Can you give financial advice to friends and receive money?

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flyingaway
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Can you give financial advice to friends and receive money?

Post by flyingaway »

Some of my friends have been asking me for advice about investment choices and retirement planning. Most of the questions are simple, I have been happy to give them my candid advices which are appreciated.

However, maybe my advices have helped them and words are spreading. More people are asking me for advices and some questions are complicated and may need some analysis. I'm wondering if I could receive payment for my advices and time without a license. For that, I meant some kind of formal analysis given in the form of a report.

I know a few bloggers are couaching, consulting, advising, and are receiving compensation. I just want to have some answers about the legality of this activity and will appreciate some experience for forum readers.
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AerialWombat
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Re: Can you give financial advice to friends and receive money?

Post by AerialWombat »

.....
Last edited by AerialWombat on Thu Apr 01, 2021 10:08 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
backpacker61
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Re: Can you give financial advice to friends and receive money?

Post by backpacker61 »

You will be opening yourself up to potential litigation. Filing lawsuits is viewed as an "income stream" by some people. I have had relatives that do this. When people are drowning, they will grab at anything in order to stay afloat.

Frankly, I would be very reticent even to offer casual advice.
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White Coat Investor
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Re: Can you give financial advice to friends and receive money?

Post by White Coat Investor »

A fair number of people get around this by "coaching" rather than advising, but it's a pretty gray area. Tread carefully.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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BolderBoy
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Re: Can you give financial advice to friends and receive money?

Post by BolderBoy »

backpacker61 wrote: Sat Mar 20, 2021 11:48 am You will be opening yourself up to potential litigation. Filing lawsuits is viewed as an "income stream" by some people. I have had relatives that do this. When people are drowning, they will grab at anything in order to stay afloat.

Frankly, I would be very reticent even to offer casual advice.
Pretty much agree with these sentiments. The most I'll do is tell folks what I do for myself and that their situations are probably completely different from mine.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
MotoTrojan
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Re: Can you give financial advice to friends and receive money?

Post by MotoTrojan »

I wouldn't. Whenever your advice goes against them (even if sound advice), they may no longer be friends. Even unpaid advice can be a risk if you are detailing exactly what to do.
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retired@50
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Re: Can you give financial advice to friends and receive money?

Post by retired@50 »

Maybe you could direct your friends with questions to set up an account at Bogleheads.org

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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TomatoTomahto
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Re: Can you give financial advice to friends and receive money?

Post by TomatoTomahto »

In a market that has, for the most part, only gone up, it’s easy to be seen as helpful and wise. Being regarded the same way when markets go down is not as likely. I would avoid giving advice even for free, but would definitely not charge for advice. Ever.
I get the FI part but not the RE part of FIRE.
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Re: Can you give financial advice to friends and receive money?

Post by tibbitts »

flyingaway wrote: Sat Mar 20, 2021 11:34 am I know a few bloggers are couaching, consulting, advising, and are receiving compensation. I just want to have some answers about the legality of this activity and will appreciate some experience for forum readers.
I assume you mean they are accepting compensation from sources like ads or links on their websites? If not maybe you can provide an example.
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ResearchMed
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Re: Can you give financial advice to friends and receive money?

Post by ResearchMed »

TomatoTomahto wrote: Sat Mar 20, 2021 12:03 pm In a market that has, for the most part, only gone up, it’s easy to be seen as helpful and wise. Being regarded the same way when markets go down is not as likely. I would avoid giving advice even for free, but would definitely not charge for advice. Ever.
This ^^

People are unlikely to shrug it off if they lose a lot because the market went down and you "didn't save them"...

RM
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retire2022
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Re: Can you give financial advice to friends and receive money?

Post by retire2022 »

flyingaway wrote: Sat Mar 20, 2021 11:34 am Some of my friends have been asking me for advice about investment choices and retirement planning. Most of the questions are simple, I have been happy to give them my candid advices which are appreciated.

However, maybe my advices have helped them and words are spreading. More people are asking me for advices and some questions are complicated and may need some analysis. I'm wondering if I could receive payment for my advices and time without a license. For that, I meant some kind of formal analysis given in the form of a report.

