fiduciary

Apache is functioning normally

A fraud alert is a temporary alarm system set up on your credit account that will inform you if there are any changes in your account. A credit freeze is a freeze placed on your credit file that blocks lenders from viewing your report without authorization.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Fraud alerts and credit freezes are two methods for protecting yourself from identity theft. But they’re not the same thing, and if you understand the pros and cons of each, you can decide which is best suited to your needs. A fraud alert requires creditors to verify your identity before allowing new credit accounts to be opened, whereas a credit freeze stops new credit accounts from being opened in your name. 

So, what’s the right choice for you in the fraud alert vs. credit freeze debate? Keep reading for a complete breakdown of both options. 

What is a fraud alert?

A fraud alert is when you put an added layer of security on your credit report that forces all lenders and financial institutions to verify your identify before approving a new credit account being opened. Typically, the creditor will call you whenever a new account request is initiated to confirm you’re the one asking for the account. 

People typically use a fraud alert if they’ve been a victim of identity fraud or if they suspect their information has been compromised. While a fraud alert adds some protection to your account, it’s not a guarantee, and there are still ways scam artists can get around the identity check. 

There are three main types of fraud alerts:

  • Standard fraud alert: A standard fraud alert typically lasts one year but can be renewed as many times as needed. Individuals don’t need to be victims of identity theft to activate this kind of fraud alert on their accounts. 
  • Extended fraud alert: An extended fraud alert lasts for seven years. This option is only available to those who’ve been victims of identity theft. To qualify, you have to file a report with the police or the FTC’s IdentityTheft.gov website. In addition to verifying your identity with each new account request, the extended fraud alert will remove you from marketing lists for credit and insurance offers for the next five years. However, if you want to remain on this list, you can choose to do so. 
  • Active-duty fraud alert: The active-duty fraud alert is only for military service members. When individuals go on active duty assignments, they can apply for this type of fraud alert to protect their accounts while they’re abroad. The alert typically lasts one year but can be renewed as long as the individual is deployed. In addition, they’ll be removed from marketing lists for two years unless they request otherwise. 

Fraud alerts are self-imposed and free to add to your account. 

How do you place a fraud alert?

You can place a fraud alert on your account by reaching out to one of the three major credit bureaus—Experian®, Equifax®, or TransUnion®. After you notify one bureau, it’s their responsibility to inform the others. You can set up a fraud alert online or contact any of the bureaus by phone with this request. You’ll need to submit your proof of identity to successfully set up the fraud alert. 

How do you remove a fraud alert?

Fraud alerts are automatically lifted from your account after the applicable deadline (one year for standard and active-duty alerts and seven years for extended alerts). However, if you want to remove the fraud alert earlier, you can. You’ll need to contact each credit bureau separately and request that the fraud alert be lifted. As was the case with setting up the alert, you’ll need to provide proof of your identity to remove the alert from your account. 

What is a credit freeze?

A credit freeze offers even more protection than a fraud alert. Essentially, a credit freeze stops anyone from accessing your credit report. This effectively prevents anyone from being able to open a new account under your name, as creditors need to review your report before approving a new application. You’ll be able to open new accounts only when you “thaw” or “unfreeze” your account.

How do you freeze your credit?

To freeze your credit, you’ll have to contact each of the three major credit bureaus separately. Note that fees are usually associated with a credit freeze, with the exact amount varying by state. On average, expect to pay around $10 per bureau for a credit freeze. You can apply for a credit freeze online or via phone for all three bureaus. 

When you’re setting up a credit freeze, you’ll be asked to set up a PIN or password, which can later be used to unfreeze your account. 

How do you unfreeze your credit?

Your report will stay frozen until you choose to “thaw” it. This means that you need to unfreeze your credit before applying for more credit, and this is usually the driving factor that motivates people to thaw their accounts. Often, people want to get a new credit card, loan, or mortgage or apply for a rental lease or some other credit account and need to give the lender access to their credit report. 

To unfreeze your account, you’ll need to contact each of the credit bureaus and provide your PIN. There may be a small fee associated with unfreezing your account with each agency. Once you put in a request to unfreeze your account, the change can take from as little as a few minutes to up to three days. As a result, it’s essential to give yourself plenty of time for the account to thaw before the lender goes to access your report. 

If you lose your PIN, unfreezing your account will still be possible, but it’ll take longer to approve. 

Do fraud alerts or credit freezes affect your credit?

No, fraud alerts and credit freezes don’t affect your credit. In fact, they can protect your credit from identity fraud attempts. Identity fraud is a serious situation that can significantly drag your credit score down and take months to years to clear up on your credit report. 

Which option is right for you? 

Ultimately, each individual needs to decide which option is right for them based on their situation. Some of the popular situations to consider that might call for either a fraud alert or a credit freeze are:

  • You’re in the process of or about to begin getting a mortgage, auto loan, lease, or another account: In this case, you don’t want to go through with a credit freeze, as access to your credit report will be necessary to approve your new application. Instead, a fraud alert should be sufficient to protect you. 
  • You’ve been a recent victim of identity theft or know your information has been compromised: If you’re seriously concerned about identity theft, you should likely opt for a credit freeze, as it’s more protective.
  • If you know you don’t need new credit for a while: Older people often are settled with all their credit needs—a mortgage, car loan, credit cards, etc. Therefore, they can comfortably assume they won’t be applying for new credit anytime soon and might feel more protected with a credit freeze. 

Note that you can have both hypothetically, although it might be somewhat redundant. Generally, most experts recommend choosing one or the other. 

Even with a credit freeze or a fraud alert on your account, it’s still crucial for you to check for fraudulent charges on your cards and look for red flags on your credit reports. You never know when something could slip through, and if it does, it’s crucial to act quickly. The longer something remains on your credit report, the longer it will impact your credit and be harder to rectify. 

If you don’t have the time or desire to check your credit reports, you can take advantage of the services provided by Lexington Law Firm. Our credit consultants will help you review your credit reports and file disputes if needed. Removing even one error from your credit report could result in a credit score increase. Get started today.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Paola Bergauer

Associate Attorney

Paola Bergauer was born in San Jose, California then moved with her family to Hawaii and later Arizona.

In 2012 she earned a Bachelor’s degree in both Psychology and Political Science. In 2014 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, she had the opportunity to participate in externships where she was able to assist in the representation of clients who were pleading asylum in front of Immigration Court. Paola was also a senior staff editor in her law school’s Law Review. Prior to joining Lexington Law, Paola has worked in Immigration, Criminal Defense, and Personal Injury. Paola is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.

Source: lexingtonlaw.com

Apache is functioning normally

Safeguarding Your Investments: Navigating the Debt Limit and the Security of Your Treasury Bonds | SmartAsset.com

Close thin

Facebook

Twitter

Google plus

Linked in

Reddit

Email

arrow-right-sm

arrow-right

Tap on the profile icon to edit
your financial details.

Get ready for the trillion-dollar question: Are your Treasury bonds at risk in the face of a U.S. default? Brace yourself, because if Congress falters in raising the debt ceiling before the Treasury’s coffers run dry, the repercussions will be felt far and wide. When the government can’t foot its bills, that includes honoring payments on Treasury debt—bonds, bills and notes included. Discover the potential impact on your investments and protect your financial future.

A financial advisor can help you navigate this precarious moment. Find a fiduciary advisor today.

If you own Treasury bonds, there’s a very good chance that this will reduce the value of your investment. While the government will ultimately pay all of the interest and par value that you are owed, a default might delay those payments. It will also very likely reduce the value of your bonds on the secondary market, generating a lower return if you choose to sell them.

