Pod Insights So Money with Farnoosh Torabi 2016: Should You Hire a Financial Planner? Plus, the Credit Score Mortgage Myth About this episode Farnoosh recaps a webinar on navigating money conversations with loved ones, then dives into the week's financial news: the Fed holding rates steady, what Apple and Microsoft earnings mean for your index funds, and a landlord's "work from home fee." Then, she tackles two big listener questions: how to find and pay for a financial planner (flat fee vs. retainer vs. AUM, and what "fee-only" really means), and why a perfect credit score doesn't guarantee you the lowest mortgage rate.
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1:36 Speaker 04 So Money episode 2016, Ask Farnoosh.
1:41 Speaker 05 You're listening to So Money with award-winning money guru Farnoosh Torabi. Each day, get a 30-minute dose of financial inspiration from the world's top business minds, authors, influencers, and from Farnoosh herself. Looking for ways to save on gas or double your double coupons? Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life? Welcome to So Money.
2:08 Speaker 04 Welcome to So Money, everybody. It's Ask Farnoosh Friday. Happy last day of July. I don't know about you, but I feel like this month absolutely flew by. August is always a relaxing, fun time of year for us because we finally take a vacation. We finally take some time off work. A lot of us are trying to squeeze every last drop of summer. Some of us are already buying school supplies. We're looking at calendars and wondering how we're suddenly talking about Labor Day. Wherever you're listening today, whether you're out for a walk, or you're driving somewhere, maybe just enjoying a few quiet minutes before the weekend officially starts, really glad you've decided to spend some time here. And we've got a lot to cover. I had the opportunity this week to give a webinar that drew more than 13,000 registered attendees. And whenever I speak to a group that large,
2:52 Speaker 04 I always try to pay attention to the questions because they're often a preview of what many of us are wrestling with. And interestingly, this wasn't a webinar about investing or retirement planning. It was about, in my experience, something a lot harder, and that is how to navigate difficult conversations about money with the people we love. And so we explored things like, what happens if one of you wants to retire 10 years before the other? How do you decide what to do with a financial windfall, whether that's a tax refund, or an inheritance, a bonus? Should you invest it? Should you use it to save for a big goal? Help your kids out? What happens when one partner has always managed
3:34 Speaker 04 the finances, but the other one wants to become more involved suddenly? Or you're trying to choose between two financial goals that are both important, but you can only realistically prioritize one. Trade-offs, right? And so it was about an hour long. It was, we covered a lot. And it reminded me of something I often say on this show, which is that money problems are very rarely just money problems, right? They're conversations about trust, about values, how we grew up, fairness, and really, a lot of the times, it's our sense of security and our sense of self. Sometimes they're conversations about who earns more, who spends more, who feels responsible for making sure everything is going to be okay.
4:17 Speaker 04 Financially and the spreadsheets and the numbers matter, but they're usually the easy part, in my opinion. Understanding each other and where we come from is really where the work begins. And one exercise I shared during the webinar that I want to share with you is if you have a partner, try this this weekend. Instead of asking, how much money do we need to feel secure? Ask this, what does financial security actually mean to you? How does it feel? What does it look like? And those answers are often surprisingly different. One person could say, well, I want a year's worth of expenses in our bank account. Someone else goes, well, financial security means knowing I could walk away from my job if it's
4:59 Speaker 04 making me miserable. And you've got one person who defines it as having no credit card debt, another one saying it's helping my parents as they get older. There's no wrong answer. It's just, it's important to know the definition before you start telling your money where to go. Now, in case you missed any episodes this week, go back and take a listen. On Wednesday, we sat down with Lauren Benton, who's the general manager of Back Market in the US. So Money has partnered with Back Market to talk about the real cost of tech, more importantly, how we can afford it, especially if you're a family and you've got your devices, your kids' devices. As we know, Apple just raised prices on several products and analysts expect that the iPhone is
5:43 Speaker 04 going to see a hike this fall, too. So now's a really smart time to rethink how to spend on tech. That was on Wednesday. Then Monday, Freddie Smith, former actor from Days of Our Lives, I love Days of Our Lives, he joins to talk about his new book, Generation F. So Freddie has, since his acting career, he's moved on to talk about financial freedom. He's got a ton of people that follow him through YouTube and TikTok. And his book is really about the crisis that he sees for millennials and Gen Z. And the crisis, he says, is not really financial illiteracy, it's the wages that haven't kept pace with the actual cost of living. Housing costs, student loan costs, childcare and healthcare.