I know a few bloggers are couaching, consulting, advising, and are receiving compensation. I just want to have some answers about the legality of this activity and will appreciate some experience for forum readers.
I think it is a state specific, and the number of clients you have, at one time one did not need license to be Registered Adviser in NYS with the attorney generals' office, I am not sure if it is the case right now.

https://ag.ny.gov/investment-advisers-faqs

I would check with your state Attorney General website.
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FIREchief
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Re: Can you give financial advice to friends and receive money?

Post by FIREchief »

The only advice I will ever give to anybody other than my immediate family is "call Vanguard and ask them about PAS."
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Stinky
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Re: Can you give financial advice to friends and receive money?

Post by Stinky »

I tell them what I do myself.

I’ll also refer them to “Bogleheads Guide to Investing” and “Little Book Of Common Sense Investing”. Heck, if I like them well enough, I might even give copies to them.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: Can you give financial advice to friends and receive money?

Post by Misenplace »

This thread is now in the Personal Finance (Not Investing) forum [employment/legal questions].

Moderator Misenplace
TheNightsToCome
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Re: Can you give financial advice to friends and receive money?

Post by TheNightsToCome »

retire2022 wrote: Sat Mar 20, 2021 12:22 pm
flyingaway wrote: Sat Mar 20, 2021 11:34 am Some of my friends have been asking me for advice about investment choices and retirement planning. Most of the questions are simple, I have been happy to give them my candid advices which are appreciated.

However, maybe my advices have helped them and words are spreading. More people are asking me for advices and some questions are complicated and may need some analysis. I'm wondering if I could receive payment for my advices and time without a license. For that, I meant some kind of formal analysis given in the form of a report.

I know a few bloggers are couaching, consulting, advising, and are receiving compensation. I just want to have some answers about the legality of this activity and will appreciate some experience for forum readers.
I think it is a state specific, and the number of clients you have, at one time one did not need license to be Registered Adviser in NYS with the attorney generals' office, I am not sure if it is the case right now.

https://ag.ny.gov/investment-advisers-faqs

I would check with your state Attorney General website.
I ran a small RIA for a while years ago, and looked into this before setting up shop. As I recall, one could manage investments with limited clients (<= 5?) and limited AUM (< $15M?) as long as one did not advertise or otherwise hold oneself out to the public as a professional investment advisor. I believe the regulations are state specific for small operations.

I agree with others. Don't go down this path unless you want to establish a business and purchase E&O insurance.
Sahara
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Re: Can you give financial advice to friends and receive money?

Post by Sahara »

I believe this depends in part on what type of advice you provide, what type of analysis or reports you might generate. New York had a de minimis exception for providing advice to less than 5 individuals. I believe this changed in February 1, 2021. The registrations vary depending upon what state you are in, what type of advice you give and what type of compensation you receive. You might want to look at Michael Kitces as well as NASAA and FINRA for further guidance regarding requirements. You may take the Series 65 exam without a sponsor. In some states that might suffice and you could set up your own RIA as has been suggested. You may also be able to find a firm to take you on as a contractor, for which of course they would receive a percentage of your compensation.
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Wricha
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Re: Can you give financial advice to friends and receive money?

Post by Wricha »

Stinky wrote: Sat Mar 20, 2021 12:48 pm I tell them what I do myself.

I’ll also refer them to “Bogleheads Guide to Investing” and “Little Book Of Common Sense Investing”. Heck, if I like them well enough, I might even give copies to them.
I have also given people “Bogleheads guide to Investment did it this week matter of fact. I would want my “client” to have best information available :D
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Re: Can you give financial advice to friends and receive money?

Post by Dottie57 »

retired@50 wrote: Sat Mar 20, 2021 11:56 am Maybe you could direct your friends with questions to set up an account at Bogleheads.org

Regards,
I’ve tried that with friends and family? Most want someone totell them what to do.
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Re: Can you give financial advice to friends and receive money?

Post by bogledogle »

White Coat Investor wrote: Sat Mar 20, 2021 11:52 am A fair number of people get around this by "coaching" rather than advising, but it's a pretty gray area. Tread carefully.
+1
TG2
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Re: Can you give financial advice to friends and receive money?