Here’s why.

Despite its misleading name, the debt limit does not actually limit government debt. Instead, it limits the Treasury’s ability to restructure that debt as necessary.

The total amount that the United States owes is established each year through Congress’ tax and budget process. In the annual budget, Congress makes millions of individual commitments to soldiers, sailors, teachers, air traffic controllers, corporate vendors, foreign governments and countless others. When tax revenues fall short of these commitments, the result is the total debt of the U.S.

To consolidate this debt, the Treasury issues bonds. These instruments shift the government’s obligations from a network of countless ad hoc creditors to a series of structured lenders on a fixed repayment schedule. Bonds give the Treasury the cash flow it needs to pay the bills that Congress has incurred, including past bills such as bonds issued in previous years.

The debt ceiling puts a cap on how many bonds the Treasury can issue. This eliminates its ability to restructure and consolidate, choking off the Treasury’s cash flow without affecting the government’s underlying debt.

What Will Happen to Bondholders If the Debt Ceiling Isn’t Lifted?

It’s difficult to tell exactly because this never happened before. However there are some likely results.

Investors who hold U.S. Treasury bonds are one of the great network of creditors to whom the government owes money. In their case, the government owes them regular interest payments and lump-sum repayments for matured assets. The Treasury issues these payments on a regular schedule, based on the nature of any individual asset.

Once in default, the Treasury will likely begin prioritizing payments, sending checks to some creditors while defaulting on others as cash rolls in. Among other things, in the same way that an unpaid power bill leads to penalties and fines, an extended default would likely result in penalties and lawsuits as individual creditors seek the money they are owed.

For bondholders, this could result in several significant outcomes.

First, no new assets to purchase.

Investors in U.S. debt will not be able to purchase new assets while the government is in default. The debt ceiling means that the Treasury is barred from issuing new debt instruments, so it will not sell new bonds until that limit is raised.

That does not mean that you can’t buy any Treasury bonds, just that you won’t have access to newly created and issued ones.

Second, payment disruptions are possible but unlikely.

If the Treasury has to structure payments due to cash flow issues caused by the debt ceiling, it’s likely that it will try to prioritize existing debt holders in an effort to preserve as much of the government’s credit and credibility as possible. If it has the cash on hand to do so, the Treasury will then continue issuing interest and repayments for existing bonds on schedule.

The problem is that the Treasury owes more than $1 trillion in maturity and interest payments over the course of June. It is unlikely to have this cash on hand in the absence of new borrowing.

In the event of a brief default, lasting hours or days, bondholders will probably not see any interruption in their payments. If a default lasts longer than that, the risks of a missed payment will increase, becoming a near-certainty if the government remains in default over a period of several weeks.

Third, your returns will likely suffer.

The yield on your bonds will likely be safe, even in the event of a payment disruption. However you can likely expect lower returns if you choose to sell your bonds.

If Congress defaults on the U.S. debt, it will almost certainly reduce the market value of this debt at every level. Much of the value behind these bonds is their perception as the world’s safest asset, guaranteed by both law and tradition. That confidence, once shaken, will not be easily restored. Secondary markets will almost certainly price this risk into Treasury bonds.

Beyond that, once in default credit agencies will downgrade U.S. debt. If that happens Treasury bonds will no longer meet the minimum standards for many low-risk funds and institutions, forcing them to sell their assets and flooding the market with Treasury bonds. Collectively, this will reduce the amount that buyers pay for Treasury assets, reducing the returns you can expect if you choose to sell your bonds. It will also likely push up the value of long-term bonds over short-term bonds, as investors seek the perceived security of assets that mature after the immediate default crisis has passed.

Fourth, interest rates will go up.

This is a double edged sword for investors.

As noted above, much of the value behind Treasury bonds is the idea that they are the world’s safest asset. This is priced into their interest rate. If Congress defaults on the U.S. debt it will introduce risk into Treasury borrowing. As with all debt, lenders charge higher interest rates for riskier assets. The result is that, once the debt ceiling is lifted, the Treasury will almost certainly have to pay higher interest rates for newly issued bonds.

For new investors, this will be a bit of rare good news. They will likely get better yields on new Treasury bonds going forward. For existing investors, however, this will devalue the bonds they currently hold, pushing down their value on the secondary market relative to new, higher-interest assets.

Returning to our original question, are your Treasury bonds safe? The answer is mixed.

If you are a long term investor whose goal is to collect interest payments until an asset’s maturity, then your investment is probably safe. You may see a brief disruption in your bonds’ repayment schedule, but that is unlikely to last very long. Beyond that, it is still extremely unlikely that you will lose money on this asset.

If you want to sell your bonds at any point, you will very likely lose money. The value of existing bonds will almost certainly fall (possibly quite significantly) in the event of a default.

If you are a future investor, you will probably improve your yields as the increased costs of U.S. borrowing push up the interest rates on future Treasury bonds.

But it’s critical to understand that this is entirely speculative. A U.S. default would cause chaos across every financial market, from investments to employment to borrowing and beyond. Borrowing and credit of every kind would get more expensive, likely pushing up prices in most markets and pushing prices down on most investments. There is no clear way to predict what would happen in this environment, even if these are a series of likely outcomes.

The Bottom Line

If Congress defaults on the U.S. debt, the first assets hit will be Treasury bills, bonds and notes. For current investors this will likely mean chaos. You can most likely expect Treasury payments in full, even if not on time, but secondary market returns will almost certainly plummet.

Risk Management Tips

  • Even if Treasury assets are supposed to be immune from risk, it’s still a part of investing overall. Managing that is a key part of managing your money.
  • The best way to prepare for risk is with good advice. A financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

Photo credit: ©iStock.com/William_Potter, ©iStock.com/Douglas Rissing

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

Related Posts

Read next article

About Our Investing Expert

Have a question? Ask our Investing expert.

Categories

Source: smartasset.com

Apache is functioning normally

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a round of Money Hot Takes.

Then we pivot to this week’s money question from Sean:

“Hey folks,

Huge fan of the podcast. I have been listening for years, but this is, I think, the first time I’m submitting a question and it’s a complicated one.

I currently work as an engineer for a municipal utility. As an engineer, I have some ability for job mobility. While I do like my job, I have thought about what it would take to draw me away from my job, and I have had trouble figuring out what a ‘godfather offer’ would need to be.

As a civil servant, I have great healthcare, a pension, job security and overtime if I work beyond my scheduled 40-hour workweek. In the private sector, I have more income potential, but I would lose a lot of these benefits and end up working a lot more hours. I’ve had some trouble figuring out how to evaluate some of these benefits, particularly the pension.

Thank you,

Check out this episode on either of these platforms:

Episode transcript

Sean Pyles: Hey, Liz, if you had a job that offered you a pension, would you still leave just because you were bored?

Liz Weston: Well, pensions are sweet, but I do like being challenged, so maybe.

Sean Pyles: All right, I’m going to say I wanted a yes or no answer, but I think that that’s OK. I just hope that you would at least stick around until you’re fully vested.

Liz Weston: Well, of course.

Sean Pyles: Yes. But in this episode, we answer a listener’s question who’s considering bailing on a pension.

Welcome to the NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I’m Sean Pyles.

