Pod Insights The Clark Howard Podcast 11.11.24 Robo Advisor Or Financial Planner? / Why Clark Hates Rent Control About this episode A Special Veterans Day Thanks To All Who Have Served, Past, Present and Future. Today Clark goes back to basics, explaining how to determine if a robo advisor or a financial planner is best for you. Also, how rent control can distort a market and limit housing supply. Investment Advisors: Segment 1 Ask Clark: Segment 2 Rent Control: Segment 3 Ask Clark: Segment 4 Mentioned on the show: Who Should Use a Robo-Advisor? (Clark.com) Investing: Self-Directed vs. Robo-Advisor vs. Financial Advisor (Clark.com) Robo-Advisors - Clark.com / 5 Best Robo-Advisors in 2024 What Is a Fiduciary Financial Advisor and Do I Need One? How Much Does a Financial Advisor Cost? Best Financial Advisors in 2024 What’s the Best Place To Get Investing Advice From an Advisor if I Have Limited Assets? 3 Places You Should Never Invest Your Money Stripe, Inc. | Better Business Bureau® Profile Good2GoMobile / CELL PHONES - Clark.com Phone Plan Finder – Find the Best Plan For You - Clark.com Military and Veterans Guide: Free Resources for Your Finances 25+ Places That Offer Discounts to U. S. Veterans Clark.com resources Episode transcripts Community. Clark.com Clark.com daily money newsletter Consumer Action Center Free Helpline: 636-492-5275 Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
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1:04 Speaker 02 It's my pleasure to welcome you here to the Clark Howard Show where our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. And speaking of financial decisions, when you're trying to decide what phone plan, TV streaming service, rewards card to get, anything like that, remember, we have put in great effort and expense into developing easy to use tools at Clark.com that drill down to your exact personal situation for you to figure out the best rate and best service for you to be with.
1:49 Speaker 02 And I'm really, really proud of these tools that we continually refine from feedback from you to make them even more precise so that you can let us do the work behind the scenes to make it easy for you to make the best decision for your wallet. And today, I'm going back to base. And I'm going to try to address something that has come in so scattershot, but steadily more questions about should you use a robo advisor? Or should you invest on your own? Or should you use a financial advisor? Financial planner? I'm going to try to help you.
2:29 Speaker 02 These are not ironclad choices, but give you a sense of direction, how you pick. Also, I hate rent control. I hate it. I hate it. I hate it. And when you hear my reasons, you might still be mad at me. But I got proof that the market may actually lower rents when you don't have rent control in that market. So let's talk being the Lone Ranger, paying for advice or paying for advice from a human when you're investing.
3:06 Speaker 02 A lot of people find investing boring, intimidating, or just a hassle. So a lot of people starting out will ask me, should they hire a person? Should they hire somebody to get them investing? And my answer pretty much always is no. That a financial advisor, financial planner becomes very important later in life is you're assessing whether you are on track, you've saved enough money to be financially independent.
3:44 Speaker 02 They're very important in dealing with later in life issues in terms of estate planning, or if someone may be facing the possibility as they get older of maybe some diminished mental capacity, or just needing a checkup to see how you're doing midway through building up security for your life. But when you're starting out, the basics of investing are so simple that I don't believe you need a professional guiding you. But if just the whole thing overwhelms you, there's this thing that's grown over the last 10 years.
4:29 Speaker 02 Robo advising, where you pay a small fee and answer a bunch of questions and a computer program, a robot basically, will advise, "Hey, you should put your money in this, this, and this." You put the money in there and it'll usually be a mix of index funds or more commonly, exchange traded funds, which are like a sibling of index funds. Or it may have you go into target retirement fund inside a retirement account like a 401k or a Roth IRA.
5:09 Speaker 02 And so, the robo is a great way if you feel kind of stuck, you don't know how to start to do. And a robo can be very valuable early to mid-career. Making sure that your money is wisely allocated and if you're doing an investment account or you're in retirement accounts of various types. So you get the mix of money right, the risk and the long-term reward are correct if the whole thing just confuses, intimidates, or bores you.
