Podcast Summary: "Can We Renovate Our Kitchen?"
Jill on Money with Jill Schlesinger
Release Date: December 20, 2024
In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the financial intricacies of home renovations, particularly kitchen upgrades. The episode features insightful discussions on managing financial advisor fees, selecting fee-based financial planners, making significant home improvement decisions, and strategies for portfolio rebalancing. Through listener questions and expert guidance, Jill and her team provide actionable advice to help listeners make informed financial decisions.
1. Managing Financial Advisor Fees
Listener Question from Rich:
Rich expresses concerns about his financial planner reducing his fee from 1% to 0.8% of his IRA account but simultaneously increasing his investment in mutual funds from 15% to gain access to specific markets.
Expert Response:
Jill addresses Rich's unease by highlighting the importance of understanding what services are being provided for the fees charged. She states:
“If you're just paying 80 basis points or 1% and you're not getting any financial planning, you're just getting money management. All of it's a ripoff.”
— Jill Schlesinger [04:00]
Jill advises Rich to question his advisor about the necessity of the fees and whether ongoing financial planning is part of the service. She emphasizes the importance of transparency and ensuring that fees align with the value received.
2. Seeking Fee-Based Financial Advice After Receiving Life Insurance Proceeds
Listener Question from Brenda:
Brenda seeks recommendations for a fee-based financial firm after her mother inherited $111,000 from a life insurance policy. She is unsure whether to choose a wirehouse or another type of firm.
Expert Response:
Jill outlines the different compensation models for financial advisors:
- Commission-Based Model: Typically older and often involves selling specific financial products.
- Asset Under Management (AUM) Model: Fees based on the total assets managed, usually requiring ongoing financial planning.
- Fee-Only Advisors: Charge a flat fee and do not receive commissions, focusing solely on providing unbiased financial advice.
She suggests that Brenda determine her needs—whether it's asset management, investment, or comprehensive financial planning—and choose a firm that aligns with those requirements. Jill highlights the benefits of fee-only advisors for unbiased advice:
“We don't take commissions, we're not selling stuff. It is just a flat fee or some, some way to compensate people for the advice that they are getting that is not linked to a product or an asset under management model.”
— Mark [07:00]
3. Deciding on a Kitchen Renovation
Listener Question from Ronald:
Ronald and his wife, both in their early 40s with substantial savings and a stable income, contemplate a $75,000 kitchen renovation. They are concerned about whether this expenditure is financially prudent given their long-term goals and current mortgage balance.
Expert Response:
Jill and her guests analyze Ronald's financial situation, considering their savings, investment accounts, and mortgage. Mark offers a candid perspective:
“You have this beautiful sub 4% loan. No, you should use your brokerage account. That is how you're going to pay for it.”
— Mark [12:11]
He advises against pausing contributions or taking out a loan, emphasizing the importance of utilizing available brokerage funds to finance the renovation. However, he cautions that the final cost may exceed the initial estimate, potentially reaching $100,000.
4. Strategies for Rebalancing a Balanced Fund
Listener Question from an Anonymous Caller:
A listener inquires about the necessity and method of rebalancing a balanced fund, specifically the Vanguard Wellington Fund, which maintains a roughly 2/3 stock and 1/3 bond allocation.
Expert Response:
Jill examines the characteristics of the Vanguard Wellington Fund, noting its balanced nature and low expense ratio compared to other balanced funds. She reassures the listener:
“You are paying more for that balance. But it's easy. And so like I'm fine with it. I'm totally fine. I would keep it. You're all good.”
— Jill Schlesinger [13:30]
She concludes that for those comfortable with their current balanced fund setup, extensive rebalancing may not be necessary. However, she suggests monitoring the fund's performance and being open to adjustments if allocations shift significantly.
Conclusion
Throughout the episode, Jill Schlesinger and her team provide nuanced financial advice tailored to individual circumstances. Whether it's evaluating financial advisor fees, selecting the right financial planning services, making informed home renovation decisions, or managing investment portfolios, listeners gain valuable insights to navigate their financial journeys confidently.
For more personalized advice, listeners are encouraged to visit jillonmoney.com and reach out with their financial questions.
Notable Quotes:
- Jill Schlesinger: “If you're just paying 80 basis points or 1% and you're not getting any financial planning, you're just getting money management. All of it's a ripoff.” [04:00]
- Mark: “We don't take commissions, we're not selling stuff. It is just a flat fee or some, some way to compensate people for the advice that they are getting that is not linked to a product or an asset under management model.” [07:00]
- Mark: “You have this beautiful sub 4% loan. No, you should use your brokerage account. That is how you're going to pay for it.” [12:11]
- Jill Schlesinger: “You are paying more for that balance. But it's easy. And so like I'm fine with it. I'm totally fine. I would keep it. You're all good.” [13:30]
This comprehensive discussion equips listeners with the knowledge to assess their financial strategies effectively, ensuring that their decisions align with both their immediate needs and long-term financial aspirations.