An Interview with Dan Malachowski of Baron Financial Group LLC.
Who is Dan Malachowski?
Mr. Malachowski is a financial consultant at Baron Financial Group LLC., here in Springfield, Missouri. Mr. Malachowski has lived in Springfield his entire life and has a wife and 3 children. He has 18 years of experience in the financial planning field, beginning in March of 1999. He is also licensed to sell life insurance products and is licensed for securities in series 6, 7, 24, and 63.
He graciously took the time out of his day to answer questions about financial planning and how it pertains to younger adults.
What is Financial Planning?
Diving into the topic of financial planning, I asked what Mr. Malachowski would say his job was as a financial consultant. He said that his duty is to look at the overall picture of a client’s financial situation and give recommendations on investments. He makes sure to ask each client about different types of insurance, wills, trusts, and power of attorneys even though he may not be able to directly help the client with those specific items. This helps him get an idea of their limits of liability (the maximum number an insurance company will cover depending on one’s policy1) before making any recommendations.
Why is financial planning so important and when should you start?
Mr. Malachowski highlighted four reasons for financial planning:
- Social Security may not always be there and it was never intended to be someone’s only form of income.
- It is important to be able to take care of yourself in retirement.
- The earlier you start saving, the easier it will be.
- Money can and will compound over time if you start saving now.
Mr. Malachowski emphasized that if you can, you should start saving NOW. That goes for any age, whether you’re 18 or 55. Whatever age you are now, is when you should start saving. This will get you into the discipline of saving your money.
What advice would you give younger adults about financial planning?
Mr. Malachowski could not stress enough how important learning to budget is. He said budgeting “opens the door”3 to all other aspects of planning. Budgeting helps increase your discipline against impulse buying. The best way to budget is to get your bank statements for the past 3 months and categorize everything you bought to see how you’re spending your money. He says, “if you want to spend $5 on Starbucks five days a week, that is totally fine, my job is not to judge; but you then have to budget that $100 a month for those coffees. And you’ll never remember your favorite cup of coffee.”3
To help younger adults start budgeting, Mr. Malachowski says that younger adults could download any number of applications on their phone/computer/tablet to help them or simply just open an excel spreadsheet and start there. Even though with technology today where we can look at our bank accounts on our phones, those numbers may not always be accurate. Keeping a separate copy that you make yourself, is beneficial when planning and budgeting.
Think about your goals.
Short-term and long-term goals are important to everyone’s financial planning. As a younger adult, your goals will be constantly changing so Mr. Malachowski advises everyone to be flexible. Life can be unpredictable, children can be born and accidents can happen that may cause us to modify our goals. However, always thinking about those different goals and how they change or how to achieve them will come in handy when you’re financial planning.
Being a new client, where to start?
I shared with Mr. Malachowski a study from the Pew Research Center that said millennials were less trusting than older generations2 and asked how he thought the best way to handle a younger client that may hesitant to trust a financial advisor with their money would be. Mr. Malachowski said the initial meeting with a new client lasts about two hours in his experience. Getting to know the client’s/consultant’s personality is a tell-all as to whether it will be a good fit, professionally. For younger adults who are nervous about sharing their financial information, he said to be as open-minded as you can when going into the meeting. Part of a financial advisor’s job is to share their experience of financial planning and attempt to alleviate any concerns that a client may have.
Stocks and Bonds: What are they and are they important?
Many younger adults have heard of stocks and bonds but probably do not know much about them. I asked Mr. Malachowski what they are, if younger adults should be taking advantage of them, and in what way? He answered with the following graphic that makes it simpler by breaking down the types of stocks and bonds by level of risk and return.
What are they?
Mr. Malachowski described bonds as established companies borrowing money from the public, rather than a bank, to help fund their venture. Stocks are an investment vehicle into a company so that when they make money, you make money and vice versa. There is a scale of conservative to aggressive stocks that a person may invest in. Whether to go more conservative or aggressive depends on each client’s risk tolerance, how adverse or comfortable one is with different points on the spectrum. Age may also play a factor in where someone may want to invest. If an older adult is investing they may wish to go with more low risk investments because they will be selling their shares quicker. Younger adults (if up for the ride) may want to go the more aggressive route because they can hold their stock longer which may or may not result in a higher pay-out.
Should younger adults invest and what is the best way to invest?
When it comes to financial planning, everything depends on the client. The same rule applies with investing. If a younger adult would rather just save money by putting some away each month, then that is what they should do. If they are more open to stocks and bonds, are they willing to go with high risk companies or would they rather stay on the low risk side? That depends solely on the individual. After the individual makes that decision, Mr. Malachowski suggests that the younger adult talk to their financial planner on which stocks or bonds would be the best for them to invest in. After all, the financial planner is the expert in the field. Stocks and bonds have fluctuated so much over the years, it may be hard for someone without a trained eye to know when the best time to invest and sell is.