5:47 Speaker 02 So the robo advisors are so inexpensive, you're adding a little cost into the system, a little sand in the gears, but not a lot. The financial planner, as I mentioned, generally later in life and as a general rule, figure it's going to be 1% of the money they manage for you. But you don't even have to do that. You can hire, more and more common now, you can hire a financial planner who you pay a fee to, like you'd pay a lawyer and accountant, and have a checkup from them. They don't actively manage your investments typically, but you're paying them for looking
6:29 Speaker 02 at what you're doing, suggesting to you what you need to do differently. And you've got to be somewhat of a self-starter in that environment. But that way, you're paying somebody for completely unbiased advice. And remember this, if you do find you need that person who you're paying to manage your assets for you, they gotta, gotta, gotta be a fiduciary. Gotta be. That means that legally, they are bound to do what's in your best interests. And be wary of anybody who is an insurance person.
7:08 Speaker 02 Because odds are about 99.9% they're not a fiduciary. And every recommendation comes back to selling you some ultra-high-cost insurance product or annuity. Know the distinction with the difference. If you do decide you want that advice from a human, they got to be a fiduciary, period.
7:36 Speaker 03 Okay. This question came in from Will in Ohio. I was considering a side gig and Stripe was the only payment option. I looked at the Better Business Bureau website for them and noticed they have hundreds of recent complaints filed. I don't feel comfortable doing business with a company that has such a poor reputation, especially for financial transactions. What are your feelings on using Stripe as a payment service?
7:58 Speaker 02 This one's a tough one for me to answer because Stripe does a huge number of transactions out there. And a lot of times Stripe is the payment option that will be available to you. And I guess that's not an option if they're the only, if that's the mandatory choice.
8:17 Speaker 03 We actually have a vendor that will only pay us that way.
8:19 Speaker 02 Only pay us. And have we ever had a problem?
8:21 Speaker 03 We have not.
8:22 Speaker 02 And so Stripe, if you look at the Better Business Bureau, their consumer reviews are one out of five stars. And this is an interesting one because they're Better Business Bureau ratings and A+ and they're a participating member. So my guess is the only time anybody, because most people have never heard of them, that somebody files a complaint about them is when they've had a problem. Nobody goes there and says, hey, these people were great. That's not gonna happen. So I it's not been a systemic thing that's come on our radar that people are having a problem with Stripe. And gosh, you'll say, okay, I'll try it. And
9:07 Speaker 02 then sure enough, you'll have a problem. But hopefully you won't. And they have never, I'm gonna say never, been a source of complaints to us or to our team Clark Consumer Action Center than I'm aware of.
9:22 Speaker 03 Ron in Wisconsin says, my brother and I have been renting out our parents condominium ever since their passing 13 years ago. We each own half the condo and share the income equally. My brother got a notice from his tax preparer recently that we will be required to register with the federal government, B O I, Beneficial Ownership Information Report. I looked at the government site, but it's asking for our business name. We never had a business name or considered it a business per se. We have a good renter and will probably sell the property if and when they decide to move. We've always split the income from the property and reported it annually on our tax filings. Do we have to file with the federal government? We have until January 1 of 2025, as I understand it. It seems
10:04 Speaker 03 like we're so small, they wouldn't be interested in it. It's supposed to prevent money laundering or track it. We're renting a two bedroom, 1,200 square foot condo for 1,250 a month.
10:14 Speaker 02 Wow. People would like that rent, wouldn't they?
10:17 Speaker 03 Mm hmm.
10:18 Speaker 02 Okay, so first of all, Ron, this has been so confusing to people, I can't even stand it. So the feds, the Congress came up with this weird tool, this B O I, and I had to do it for our corporate entities. And it's a lot of busy work. I don't know whatever happens with the busy work I did. But yes, it's to find out who's behind the scenes because a lot of legitimate or seemingly legitimate businesses have always been used for money laundering, for underworld activities, drug smugglers, drug dealers, all of that.