6:27 Speaker 04 We get into it and also why he's cautiously optimistic that his generation is about to be the one that finally changes the system. All right, we're going to head to the mailbag soon, but first let's turn to a few headlines from this week that I think are worth our attention. First, interest rates. The Federal Reserve wrapped up its latest meeting and, as expected, left interest rates unchanged. The Fed funds rate remains in the range of 3.5% to 3.75%. Every time the Fed meets, I would get emails asking the same question. Does this mean mortgage rates are finally going to move? And the answer unfortunately isn't that straightforward. So, one of the big misconceptions is that the central bank or the Federal Reserve directly
7:11 Speaker 04 controls mortgage rates. It doesn't. Mortgage rates tend to follow the bond market, particularly the 10-year Treasury yield, and investors' expectations for inflation and economic growth. And the Fed certainly influences the broader interest rate environment, but it isn't sitting in a room deciding what your next mortgage rate will be. So, the takeaway for anyone thinking about buying a home is this. If buying a home makes sense for your finances, your career, your family, and you can comfortably afford that monthly payment, don't let the hope of saving another quarter of a percentage point keep you on the sidelines indefinitely because rates always move. By the way, refinancing is always an option. The house you wanted,
7:55 Speaker 04 however, may not still be on the market. Another story that came out this week from the corporate earnings world, Apple and Microsoft both reported their results. And while earnings reports might not sound like something we care here at So Money, it's only a Wall Street thing, it's actually kind of significant. If you have money invested in a 401k, an IRA, or a low-cost index fund, chances are you own shares of both of these tech giants. They're to the largest in the stock market. One of the biggest themes to emerge continues to be about artificial intelligence. So, Microsoft in particular continues to spend billions building AI infrastructure, while Apple is trying to integrate AI more deeply into its products and services.
8:37 Speaker 04 Services and there's a lot of competition and a lot of money being invested because every major tech company wants to help define what the next decade of computing looks like. So we don't have to figure out who's going to win this AI race and how to invest between Microsoft or Apple like chances are if you have an index fund that follows the stock market, the US stock market, you're invested in these companies and that's a good thing in the long run. It's diversified, you can participate in innovation and you don't need to predict the future, you just have to stay invested in it. We just have to participate in the market. And then finally, the story that really made me laugh a little bit and also roll my eyes at
9:18 Speaker 04 the same time, it's out of USA Today. So apparently some landlords are beginning to experiment with something called a work from home fee. Yeah, that was not a misprint, a fee for working from your own home, an apartment in this case. The article profiled an apartment building in Walnut Creek, California. And the reasoning is that, from the landlord's perspective, is that people who work from home, they use more electricity, more internet bandwidth, more common spaces, and they create more wear and tear on the building than someone who's away at an office all day. I mean, come on. What if you just don't like have a job and you are at home because you're either, you know, a trad wife? No, I'm kidding. You know, you're taking
10:03 Speaker 04 care of your kid. Should there be a taking care of your kid full-time fee? Who cares what you're doing at your house? This is where I got really annoyed because a fee for working from your own apartment sounds nuts. I get that housing costs are becoming increasingly higher and especially as a homeowner, I know that, but housing costs as a renter are becoming increasingly layered. You've got just, you don't have just rent, you have the fees, like pet fees, there are parking fees, amenity fees, some buildings charge a package handling fee, and then of course, to apply for the apartment, you have an application fee, the administrative fee, and now you want to charge me for working from my home, basically sitting at my desk all day? Wear and tear, what kind of job from home puts
10:48 Speaker 04 an abnormal amount of wear and tear on an apartment? Anyway, I guess the lesson here is whenever you're apartment hunting, really look at the fee structure and look at the total monthly housing cost, it's not just the advertised rent. Get a complete breakdown of every recurring fee before you sign a lease. And for what it's worth, that Walnut Creek rental has been taken off the internet since that USA Today article hit. So maybe that landlord or that property manager is having a change of heart, or they just don't want the attention. All right, let's get to your questions because there was one topic this week that really seemed to strike a nerve. So I posted a reel on Instagram where it's kind of a trend right now. I'm sharing the five things that are totally worth it, in my opinion.
