InSight

Financial Planning Dentist

This is the untold story of what happens to most people that meet with financial advisors not CERTIFIED FINANCIAL PLANNERS™.  Whether you’re at a big brokerage firm, insurance company, or on a robo advisor platform, the stories are the same.  

It’s Wednesday during your lunch break and you decide to finally go into an office to deposit your old company’s 401(k) rollover check.  You’ve been postponing putting it into an account because the market has been really volatile recently and the SP500 just hit another all time high. You walk into any of these big brand name brokerage branches (or you go online) and a representative greets you at the door and welcomes you to their office.  Your goal is to get some genuine help, not to get ripped off, and get some guidance as to what to do with your money.  The representative brings you back to their desk or office and you get started.  After just a few minutes of chatting you start to hear, before you’ve really said anything, about how their solutions are a perfect match for you.  Heck, maybe they start going down the path of what your risk is and if you need income or growth.  A few minutes later you find yourself answering questions about what you do if the market goes up or down? The representative is excited and is throwing out lots of financial jargon which maybe you know some or most of it, but don’t really know what you’re being asked or why and all of a sudden after 7 questions around what you need from retirement, the representative is ready to give you the road map to a successful retirement. The big brokerage firms software program has told the representative to tell you that you have 3 options to pick from: conservative, moderate or moderate growth.  Unsure of what’s going on, you find yourself picking a moderate growth portfolio made up of who knows what, and just like that, they have you walking out the door.  You have your new account number, disclosures that are 75 pages long about how the brokerage firm you just opened an account with isn’t liable for anything they just did for you, and a 60% stock/40% bond portfolio.  You were in and out faster than your last oil change.  You get home and your spouse asks you how opening your new IRA account went and you barely know what just hit you. 

This is what financial advice has turned into.  The representatives aren’t bad people, well most of them, but they are told to give you the solution that fits what the firm wants them to do.  You have your pick of ETFs, Mutual Funds, and sometimes stocks if you’re willing to pay for a “custom portfolio” of stocks that you have to pay for on top of the fee that you’re paying the brokerage firm. That’s because “the firm” doesn’t want to take additional risk so they delegate their “more advanced” solutions to third parties and the costs just go to you. 

So, after a couple days of “building your portfolio” or what I like to think of as, the time it takes your risk tolerance questionnaire to be approved by 25 different people to make sure the way you answered the questions aligns with the portfolio you’re allowed to be in based on your income and net worth. Your “portfolio” is one of 10 or so different portfolios that, you guessed it, someone else runs, and you’re plopped into.  Or worse, it’s just made up of the firm’s own proprietary products but it’s so cheap it’s hard to pass up. It’s not cheap, they’ve just found more creative ways to charge you that’s not in the portfolio management fee.  Trust me, think of brokerage firms as the nicer big banks.  They don’t stop creating more revenue, they just get better at disguising it.

Back to our story.  It’s been six months since you’ve opened your new managed moderate growth portfolio.  The market is up so your broker calls you. Hey, Mr. or Mrs. Client, how are things going? I wanted to see how things were going with your portfolio?  You’ve already made 1%, great huh? Alright well if anything changes just give me a call.  6,12, 18 months pass by.  You get a call but this time it’s different. It’s a different representative.  Hey Mr. or Mrs. Client, its ____ from Blah.  I wanted to introduce myself as your new consultant, if you need anything let me know.  This happens over and over again until you have no idea who is going to call you anymore or worse, no one calls you anymore.  All this time, you’re paying for management.  But do you get anything else? Maybe you get planning? To big firms in order for the representative to get paid means re-plugging in the same information so that they can say they held a meeting with you. 

So, what have you gotten? An investment strategy, which in itself is fine.  It’s safe, predictable, and isn’t trying to do too much.  I would say that the majority of people actually benefit from these strategies because without it they would be sitting in cash, be too conservative or be too aggressive.  

Are you satisfied? Are you getting what you need/want from this investment strategy to set yourself up to reach your goals?  You’re probably saying no or you’re not sure.  Maybe your thinking, well it’s making some money so it’s good for now.  

I am here to tell you that based on working in that role for nearly 10 years it’s not good enough. You need more for what you’re paying and frankly deserve more.  It is worth it to sit down with someone that is held accountable to make your situation better and is accountable for helping you reach your goals.  You deserve someone looking at your tax liability and offering your ways or ideas on how to improve and then implementing action items to take those steps.  To review your insurance policies and let you know are you over insured or underinsured or that you’re paying too much. To look at how to take those savings and tell you how to put that money to work so that you don’t have to work so hard for so long and that maybe you can reach your goals earlier and live the life you want to live.  Instead of giving your money to a firm or representative that isn’t accountable to get you to where you need to go you should have someone that sends you updates bi-monthly about a different topic to guide you with actionable items to improve your situation beyond just the investment management piece.  That is investing your money at the same/similar costs as you’re paying now.  That can explain to you why they’re investing in certain things stocks and overweighting/underweighting different asset classes based on economic conditions. Someone you can have a relationship with and can help your whole family with questions surrounding debt, loans, education, or whatever you have questions about.  

Make a better investment in yourself.  

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