For about 20 years, Sue and Steve Manseau kept searching for a financial planner. Like most middle-class Americans, the couple found that the advisers they met didn't want their business.
Until recently, financial advisers have managed investment portfolios for affluent clients and charged more than the Manseaus could afford. Fortunately, a growing number of financial planners and online websites are serving middle-class families.
The advice that middle-class families need is much different than that of the affluent. "The recession mainly hit the middle class," says Stephen Brobeck, executive director of Consumer Federation of America. The middle class has been hit hard by job losses and increasingly costly benefits. The housing bubble also caused many home values to plummet. And because few of them have a pension plan, middle-income workers have to figure out how to save for retirement. Smart investing is only a small part of their needs.
"The financial planning decisions of middle-income families are more critical than that of wealthier people because they can't afford to make any mistakes," says Sheryl Garrett, the founder and CEO of the Garrett Planning Network, a nationwide network of fee-only financial advisers who specialize in serving the middle class.
The Manseaus, who live in Santa Barbara, Calif., are in their early 60s. Sue is a nurse and Steve is a salesman. Now that their two daughters are grown, their biggest concern is retirement, especially because of some bad investment decisions, the stock market crash and costly mortgages. "I have been afraid that we could not retire and that we are going to be the greeters at Walmart," Sue says.
Like the Manseaus, two-thirds of middle-class families have made a really bad financial mistake that typically has cost them between $5,000 and $23,000, says a 2012 report by Consumer Federation of America and Primerica. And on average, middle-class families have assets only of $27,300, based on the Federal Reserve Board 2010 survey, down 28 percent from 2007.
Despite the roadblocks they encountered, the Manseaus never stopped looking for a financial planner who can serve their needs. Last year, when they went to the NAPFA website, a national association of fee-only financial advisers, they found Anna Sergunina, a member of the Garrett Planning Network.
Sergunina immediately understood their needs and came up with a plan to help them deal with their financial problems. "She was able to show us that we really can retire," Sue says. "It may not be with lots of trips or living in a gorgeous home, but it is doable if we follow what she has recommended. And that is a huge relief."
The Garrett Financial Network alone has about 325 financial advisers. And NAPFA has other members who serve the middle class.
Today there are also inexpensive online startups that do not just provide calculators or cookie-cutter financial advice. "Technology is not replacing the relationship," says Esther Stearns, CEO of NestWise, an online website for financial advice. "It is enabling it to reach out to the middle class with real-life financial planners."
NestWise is starting to open offices in major cities. But families who live in small towns that are far from most financial planners can have an online relationship and a personal NestWise adviser. Clients can talk to them on the phone or use video conferencing.
LearnVest is another new financial site for underserved Americans. In addition to a mobile budgeting tool, it offers an affordable way to call or e-mail a staff of certified financial planners for guidance.
What's the cost?
Financial advisers traditionally have charged an annual fee based on a percentage of the client's assets. In contrast, planners who serve the middle class offer a range of services and fees. For example, some clients can pay an hourly fee for an occasional checkup.
At Garrett Planning Network, there is no minimum fee. Its advisers charge different hourly rates that range from about $150 to $300.
At NestWise there is an initial planning fee of $250 and then an annual fee of $575 that can be paid monthly or quarterly. And LearnVest charges a $19 monthly fee, and a one-time set up fee that ranges from $69, for a budget help, up to $399, for a financial plan and investment help.
What do you get for your money?
When looking for an adviser, you need to ask what kind of financial services they offer. Do they start with a basic financial plan or will they provide only an investment plan? Will you have an ongoing relationship with one planner or will you occasionally see a member of a team of advisers?
"Middle class need blocking and tackling, with debt management and cash flow management," says Eleanor Blayney, CFP Board's Consumer Advocate. "It's important for them to find a planner who offers two sides of financial planning and is not simply an investment manager."
At NestWise, the advisers start by asking what's most important to clients. A young couple might be focused on buying a home, but they also may have much debt. The adviser will help them understand the trade-offs in life, focusing on spending and savings, as well as investing, Stearns says.
Evelyn and LaChristian Porter, who live in Charlotte, say that student loans and credit card debt have held them back from buying a home and saving money. When they found that they could not afford most financial planners, they turned to NestWise. Now the 34-year-old couple has an adviser who is helping them get their finances in order, set up an emergency fund and plan for their future.
Who can you trust?
Even if financial advisers have a lot of letters after their names, that doesn't tell you anything about their experience. Among the variety of designations, a CFP, certified financial planner, is often considered the most significant. A PFS, personal financial specialist, and a CFA, chartered financial analyst, also provides credibility.
BrightScope.com provides information about many advisers, including experience, certifications and conduct. If a planner is a CFP you can go to cfp.net to verify their certification and see if they have been disciplined by the CFP Board.
Make sure advisers are not trying to sell a product and are willing to take time to clearly explain their recommendations. It is also important to find someone you are in sync with. When Michael and Lindsey Almeida, who are 30, wanted an adviser, they chatted with several planners who are part of the Garrett Planning Network.
In the end, the couple, who lives in Washington Township, N.J., selected Theresa C. Wan, at TCW Financial Planning. "It was pretty important to make sure that we are comfortable and that we trust her," Lindsey says. In the past, the Almeidas say they were "mattress people," because they kept their savings in a bank account, unsure how to invest it.
Wan is now helping the couple get a good financial start in life. She recommends mutual funds for their savings and helps them maximize their retirement plan investments. And that is something they wouldn't get from most investment advisers. As Michael says, "The big Wall Street types don't want to deal with our few dollars. They want to work with the big fish and whales."