11:33 Speaker 04 And one of those things that I mentioned was hiring a financial planner. And apparently this one hit a chord because my inbox quickly filled with questions, the DMs also, like, how much does a financial planner actually cost? And what does fee only really mean? And how do I find one? How do I find a financial planner? How do I know if I'm hiring the right person? All good questions. I put a follow-up video on Instagram, but as I mentioned, I think the whole video was like eight minutes and Instagram wasn't like it when you post long things. So I cut it down to like two. Lot of gems on the cutting room floor. So I want to spend some time now talking about all things CFP. The good news, let's start with the good news.
12:15 Speaker 04 The good news that finding financial advice today is actually a lot easier than it was 20 or 30 years ago. There was a time when many advisors simply were not interested in working with you unless you already had hundreds of thousands, millions of dollars for them to invest for you. Today, that's changed dramatically. There are advisors who specialize in helping young people, married couples, entrepreneurs, families with young kids, and people preparing for retirement, people in retirement. The first thing to understand is that there are really two different services that people often lump together. One is the Financial Planning Service. And the other is investment management. When you work with a financial planner, you don't have to do both.
13:00 Speaker 04 You can do either or. Financial planning is exactly what it sounds like. It's helping you answer questions like, am I saving enough for retirement? Should I pay off my mortgage faster or use whatever extra money I have every month to invest or pay off other debt? How much life insurance do I need? Should I be doing a Roth conversion? Am I on track to send my kids to college? How do I prepare financially for a career change or an inheritance? So as I say, financial planners, they're thought leaders. They are experts. They can give you qualified options and ultimately help you make better money decisions across all areas of your life. Investment management, on the other hand, is more specific.
13:45 Speaker 04 And that's when someone is actually managing your investment portfolio. Your 401K at work, your IRAs, your 529 plans, your brokerage account. They're deciding how your money should be allocated, choosing those investments. They rebalance your portfolio. They manage risk. And some advisors provide both of these services. Others focus primarily on just one. And there are different fee structures for these services. So let's start with the simplest model, and that's the flat fee. Some planners charge a one-time fee to build a comprehensive financial plan. And depending on your circumstances, it could range from $1,000 to $5,000, maybe more if your finances are especially complex.
