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Money Matters: Do financial planners have your interests at heart?

By Stephen Kelley - | Sep 12, 2018

One of the most common claims by people in my business is, “It’s about the people, not the money.” Indeed, we make that claim as well. It’s a great line, isn’t it? If only it were true. A first step in working with us is going through an online survey. One of the true/false questions is, “Financial planners put their interests over mine when making recommendations,” and it is nearly always answered true. Another of those questions on the survey is, “Financial planning is only for the wealthy,” which is also overwhelmingly answered as true. Clearly, we have some work to do to convince people we put their interests over ours or the money.

What are some of the questions you can ask, both yourself, and the adviser you are considering hiring, to determine if they are really looking out for your best interests?

The first thing I would look at is, do they require a minimum amount to invest, and if so, what does that look like? One very prominent money manager requires $500,000 investible assets just to get in the door. Now maybe once you are in, they focus more on the client, but clearly, they don’t want just anyone walking in. Another thing to look at is, are they product or people-oriented. Not coincidentally, this same money manager has carved out a niche that is very clearly product, rather than client-oriented. How do I know? Because he advertises all over the place that he never sells annuities. When I see that, I wonder, what if someone needs an annuity? Clearly, they will get something else. That doesn’t seem client-centric to me. This is not a pitch for annuities; it’s a convenient example of a product-oriented, rather than client-oriented practice.

The next thing I would look at is the intake and discovery process. Does it focus on money or people? Obviously, both are important to good outcomes, but in our opinion, one works much better than the other. For example, in our survey, which is rather extensive and can take several minutes to complete, there are no money questions at all, other than those which reveal people’s concerns and needs. Now, that doesn’t mean we don’t look at the financial picture early in the process; we simply look at it within the context of a client’s needs, wants, and desires.

Here are a couple of examples of the questions we ask and how they can impact the process, taken from a case I am currently involved in.

“I have provided my heirs a good picture of my finances.” “My spouse has a pretty good handle on our money situation.” “I have an accurate projection of my future expenses and income.” “If I need care, I am OK with relying on my family to providing it.” “I have clear investment goals.”

So, yes, they are money questions (we are after all financial planners), however they are designed to dig into the core issues being address, not the money. For example, how can you even begin planning if you don’t have an accurate idea of future expenses and income? Or clear investment goals? Yet the vast majority of people who enter my office say “no” to both of those. If I were to start making recommendations about their money before really digging into those issues, whose interests would I be serving? Certainly not the clients’. In addition, we all too often find one spouse is usually responsible for most of the financial decisions. What happens to (usually) her if he dies?

An example of that played itself out in graphic detail a few months ago. I had a client, Bob, who had been with us for nearly 10 years. Every time he came in, he walked out feeling great. The last time I saw him, he said, “This is great. I get all the income I need without spending down my principal, and never have to worry about stock market losses. And the best part is I know Pat (his wife) will be taken care of when I pass.”

One day soon after, I got the news that Bob had passed from cancer. I thought, OK, I need to get in touch with Pat, so we can go through her assets. Before I could, however, I received a call from Pat’s daughter, who demanded a meeting with me immediately. When she came in, she was very serious, and really quite hostile. Apparently, she didn’t approve of our program and was convinced we had been taking advantage of her parents. She was there to rescue her mom and would not even take the time to hear us out. Normally, that would not be an issue, but I knew how Bob had felt about their arrangement and he felt very good about having taken care of Pat. When I could not even explain that to the daughter, or Pat, I felt like I had failed him.

That’s why I believe it’s so important to get the whole picture before we start to make recommendations. It’s also why we now discuss designating a “next generation representative” into most plan designs. I want the children and grandchildren to have a clear idea of how and why Mom and Dad did what they did. That way, even if they don’t elect to carry on, at least they understand the motivations and reasons behind the choices.

And in my mind, the best gift I can bestow on a client is a clear understanding.

Stephen Kelley is a recognized leader in retirement income planning. Located in Nashua, he services Greater Boston and the New England areas. He is author of five books, including “Tell Me When You’re Going to Die,” which deals with the problem unknown lifespans create for retirement planning. It and his other books are available on Amazon.com. He can be heard every weekend on the “Free to Retire” radio show on WCAP and WFEA, and he conducts planning workshops at his New England Adult Learning Center, located in Nashua. Initial consultations are always free. You can reach Steve at 603-881-8811 or at www.FreeToRetireRadio.com.


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