Post by TG2 »

BolderBoy wrote: Sat Mar 20, 2021 11:54 am
backpacker61 wrote: Sat Mar 20, 2021 11:48 am You will be opening yourself up to potential litigation. Filing lawsuits is viewed as an "income stream" by some people. I have had relatives that do this. When people are drowning, they will grab at anything in order to stay afloat.

Frankly, I would be very reticent even to offer casual advice.
Pretty much agree with these sentiments. The most I'll do is tell folks what I do for myself and that their situations are probably completely different from mine.
Exactly. I give information but only generic advice. I would also mention articles and statistics I had seen and start a brief discussion. My thing was always, "I would have to know way too much about you and your situation to offer any real advice, and neither of us would be comfortable with that. What I will do is tell you what I do and why I do it, but it may not be appropriate for you. I will give you things to think about, but you have to make your own decisions." There were a few people I "helped" at work back in the day. One in particular was still thanking me 20-25 years later for getting him started saving and investing. He was looking around at friends and family with little or nothing saved and realizing he wasn't in that same spot. Felt pretty good.
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ipdiddly
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Re: Can you give financial advice to friends and receive money?

Post by ipdiddly »

How much is your advice really worth?
Perhaps offer to take a small percentage of any gains and REFUND the same percentage of any losses. (Just kidding!) :oops:

I am happy to manage my own portfolio in which I break most investment rules and understand the risks involved. I like to refer to my portfolio as "The Seat of the Pants Portfolio."

I would feel uncomfortable suggesting to another person how to manage his/her portfolio, other than to broadly suggest certain basic ETFs or mutual funds - e.g., total market.

I help my son and DIL with their investments, but that's as far as I'll go.
goonie
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Re: Can you give financial advice to friends and receive money?

Post by goonie »

I wouldn't take money from anyone unless I got the appropriate education/certifications/registrations and became or joined a legitimate business entity that has liability appropriately covered.

Assuming you don't go that route, I wouldn't waste too much time working with anyone unless they demonstrate that they're putting in serious time on their own to learn and not relying on you to spoon feed them. If they're not working to acquire the knowledge for themselves, they're almost assuredly not going to fully appreciate what you're doing for them. They're also going to be like a wounded animal when the market inevitably cools or crashes. They won't fully understand what's going on and won't really know what to do (a dangerous combo). And you may end up getting some blame. Anyway, Vanguard PAS is a decent place to refer people who show that they can't be bothered.

VERY close family and friends can be a different story in certain contexts but I would still try to take the same approach if possible. Some situations may need you to be more involved for someone close to you who isn't putting in quite a bit of effort on their own but those situations should be very few and far between in life.
Last edited by goonie on Sat Mar 20, 2021 3:01 pm, edited 2 times in total.
afan
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Re: Can you give financial advice to friends and receive money?

Post by afan »

I would not do this as a business without really doing it as a business. Get all the required certifications, probably form a corporate organization, set prices, define services and get the appropriate insurance.

In other words, make it a second, or first, job.
Far too many ways for things to go wrong.
I find few people I talk with want to do any homework. I offer them papers to read or say things like "take a finance course". Not many people want to do that.

What I know about personal finance is based on what is relevant to me. That leaves gaps in my knowledge. I could fill them but, not being in the business, I don't care about, for example, Medicaid nursing home rules. If I were to accept payment for my opinion, I would be claiming to be expert in everything that matters for someone's situation. I am not such an expert and don't intend to become one.

In short, I agree with those saying this is not something to take up as a sideline. Either become a fully qualified and credentialed professional and do it as a business or leave it alone.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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Re: Can you give financial advice to friends and receive money?

Post by Sahara »

This post really resonates with me. I often find myself in conversations about personal finance. There is a great absence of basic financial literacy in the US, and most of what people I speak to seek comes way before actual investment advice. For example, I might recommend someone autopay all of their monthly bills via one credit card. If I do this and I receive compensation (which I don’t) I would require no registration.

With a passion for helping others and a passion for personal finance and investing, it would be ideal if that became lucrative on a financial level. What I ask myself is: “what happens next?” I need to register as a representative or advisor in the industry to work at that next level. And what does that look like? I can work for a firm or I can set up shop by myself.