14:30 Speaker 04 I kind of compare this to hiring an architect. You're paying someone to create the blueprint. And once you have that blueprint, you can choose to implement it yourself or hire someone, maybe the same person, to help you carry it out. Now, for a lot of people, especially if you're just trying to get organized, this can be an incredible value. Maybe you've been wondering if you're saving enough, whether your investments make sense, how to prioritize competing goals. A one-time financial plan can give you clarity without committing to an ongoing relationship where you're paying a monthly retainer or an annual fee. I will say, when we first got married, my husband and I worked with a planner. We sat down. She was able to kind of take a broad look at both of our financial pictures,
15:15 Speaker 04 understand where there were strengths and weaknesses, come up with a plan. That plan. Was not cheap. It was $5,000, but we used it for over a decade. We're still using it. And now we've enlisted the help of another financial planner. Now that our family's grown, we've changed states, all the things, just to first audit our current plan that we've been using for the past 10-plus years and see what tweaks we want to make with the goal of retiring by a certain age. And that has also been invaluable. That has also been another $5,000 investment, especially in midlife, because as I said on the Instagram post, you don't want
15:58 Speaker 04 to catch yourself by surprise in your 60s and go, oh, my gosh, when I was 45, I really should have done this and this and this when I had more time to let that decision prosper. You know, like, yeah, you can aggressively save in your 60s, but it's a lot easier to get on a schedule to save at 45, knowing, you know, what your goals are in retirement. Now, the other model that's become much more popular over the last decade is the monthly retainer or subscription model. So instead of paying that one large fee upfront, you pay an ongoing monthly amount. Maybe it's a few hundred bucks a month, depending on the complexity
16:40 Speaker 04 of your financial life. And in exchange, you have someone you can call when life happens. Maybe when you change jobs, you get that inheritance, maybe you're deciding whether to exercise stock options. And rather than paying for a brand-new financial plan every time something happens, your advisor is already familiar with your situation and can help you make decisions as they come up. And I think this model has been, honestly, one of the best improvements in the industry, because it makes financial advice more accessible to those who may not yet have a large investment portfolio, but still have a lot of important financial decisions to make, right?
17:18 Speaker 04 And then there's the model most people probably think of when they picture that traditional financial advisor and it's called Assets Under Management or AUM. This is where an advisor actually manages your investments and charges a percentage of the assets they're overseeing. Whether you make money or not in a given year, whether the market works in your favor or not, they collect that fee. And historically, it's been around 1% annually, but it's usually on a scale depending on, again, how much they're managing. The more money they manage, the less, the smaller the fee in my experience. If you're building wealth, growing your career, or running a business, every dollar matters.
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20:07 Speaker 04 This podcast is brought to you by Giving Done Right. Here on So Money, we talk a lot about how to build wealth, take agency over your money and live a rich life on your own terms. But a really rich life isn't just about the accumulation in your bank account. It's also about how you use your money to drive real change in the world. And if you've ever tried to figure out how to donate effectively, you know, it can be daunting and it can feel like a black box. Where's your money actually going? How do you know if an organization is making a real impact? That's why I want to share a podcast I've been using for guidance. It's called Giving Done Right, hosted by Phil Buchanan from the Center for Effective Philanthropy. What I like about the show is that it cuts to the noise
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21:45 Speaker 04 So let's use an example. Suppose you have $500,000 across all your investments and your advisor charges 1%. That's $5,000 a year. Now, some people hear that number and immediately think, okay, nope, next. Others might go, if someone can help me avoid costly mistakes, they can keep my investments aligned with my goals and prevent me from panic selling, that may actually be money well spent. They can sort of help you get out of your own way. Maybe that's worth it, but the question is, is it worth that money every single year? That's not the only fee you pay, right, when you're investing. There's also an annual fee for investing in an individual fund. So those percentages do add up. So I would
22:29 Speaker 04 recommend doing the math and extrapolating the math over 10 years, 15 years to see what you're actually paying. Now, let's tackle one of the most confusing parts of this entire industry, in my opinion, and that is the fee-only advisor versus the fee-based advisor. Those two terms are used interchangeably, but they're not identical. A fee-only advisor is compensated only by their clients. They don't get commissions for selling insurance or annuities or whatever product. Whether you pay them a flat fee, a monthly retainer, or an asset under management fee, the money comes from you, not from a product manufacturer. And that's why a lot of advocates, myself included, generally prefer this model because
23:14 Speaker 04 it minimizes potential conflicts of interest. Then there's a fee-based advisor, which may charge you a fee, like the fee-only advisor, while also receiving commissions when their clients purchase certain financial products. But let me be clear, that doesn't mean that makes someone a bad advisor. There are many ethical, highly qualified advisors who operate this way. And why they're okay is because they're completely transparent about how they're compensated. But here's something else. Just because a financial planner is transparent, it doesn't mean conflict of interest can't happen. So disclosure is important. It's essential. It's a non-negotiable. But if If an advisor is receiving a commission, the disclosure does not eliminate the incentive.