Liz Weston: And I’m Liz Weston. Listeners, remember to send us your money questions. Maybe you’re wondering if now is a good time to buy up a bunch of gold or you’re wondering how far in advance you should book an international vacation. Whatever your questions, send it our way. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373; that’s 901-730-N-E-R-D. You can also email us at [email protected]

Sean Pyles: In this episode, our co-host Sara Rathner and I answer a listener’s question about how to leave a job. But first, Liz and I are going to get mad because it’s time for another round of Money Hot Takes. This is our occasional segment where we rail against something that we just don’t like in the personal finance space. The goal is for us personally to blow off a little bit of steam and hopefully help our listeners make smarter decisions in a world full of scammers, fraudsters and phonies or sometimes just plain old misconceptions that can cost you money.

Liz Weston: Oh, I love this. This is going to be fun. OK, Sean, what do you have for us?

Sean Pyles: Today, I’m calling out the online, quote, unquote, “courses” that some influencers peddle to their followers. A lot of these classes aren’t providing you any information that you can’t get on your own for free, and the folks teaching them are often, shall we say, not exactly qualified. And a shoutout to Rebecca Jennings from Vox who wrote an article that so well articulates my feelings and concerns around these courses. We’ll have a link to that article in the show notes.

Liz Weston: So what’s in these courses, Sean?

Sean Pyles: Kind of everything that you can imagine you might want to improve upon. There are classes in things like how to use Excel. There are classes in how to get started investing or budgeting. There are even classes on how to make your own class to sell to people, which is a little meta.

Liz Weston: Of course, of course.

Sean Pyles: And the prices vary greatly. Some are under a hundred dollars; others are over a thousand dollars, maybe $2,000.

Liz Weston: Ooh, well, I think I know the answer to this question, but tell us why you don’t like them.

Sean Pyles: Well, as I mentioned at the outset, a lot of people are paying for information that they can get elsewhere for free. And again, many of these people have very questionable credentials. Sometimes the people who are teaching these classes are not actually experienced or qualified in what they’re telling you to do. And in fact, they’re just really good at marketing themselves, which I always have an issue with. People who seem just overly into marketing their own personality for the sake of getting money and attention on the internet.

Liz Weston: Yeah. And I imagine that could cause people not to go to good sources to get their information or leave them with a patchwork of incomplete information.

Sean Pyles: Exactly. They think that they’re getting everything they need to know about how to get started investing from one online class when in fact it might just be a small piece of the picture. Also, they can seem a little scammy to me. This is especially the case with classes around investing. Some will teach you how to invest and then maybe try to get you set up with investing during the class, and they’ll get you set up through a platform that also pays the influencer and affiliate commission, which seems like quite the conflict of interest there. And also, never mind the platform the influencer is peddling might not be the right one for you. So this person is getting money from you signing up for their class, and they’re also getting money from the company that they’re pushing on you as well, which I just don’t like.

Liz Weston: Now, I will say I like online courses in some cases because they help me get up to date or catch up on something I should have learned earlier, like Excel. The Excel courses were very helpful, but they’re not all bad. So how do you determine which are the better ones?

Sean Pyles: I’m with you, Liz. I am not an absolutist. In pretty much anything, there are plenty of great online classes. I’m a huge fan of Masterclass, for example. Not paid to say that; I just use their stuff a lot, but they are very well vetted. I think it’s important to vet your sources and to be selective about the type of information that you’re getting. Maybe a language course from someone who lives abroad and has learned a different language is something that you can more easily get into versus a class that’s about the secret to getting rich. Also, maybe don’t have this online course be the only source of information on the subject.

Liz Weston: Yes, maybe you could even come to a site, I don’t know, NerdWallet.

Sean Pyles: Yeah, we are a great alternative. And you know what? I think some folks might be thinking, “Hey, how is NerdWallet different from these online personal finance influencers or courses?” And to that, I have two words to say: journalistic rigor. Our content is deeply reported, edited, fact-checked, not to mention editorially independent, to ensure that the information that we’re giving is as accurate and consumer-first as possible.

Liz Weston: And if you need more personalized help with your money, there are plenty of professionals who can help you. Financial coaches can help you get a grip on your budget and financial goals. Accredited financial counselors can offer tools to wrangle your debt, and fee-only fiduciary financial planners are a solid choice if you need guidance on building your wealth.

Sean Pyles: Very well said, Liz. So that is my rant, and Liz, now you’re up.

Liz Weston: OK. This is really nerdy, Sean, but I am annoyed that people don’t understand how life expectancy works.

Sean Pyles: OK, you’re right. That is really nerdy. I’m going to need you to elaborate on what that even means and why it’s making you so mad.

Liz Weston: OK. This is important because understanding life expectancy is key to so many things about retirement planning, which is basically how long your retirement will last, right? So you need to know roughly your life expectancy so you can figure out when to take Social Security, and it probably can help you better understand all the debates about raising the retirement age. Remember when I was in Paris and they were setting fire to the garbage over there?

Sean Pyles: Yes.

Liz Weston: Yeah, that’s this debate. So I just read a New York Times article about the best age to retire, and it used the wrong number. It said the average life expectancy was 76 years.

Sean Pyles: OK, so you’re out here dragging the Gray Lady for being wrong, is that right?

Liz Weston: Sorry, hats off to The New York Times, lots of great reporting, but that’s the average U.S. life expectancy from birth. That factors in infant mortality and all the people who die young or young-ish from accidents or disease or whatever. That number is 76, by the way, because largely of all the COVID deaths, which is the reason that life expectancy has dropped a bit. But that number is pretty much irrelevant for retirement planning because the longer you survive, the longer you’re likely to survive. What matters is how much life you’re likely to have left when you get to retirement age. And at 62, which is the earliest age you can claim Social Security, the average man can expect to live until almost 81 and the average woman till 84. If you make it to 65, both men and women are likely to make it to their mid-80s. Now, your mileage may vary. Obviously, lifestyle, genetics, other factors come into play. Unfortunately, Black people tend to have shorter life expectancies. But the more income and education you have, the more years you can probably add to your life expectancy.

Sean Pyles: And I imagine this really matters when it comes to claiming Social Security.

Liz Weston: Oh, it’s so true. If you file early at 62, you are settling for a permanently reduced check. You’re giving up a lot of money because you’re likely to live well past the age when the larger checks that you would’ve gotten for waiting more than make up for the smaller checks you bypassed in the meantime. We talked to Nerd Tina Orem, and her calculator can show you your break-even age. And what’s more, if you’re the higher earner in a married couple, you’ve really done your spouse a disservice if you file early. And that’s because your benefit determines what your spouse gets to live on after you’re gone. So starting early means you’ve permanently reduced the survivor check that your spouse will have to live on for the rest of their lives.

Sean Pyles: Got it. OK. And that’s especially important for men to think about because women tend to outlive men.

Liz Weston: Yeah. And if you are a same-sex couple, again, it’s the higher earner that matters. So it’s something to keep in mind. The higher earner should delay as long as possible. And also, it can really help to use a calculator to estimate your own life expectancy. And there’s a really good one at livingto100.com.

Sean Pyles: Well, I think that we both feel a little bit better getting that out of our system. I don’t know about you, Liz.

Liz Weston: Yes, thank you. I do.

Sean Pyles: Great. Now let’s get on to this episode’s money question segment with co-host Sara Rathner.

Sara Rathner: This episode’s money question comes from the excellently named Sean, who sent us an email. “Hey folks, huge fan of the podcast.” Thank you. “I’ve been listening for years, but this is, I think, the first time I’m submitting a question and it’s a complicated one. I currently work as an engineer for a municipal utility. As an engineer, I have some ability for job mobility. While I do like my job, I have thought about what it would take to draw me away from my job. And I’ve had trouble figuring out what a, quote, unquote, ‘Godfather offer’ would need to be. As a civil servant, I have great healthcare, a pension, job security, and overtime if I work beyond my scheduled 40-hour work week. In the private sector, I have more income potential but I would lose a lot of these benefits and end up working a lot more hours. I’ve had some trouble figuring out how to evaluate some of these benefits, particularly the pension. Thank you, Sean.”