10:58 Speaker 02 So the registration does not take very long. I may be mistaken. I thought it was only for people who have an LLC or a corporate entity. I wasn't familiar with sole proprietors, which is kind of where you and your brother would come because it doesn't sound like you have. An LLC. I have to defer to your accountant. I would ask if you go back and look at the BOI website, see if I'm wrong, if it doesn't just say LLCs and corporate entities. And if it does say that, as I recall, then I'd ask your accountant again, do you really want me
11:40 Speaker 02 to do this because we're not either of these? But this is something, if you do own a company, either as an LLC or corporation, do the busy work. It's pretty simple and it'll get the government out of your hair later about this.
11:56 Speaker 03 All right. This one came in from Lloyd in Georgia. I've been talking to a lady on TikTok and she was telling me about investing in Bitcoin. Her name is Charlotte and she is asking me to send her $300 and she'll invest it for me in Bitcoin. My wife says it's a scam and says they're just going to take my money. I'm just want your take on this. If you were going to invest in Bitcoin, how would you do it?
12:18 Speaker 02 Well, Lloyd, I certainly wouldn't do this and your wife is right. This is totally bogus. This is a classic, typical Bitcoin scam thing and don't talk to Charlotte anymore, which is probably not even her real name. I would stay away from it. Just block this person.
12:42 Speaker 03 Yeah, I'm sure. Just don't talk to Charlotte.
12:44 Speaker 02 Yeah. Charlotte's done in your life, period. If you do want to invest in Bitcoin, it is getting easier to invest on your own through recognized exchanges. I'm not a big fan of crypto or Bitcoin, so you don't hear me talk about it. Crypto, the idea, the underlying thing of Bitcoin, of crypto, is something that so far has not matured to a point that I see it as something to recommend. The idea of electronic bookkeeping is essentially
13:24 Speaker 02 part of what it's about. That is something that's definitely part of our future. But at this point, crypto is still a very high-risk speculation.
13:36 Speaker 02 Even Bitcoin, even though people can show me how it's gone from this to that, it's still not investing. It is not an investment even today.
13:50 Speaker 02 Coming up ahead, I can't stand rent control. And all over the country, there's noise about having rents controlled by government on apartments and rental homes. Well, I hate this. And I'm going to tell you why what seems like relief to renters isn't relief at all.
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16:00 Speaker 02 Okay, I've said it now. This will be the third time since we started this podcast. I've said, I hate rent control. Okay, so let me explain why I hate it so much. Rent control completely distorts the market to the point where it limits housing supply in a community. And in the United States, an obvious reaction in people and the politicians who've been told they gotta do something about rising rents because rents went crazy for several years is we gotta stop this.
16:45 Speaker 02 And so politicians are like, hey, we gotta deliver for the voters. So now in more and more places, they want to do rent control or they're implementing rent control. And what that means is that if I own a place and I'm a landlord, I don't get to decide what the rent's gonna be, even if my taxes on the property go up, my maintenance costs go up, the repairs go up, what I can charge in rent is capped. And there may be an adjustment where I can raise it so much per year. I was reading a story three weeks ago in the New York Times.
17:28 Speaker 02 It was about a couple that lives in Brooklyn, the borough of Brooklyn, New York. They've been in the same apartment for decades. Their rent is 300 and some odd dollars a month on a two-bedroom apartment. And their neighbors, they feel so lucky because their neighbors around them in non-rent-controlled buildings are paying many, many thousands a month for an equivalent apartment. And they go, see, they're friends. They're paying thousands a month. But they're paying 300. It's not equitable. It's not right. It violates fairness and it
18:08 Speaker 02 reduces the supply of housing. Because if I'm a landlord and I'm thinking of buying another property, or I'm, you know, a developer, I'm thinking of building a place, and I have no idea if I'm going to be able to earn a return on my money, even in a free market. But if I have to worry about the government telling me what I can charge in rent, I'm not going to commit that money to build a place. And if you go to cities with rent control laws, you'll see people aren't building new housing. So the supply, maybe the rent control makes it great for like that couple in Brooklyn, but everybody else pays more
18:51 Speaker 02 and gets less for it. Now, I want to give an example that got a lot of media coverage over the last couple of months. Argentina, which had had a completely government-controlled economy, and thus went from being a society 90 years ago that was as wealthy or wealthier than the United States, and now is dirt poor because of government interference in the economy. Argentina eliminated rent control. And at first landlords went crazy raising rents. And then what happened next is rent started falling and falling. Because suddenly,
19:33 Speaker 02 housing that had not been available to rent went on the rental market. And now there's incentive for people to come in and build more housing because the country's short of housing because nobody would build it. I mean, you know, things that look good in the short term have the law of unintended consequences. Not an actual law, but just the way it plays out. And rent control is one of those things that you need to provide incentives that somebody puts their money at risk. You know, a lot of times, people have this sense that things just appear in magic. You know, that, hey, we should have more housing over here.
