be able to truthfully say this.
Is my job easy? H-E-Double-Hockey-Sticks no!
Being a financial advisor requires a certain skill set I had no idea I had until I got started in the business.
But I'm not here to tell you how successful I am.
What I want to do is to address the most common question I get from prospective advisors:
I'm interested in becoming a financial advisor. What do you consider the best way to get started in your industry?
Whew. That might seem like an easy question to answer, but SO much has changed since I got in the business over 15 years ago.
How I Got Started: A Look Back In Time
Pretty soon it would be the end of a good run — graduation was approaching. I had just had one of the best interviews of my life with A.G. Edwards and Sons (they were purchased by Wells Fargo).
It was so good, in fact, I felt I had secured a position with their corporate office in St. Louis, and I would soon be living the dream of riding the corporate ladder to the top.
It all looked good; then the “Dot Com” bubble burst.
Things changed. And not for the better.
A. G. Edwards, at the time, had a been in existence for 117 years and never had any company layoffs. Never.
That is, until, I was getting ready to graduate. Of course, right?
My future, which once had visions of me living in St. Louis, was gone. Now what I'm going to do?
Um… How about Plan B?
Part of me getting the opportunity to have a great interview was because I was already interning at the local A.G. Edwards office in my hometown.
I landed the internship as kind of a desperate measure between my junior and senior year. I had one of those pucker moments where I realized that other than my work history of local retail jobs and my military experience, there was nothing really outstanding on my resume.
It hit me how I would be graduating in a year and I still needed to get up and do something, and I needed to do it now.
Through a connection, I inquired about a summer internship at the local A.G. Edwards branch, and I was lucky enough to get it.
It was like any other internship you would imagine: filing, paper shredding, all the administrative tasks that no one else in the office wanted to do.
Although the tasks were remedial, I treated the internship like a real job. I showed up on time, dressed the part, did everything which was asked of me (and above), and made a lot of good impressions on the staff.
Amazing What a Little Bit of Effort Will Do
Along the way, I was asked by one of the assistance of the top producers in the branch if I could help file away some financial statements which had been piling up on them. I'm the intern, of course, I'll help.
As I started to file them away, I realized their filing system was a little bit out-dated. In fact, it was a mess.
So I took it upon myself to re-setup their file system which I thought would help them out in the long run. Turns out, the little extra effort made a very good impression.
As it turns out, the top producer was looking to hire someone part-time to help out his assistant with their day-to-day tasks.
At this time, I was getting ready to be a senior in college. I was already working 15 to 20 hours a week at a mall job. But I thought it was good opportunity to get my foot in the door.
My senior year, I was hired to work 8 a.m. – noon, Monday, Wednesday, and Friday (most of my classes were on Tuesday and Thursdays), and then I would also work at my mall job in the evenings and weekends.
I didn't think much of the job at the time, about what it may turn into. Turns out it would lead to much, much more.
I continued working for them and helping them out with just their day-to-day tasks. Then, along the way, the broker had asked me if I'd be interested in cold-calling for him.
I had never done anything of the sort, but I thought, oh, what the heck, we'll give it a try.
Every once in a while I would call randomly from a list he had purchased of residents in the local community. I was calling just to set appointments for him, with a basic spiel; and, to both his and my amazement, I landed him a few appointments.
That's when it started to happen.
My first nameplate – how exciting!
As graduation was getting closer, it turns out this producer who I had helped with his filing, was looking to hire a junior broker.
He had asked if I was interested, but initially I turned him down, primarily because I had bigger dreams. I had planned on working a corporate job up in St. Louis, and also I felt I was way too young to handle people's money.
I had noticed many of the top clients who came in the branch were at least twice, if not three times my age. I felt I had no business advising them on their retirement planning.
So I kept plugging away, hoping for the next bigger and better thing.
As graduation approached, I realized the bigger and better thing was not coming. I didn't want to graduate without having something lined up, so I accepted his offer.
I was going to be a junior broker.
I didn't have the same ring as “corporate executive” or “investment banker”, but I was still excited for the prospects of what could come.
Most everything in life I'd ever tried out, or even attempted, I had always succeeded; so naturally, I thought this would be no different.
I still didn't know if this was what I would do for the rest of my life, but I was excited for the opportunity to see what could happen.
And as they say, “the rest is history.”