Taking a position with a firm and recommending index funds is unlikely to go over very well. Further, once in the industry, upon what do I base my advice? Many I know in the industry use software such as Money Tree and Money Guide or lower-level programs supplied by the Broker-Dealer. These create long glossy reports that clients find difficult to comprehend. So then I’d be making money and giving advice that’s glossy and maybe not particularly helping people.

I am comfortable working with spreadsheets, asset allocation, fund choices, tax scenarios, and Roth Conversion plans based upon my assumptions and methods. If my assumptions or methods are in error, I will be the one to face consequences.

Imagine working on your own in a universe of multiple assumptions and methods. Have you considered how to determine that you are providing the best advice and that your friends or clients won’t face any negative consequences?

If we look more deeply at the products commonly used by advisors we see that they all work on a set of assumptions. If I work in the industry do I simply use and trust the software and assumptions used by my firm? Do I use my own “Bogleheadish” assumptions and methods? Are those fixed, ideal assumptions that I can always rely upon? Even Bogleheads utilize multiple platforms such as I-Orp, Personal Finance Toolbox, Pralana Gold, etc. Each of these has a set of assumptions, or the option to vary the assumptions and method and produce varying outcomes. So how do I choose what to use to serve my friends or clients and sleep well at night knowing that the advice I’ve provided them is best?

Then there’s the issue, as already mentioned, that you may be asked to help with areas in which you don’t have expertise. For example, I know a good deal about the NYSTRS system, am comfortable with taxes, and often step onto my “evils of the 403b industry” soapbox. However, if someone wants to discuss taxable accounts or ACA subsidies I am pretty lost.

I passed the SIE exam in 2020 and the Series 66 exam this January. The Series 66 exam is a tricky and wordy exam with a very wide knowledge base. I can assert that I have learned a great deal more on this forum than I did in preparing for the Series 66 exam. And, the advice and wisdom here are much more practical and applicable than most of the Series 66 content, with the exception of the registration requirements for those in the financial industry.

I never recommend a fund, contribution amount, or investment vehicle to friends or acquaintances. I very much enjoy discussing projections and scenarios and I will usually share the tools available. If others are interested in taking some ownership, I will support them as they learn, and it becomes a collaboration - similar to what is found here on the forum.

Just some additional considerations.
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flyingaway
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Re: Can you give financial advice to friends and receive money?

Post by flyingaway »

OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
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Re: Can you give financial advice to friends and receive money?

Post by sailaway »

flyingaway wrote: Sat Mar 20, 2021 9:46 pm OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
What are you 15? Those aren't friends.
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Re: Can you give financial advice to friends and receive money?

Post by tibbitts »

flyingaway wrote: Sat Mar 20, 2021 9:46 pm OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
You're not making any sense. It's the beer money that's the problem. You say you enjoy talking finances with people so just forego the beer money that you don't need. What's the problem? If not "helping" ruins what you're interpreting as a friendship, well, you weren't interpreting the relationship correctly.
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beernutz
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Re: Can you give financial advice to friends and receive money?

Post by beernutz »

flyingaway wrote: Sat Mar 20, 2021 11:34 am Some of my friends have been asking me for advice about investment choices and retirement planning. Most of the questions are simple, I have been happy to give them my candid advices which are appreciated.

However, maybe my advices have helped them and words are spreading. More people are asking me for advices and some questions are complicated and may need some analysis. I'm wondering if I could receive payment for my advices and time without a license. For that, I meant some kind of formal analysis given in the form of a report.

I know a few bloggers are couaching, consulting, advising, and are receiving compensation. I just want to have some answers about the legality of this activity and will appreciate some experience for forum readers.
Can you give an example of your helpful advices?
AA: 40/41/19 - equities/positive return-zero volatility/bonds
TheNightsToCome
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Re: Can you give financial advice to friends and receive money?

Post by TheNightsToCome »

flyingaway wrote: Sat Mar 20, 2021 9:46 pm OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
If you want to lose a friend, offer investment advice prior to a deep bear market.
smitcat
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Re: Can you give financial advice to friends and receive money?

Post by smitcat »

flyingaway wrote: Sat Mar 20, 2021 9:46 pm OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
"Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish."
Pre-print a list of books & websites that they can utilize to get whatever they seek, that is what a friend would do.
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Re: Can you give financial advice to friends and receive money?