20:18 Speaker 02 Boom, it's there. Doesn't work that way. You need to have incentives where someone has a reasonable marketplace incentive that they think they're gonna make money and they put their money at risk. And if you don't have that incentive, gosh, we got a problem. I mean, you don't solve things like a housing shortage in a day. There are a lot of steps to making housing more available of all types, for purchase, for rent, more affordable. And we've got things we can do that will free up the marketplace more, we're not doing
20:59 Speaker 02 in the United States. But I'll tell you, rent control is a shortcut to disaster. To me, it's a fact. To you, it may be a wrong opinion. Krista?
21:10 Speaker 03 All right. Doug in Arizona says, I have a 20-year term life policy. There will be an upcoming option with this policy. It states, this term life insurance has the option to convert the base term policy to a product without evidence of insurability. What should I expect with this option to convert? Will I be able to extend my current term insurance? Or will it be some other insurance product?
21:33 Speaker 02 Okay, what a wonderful question. So Doug, the most common conversion is to what they call permanent, into a whole life policy. And that's a whole different math. This whole life policy has a savings account to it and the life insurance. The cost per month, or per year, or per quarter, however you're paying, will go through the roof. There's also occasionally An ability for you to convert to what's known as ART, annual renewable term, which means every year, based on mortality risk, but without a medical exam, you can continue the coverage for whatever amount,
22:17 Speaker 02 but the premium will escalate each year because you're one year closer to the actuarial tables saying you're going to die. So who benefits from a policy with conversion without evidence of insurability, as it's called? Someone whose health has declined over the period of time that you've owned the policy and you'll no longer medically underwrite to continue insurance. And in that case, taking the option to convert becomes a very good viable option, even though the insurance will be a lot more expensive. But if your health is good
22:58 Speaker 02 at the time that a policy is coming to the end of its life, that's when you want to go through medical underwriting and see if you can qualify for a new level term policy for the period you need to insure 10, 15, 20, 30 years, whatever that is. And even if you're worried about your health, see if you can qualify for a new policy through medical underwriting. If you do, case closed. If you can't, then you look at doing the more expensive conversion without a medical process.
23:35 Speaker 03 Douglas in Texas says, "My parents are retired and have been fortunate to save plenty for retirement. We're doing estate planning now while they're still alive and have sound mind. We're forecasting significant inheritance after their passing. When meeting with estate planning attorneys, they are getting billed at $700 an hour. I think this is an absolute robbery. And even if they do live and the attorneys reside in California, it just seems so excessive. Is this normal? Where and how can I shop to find better rates and verify the attorney is top notch? By the way, the attorney bill's at 700 and the admin bill's at 350. If you send them an email that should be filed in your folder, that 30-minute action costs me $160 plus."
24:17 Speaker 02 Absolutely.
24:19 Speaker 03 Yeah.
24:19 Speaker 02 Okay, so let me tell you the deal. Attorneys who practice corporate law for big corporations charge, as best I know, the highest rate per hour. The second highest rate that I'm aware of is estate planning lawyers. So these lawyers are being paid for specialty expertise, not routine kind of stuff. They're being paid for people of great means trying to reduce taxes today or reduce taxes in the future for heirs. Doing extreme exotic estate planning. If your parents' stuff is more basic, you don't want to be at one of the firms
25:03 Speaker 02 where they serve you a cup of coffee with crystal and silver trays and all that, like the big expensive firms do that do estate planning. You want to be with someone who is a sole practitioner whose expertise is estate planning, who usually used to work for one of the the big law firms and now has gone off on their own. So with estate planning, you want a lawyer whose expertise is in that area. But unless we're dealing with enormous family wealth.
