The internet and mutual funds have given investors knowledge and independence previous generations might never have imagined. But many, perhaps most, continue to lean on professionals for guidance.
That’s easy to understand when it comes to big-ticket matters like growing a nest egg for retirement. But some investors, especially if they’ve lost a step or two, also get professional help with day-to-day chores like paying the electric bill.
Sound daily money management is key to investing success because it allows bigger contributions in the portfolio-building stage and smaller withdrawals in retirement. But routine chores can become challenging for older investors just as the stakes get highest, when money must be stretched for years and years.
The question: how do you know when you or a loved one needs help, and how do you get it?
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For a price, you can find someone to help with anything, and an accountant or bookkeeper might take on money management chores. But these days, many turn to a little-known community of specialists called daily money managers, represented by 800-member American Association of Daily Money Managers, which has a provider locating tool on its website.
“Chances are you have never heard of a daily money manager (DMM),” says Richard Best, personal finance expert at DontPayFull, a money management and education site. “You won’t see them advertised because they generally work off of referrals, and you probably won’t hear many of your friends talk about them because, well, who wants to admit they can’t handle their personal money matters?”
These services, once used by the wealthy, are now cheap enough for ordinary folk. They are used most commonly by people who have come to feel, on their own or with urging from family members, that routine money management chores have just become too difficult.
If bills are going unpaid or the debit card is often short at the supermarket, help may be in order. Some seek help after losing a spouse who took care of things, or because family members worry the loved one is an easy mark for con artists. Other clients are capable of handling money but are traveling or feel they are just too busy.
DMMs can help with ordinary bills, insurance policies and claims, and in keeping papers organized for tax time. Advocates say a good money manager can help a retiree remain independent and may be the first to notice if things are getting out of hand, like medications being left untaken.
Best says, “A DMM can step in to keep your money flowing and keep you out of trouble. They can be especially valuable for decoding complex insurance or government programs, such as Medicare, Social Security, and health plans, to ensure you are optimizing the benefits available to you.”
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But it’s not something to jump into until the need is clear, as charges can range from $50 to $75 an hour and up, according to Best. Some DMMs require a monthly minimum. Often, it’s cheaper for a family member or friend to handle things until issues get too complex.
There is no government licensing requirement, so it pays to make sure the provider is well-established, experienced and honest. Some clients seek referrals from other advisors they trust, like an estate lawyer, tax preparer or financial advisor. The AADMM has a certification program, an ethics code barring conflicts of interest, and offers ongoing education for members.
But Liz Crystal, founder of The LC Group, a DMM firm in Green Brook, New Jersey, says it’s important to realize a DMM cannot replace an investment advisor.
“Unless specifically licensed to do so, a DMM should not be trading stocks or giving stock advice,” she says.
In choosing a daily money manager, it’s obviously important to learn costs and what services can be provided. Among issues to consider:
Get details. In addition to paying bills and keeping the checkbook balanced, a DMM can analyze the client’s cash flow and spending patterns, Best says.
“They will work with your creditors to resolve disputes or negotiate better credit terms,” he says. “On a daily, weekly or monthly basis they will reconcile your accounts, sort your mail, pay your bills, and track your spending. They will restructure your debt situation by consolidating accounts and transferring high-interest balances.”
Coordination. Make sure the manager can coordinate with other pros like the investment advisor and tax preparer.
Security. Be sure the manager carries proper protections for clients.
“A DMM should carry errors and omissions insurance,” Chrystal says. “It is a form of malpractice insurance and the same type of insurance that an accountant or investment advisor would carry. I routinely provide a copy of my E&O insurance certificate to clients.”
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And, do some checking, Best says.
“Check with state agencies and the Better Business Bureau for complaints,” he says. “Verify any credentials, such as CPA or CFP with their respective governing boards.”
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Do Investors Need a Daily Money Manager? originally appeared on usnews.com