If you’re at the same point in your life, where you’re truly considering the possibility of becoming a CERTIFIED FINANCIAL PLANNER, you might be wondering what exactly the process looks like from beginning to end.
Well, here's exactly what it takes.
The Steps You Need to Take To Become a CFP
1 | Complete the Education Requirement
Before you can even apply to the CFP® program, you have to satisfy the preliminary education requirements.
At the point in my career, I decided to pursue the CFP® certification, I was more than five years removed from college, with my Bachelor's in finance, so I easily satisfied the education requirement.
Currently, the CFP Board allows three different paths to achieve these requirements. Taken directly from the CFP.net website:
Complete a CFP Board-Registered Education Program
There are more than 300 academic programs at colleges and universities across the country from which to choose.
These programs include credit and non-credit certificate programs, undergraduate and graduate degree programs.
They use various delivery formats and schedules, including classroom instruction, self-study, and online delivery.
Many of CFP Board's Registered Programs also offer in-house educational programs for individual companies.
Academic degrees and credentials which fulfill the educational requirements include:
Certified Public Accountant (CPA) – inactive license acceptable
Licensed attorney – inactive license acceptable
Chartered Financial Analyst® (CFA®)
Doctor of Business Administration
Chartered Financial Consultant (ChFC)
Ph.D. in business or economics
Chartered Life Underwriter (CLU)
Request a Transcript Review
Certain industry credentials recognized by CFP Board, or the successful completion of upper-division level college courses, may satisfy some or all of the education requirements set by CFP Board.
Bachelor's Degree Requirement
A bachelor's degree (or higher), or its equivalent,1 in any discipline, from an accredited college or university2 is required to attain CFP® certification.
The bachelor's degree requirement is a condition of initial certification; it is not a requirement to be eligible to take the CFP® Certification Examination.
After you pass the CFP® Certification Examination, you will be required to provide evidence (official transcript from the degree-granting institution) you hold a qualified bachelor's degree or higher degree.
I took the American College Chartered Financial Consultant (ChFC) course which fulfilled the education prereq. The ChFC course was provided by my employer at the time (an insurance company). I followed this up with a CFP self-study course from Dalton. Then I went to a two-weekend live review from Dalton. The Dalton courses were much more useful than the American College course, in my experience.
2 | Pass the CFP® Certification Examination
Wholey Moley, what an exam!
The CFP® Certification Examination was by far the most challenging exam I've ever taken (and hopefully ever will) take.
The two day, 10-hour exam applied all the key areas of comprehensive financial planning. Although all questions are multiple choice, they are arranged in a way where every question “almost” sounds right.
That's what makes the test so challenging.
The exam is administered three times a year – generally on the third Friday and Saturday of March, July, and November, at about 50 domestic locations.
I took mine at the University of Missouri-St.Louis in November of 2007. The application deadline is approximately seven weeks prior to each exam date (e.g., February 1, June 1, and October 1).
To apply to take the exam, complete the online application, download an application, or call 800-487-1497 to have one mailed to you.
Completed applications, including payment of the $595 fee, must be received by the deadlines printed on the applications – there are no exceptions.
How I Prepared For the Exam
My previous firm had an arrangement with Kaplan University which offered a “boot camp” style class.
Once a month, for nine months, I traveled to St. Louis to sit in on a four-day (8 a.m. – 6 p.m.) lecture. I've never drank more Diet Coke and coffee in my life!
Our instructor was insanely smart and helped us trudge our way through all the concepts. Imagine learning about estate planning for 9+ hours a day. Are you jealous, yet?
After all the sessions, we then had a final recap with a different instructor a month before the actual exam.
Reflecting back, I really don't know another way I could have absorbed so much information in such a small amount of time. If I had to do the CFP program by self study, I would probably still be without the designation (no joke).
Richard T. Freight, CFP® who also authors the blog Think Beyond the Numbers, confirms my suspicions by sharing his experience with the CFP self-study program:
After failing to discipline myself with self study, over the course of 3 years I took the individual courses (5 in 1998) at 3 different community college and universities, often traveling an hour each way, twice a week, to pass the exams. Then I took Ken Zahn's “blitz” 3-day course to pass the overall exam. I know it sounds like the old walking uphill both ways to school in the snow, but it wasn't a cake walk by any means. My overall exam had a pass rate of 49% across the U.S. that year.