Post by Sandtrap »

There is an informal and rigorous test and unwritten certification in this forum that is a good measure of one's ability to give financial advice.

1. Participate in "portofolio review analysis, suggestions, and long term strategy. You will be helping "real people". Your peer group will be . .. . stringent.
(warning: you may be "reminded" when you are not up to a reliable standard and require further learning).

2. Search the forum archives for forum portfolio reviews by the seniors; "ducky", "123", "Grt2bOutdoors", "ruralavalon", "lakpr", "davidjay", and other senior portfolio reviewers. Are you up to that level?

3. With fees charged for any advice comes liability and responsibility for the results, whether certified Fp, and especially if not certifed and insured. Are you up for that?

*suggestion: remain popular and helpful, be discreet and selective in who you "help" as a "friend" informally, set boundaries on the level of depth of suggestions IE: give options and let others select their own, help them through the process on their own (teach) vs a professional/authoritative role (which can be tempting).

dislaimer
there are lot's of ways of approaching this type of thing, especially giving any kind of advice for a fee, let alone for no fee, depending one's life and professional experiences and education, etc.

1
My suggestion: Either go the certified FA route or don't at all.
2
Prepare a general "help sheet" that includes the following (then give to "friends" for advice); link to this forum, reading list, bullet points of "bogle financial concepts from the wiki", include "Ages of the Investor: Life Cycle Investor" by Bernstein as a suggested read, etc.

j :D
Wiki Bogleheads Wiki: Everything You Need to Know
lostdog
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Re: Can you give financial advice to friends and receive money?

Post by lostdog »

So you could get sued if your just BSing about the stock market with your gym buddies?
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ResearchMed
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Re: Can you give financial advice to friends and receive money?

Post by ResearchMed »

lostdog wrote: Sun Mar 21, 2021 8:30 am So you could get sued if your just BSing about the stock market with your gym buddies?
Are they paying you for this, uh, information?

RM
This signature is a placebo. You are in the control group.
lostdog
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Re: Can you give financial advice to friends and receive money?

Post by lostdog »

ResearchMed wrote: Sun Mar 21, 2021 8:32 am
lostdog wrote: Sun Mar 21, 2021 8:30 am So you could get sued if your just BSing about the stock market with your gym buddies?
Are they paying you for this, uh, information?

RM
Of course not.
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ResearchMed
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Re: Can you give financial advice to friends and receive money?

Post by ResearchMed »

lostdog wrote: Sun Mar 21, 2021 8:33 am
ResearchMed wrote: Sun Mar 21, 2021 8:32 am
lostdog wrote: Sun Mar 21, 2021 8:30 am So you could get sued if your just BSing about the stock market with your gym buddies?
Are they paying you for this, uh, information?

RM
Of course not.
Then what grounds would they have to sue you? There's no professional relationship.

OP's question involved getting paid for the advice.

RM
This signature is a placebo. You are in the control group.
lostdog
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Re: Can you give financial advice to friends and receive money?

Post by lostdog »

ResearchMed wrote: Sun Mar 21, 2021 8:36 am
lostdog wrote: Sun Mar 21, 2021 8:33 am
ResearchMed wrote: Sun Mar 21, 2021 8:32 am
lostdog wrote: Sun Mar 21, 2021 8:30 am So you could get sued if your just BSing about the stock market with your gym buddies?
Are they paying you for this, uh, information?

RM
Of course not.
Then what grounds would they have to sue you? There's no professional relationship.

OP's question involved getting paid for the advice.

RM
Good point. You never know in the "United States of Litigation."
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Triple digit golfer
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Re: Can you give financial advice to friends and receive money?

Post by Triple digit golfer »

flyingaway wrote: Sat Mar 20, 2021 9:46 pm OP here. I'm currently teaching students in mathematics at a university and I plan to retire from that profession soon.
I certainly have no interest in getting another job as a financial advisor. I am just thinking to do it on an ad-hoc basis to get some beer money if some friends want help.
Furthermore, it is difficult to decline to give them advices when they know I have that knowledge. Not helping them may ruin our friendship, as they may consider me as selfish.

So, I'm really in a difficult situation.
Just say you're not comfortable giving financial advice and that you just know the basics. If they insist, give them Boglehead generalities. Save regularly, use tax advantaged accounts, things like that.
dknightd
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Re: Can you give financial advice to friends and receive money?