25:39 Speaker 03 I think it is. You said significant double-digit inheritance in the original.
25:43 Speaker 02 So in a double, in that case.
25:45 Speaker 03 I'm assuming that means double-digit in the millions.
25:47 Speaker 02 If it's double-digit, if we're talking 10, 20, 30, 50, 60 million dollars, pay the fees. Pay them. Because the money you're paying versus the expertise available in one of those fancy firms, doesn't make the coffee taste any better being served. On China, on a silver platter, but the expertise is so good typically in those firms that you just absorb that. It's a success tax, if you will.
26:23 Speaker 03 And you can find reviews of attorneys online, too.
26:26 Speaker 02 So you can, if you want to really dig and find an attorney in the county or area they live in, in California, who is really well credentialed, having worked in a state law for a good period of time, worked for one of the big fancy firms, and decided that wasn't for them, and they went out on their own, hung their own shingle, then absolutely you can do that, and it will bill at a meaningfully lower rate per hour. And you might not have the junk fee for putting an email in a folder.
27:02 Speaker 03 Jason in Florida says, can you offer an opinion on Good2Go Mobile, $60 per year for talk, text, and one gig of data?
27:09 Speaker 02 So Good2Go is not a company that we have reviewed. We do deep reviews on various smaller cellphone carriers, what are known as MVNOs, Mobile Virtual Network Operators, which means they buy wholesale capacity from other companies, and then they market their own cellphone service. If you look online, the reviews of Good2Go are very mixed. There are others that charge an equivalent $5 to $10 a month, $60 to $120 a year, with a
27:50 Speaker 02 modest amount of data involved. And we have reviews of some of those at Clark.com. I tried one of these $5 a month ones for a while, and the review of that is on Clark.com. And I found them, I had no problems at all, and haven't been able to find records of problems. And we have that review for you at Clark.com. But what's significant, I want you to think about this. This is a cellphone provider charging per year
28:28 Speaker 02 What Verizon, AT&T, Mobile usually charge per month? Now, the data is not equivalent, but the point is, the cellphone industry is going through a parting of the Red Sea. It is clear as all get out that the three brand name cellphone providers, AT&T, Verizon, and T-Mobile, have been pushing their rates higher and higher and higher for people who need the comfort of that brand name. At the same time, other providers have been getting cheaper and cheaper and cheaper, and that's their claim to fame. I switched to another provider, in my case, Google Fi, because I travel so much outside
29:13 Speaker 02 the country, and it is costing me much less than our prior T-Mobile service, and I've been very, very happy with the service with Google Fi, again, for someone who travels internationally. And then you've got, from the three brand name cellphone providers, Verizon, AT&T, and T-Mobile, all now have their own discount brands, and you're on the same networks, but at a far, far lower cost per month, or you can go with the independents that buy the wholesale capacity.
29:52 Speaker 02 And in every case, when you compare apples to apples, the prices are far, far cheaper with the discounters owned by the big three and by the independents than they are when you have your service with any of the big three. So Jason, I like how you're looking, but as far as good to go, I'd say the jury's still out because the customer reviews are so mixed on it at this time. And speaking of time, we're out of time on today's podcast, and I want to thank you so much for joining us today on this Veterans Day.
30:36 Speaker 02 Because I woke up thinking about it. And I want to thank all those who served our great nation, serve our great nation today, and in advance, thank those who do in the future. You know, we face so many threats in the world as we always do. It is such a wonderful thing you do for this great nation when you choose to serve. And I thank you for that. Know that if you are serving in the military or are a veteran, we put a lot of effort every time this year, making sure that our guide to discounts and services and things vets
31:17 Speaker 02 and active duty people need to know, and that's available to you at Clark.com. Have a great rest of your day, and we'll be at your service tomorrow.
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31:45 Speaker 05 Pricing participation may vary. Promotion pricing may be lower than meal pricing.
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