I don’t know about you, but I hate liars. Sadly, there are liars, and then there are really, really good liars. Financial advisors talk all day, so guess which type I saw? Like every industry, the financial planning and advising profession includes great pros and horrible charlatans. Sadly, there are enough charlatans out there that some in the public begin to view every apple as a bad one. In fact, some of the charlatans have been telling themselves these fibs for so long, they THEMSELVES believe the lie.
But if you need help, you shouldn’t shy away from a competent financial advisor. After you observe the office and staff, ask good questions and hire an advisor, watch out for these pitfalls. These are signs your plan might not be as great as you’d hoped:
1) “We expect the markets to….” This may be a clue that your advisor thinks she can call market fluctuations. That’s what many clients want, but something that advisors are unable to deliver. I prefer advisors who admit that markets are largely unpredictable and who helped clients plan for unpredictability rather than guessing the next turn.
Honest advisors will hedge their bets (and yours!) by using stop losses, wide asset allocation, or a series of other defense mechanisms. Advisors who don’t have a serious defensive strategy for your portfolio are putting your money at risk.
2) “I have a portfolio that’s unique to you…..” I was guilty of this when I was first practicing. I thought that every portfolio needed to be tailored to each individual’s unique goals. While this is true in a perfect work, about my fifth year of practice I ran into the reality of being a good advisor: people hired me NOT to make recommendations but to help them HERD their flock of investments. How can any advisor know what’s going on in 200 different portfolios? There’s not enough time to successfully manage this effectively. I was inefficient until I created a series of model portfolios and then tracked the investments instead of the clients. If something happened with a particular position, I could quickly call up all the clients who owned that investment and contact them to determine our next move.
3) “I’m a fee-only advisor, which makes me better…..” While I appreciate the fee-only, fee-based, and commission advisor argument, and could make an incredible case why fee-only or fee-based advisors are often the ones to hire, I’ve heard some horrible advisors tell people that because they were paid a certain way, this made them better.
While an advisor’s compensation factors into your decisions, it isn’t the only factor and doesn’t make someone “good” at their job. It just defines their pay.
“Better” is defined by the thoroughness of the plan, the accuracy of the milestones, and the defensive strategies the advisor helps you create. It isn’t created by a pay model.
4) “We’re watching your investments constantly…..” So here’s how my model week was planned: 12 – 14 client meetings a week, tons of emails and calls, internal staff meetings to plan strategies for clients, meetings with mastermind groups to discuss events across the different financial sectors, and marketing meetings (even top advisors have to bring in new clients to replace the natural attrition in a practice). I looked at the state of the financial markets twice a day, max. Once a week I received a detailed report on the performance of all the investments we recommended. Barring a major move in the markets, I RARELY KNEW how your investments were doing on a day-to-day basis.
If an advisor tells you that, she won’t be business long. If they’re “watching your investments” they aren’t completing the tasks that allows them to service client needs.
5) “I will be the only one in the office you talk to about your planning….” sadly, this one might be a truth, but shows that you have a bad advisor. If I was scheduling meetings, calling about tweaks, and chatting, I’d never have time to make sure my client’s money was safe. Every great advisor I know makes sure every client receives top notch service by delegating non-urgent correspondence to members of the staff.
My clients knew to talk to Tina about scheduling meetings or calls. They could call me, but learned quickly that if they called Tina, they’d get an answer more quickly…or me on the phone more quickly. Emails also were usually a quicker way to get a response, because I could pound out an answer to the question. I avoided the phone unless absolutely necessary because I love to talk to people. It was a time suck because of all the pleasantries. I didn’t have time for “How are you?”
My junior planning partner, Todd, knew who we recommended for mortgages, tax prep, and even car repairs….he processed all new accounts, helped clients add and take out funds, and set up any client-requested changes. I didn’t get involved in any of that. Would you want your expert advisor filling in names and social security numbers or in a meeting about new tax law changes?
How did I learn that these five areas were signs of a bad advisor? Being around some talented advisors. Their main job was to counsel clients….not be the only person they’d talk to…. You can’t handle everything and be a star advisor. Any great leader needs systems and a fantastic team.
Okay, those are my five. What are the biggest lies people tell in your industry?
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