To help us answer Sean’s question, on this episode we’re joined by NerdWallet data writer Liz Renter. Welcome back to Smart Money, Liz.

Liz Renter: Thanks, Sara. I’m excited to be here.

Sean Pyles: So first, I think folks should understand the total value of work benefits because it extends well beyond the cash that you get. According to March 2023 data from the Bureau of Labor Statistics, for government workers, benefits represent about 38% of compensation, compared with just under 30% for private-sector workers. As our listener knows, the benefits of government jobs are pretty cushy, and that can be really hard to give up.

Sara Rathner: That 30% to 38% figure might come as a surprise to you because I think when people are evaluating a job opportunity, there’s so much of a focus on the salary and maybe a bonus if that’s part of the deal. But if you’re thinking of leaving your current job, it is worth it to work to understand your total compensation, not just wages, but benefits as well. So listing out your benefits, like paid time off, access to resources like financial advisors or even discounted legal assistance, maybe some cold brew coffee on tap in the office kitchen.

Each of these has a specific value, but it can be pretty tedious to add it all up. Another big thing to think about are taxes. This is a bigger deal if you’re thinking of becoming a freelancer or a contract worker where you’d be on the hook for sorting out your own tax obligation. Based on what you figure out, you might decide whether or not you want to go down the freelancer or contractor route at all, or would you prefer to be a full-time employee at a company? Another big one, this is a really big one: health care.

Liz Renter: Huge.

Sara Rathner: Huge and so expensive. Definitely contact HR during the interview process, or when you have the offer and you have some time to think it over, to get the health care plan options and their pricing.

Liz Renter: Yeah. And I just want to interject, Sara, that’s a good point. If you’re talking to a potential employer or even your current employer about what the health care costs look like, how much they’re covering, keep in mind that employers get a heck of a discount on premiums. They get a group discount because they’re paying for multiple policies at once or helping to pay for multiple policies at once. So if self-employment is under consideration or a job that may not offer health insurance at all, your premiums are going to be much, much higher than what your employer would be paying in the situation where they’re helping to cover those costs.

Sara Rathner: Yes. And I have been in both boats and …

Liz Renter: Same.

Sara Rathner: … real expensive to be self-employed when it comes to health insurance coverage. And that was one of my reasons for not pursuing that for the remainder of my career if I can help it. But you know, you do you. And then also, here’s another one. There are all these extra benefits that really add up. Things like a monthly gym stipend or a cell phone stipend. A lot of remote workers get a home internet stipend as well. And the cost of these things can really offset the price of some of the things you might have been paying for out of pocket if you were previously at a job that didn’t provide this as a benefit.

Liz Renter: Right. And I think those things are far less likely in, like the listener wrote in about, a municipal job or a state government job. Unlikely you’re going to have a keg of cold brew in the kitchen unless you’re in a really affluent city and tax rates are pretty high. But you’re right, some of those things that you take for granted, the snacks and the catered lunches at private industry, really do add up. You can spend a lot of money on those yourself if you’re having to pay for them.

Sara Rathner: Yeah, you definitely see a lot of those benefits in the tech industry because they are just falling all over themselves to make these companies more attractive to job applicants than the tech company down the street. Literally down the street, depending on what city you’re in. And so if that’s an industry where you are weighing some job offers, then yeah, you’re going to see some pretty wild benefits that have a dollar value to them.

Sean Pyles: Well, that said, there is one benefit that you will maybe get at a municipality that a tech company is not really going to be offering you. And that is the pension benefit that our listener wrote in about. And I want to give a quick rundown of how pensions work because they’re pretty incredible and they’re unfortunately not very common. So pensions are typically employer funded. That means the employer is putting in money, which is great. So the amount folks get in retirement depends on wages earned and how long they worked for the company or, in this case for our listener, a municipality.

Then upon retirement, someone who has access to a pension, they get payouts, typically for life. You generally do have to work at an organization for a set amount of time to get full access to the payouts. That’s called being fully vested. But once you’re fully vested, you can leave that job and still get access to the pension benefits upon retirement. So, so cool. I really wish I had a pension. Now, like I mentioned, pensions are really rare nowadays. So again, pensions are a very sweet benefit to have, and I would think very hard about losing that, especially if you’re not fully vested.

Liz Renter: Yeah, absolutely, Sean. And the listener wrote in about putting a dollar figure on their pension. So I just want to know that that’s an extremely difficult thing to do without a lot of details, and a lot of time, and a big spreadsheet and a calculator. Anyways, when you’re thinking about how long you’ve been at a job, how much your employer’s putting in, what the specifics are about vesting and if you decide to leave that government job, to leave your pension, and what would it take to create something comparable yourself? So there’s a lot of numbers involved, a lot of time frames, a lot of assumptions. So this is one instance where we would say, “If you really want to get precise on that measurement, it might make sense to consult with a certified financial planner who can put the dollar amount on those things.”

Sean Pyles: You’d likely want to talk with a CFP who maybe has some gray in their hair and who has done this before since figuring out pensions can be so complicated.

Liz Renter: Right. Yeah, exactly.

Sara Rathner: And honestly, if you have a financial planner that you already have a working relationship with, I mean, job hunting is an excellent time to have a check-in with them in general, and they might even help you wade through competing job offers or even just the comparison of a job offer to what you’re currently working in. And they can help you work through all the financial considerations of those options. And so that is a great way to utilize their assistance.

So let’s get to the other part of a listener’s question. The mushier stuff that folks should consider if they find themselves itching to leave a job. To start, they should ask themselves, what’s behind this urge? Are they bored, unhappy, unfulfilled? Are they upset because there’s no cold brew in the break room and they really want that?

Liz Renter: Yeah, this is key, Sara. I think there’s so many considerations when you’re thinking about a career move. And I had two really major career changes in my younger years. It’s over the past 20 years, but they were really pretty close together when I was in my late 20s. One when I moved from state government to private industry, and then a few years later, I went from private industry to self-employment. So those are pretty big changes. And in each of those changes, I was weighing different motivations. In one case, it was more about the money and advancement, and in the other case, it was more about what’s really going to make me happy long term? And so I think really diving into why and what your motivations are for leaving or staying, and getting clear on those before you start weighing your options, is a good place to start.

Sean Pyles: To what extent did you have that conversation with yourself or maybe with those around you around, “OK, if I leave this job, I might be making a little bit less, but I will be that much happier.” Or, “If I go to this job, I’ll be making a good amount more, but it’s going to be a boring job.” How did you think about those things?

Liz Renter: It’s tough. I probably had limited discussions. So as a single mom, it was just me and my daughter at the time, who was probably 4 when I made the first job change, maybe 7 when I made the second job change. So there weren’t a lot of people for me to toss these ideas around with. And I’m an extremely private person, but these were conversations I was having with myself. And in the first job going from state government to private industry, I realized in state government that, yes, the paycheck is steady, the benefits are nice, but I really love to work hard.

And in my experience, this government job, you were rewarded for how long you were there, not how well you were doing. And that was tough to deal with, and it really bred apathy among the people around me. I wanted to be somewhere where I could work hard and that would be recognized. So that’s not to say that all government workers are taking naps at their desk. That definitely wasn’t my experience, but personally, I wasn’t being recognized for the hard work that I was doing, and that was really important to me.

Sean Pyles: Right. That makes sense.