23:59 Speaker 04 It just tells you that there is one. And that's why I think it's important to ask thoughtful follow-up questions before making the decision. If you're interviewing an advisor, here's some questions I would ask. One, are you a fiduciary when you're working with me? Which means that you have a legal obligation to put my interests first. Two, how are you compensated? Ask them to explain it in plain English. Third, do you get a commission for recommending products that I ultimately buy? And finally, if you do get those commissions, are there comparable alternatives that don't pay one? Because I think I should know, right? I want to know what my options are outside of the ones that you're going to make money off of.
24:42 Speaker 04 And that'll be a very revealing answer, whatever they say, because it'll help you understand whether you're working with somebody who really does have your back. And by the way, a good advisor will not be offended by these questions. In fact, they should welcome them. You're interviewing someone who is going to play a significant role in your financial future. That's a lot of money they're going to be making off of your money. So how do you actually find a planner? So I would start by looking for a certified financial planner, CFP. It is one of the most respected designations in the profession, and they are held to that fiduciary standard. It doesn't automatically mean someone is the perfect advisor for you, but it's a great place to start. And second, this person can be across the country.
25:26 Speaker 04 They don't have to be down the street. One of the biggest changes in this industry is that advisors now work virtually all the time. You can hire someone across state lines if they're the best fit for your needs. I'm also a fan of XY Planning Network, which is a nationwide directory of fee-only CFP professionals. And one thing I like about it is that you can search by specialty. So maybe you're a mom who runs her own business, and you really want to work with somebody who understands like your business structure. Maybe you're a doctor. Maybe you're a young family. Maybe you're approaching retirement. Again, these days, certified financial planners, the good ones, they really niche-ify. They really have an audience.
26:10 Speaker 04 They really know, they have a target. And then, you know, they can help everybody realistically. But You want to work with somebody that's gotten more reps, working with people that fit your profile because they'll just have more experience, right? Helping people like you and that's going to benefit you. And then finally, just ask around people you trust, friends, family, colleagues, whose financial lives look similar to yours. They can often provide great referrals. But don't just say, "Who do you use?" Say, "Why have you stuck with them? What value are you actually getting?" Because at the end of the day, yeah, a financial plan will help you maximize your financial life. But it's really about getting to a place where you feel like your money is supporting the life that you actually want to live.
26:55 Speaker 04 And this person is going to play a really important role in your life. It's a really intimate role. They're going to get to know a lot about you. So feel them out. If you're getting weird vibes, move on. You want to interview at least a few people and then make your decision from there. All right, next question comes from Instagram. And I have a feeling a lot of you have wondered the same thing. It's this, "Farnoosh, I have a perfect credit score. So why is the bank still offering me a 6.5% mortgage rate? Isn't 6.5% just the average? Shouldn't my excellent credit qualify me for something lower?" Yeah, I mean, it sounds reasonable.
27:36 Speaker 04 It's one of the biggest misconceptions, though, that people have about interest rates and borrowing. The short answer is that a perfect credit score doesn't guarantee you're going to get a below-average mortgage rate. What it does is it qualifies you for your lender's best pricing tier. So the analogy that I like to use is like, think about buying an airline ticket. Let's say you're the airline's most loyal customer. You've got elite status, so that gets you to board early. You get free checked bags. Maybe you even get upgraded once in a while. But you still have to pay today's airfare, right? Your loyalty gets you perks. It gets you great customer service, but it doesn't exempt you from the market price. Mortgage rates work very much the same way.
28:21 Speaker 04 Everyday lenders are looking at what's happening in the broader economy. They're looking at inflation. The treasury yield, bond market, investor demand, and all of those factors will determine the baseline mortgage rate that's available that day. For anyone who's gone interest rate shopping for a mortgage or a car loan, you know that, right? That like, timing matters because if you sit too long on an application, the rate could change within a matter of days or weeks. So your credit score comes into play after the bank decides on that day's rate. So think of the market establishing the starting point, not you. And then your personal financial profile determines whether you stay at that rate or you pay more.