I sat for the exam in November of 2007 and didn't receive my test results until early January. Talk about suspense.
I just happened to be home the day when the mail came. I remember seeing the thin, little white envelope from the CFP Board and my heart sank.
Why was the envelope so thin? Was it a bad sign?
I nervously paced inside and finally just ripped the envelope open….Congratulations you passed.
I screamed with excitement and then called my wife to share the good news.
Typically, each testing period has about a 50% pass rate and this was about the same with my group. This is why I was so thankful I passed.
When you receive notice you passed, you then have to satisfy the remaining requirements.
3 | Meet the Experience Requirement
In March of 2007, I began the Kaplan University CFP® course. At that time, I had been a financial advisor for already five years, which satisfied the experience requirement.
The CFP Board requires you have at least three years of qualifying full-time work experience.
According to the website, the experience can be gained in a number of ways including:
the delivery of all, or of any portion, of the personal financial planning process to a client.
the direct support or supervision of individuals who deliver all, or any portion, of the personal financial planning process to a client.
teaching all, or any portion, of the personal financial planning process.
Joe Pitzl, CFP® shares how he got a head start in completing his experience requirement:
To get a head start on fulfilling my experience requirement, I held three financial planning internships and filed tax returns in a tax firm for two years while in school (it counted for about a year collectively). I then worked for a year as a full-time financial planner before taking and passing the exam. Six months later, I had officially fulfilled the 3-year requirement and became a CFP®.
4 | Background Check… Do You Pass?
Applicants for CFP® certification must pass CFP Board’s Candidate Fitness Standards, which describe conduct which may bar an individual from being certified.
This is one of the aspects which makes being a CFP® professional so much more prominent; we are held to a higher standard than your typical financial advisors.
The board will conduct a background check as you make your commitment to adhere to the CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards.
Brian Plain, CFP® shares a similar accelerated approach to achieving his designation:
Apparently I'm a glutton for punishment as I fulfilled my education requirement through the accelerated 9-month program at Northwestern and then did a 4-day live review course prior to taking my exam…for the first time. Getting the “fail” letter in the mail was deflating, but it was also made me appreciate the experience so much more when I received my “pass” letter the next time I sat for the exam. Needless to say, I still have the letter!
5 | Time to Pay Your Dues
After you verify those three steps, it's time to pay up (yeah, the $595 fee from before was just to apply).
You'll have to pay a one-time, non-refundable initial certification application fee of $100 for the background check.
In addition, you will be responsible for a biennial certification fee of $360. To me, this cost is minimal, compared to the amount of knowledge I have gained through the whole process.
Jason McGarraugh, CFP® gives a detailed account of his path to becoming licensed:
I went the Degree Plan rout. After spending 4 years getting a BBA in Corporate Finance at Texas Tech I graduated without any of the Financial Planning knowledge that I wanted. Circa 2000 I discovered that Texas Tech actually had a Masters program in Financial Planning. I spent 2 1/2 years working on my Master of Science in Personal Financial Planning which included the necessary CFP® courses with additional classes to round out the degree plan. After graduating I spent a semester working for a private school in Singapore that taught the CFP® courses there.
I moved back to Lubbock in May of 2003 and began the two month live review with the professors at Tech to prepare for the July exam. I made enough money In Singapore to pay for the review and a few months of rent with some friends that were also taking the review. I studied 6 days a week for two months and passed the exam on the first go round. I probably put in about 250 hours of study and class time. I made it a point to take one random day off a week to relax.
It took about a month to get the results back and during this time I was interviewing for jobs. By early October 2003 I was fully licensed for insurance and securities and working with Waddell & Reed in Fort Worth, TX (plan B). I reached my 3 years in October of 2005 thanks to 12 months of experience as a Peer Financial Counselor with Tech's Red to Black program.
6 | Congratulations! You Are Officially a CERTIFIED FINANCIAL PLANNER Professional
Once everything is complete, you will get a notice you are officially a CFP® and you can refer to yourself as one.
After making it this far, you deserve it.
Now it's time to order new business cards and make the appropriate updates to your website. I never thought I would be so excited over “three little letters” but all the time invested to achieve those letters makes them extra special.
7 | Continuing Education Requirements for a CFP®
Once you pass the exam, you're not done, however.
