Financial Aid in a Nutshell

Understanding how you are going to pay for college is complicated. It is complicated for students, and it is complicated for parents.

The many different forms of loans, grants, and scholarships, can be daunting at times; the confusion and misunderstanding related to educational planning can be a real burden. As a financial planner it is important to have a complete understanding of a family’s options: how to maximize benefits and how to minimize the total cost of education per child.

Where to begin? Naturally, understanding a client’s beliefs and goals, as well as gathering actual educational costs is a good start. Once a good image of what these costs actually look like is established, you move on to the Free Application for Federal Student Aid, or FAFSA.

The FAFSA is the beginning of the financial aid process. The FAFSA is a form that can be prepared annually by current and prospective college students, and this form will determine eligibility for student financial aid.

To be clear, this form is not for a single specific federal aid program, but a gateway to them all.

Within the FAFSA the Expected Family Contribution is calculated. This formula is used to determine how much a family should contribute to their child’s education. It takes into account things like income, assets, retirement funds, and even unusual expenses, such as medical costs and things like that. This will help the government figure out what type of aid a student qualifies for.

What are all the different types of financial aid programs?

The most common form of financial aid is the Stafford Loan. This is financial aid provided by the US Department of Education; Stafford Loans are student loans. A student needs to start paying these back six months after they leave school, or fall below part-time status.

There are unsubsidized Stafford loans and subsidized Stafford loans. Subsidized Stafford loans are given on what’s called a need basis, meaning the expected family contribution, for whatever reason, is low. The interest in this situation does not start until the student is out of school. Unsubsidized Stafford loans do not have this feature, and the interest begins the moment the student receives the funds.

Another route that can be taken for education payments are Parent Loans for Undergraduate Students (PLUS). This program is designed for parents who can afford to make a loan payment, but may have not saved anything for their children’s education. They are loans given to the parents that are used to pay for their children’s education.

There are also the Federal Perkins Loans; similar to subsidized Stafford loans they are on a need basis. These loans carry a fixed interest rate of 5% for the duration of the ten-year repayment period. These loans are subsidized by the Federal Government and have a nine-month grace period. These Perkins Loans are eligible for Federal Loan Cancellation for individuals choosing to work in a number of different public service occupations.

Yet another form of financial aid is the Pell Grant. A Pell Grant is funds the U.S. Federal Government provides to students with financial needs, who have not earned a bachelor’s degree. Pell Grants are not loans.

These are just a few of the many different forms of financial aid that may be available to current or future students. As a financial planner it is important to understand how an individual is able to apply and/or qualify for these benefits. 

Confessions of an Advertising Man

I recently finished reading ‘Confessions of an Advertising Man’ by David Ogilvy. I am a huge fan of the TV series, Mad Men, and I learned that Ogivly is considered to be a loose inspiration for the show’s main character, Don Draper.

Widely considered the “Father of Advertising,” Ogilvy changed the advertising industry for generations to come. Given the fact that the advertising industry is largely a sales culture, I was truly impressed by Ogilvy’s integrity throughout the book.

While I originally bought the book for entertainment, ‘Confessions of an Advertising Man’ was filled with timeless wisdom that’s worth sharing. Chapters like, “How to Get Clients,” “How to Keep Clients,” and “How to Rise to the Top of the Tree - Advice for Young People,” although meant for the advertising industry, could be directly translated for aspiring financial planners searching for success.

Learn Your Clients before you Give Advice to them
“When KLM Royal Dutch Airlines decided to change agencies, they invited Ogilvy, Benson & Mather and four others to prepare speculative campaigns. We were first on their tour of inspection. I opened the meeting by saying “We have prepared nothing. Instead we would like you to tell us about your problems. Then you can visit the other four agencies on your list. They have prepared speculative campaigns. If you like any of them, your choice is easy. If you don’t, come back and hire us. We will then embark on the research which always precedes the preparation of advertisements at our agency.”