Liz Renter: And so that one was really more about the professional rewards of working. And then the second one, it was more about the trade-offs. Am I willing to give up some of those professional rewards to really fulfill my personal life? So as I said, my daughter was really young at the time, I was dropping her off early in the morning, I was picking her up after work, sometimes 12 hours later. And the job was paying more than my state government job, but I definitely felt like I was punching a clock and I wasn’t fulfilled, and I totally could not see myself doing that for years upon years. And I knew leaving that job meant I would absolutely take a decrease in pay, at least in the short term, as I got on my feet as a self-employed freelance writer. But when I balanced that against what was really important to me and what was going to make me happy and make me feel good about the way I was living my life, it was a no-brainer.

Sara Rathner: Yeah. I’ve known people who’ve switched jobs out of boredom and ended up regretting it, actually, because the reason they were bored at their previous job was they’d done it for a while and it became rote. But they realized leaving for a greater challenge meant giving up maybe some of the work-life balance and predictability that came with a job that was quote, unquote, “boring,” and they had to make pretty big structural changes to how they operated at home with their household, with their family, to accommodate the new challenges of a new career.

Sean Pyles: Kind of goes back to the idea that it’s not what decision you make, it’s what you do with the decision that you make. If you do leave a job that you’re bored at and you find that your next gig isn’t quite what you wanted it to be, there are going to be other opportunities later on.

Sara Rathner: Yeah.

Liz Renter: I think that’s a good point. When I went into freelancing and I knew I was going to take a pay cut and I was banking on turning that around in a year or two, I always had that in the back of my head like, “OK, worst-case scenario, I’ll get a part-time job for when my daughter’s in school,” or, “Worst worst-case scenario, I’ll go back to working full time.” With a reassessment of maybe I find something that’s closer to home so there’s less of a commute, what have you. But I think knowing that, “OK, I’ve thought through why I want to do it. I know this is the move I want to make, but just in case, I have these outs and these would be perfectly acceptable if things didn’t work out once I make this decision.”

Sean Pyles: Yeah. And I think your experience demonstrates how important it is to think through various scenarios. What could you fall back on if you do need to make a change after this job switch maybe doesn’t pan out how you thought it was going to.

Liz Renter: Right. I think if you’re planning well enough in advance, if you’re sitting around listening to this podcast thinking about, “Well, I’ve been thinking maybe I’m not happy where I am and maybe I should be considering this,” now’s a great time to make sure that, and I know we talk about this a lot on podcast, but make sure that your emergency fund is in place. Maybe cushion it a little bit more. You want to set these guardrails for, OK, sometimes we make decisions with what we think is all the right information and it turns not to work out the way we expected. So if you have those extra guardrails up, just in case, it can make you feel more secure moving forward with your decision when it’s time.

Sara Rathner: Yeah. And keep your professional network warm. Because it is a risk to take a new job, and sometimes you take a new job and hate it immediately, and you’re like, “I’m just going to job hunt again.” And so by keeping that network warm, by staying in touch with old co-workers or friends or relatives who maybe have some professional connections that would be helpful to you, you still also have an out. Not just financially, but also professionally where you’re still open to hearing about opportunities. Because if the jump that you made ended up being a pretty bad bet, then you’re still pursuing other places you could go and you haven’t closed off all the doors to that.

Sean Pyles: Well, now I want to talk about the counterpoint. About when it actually might be a good idea to stick around at a job. Conventional wisdom, at least among millennials, is that you shouldn’t stay at a job for too long because you’ll probably be able to earn more money going to a different job after a couple years. But sometimes staying at a job for potentially several years can be the best choice for people. So let’s discuss that. Liz, you’ve been at NerdWallet nine years, so what’s kept you around and how do you think about that sort of equation?

Liz Renter: So it’s interesting to think back at how this has changed over the generations because, definitely my grandparents to a certain extent and a little bit my parents as well, those generations you were rewarded for just staying where you were. You get a good job with good benefits and you don’t leave for 50 years, and then they throw you this big party. And that’s changed over the years where there’s more mobility and we can experience different opportunities. And I think there’s room for both of that. A little bit of each. So if you are the type that really wants to be loyal to a single company and wants that stability and you’re happy with what you’re getting paid, you don’t have to keep chasing 5% salary increases at other companies. That’s not a requirement. If you’re good where you are, you like your work and you’re working towards your long-term financial goals, that’s totally acceptable. You don’t have to get in on this hustle life.

Sean Pyles: That can also be a good way to approach things, given that the macroeconomic conditions right now are a little shaky. Many companies still have the policy of last in, first out when it comes to layoffs. So for this year in particular, it might not be a bad idea to stick around if you do like the job that you have.

Liz Renter: Right. People are still leaving their jobs at really high rates, but they’re getting into new jobs at really high rates. The unemployment rate hasn’t ticked up, which means people that are leaving their jobs aren’t filing for unemployment, they’re going elsewhere. So that’s a positive sign if you do want to change jobs. But to your point, Sean, there is a lot of uncertainty, and if you’re risk intolerant, it might make sense to sit tight for a while and see how things shake out.

Sean Pyles: Well, Liz, do you have any final thoughts for those who might be thinking about switching jobs right now?

Liz Renter: I would say, yes, it’s as complicated as you think it is. I envision it as you’ve got all of these scales in front of you that you’re trying to balance and you’re trying to figure out, “OK, if I take away this much of my work-life balance, how much salary do I have to add to make it worthwhile?” Or, “If I take away the cold brew in the kitchen, how much of a cell phone stipend do I need to add to make it worthwhile?” So there’s all these scales you’re trying to balance here, and it’s a lot to think about. So you just do the best you can, set up some guardrails just in case things don’t go well.

Sean Pyles: And maybe take your time making a decision. Don’t rush into anything too hastily. Otherwise, the scales may just collapse and go crazy.

Liz Renter: Yes, absolutely. That’s perfect, Sean.

Sean Pyles: All right, well thank you so much for talking with us, Liz.

Liz Renter: Thanks for having me again.

Sean Pyles: All right, and with that, let’s get into our takeaway tips. Sara, will you please start us off?

Sara Rathner: Sure. First, know what you’re getting. Compensation can include a lot more than the cash you get. Understand your total compensation ahead of any job hunt.

Sean Pyles: Next up, go beyond the math. Jobs are about a lot more than the money. Consider things like personal fulfillment and work-life balance when weighing other job options.

Sara Rathner: Finally, there’s nothing wrong with sticking around. If you’re fulfilled and well compensated in your current position, staying put might be your best option.

Sean Pyles: And that is all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-N-E-R-D. You can also email us at [email protected] Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast.

Sara Rathner: And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles: This episode was produced by Liz Weston, Tess Vigeland and myself. Kaely Monahan mixed our audio. And a big thank-you as always to the folks on the NerdWallet copy desk. And with that said, until next time, turn to the Nerds.

Source: nerdwallet.com

Apache is functioning normally

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Do you enjoy spending your hours at work in the office, or do you like to be outside? Do you find it fun and exciting when a deal is done, or are deals just more busy work for your day?

If any of those questions have got stuck on repeat in your head, then these real estate investment trusts might be a good career path for you.

The short answer: Real estate investment opportunities are plentiful and they come with varying degrees of risk and reward depending on what you’re looking for.

I know from experience that real estate investment trusts can be a good career path.

So if real estate investing sounds like something that might be right up your alley, keep reading!

Learn how to become a real estate investment trusts professional by following these steps. Then, you can decide is real estate investment trusts a good career path for you.

What are Real Estate Investment Trusts?

