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April 17, 2007


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My financial planner has a negative net worth. He had a serious health problem and was hospitalized for 3 months, then he had months of recovery when he couldn't work. Health insurance was very high because his health problem is genetic and he's had it for many years. Between hospital bills and a software business he started that went out of business, he had to file bankruptcy. Despite his background, he gives great advice. His recommendations from last year earned 15.7%.

As one who aspires to be a financial planner, as well as one who has probably an above-average level of financial literacy, I am bothered by this question.

If I could somehow actually become a financial planner (I currently have no way to afford the educational requirements), I would undoubtedly start out with a five-figure negative net worth.

How would that make me unqualified to dispense financial advice?

Someone's personal actions are not relevant to the propriety of the advice he/she gives. To claim that these are related is to commit the "Tu Quoque" variety of the "Ad Hominem" logical fallacy. See this Wikipedia link for more info:

See, I knew it would pay to be a philosopher and a personal finance blogger!

It depends on what caused the negative net worth. Funnily enough, if its caused by spending on credit cards then that would be ok. If its caused by using their own financial planning skills then that would be bad.

"How would that make me unqualified to dispense financial advice?"

If you can't use your own skills advice to make yourself wealthy, what makes me think you can do it for me?

More and more companies are selecting executives that have made mistakes based on the theory that mistakes are learning experiences. I would choose a mature financial planner with low net worth over a young planner because the youngster has not faced enough challenges from life and historical averages hide great disasters. Knowledge is great but experience is absolutely necessary. Unfortunately, experience often depletes one's net worth.

I started out with student loan debt and a minimum wage job. In other words, I started out with so-called "good" debt and no way to pay it off.

Do you seriously think ANYONE would be able to use their financial skills advice to make someone with student loan debt and a dead-end minimum-wage job wealthy?

It takes money to turn financial skills into wealth. I have never heard of any financial planner making an indebted minimumum wage worker wealthy. Have you?

"What makes me think you can do it for me?"

I can turn money into wealth. I can't turn negative money (debt) into wealth. Could you turn debt and a minimum wage income into wealth?

Wouldn't that make for a great financial challenge?

The first thing I'd tell them is to stop complaining about their "dead-end minimum-wage job" and do something about it.

Interesting Question. There is more to it than net worth I guess - from the responses.

But I think it is an important question. I have a friend who does horribly financially and has decided to become a rep for Primerica. They sell financial services. I find it VERY ironic my friend who has no assets to speak of and 100s of thousands in debt (mostly student loans, but she is almost 40). Well I find it ironic she wants to give me financial advice. No way no how. I just turned 30 and my net worth is 1/2 mil. I don't need her stinking financial advice.

I think there could be some bad financial planners out there and is one way to weed the bad ones out. Obviously someone selling financial services as an independent sales consultant is not the way to go - they are trying to sell products. & looking at net worth can kind of get you a feel of this is some fly by night thing or someone who really takes their financial situation seriously and can offer true help or advice.

As far as the minimum wage comment, we all have to start somewhere.

My dirty secret is that I was a Primerica rep for about three months. There are bigger issues at play than that your friend has a negative net worth. What they have to offer, IMHO, is a parody of real financial planning advice. All she's going to be "selling" anybody is to cash in their whole life insurance and buy their term life products. That is NOT financial planning, she's just become an insurance salesperson. (Further down the line she could end up getting a Series 6 license but the heart of Primerica's schtick is insurance.)

Otherwise, no I wouldn't go to a financial planner with a negative net worth, for much of the same reasoning as FMF. I can empathize with somebody who falls on medical misfortune and so might overlook that, but as a rule I expect somebody who is advising me to be in a better position than me. Too bad if that's harsh (actually for my situation that's pretty doable).

I had a brief foray with a financial planner that turned me off of financial planners anyway (He stuck me in mutual funds of his selection without offering me choices or explanations, which I hated and I hated the funds. Also our meetings usually turned into me listening to him talk about how tough his life was and how hard it was to pass his financial planner tests -- he wasn't yet licensed -- how did I even get involved with this guy? Oh yeah, one of those companies came to the office with their free seminar, and this was the turkey they stuck me with when I said I wanted a further consultation instead of the guy who made the presentation (who I wanted).) Now the only reason I'd seek out a financial planner would be if (WHEN!) I become wealthy beyond belief.

Otherwise my best financial plan is to educate myself on finances and think through the decisions myself.


Oh, and P.S. I too started out earning minimum wage out of college with my hot little English Lit/Philosophy degree in hand. I was a file clerk at a law office. Thanks to this job I spent several MONTHS of my life where my sole responsibility was standing at a rented photocopy machine for 8 hours a day (every day) in the office of the company our client was sueing while I photocopied just about every piece of invoicing and other paperwork this company had ever produced, then stamping a unique letter on it and recording it in a log book. Surrounded of course by hostile people. It was a horrendous job.

I went on from there to secretarial work (ugh) and proofreading (double ugh) until I finally got myself onto an upward career track. Those were desperately hard years.

Today I'm a software developer making much bigger money. It took a lot to get there but the only person who got me there was me. The only reason I got there was because I decided working those grunt jobs wasn't going to cut it, and I did what I had to do.

There's no doubt minimum wage jobs suck. You have to put in the time and energy to get yourself out of that gig. Self-pity won't help.


Negative net worth is acceptable, but a downward sloping trend in net worth is not. I'll take a 'poor but upwardly mobile' advisor over a 'rich but bleeding cash' advisor any day.

I have never used a financial planner but if I did, I would only use one that is personally successful financially. I would simply ask the question and expect that if the person was good, the question would be anticipated and an answer would be ready, even if it didn't go into specifics. If the question was perceived as too personal, I would be walking out the door.
As for the individual with the medical problem, I would say that is a bad financial planner. Part of financial planning is preparing for the unexpected and putting the right insurance or safety net in place to avoid permament loss of capital whether through illness, death, litigation, or anything else. Getting a certain investment return is not financial planning. That is the investment part of financial planning. In 2006, putting money into an S&P500 index fund would have netted a 16% return so if you paid money for that advice, I'd suggest asking for a refund.
Similar to DB, I worked at a minimum wage job throughout my college years to pay for room, board, and tuition. I received no help whatsoever from family or friends. I started college with a net worth of $0. When I graduated, I had a small positive net worth (about $500 in cash) plus a diploma. It was not easy, but it was possible. And I continue to apply the same frugality today, 11 years after graduating, even though my income has reached heights I never thought possible.

I'm not looking for a financial planner, but if I was,I would interview them. To see what they envision to do with my situation and their basic view of finance. If they were too different from what I have in mind then I would keep on searching for someone that was like-minded on basic financial principles. For me it is eliminating debt and not adding to it.
This is the same reason I take very little financial advice from my parents. I see where they are at, now, and I have a different vision for myself at their age. They are very conservative about saving for retirement, mostly through the bank savings account, and they could have done much more if they would have taken advantage of different investments.
"Minimum wage"
I was where you are 3 yrs ago. Working at Wal-Mart trying to advance in their management system. It had nothing to do with my degree, so I took a job that paid better but still not what I was looking for as a career. But the skills I took from my second job, led me to the job I have now. (money definitely came with it). If you are struggling that much with one job, find another minimum wage job and work 80 hrs/ wk. You'll find a way out after doing that for 6 months.
Went from selling Stationary to the automotive industry and now am in Aerospace.

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