29:04 Speaker 04 Know that people with not so great credit scores are not getting that 6.5%. They're probably getting something like 7% or 8%. And here's another fact that surprises people. Once your credit score gets into roughly the 760 to 780 out of 850 range, you have generally earned the maximum pricing benefit available from most lenders. So if you're like, trying to get that 850 credit score or 800, good for you, but it's not going to mean a dramatic difference in what your mortgage rate will end up being. I know we love chasing perfect credit scores in this country. Nothing wrong with that, but once you've crossed into that 760, 780 top tier, the rewards start to level off.
29:47 Speaker 04 Now, I will say that your credit score is only one piece of the puzzle. Lenders evaluate your down payment. They look at your debt to income ratio, which is how much of your monthly income is already committed to paying other debts. They're looking at the size of a loan, the type of property you're buying, whether it's your primary residence or an investment property, and even where the property is located. So all of those factors influence pricing. And another thing many borrowers don't realize is that not all lenders price loans the same way. One bank may really want jumbo mortgages, and they'll offer aggressive pricing to attract those borrowers. Another lender may specialize in first-time home buyers.
30:30 Speaker 04 There are credit unions that have different pricing than national banks. Mortgage brokers can And sometimes access wholesale rates that individual consumers can't. And so shopping around is really important. Research consistently shows that borrowers who compare multiple lenders often save thousands of dollars over the life of a mortgage, simply because they took the time to collect several quotes instead of accepting that first offer. And one last thing I'll say, and this helped us out when we were getting a mortgage, is relationship pricing. So some banks will offer discounts on your interest rate if you already have a meaningful relationship with them. Maybe you have a sizable investment account there. Maybe you qualify for their private banking services.
31:15 Speaker 04 Maybe you move your additional assets over to the institution, even if it's just temporary. They may lower your interest rate or reduce certain closing costs. And so these are some programs to ask about because they can certainly help to reduce your annual cost of carrying this house. But, and here's what I'll say, a lot of times you'll be like, I don't want to move my money into this bank. You know, they have a great mortgage offer, but the savings rate is so low. Like, I'm really happy with my high-yield savings account over here. A lot of times, and this is what we were told, you can move the money temporarily. Once you sign off on the loan, you're free to move that money wherever you want.
31:56 Speaker 04 And they're not going to change the mortgage rate because you moved your money after the fact. So it's kind of a nice secret perk that many people don't know about, don't know to ask about. So bottom line, congrats on having a great credit score. If you're already in that excellent credit range of 760 to 780 or higher, you've likely unlocked the best pricing available from your lender, which is typically what you see advertised 6.5% for that day. And those who have lower credit scores will probably not see that advertised rate. They're going to get something higher. Compare the APR, but not just the interest rate because the APR includes many of the fees associated with the loan.
32:40 Speaker 04 Ask about closing costs. See whether relationship discounts make sense for your situation. And most importantly, borrow the amount that leaves room in your budget for the rest of your life. Remember that the goal isn't simply to qualify for the biggest mortgage. That a bank will give you, it's about buying a home that still gives you breathing room to save for retirement and build wealth and take vacations and have an emergency fund. That's always better than squeezing out another fraction of a percent on your interest rate, right? Now, as we head into a new month, everybody, remember, you don't have to have your entire financial life figured out, okay? Keep your questions coming. Progress almost always comes from making one good decision and then we make another decision. You know, not all decisions are finite.
33:24 Speaker 04 So here's to a fresh month, fresh opportunities, and hopefully a little more peace of mind around your money. Thanks for tuning in, everyone, and I hope your weekend is so money.
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Previous 2015: The Real Cost of Tech (and How to Afford It) Next 2017: The One Question That Can Change Your Financial Life Page updated November 6, 2026 · transcript and summary are machine-generated