Every two years you'll have to satisfy continuing education requirements to keep your CFP® credentials. The CE requirements consist of:
2 hours from a CFP Board-approved program on CFP Board's Standards of Professional Conduct.
28 hours from one or more of the accepted subject topics.
It's up to you where and how you complete the CE requirements, you just have to make sure it's a pre-approved program by the CFP board. There are plenty of resources nowadays to do this.
One of my favorites is mini quizzes found in trade journals such as Financial Advisor Magazine and the Journal of Financial Planning.
It's always nice to learn something new and get credit for it, too!
Are you still considering becoming a financial planner? Think you’re ready? Keep reading.
Going Solo – The True Costs of Starting Your Own Financial Planning Firm
In 2011, I embarked on one of the most exciting business transitions of my life – I formed my own registered investment advisory firm. I get a lot of questions from advisors wanting to know about the process.
How does it work?
How much does it cost?
Is it worth it?
Plus, I have friends and blogging friends who are also curious and would love a look behind the scenes of starting a financial planning business. Since I have over 5 years underneath my belt of starting my own firm, I thought I would share a little bit of how it all went down.
I’m also trying to get a sense of how much I have spent in the past year in doing so… thank goodness for my CPA!
Before I begin, let's first start with a jump back to my story so you can understand exactly what had happened since getting my “three little letters” approved.
The First Step
In 2007, three others advisors and I left A.G. Edwards and Sons, which had recently been bought out by Wachovia (now Wells Fargo) and started Alliance Investment Planning Group. We were an independent financial planning firm under the independent broker-dealer, LPL Financial.
LPL Financial was the largest independent brokerage firm and the big difference between them and an Edward Jones or a Merrill Lynch (or any major brokerage firm), at least from the advisor standpoint, is they allow you to create your own company at the local level.
That’s why we operated as a DBA (doing business ass) Alliance Investment Planning Group.
Essentially, in the relationship, I was an independent contractor utilizing their services, and then LPL held my licenses: my Series 7, and my insurance licenses.
Keep in mind many advisors don't take this step, although it's becoming more popular. From a payout standpoint, it definitely pays to take some risks.
Let me explain…
With A.G. Edwards, my payout was 40%.
That meant for every commission or fee earned, I would give the company 60% of every dollar. That was my price for having the company name behind me, back office support, my fully furnished office (phone, computer, desk, etc), a receptionist and anything else you would need to run an office.
For many, it takes away all the added pressure of running a business so you can just focus on your existing clients (and also acquiring more).
Unfortunately, if you're an obsessed entrepreneur like myself; it just wasn't quite enough.
Moving to LPL meant we now became true business owners.
We had to find our own office building, buy our own computers, desks, printers, filing cabinets, phone systems, 47″ TV's (I will argue to this day it's a necessity!), receptionist, etc.
Why would anyone want to deal with that?
Because the payout increased from 40% to 90%.
Yes, that's a pretty substantial raise. What made it even more substantial is we were able to split costs 4 ways. (We eventually added 3 more advisors so everything was split 7 ways.)
This meant more money in my pocket! My revenue increased dramatically because of this.
In fact, it has increased 4-5 times more where I was at when I left A.G. Edwards in 2007.
Trapped in a Box
My practice continued to grow and, honestly, I had no reason to change. No reason whatsoever.
There was, however, this one little thing which occurred which eventually made me realize change was not only coming, it was inevitable.
That “occurrence” was this blog.
As my blog continued to take off, and I got tired of the compliance hurdles, I knew I needed to make a change.
If you have a Series 7 license, anything you do online comes with great scrutiny and everything, I mean EVERYTHING, has to be pre-approved first.
Note for those who aren't familiar with this industry: If you have a Series 7, you have the ability to sell a security (stock, ETF, mutual fund, variable annuity) and earn a commission. If you can earn a commission, FINRA has fairly strict rules on how you discuss these types of securities. That's what makes blogging such a challenge for advisors with their 7.
Pre-approval is very time consuming, but it wasn't the most frustrating part.
To get the freedom I wanted, it required me dropping my Series 7 and then forming my own RIA (registered investment advisory firm) with the state of Illinois. There were a lot of hurdles in my way because I didn’t know how it all worked.
I didn’t know if I..
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