Real Estate Investment Trusts, or REITs, are a type of investment that receive tax concessions from the government. This is because they are designed to promote the development and growth of the real estate industry.

Investors can put their money into diverse projects, such as hospitals, schools, warehouses, and hotels.

In addition, REITs are publicly traded companies that buy, sell, and operate cash flow-producing commercial real estate. There are some privately traded REITs as well.

Why REITs as an Investment?

REITs have many investors who make up their stock portfolio. These can be individuals such as retail investors like you and me or other businesses.

What’s more, is that REITs are trusts similar to mutual funds which offer stability for both short-term and long-term investments in property assets.

Finally, REITs offer investors a reasonable return on investment.

What are the different types of real estate investment trusts (REITs)?

Picture of a contract for what are the different types of real estate investment trusts.

Real estate investment trusts, or REITs, are a type of security that allows people to invest in real estate without actually having to own any property. They are similar to mutual funds, with the exception of their working procedure.

There are two major types of REIT: equity and mortgage. Each type has its own specific benefits and drawbacks.

Equity REITs

Equity REITs are the most common type of REIT and they generate their revenue primarily through rents, not by reselling properties. This makes them a relatively stable investment option and they are often used as a way to diversify an investor’s portfolio.

Mortgage REITs

Mortgage REITs are a type of real estate investment trust (REIT) that invests in mortgage-backed securities. They are similar to other types of REITs, but they tend to have a higher yield as they earn their income from the interest margin on the mortgages they own.

This makes them potentially sensitive to interest rate increases as it could reduce the spread between what they earn on loans and what they pay out in funding costs.

Hybrid REITs

Hybrid REITs use a combination of the two strategies. They own properties like equity REITS and use the money from investors to purchase mortgages like mortgage REITs.

How to Buy Real Estate Investment Trust

Picture of an agent for how to buy real estate investment trusts.

Real estate investment trusts, or REITs, are a type of security that allows investors to purchase shares in a company that owns and manages income-producing real estate.

There are three types of REITs: publicly traded, public non-traded, and private.

  • Publicly traded REITs are the most common and are listed on major stock exchanges. They offer liquidity and transparency but also come with higher risk.
  • Public non-traded REITs are not listed on exchanges but offer more liquidity than private REITs.
  • Private REITs are not available to the general public and have less liquidity than both publicly traded and public non-traded REITs. Private REITs can be sold only to institutional or accredited investors.

Pros and Cons of Investing in Real Estate Investment Trusts

Sign that says positive and negative for the pros and cons of REITs.

When it comes to making money, real estate is always a sound investment. And with the popularity of real estate investment trusts (REITs), you no longer have to be a landlord or developer to invest in properties.

REITs are becoming increasingly popular because they offer investors diversification and liquidity- two key features that any good investment should have.

But like anything else, there are pros and cons to investing in REITs. Here are some things you should consider before you put your money into this type of trust:

Pros of REITs:

1) Diversification: Real estate is a very diverse asset class, and by investing in a REIT, you’re automatically spreading your risk across many different properties. This helps reduce the volatility associated with stock market fluctuations.

2) Liquidity: A key advantage of REITs is that they’re highly liquid- meaning you can sell your shares at any time without penalty. This gives you the freedom to take profits when the market is doing well or reinvest them when prices are down.

3) Professional Management: When you invest in a REIT, you’re essentially hiring professional property developers and managers to do all the hard work for you. This takes away the hassle of dealing with tenants, repairs, and other day-to-day tasks associated with owning property.

Cons on REITs:

1) No Say in Management: Unlike directly owning property, you have no say in how the REIT is managed. If you don’t agree with the way the managers are running things, there’s not much you can do about it.

2) Taxation: The tax laws surrounding REITs are a bit complicated, so make sure you consult an accountant before investing. In general, taxation is much easier than owning the property yourself, but it’s still something to keep in mind.

3) Fluctuating Values: Just like stocks, real estate prices can go up and down quickly. So if you’re looking for a stable investment that will always give you a return on your money, REITs might not be right for you.

How successful are real estate investors?

Picture of a house and money for how successful are real estate investors.

Real estate investment is a popular way to make money, but it’s not without its risks.

Those who are successful in this field often have a lot of money or access to money (private money, hard money, bank financing, self-directed IRA).

It can be a career if you’re willing to put in the work, but it’s important to think carefully before making that decision.

Real Estate Career Path

Picture of Ladies discussing if a real estate career path is for them.

Many different real estate jobs offer high salaries and great opportunities for career growth. Plus you can match your experience to find the best real estate career path.

These jobs offer a variety of opportunities and allow you to work in a wide range of settings.

What are the Requirements of Managing a REITs?

Picture of a huge office building for what are the requirement of managing a REIT.

Real estate investment trusts, or REITs, are a type of mutual fund that allow both big and small investors to pool their money together and invest in real estate. REITs offer a variety of benefits to investors, including an opportunity for capital appreciation as well as a strong income stream.

In order to qualify as a REIT, they must be registered with the SEC and meet certain other requirements.

1. Managed by Board of Directors or Trustees

In order to be a REIT, the company has to appoint a board of directors or trustees. The board is responsible for making sure the REITs comply with the regulations set by law and also exercise their fiduciary duties. Furthermore, the board approves important decisions such as changes in investment strategies, acquisitions, and dispositions.

2. Taxable Income Paid to Investors

One of the key requirements for managing a REITs is paying out at least 90% of its taxable income to the investors. This leaves limited room for the manager to use the REITs’ income for their own benefit and also minimizes taxes. As a result, it is crucial that a REITs manager has a strong understanding of tax laws and can effectively communicate with the investors.

3. Gross Income Generated from Real Estate Investments

In order to be a REIT, an organization’s income must come from at least 75% of its total assets in real estate. The other 25% may be invested in cash, securities, and other assets. This allows the company to grow without having to worry about being classified as a security corporation.

4. Number of Shareholders or Investors

Another requirement for managing a REIT is that there must be at least 100 investors and shareholders. In addition, no one shareholder can hold more than 50% of the shares (at least). This protects the interest of all shareholders and ensures that no one person or entity can control the REIT.

How to get started in the real estate investment trusts industry

Picture of people discussing the real estate investment trust industry.

There are many different ways to get started in the real estate investment trusts industry.

There is no one-size-fits-all answer when it comes to starting a career in this field. Every individual has their own strengths and weaknesses that they need to take into account.

  • One way is to start as an intern or apprentice and then work your way up the ladder.
  • You could get your business degree and find a career in REITs.
  • Another option is to become a real estate agent and specialize in commercial real estate.

There are many online courses and programs that can teach you about the industry, and there are also many books on the subject.

Whatever route you decide to take, remember that it’s important to do your research and learn as much as you can about the real estate investment trusts industry before jumping in headfirst.

How to Get Started as an Investor in the Real Estate Investment Trust industry

Picture of an investor getting started with REITs.

Real estate investment trusts, or REITs, can be a great way to invest in property and achieve your financial goals. However, in order to be successful, you will need cash to be able to invest in the REIT.

In addition, the cash must not be needed in the recent timeframe.

My favorite REIT platforms are:

What skills do you need to be successful in real estate investment trusts?

Picture of someone writing in a journal the skills needed to be successful.

This section is specifically for those wanting to know… is real estate investment trusts a good career path?

First and foremost, you will need to have a degree in finance or another relevant discipline. This qualification will give you the basic analytical skills required for success.

In addition, experience in real estate is essential; it is one of the most complex and fast-paced industries around.

