Beware of Advisors in Financial Planner Clothing
These days, it’s very in vogue for all manner of “advisors” to pose as financial planners. Why? Quite simply, it implies a deeper relationship than the shallow transaction that they are offering. There is a kind of vagueness to the word “planning,” such that nearly anything can be made to sound like a “financial plan,” and many non-planners take full advantage. To wit:
- “Save $500 a month in this indexed annuity; annuities are a good way to plan for retirement.”
- “This life insurance product will have $100k cash value in 18 years—it’s a nice way to do college planning for your children.”
- “Let’s move your investments over to us, we’ll build you a financial plan to grow your wealth to $1M.”
None of these are even close to a financial plan. So, let’s clear the air and discuss the three typical advisor “approaches” to financial planning. Two are wolves in sheep’s clothing, and one is a good shepherd.
The Wolves
Watch out for the following two types of “advisors” who tell you they are doing a financial plan with you. Unfortunately, they are quite common in our industry, and for good reason—they want to make fast money and will do anything to get there.
The Insurance Agent
These so-called “advisors” will offer you something called “holistic planning”—don’t fall for it. The giveaway is they will persistently steer the conversation towards life insurance or annuities, all the while trying to impress you with phrases like “guaranteed cash value” and “infinite banking.” These salespeople are primarily motivated by their potential commission, which is paid by the insurance company, not you. In fact, they are not interested in creating a financial plan for you at all; they are simply trying to sell you the product that pays them the most.
The Asset Gatherer
These types will say they will help you with financial planning but then quickly steer the conversation to your transferable assets. They will overstress how important investments are, to the neglect of everything else in your plan. The giveaway is when you ask them about things like employee benefits, 401(k), and budgeting—they will become uninterested and simply change to topic back to investments again. These “investment managers,” are primarily interested in getting you to transfer your account and padding their AUM fee. After that, you’ll hear from them maybe once a year.
Please note that I am not saying that insurance and investments are unimportant—quite the opposite, in fact—these are invaluable pieces in a real financial plan (but that’s the topic for another day). Nor am I saying that all insurance agents and investment managers are less than amazing. I know some good folks in these roles, and they provide a valuable service.
What I am saying is beware of an advisor’s sales method. Essentially, advisors like this say they are doing financial planning with you, and they might even use some fancy software, but in the end, it’s all just smokescreen to springboard towards their real objective—selling you a product or transferring your assets. If an advisor is willing to misrepresent what they are doing, what are the odds that they actually have your best interests in mind?
The Shepherd
Alright, now that you know how to spot a wolf, let’s discuss recognizing a good shepherd. A true financial planner will build a trusted relationship with you, even in the very first conversation. You will notice they actually listen to you, all the while keeping the conversation focused on your plan and your goals. The agenda is yours, not theirs—the goal is relationship, not transaction.
First, they will proactively ask you discovery questions covering a wide range of topics such as:
- Expenses & cash flow
- Income & investments
- Emergency savings
- Credit card debt
- Real estate
- Employee benefits
- Taxation
- Dependents & family situation
- Health
Second, they will be interested in your financial goals and what you are trying to accomplish, such as:
- When you want to retire
- Where you want your kids to go to college
- When you want to buy a home
- Your career ambitions
- Your personal or family goals
- What kind of legacy you want to leave
Third, they will be upfront and honest with you, reviewing with you:
- The cost/benefit of engaging with them
- The planning fee and potential financial benefits
- Their commitment to you as well as their limitations
- Their requirement that you also commit to the partnership
A good financial planner will make it clear that planning about more than building wealth—it’s about building security and peace-of-mind. Moreover, they will not simply hand you a plan and disappear—they will be in it for the long-haul, helping you navigate every step of the way.
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