This is the attitude financial planners should have with all of their clients. “Tell us about your problems. After that, we’ll be glad to come up with what’s best for your situation.”

Stay Candid with your Clients
“I have never wanted to get an account so big that I could not afford to lose it. The day you do that, you commit yourself to living with fear. Frighted agencies lose the courage to give candid advice; once you lose that you become a lackey.”

In the advice-giving business, the ability to be candid is essential; no matter what business you’re in, your clients pay you to give them the absolute best advice. Always nurture a relationship that allows all parties to speak freely.

Good Listening Pays
“It pays to listen more than you talk… There is one stratagem which seems to work in almost every case: get the prospect to do most of the talking. The more you listen, the wiser he thinks you are.”

Excelling in a New Industry

“Most of the work you do in an agency will be routine maintenance. If you do it will, you will make gradual progress, but your golden opportunity will come when you rise to a great occasion. The trick is to recognize the great occasion when it presents itself.

Be patient.

Learn to make good presentations… learn to write them by studying the work of your masters… learn to deliver them well by observing the techniques of the professionals.

 Pick a subject about which your agency knows too little, and make yourself an authority on it. 

It is important to admit your mistakes and to do so before you are charged with them.
Big ideas are usually simple ideas.”

Ogilvy’s Favorite Traits
At the very beginning of the book, David Ogilvy explicitly listed the behaviors and traits he admires most:

• people who work hard
• people with first-class brains
• people who work with gusto
• self-confidence
• people who hire subordinates who are good enough to succeed them
• people who build up their subordinates
• people with gentle manners who treat other people as human beings
• well-organized people who deliver their work on time

 
Although originally written for the advertising industry, the wisdom and advice is clearly applicable to aspiring financial planners and professionals, in general. If you are new to the industry and exploring new ways to learn and excel, I would highly recommend ‘Confessions of an Advertising Man” by David Ogilvy.

My Number One Piece Of Advice

For anyone looking to improve themselves as a financial planner, or become more intelligent in general, my number one recommendation would be to read. More specifically, read books.

Josh Brown recently had a post on “Tips for Savvier Consumption of Financial Media” where he wrote the following:

Hierarchy: Books > Articles > Blogs > Tweets

Shane Parrish has noted that reading is the number one priority for Warren Buffett and Charlie Munger, chairman and vice-chairman at Berkshire Hathaway:

Warren Buffett says, “I just sit in my office and read all day.”

“You could hardly find a partnership in which two people settle on reading more hours of the day than in ours,” Charlie Munger commented. 

Munger adds: “We read a lot. I don’t know anyone who’s wise who doesn't read a lot.”

Warren Buffett on Charlie Munger:
“And Charlie—his children call him a book with legs.”

During the summer between my junior and senior year of college, I made a specific decision to start reading more. Now I read all the time. It is a large part of who I am and a huge influence on my life. I read more than 70 books last year, and I was busy much of the year studying for the CERTIFIED FINANCIAL PLANNER™ examination. In the month of December, after the exam was over, I read 24 books. My average month consists of reading between 5 and 10 books. I read about everything, including both fiction and nonfiction on business, investing, science, history, art, medicine, technology, nature, biographies, and more. 

This is not to emphasize quantity over quality. Rather, it speaks to how addictive reading can become. I love reading. Although I started out with the purpose of gaining knowledge, I quickly found it to be enjoyable too. Learning becomes a byproduct of reading.

There is no doubt in my mind the biggest influence on my professional development has been reading. The benefits consist of more than just understanding the technical content. I think reading has made me a more sociable person. This may seem counterintuitive because people often envision those who read a lot as being shy. However, since I read about so many topics, I can talk with a wide variety of people about a wide variety of subjects. In addition, when two people have read the same book, it is remarkable the connection and rapport it creates.

To aspiring financial planners and young people in general, my advice would be straightforward: read all the time. Not only will you learn a lot, but you will find it entertaining as well.