You will also need strong marketing skills. REITs are all about generating income through rent or capital gains, so you need to know how to market properties effectively.

Finally, good communication and people skills are important too; after all, you’ll be dealing with clients and tenants on a regular basis.

If you possess these skills, then real estate investment trusts could be the perfect career path for you!

In fact, if you keep using these good excuses to miss work, then a job change is probably needed.

The future of the real estate investment trusts industry

The real estate investment trusts (REITs) industry is rapidly growing and changing. In fact, REITS account for 2.9 million direct jobs (source).

As the world progresses, so does this industry, with new opportunities and challenges arising constantly. REITs offer a unique career path for those who are passionate about real estate and interested in making money.

Money should not be an issue in this sector, as REITs offer a rewarding career path for those who are willing to invest in it.

Check out the best paying jobs in real estate investment trusts.

Career Options within REITs

Picture of a group of graduates looking for career options within REITs

REITs offer the opportunity to be paid as an investor or career within the industry. Pay can vary depending on the company and its structure; however, most companies within this sector pay well.

If you work for a REIT, you can learn about investing in the real estate industry by being a part of it–an invaluable experience if you’re looking to invest personally into real estate yourself one day.

As the industry grows, so does the need for new people to enter it; companies are constantly looking for new people. In fact, they typically add 555,000 jobs per month (source).

Within the real estate investment trusts industry, there are various career paths that one can take.

Acquisitions

One common job within the REIT industry is acquisitions; which involves buying or selling real estate assets. This position requires a good understanding of the market and the ability to make quick decisions.

Analysts

In the real estate investment trusts (REITs) industry, analysts typically start out earning a salary of around $80,000 per year. With experience, they can move up to a management or executive role and earn a six-figure salary. Additionally, there are many opportunities for career growth in the REITs industry as it continues to grow.

Property Developer

In the real estate investment trusts (REITs) industry, the developers are the team responsible for building new projects from scratch. They identify potential investments, obtain the necessary permits and funding, and manage construction until completion.

This is an important role in the REITs industry as it drives expansion and innovation.

Property Managers

Property managers are famous for getting things done, and they are essential members of any REIT team.

There is no standard education background necessary for becoming a property manager; however, you need skills in project management and construction management.

Real Estate Agents

Agents typically earn more in commissions than their peers working in traditional real estate brokerages, making this a lucrative career path to consider.

Which real estate career makes the most money?

Picture of hundred dollar bills hanging from a rope for which real estate career makes the most money.

Real estate is a great way to invest and grow your money.

There are a variety of different ways to get involved in real estate, but one of the most popular ways is through real estate investment trusts (REITs).

REITs allow you to invest in a portfolio of properties without having to go out and find them yourself. This can be a great way to get started in real estate investing and build your wealth over time without day-to-day management.

Turn to Real Estate Career Pathway

Real estate investment trusts (REITs) are a good career pathway if you want to come up with better investment strategies. They can provide opportunities to learn about the market, make contacts and develop skills. However, it is important that you reflect on what skills you have, your resources, and where you align before entering this field.

There is a lot to consider when making the decision whether or not to pursue a career in real estate.

It is important to do your research, reach out to people in the industry, and reflect on what you’ve learned. Only then can you make an informed decision about your future.

It ultimately comes down to what you want and what you’re willing to do.

If real estate is your passion, then go for it!

But make sure you do your research and understand the risks involved. There’s no right or wrong answer, but be sure to weigh all of your options before making a decision.

Know someone else that needs this, too? Then, please share!!

Source: moneybliss.org

Apache is functioning normally

Investment advisors help investors figure out their goals, create financial plans, and put those plans into action. There are a lot of them out there, too, meaning that finding the right professional for you or your family may seem daunting. But finding the best investment advisor for you can be a fairly painless process.

You’ll need to start with some basics, though, by learning the difference between an investment advisor and a registered investment advisor, what to look for when you hire an advisor, and more.

What Is an Investment Advisor?

An investment advisor is an individual or company that offers advice on investments for a fee. The term itself — “investment advisor” — is a legal term that appears in the Investment Advisers Act of 1940. It may be spelled either “advisor” or “adviser.”

Investment advisors might also be known as asset managers, investment counselors, investment managers, portfolio managers, or wealth managers. Investment advisor representatives are people who work for and offer advice on behalf of registered investment advisors (RIAs).

What Is a Registered Investment Advisor (RIA)?

A registered investment advisor, or RIA, is a financial firm that advises clients about investing in securities, and is registered with the Securities and Exchange Commission (SEC), or other financial regulator. While you may think of RIAs as people, an RIA is actually a company, and an investment advisor representative (IAR) is a financial professional who works for the RIA.

That said, an RIA might be a large financial planning firm, or it could be a single financial professional operating their own RIA.

An RIA has a fiduciary duty to its clients, which means they must put their clients’ interests above their own. The SEC describes this as “undivided loyalty.” This is different from non-RIA companies whose advisors are often held only to a suitability standard, meaning their recommendations must be suitable for a client’s situation. Under a suitability standard, an advisor might sell a client products that are suitable for their portfolio but which also result in a sales commission for the advisor.

RIAs generally offer a range of investment advice, from your portfolio mix to your retirement and estate planning.

What’s Required to Become a Registered Investment Advisor?

The following steps are required to become a registered investment advisor (RIA).

•   Pass the Series 65 exam, or the Uniform Investment Adviser Law Exam, which is administered by the Financial Industry Regulatory Authority (FINRA). Some states waive the requirement for this exam if applicants already hold an advanced certification like the CFP® (CERTIFIED FINANCIAL PLANNER™) or CFA (Chartered Financial Analyst).

•   Register with the state or SEC. If an RIA has $100 million in assets under management (AUM), they must register with the SEC — though there are sometimes exceptions to this requirement. If they hold less in AUM, they must register with the state of their principal place of business. This requires filing Form ADV.

•   Set up the business. These steps require making a variety of decisions about company legal structure, compliance, logistics and operations, insurance, and policies and procedures.

How to Choose an Investment Advisor

Finding the right investment advisor is about finding the right fit for you. While personal preference plays a part, there are a variety of other things you might consider when you’re searching:

Start Local

Look to helpful databases of financial professionals that can help you pinpoint some advisors in your area. Here are a few to consider:

•   Financial Planning Association. Advisors in this network are CERTIFIED FINANCIAL PLANNERS™ (CFP®s) and you can search by location, area of specialty, how they’re paid and any asset minimums that may exist.

•   National Association of Personal Financial Advisors. All advisors in this database are fee-only financial planners, meaning they receive no commissions for selling products.

•   Garrett Planning Network. All advisors in this network charge hourly.

Get Referrals

One of the best ways to find a financial professional is to ask friends, family, and acquaintances if they’ve worked with someone they can recommend. While there are ways to build wealth at any age, it may be beneficial to ask people who are in a similar financial situation or stage of life. For instance, if you’re relatively young with a lot of debt and very little savings, you may not want the same investment advisor who’s working with wealthy retirees.

Ask About Credentials

Ask investment advisors what certifications they have, what was required to get the certification, and whether any ongoing education is necessary to keep it. Some certifications require thousands of hours of professional experience or passing a rigorous exam, while others may only require a few hours of classroom time.

Other certifications are geared toward investors at a specific life stage or with specific questions. The Retirement Income Certified Professional (RIPC) certification, for instance, focuses on retirement financial planning. Those with a Certified Public Accountant (CPA) certification are probably good sources for tax planning.