Post by dknightd »

You asked "Can you give financial advice to friends and receive money?"

The answer is probably yes, depends where you live. But I would NOT do it.

It is perfectly acceptable for them to buy you beer while you give them free advice. Or any other time ;) We usually just take turns.

Even then I would limit my advice to "this is what I'd do." I would not suggest they follow my advice.

I once considered charging for advice. After all I had it mostly figured out while I was planning my retirement. But I did not want a second career. And I sure would not risk losing a friend over it.

Sometimes I talk with friends and family about what I have planned. But I try to avoid it. I will answer questions. And explain I'm not an expert. But that is all.
Last edited by dknightd on Sun Mar 21, 2021 9:01 am, edited 1 time in total.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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ipdiddly
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Re: Can you give financial advice to friends and receive money?

Post by ipdiddly »

ResearchMed wrote: Sun Mar 21, 2021 8:36 am
lostdog wrote: Sun Mar 21, 2021 8:33 am
ResearchMed wrote: Sun Mar 21, 2021 8:32 am
lostdog wrote: Sun Mar 21, 2021 8:30 am So you could get sued if your just BSing about the stock market with your gym buddies?
Are they paying you for this, uh, information?

RM
Of course not.
Then what grounds would they have to sue you? There's no professional relationship.

OP's question involved getting paid for the advice.

RM
I question whether getting paid is a line that triggers liability. If you give a friend a ride home and have an accident, you may have liability for your friend's injuries regardless of being paid. Likewise, if you lend your friend a defective chain saw.

If you are really concerned with liability, why not have any friend asking for financial advice to sign a disclaimer of liability that clearly spells out that you have no idea what you are doing, but your friend desires your advice anyway and assumes all risks. Not totally sure that will save your bacon because liability disclaimers are generally frowned upon, but at least it gives you an argument. As others have mentioned, the bigger risk is loss of friendship - or at least an awkward friendship - if the market declines.
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slowandsteadywins
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Re: Can you give financial advice to friends and receive money?

Post by slowandsteadywins »

I can’t think of a worse combination: having a friend pay you for advice. Are you sure you’re friends? :mrgreen:
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ROIGuy
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Re: Can you give financial advice to friends and receive money?

Post by ROIGuy »

Since you are a teacher then you know that having someone do their own homework is the best way for them to learn. Make a list of books for them to read, podcasts to listen too and websites to visit (especially this one). If your friendship is based on you giving them financial advice, you didn't have much of a friendship to begin with.
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JoMoney
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Re: Can you give financial advice to friends and receive money?

Post by JoMoney »

I would advise a friend to not pay for "financial advice" and read just about anything written by John Bogle. The Little Book of Common Sense Investing would be a great place to start (and perhaps finish) when it comes to investing "financial advice".
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
dknightd
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Re: Can you give financial advice to friends and receive money?

Post by dknightd »

JoMoney wrote: Sun Mar 21, 2021 9:15 am I would advise a friend to not pay for "financial advice"
this!
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
retire2022
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Re: Can you give financial advice to friends and receive money?

Post by retire2022 »

ipdiddly wrote: Sun Mar 21, 2021 9:01 am
I question whether getting paid is a line that triggers liability. If you give a friend a ride home and have an accident, you may have liability for your friend's injuries regardless of being paid. Likewise, if you lend your friend a defective chain saw.

If you are really concerned with liability, why not have any friend asking for financial advice to sign a disclaimer of liability that clearly spells out that you have no idea what you are doing, but your friend desires your advice anyway and assumes all risks. Not totally sure that will save your bacon because liability disclaimers are generally frowned upon, but at least it gives you an argument. As others have mentioned, the bigger risk is loss of friendship - or at least an awkward friendship - if the market declines.
I would say this to friend, my advice is as good as this:

“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

–Burt Malkiel, “A Random Walk Down Wall Street”

https://www.investopedia.com/terms/r/ra ... theory.asp

Additionally, I would say I am not liable for this information, you can take it with a grain of salt.
tibbitts
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Re: Can you give financial advice to friends and receive money?