Check Complaint History

Depending on who oversees the advisor or the firm, you should be able to check whether there are complaints on record. If FINRA provides oversight, you can research them on FINRA’s BrokerCheck tool. If the SEC oversees them, the SEC has an investment advisor search feature to find information on the advisor and the company. Remember: One complaint might not be a red flag, but multiple complaints might give you pause.

Find Out About Fees

Investment advisors may be paid, or charge fees, several different ways. They may charge a percentage of assets under management, meaning that the fee will depend on the assets they’re managing for you. For example, if the fee is 1% of assets under management and you’re having them manage $500,000, you’d pay $5,000 annually for their services.

Others may charge an hourly fee or a flat project fee for specific services. There are also advisors that are paid commissions from the products that they sell to clients. It’s important to understand how an investment advisor makes money and how much you’ll pay in fees each year, and then decide what you’re comfortable with.

Get Details on Their Work Style

Communication and working style may be just as important as credentials and expertise. For instance, how often do they want to meet with you? Would you be working with them directly or with a wider team of people? Do they like to communicate via phone call, email, or text? This is something else to consider.

Take a Test Drive

Many advisors will offer a phone consultation or in-person visit to see if you’re a good fit. You may want to take them up on it. Finding the right investment advisor is as much a matter of chemistry as credentials.

Questions to Ask an Investment Advisor Before Hiring Them

It can be a good idea to find out as much as possible about an investment advisor so you can make an informed decision. Here’s a list of questions you might want to ask:

•   What are your qualifications?

•   What type of clients do you typically work with?

•   Are you a fiduciary?

•   How are you paid? And how much will I be charged?

•   Do you have any minimum asset requirements?

•   Will you work with me, or will members of your team work with me?

•   How (and how often) do you prefer to communicate? (Phone, email, text?)

•   How often will we meet?

•   What’s your investment philosophy?

•   What services do you provide for your clients?

•   How do you quantify success?

•   Why would your clients say they like working with you?

The Takeaway

An investment advisor can help you think about investing for the future, plan to save enough for all your goals, and understand how to get it all done. Finding one isn’t hard, but it does take time and some research to connect with an investment advisor that meets your expectations and feels like a good match.

With that in mind, getting the right advice can be critical even before you start investing. Someone with experience in the markets helping guide you can be invaluable.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Claw Promotion: Customer must fund their Active Invest account with at least $10 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
SOIN0523030

Source: sofi.com

Apache is functioning normally

I have a secret…

I have a little secret for you.

Your broker might not have your best interest in mind when they make recommendations to you.

In fact, brokers can legally put their interests ahead of yours. 

Did you catch that?  

Translated that means that your broker can get a speeding ticket for going 75 mph on the interstate, but won’t get punished for selling you a crap investment that makes them a bunch of money.

This is because most brokers operate under what’s called the suitability standard, which simply means the securities they recommend must be appropriate for you given your financial profile; however, many of the securities that can be considered suitable may be far from the best investment options available at a particular time.

How do you like them apples?

You may be surprised to learn that brokers working under the suitability standard are not legally obligated to find the best prices or the best investment options available at a particular time. As a result, your broker may offer you securities that provide lower returns and carry more significant risks than other alternatives as this may be more profitable for the broker. The suitability standard can apply to brokers that sell insurance, stocks, annuities, or other investment types.

1. Brokers Make Money Even if You Don’t.

This is because of the commissions-based compensation model presently used by many brokerage firms. Let’s say your broker convinces you to buy into XYZ stock at $50 per share. If the price subsequently increases to $60, than your broker may call you and advise you to buy more of the same security because of the 20% appreciation in price. This transaction would then generate a commission for your broker.

On the other hand, let’s say that the same investment in XYZ stock instead dropped to $40 per share. In this case the same broker might call you and still tell you to buy more of the same security because it is now less expensive than it once was and should therefore be considered a bargain. This transaction would also generate a commission for your broker.

Great for them.  Not so much for you.

As you can see your broker’s success can have little relation to your own. This represents a misalignment of interests that may cause your broker to benefit at your expense.

2. High commissions are a good thing right?

Brokers may choose to offer you only those investments which pay the highest commissions. To illustrate this point let’s consider another example. Let’s say that investment 1 is the best investment for you, but it offers no commissions to your broker.

On the other hand investment 2 is a worse investment, which pays 5% commission. Under the suitability standard your broker is not obligated to offer you investment 1 and may instead sell you investment 2 in order to collect the commission on the transaction. This conflict of interest is currently permitted under the suitability standard, which is applicable to many brokerage firms.

Isn’t that special?

3. Looks good on paper.

Your broker may sell you an investments that is illiquid or highly risky. This is due to the fact that brokers are often associated with particular issuers of securities or certain investment companies.

As a result they may be limited to offering only the proprietary products sold by their affiliates even though other more attractive investment options may be available in the market. They may also be restricted to particular list of securities and may be compensated to offer one investment over another at any time.

One of the worst examples that I witnessed this was with a portfolio of a friends mom.  Her broker had sold her what he called a “safe investment” which was a limited partnership.  While some limited partnerships could be considered good investments, this particular one was Medical Capital Holdings.

What’s the big deal about that?  Well, this particular limited partnership ended up being a fraud and most investors lost everything that they invested into it.   What makes the story even worse, is that this particular broker thought it was “suitable” to put over 1/3 of her portfolio into it.

4. Their commissions can eat away your returns.

If you’re paying commissions on a per-trade basis, you may be spending more than you might expect.

For example, if you’re charged 2% per trade, then making just three trades per year could result in you paying 6% of your overall portfolio in commissions annually.

5. Alphabet jumbo soup.

Brokers may be using deceptive titles to give you the wrong impression about their compensation model and qualifications. Currently, the shear abundance of professional designations being used within the financial services industry is confusing even to the most experienced investors. However, understanding the differences between these titles could have a dramatic effect on your long-term investment results and overall satisfaction.

As an example, the term financial advisor is one of the most used terms in the industry; however, many of the individuals using this title are sales people looking to meet quotas by selling financial products. They may in some cases sell non-marketable securities, which include long-term commitments, excessive fees, and a high level of risk.

Titles with the word “senior” — Certified Senior Advisor (CSA) and Certified Senior Consultant (CSC), for instance — have come under a great deal of scrutiny.   I get offers in the mail all the time to buy designations.   Don’t let the alphabet soup impress you.  The only one that should in the financial planning profession is the CFP® designation. Other notables are the CFA and CPA designation.

6. I have a sales quota.

I love when I get a statement from a competitor that is sponsored by a mutual fund or insurance company.  The broker claims to them that they have their clients best interest at heart and  can utilize all types of investment choices, except that they only investments I see are from that companies proprietary products.

Hmmm……now whose best interest is first?  I assure you not the client.

7. My records clean….kind of

Your broker is not obligated to tell you if there’s anything on his or her record.  And why they should they?  It’s reported that 70% of prospective clients do not do a background check on the broker before hiring them.

Want to make sure that your broker doesn’t have a record like Bernie Madoff?  Head over to FINRA BrokerCheck to see what’s on your brokers record.

8. It could be better somewhere else.

With a broker you’re dealing with a sales person who may or may not have your best interest in mind. On the other hand, registered investment advisors, also known as RIAs are firms which operate under the fiduciary standard, which means that they are legally obligated to put their client’s interests first at all times.

As an independent registered investment advisor, Alliance Wealth Management, LLC was founded as a welcome alternative to the traditional brokerage model so many investors have become accustom to. We are compensated only by management fees paid directly by our clients.

How do you pay you broker?  If you don’t know, maybe it’s time to find out.

Source: goodfinancialcents.com