Post by tibbitts »

ipdiddly wrote: Sun Mar 21, 2021 9:01 am I question whether getting paid is a line that triggers liability. If you give a friend a ride home and have an accident, you may have liability for your friend's injuries regardless of being paid. Likewise, if you lend your friend a defective chain saw.

If you are really concerned with liability, why not have any friend asking for financial advice to sign a disclaimer of liability that clearly spells out that you have no idea what you are doing, but your friend desires your advice anyway and assumes all risks. Not totally sure that will save your bacon because liability disclaimers are generally frowned upon, but at least it gives you an argument. As others have mentioned, the bigger risk is loss of friendship - or at least an awkward friendship - if the market declines.
I'm not an expert but there are two issues here: one is the legality in term of regulatory compliance in providing advice for payment without required licensing; the other is liability if the "client" chooses to contest whether the advice was appropriate. It would seem that the OP could completely eliminate the first one by not accepting payment, so that's half the battle. At that point my guess is that it would be difficult to establish liability, but of course that might not stop someone from trying. I'm fairly certain personal insurance wouldn't cover you if you were giving advice for a fee, but it might if you faced legal action for providing advice in a non-professional capacity. I'm not sure a liability disclaimer would help more than hurt, only because it might be evidence of some kind of perceived professional relationship.
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Re: Can you give financial advice to friends and receive money?

Post by tibbitts »

retire2022 wrote: Sun Mar 21, 2021 10:18 am Additionally, I would say I am not liable for this information, you can take it with a grain of salt.
I wouldn't waste my breath saying that because I guarantee you would be the only person who remembered that part of the conversation.
retire2022
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Re: Can you give financial advice to friends and receive money?

Post by retire2022 »

tibbitts wrote: Sun Mar 21, 2021 12:31 pm
retire2022 wrote: Sun Mar 21, 2021 10:18 am Additionally, I would say I am not liable for this information, you can take it with a grain of salt.
I wouldn't waste my breath saying that because I guarantee you would be the only person who remembered that part of the conversation.
Whatever, to each's own, been doing this for several decades, not yet been sued, it is great one can have an opinion on the internet, it is different in real life.

We are perpetuating a society of ignorance by not sharing information.
tibbitts
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Re: Can you give financial advice to friends and receive money?

Post by tibbitts »

retire2022 wrote: Sun Mar 21, 2021 1:17 pm
tibbitts wrote: Sun Mar 21, 2021 12:31 pm
retire2022 wrote: Sun Mar 21, 2021 10:18 am Additionally, I would say I am not liable for this information, you can take it with a grain of salt.
I wouldn't waste my breath saying that because I guarantee you would be the only person who remembered that part of the conversation.
Whatever, to each's own, been doing this for several decades, not yet been sued, it is great one can have an opinion on the internet, it is different in real life.

We are perpetuating a society of ignorance by not sharing information.
I would, and have, shared plenty of information about investing, but I can't imagine telling someone "I am not liable for this information." If you not being liable isn't obvious and you'd even consider the possibility that someone would hold you responsible for their outcomes, then you shouldn't share the information.
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Re: Can you give financial advice to friends and receive money?

Post by Dottie57 »

retire2022 wrote: Sun Mar 21, 2021 1:17 pm
tibbitts wrote: Sun Mar 21, 2021 12:31 pm
retire2022 wrote: Sun Mar 21, 2021 10:18 am Additionally, I would say I am not liable for this information, you can take it with a grain of salt.
I wouldn't waste my breath saying that because I guarantee you would be the only person who remembered that part of the conversation.
Whatever, to each's own, been doing this for several decades, not yet been sued, it is great one can have an opinion on the internet, it is different in real life.

We are perpetuating a society of ignorance by not sharing information.
I’ve shared information and links to the wiki to no avail. Most people don’t want the info just great results all of the time.
retire2022
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Re: Can you give financial advice to friends and receive money?

Post by retire2022 »

tibbitts wrote: Sun Mar 21, 2021 1:46 pm
I would, and have, shared plenty of information about investing, but I can't imagine telling someone "I am not liable for this information." If you not being liable isn't obvious and you'd even consider the possibility that someone would hold you responsible for their outcomes, then you shouldn't share the information.
We live in a free society, people need to be responsible for ultimately pulling the trigger.
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