How Colors Affect Your Investment Decisions

When I was a new advisor, one area I failed to understand was the importance of color. We are, at our heart, 90% subconscious beings. Sure, we have thoughts, but while we’re deciding which ice cream to eat, our automatic mind is handling the so-much-more trivial tasks of (among many, many others) breathing and sensory response. Those who are able to reach those subconscious portions of us are more likely to sell us on pursing whatever it is they’re selling.

I was in the business of selling you on your goals. Better yet, I was in the business of selling you on the fact that you’d rather pay me to handle as much of your money as possible.

I wasn’t selling actual products, I was selling the concepts of trust, commitment and richness. These concepts can be expressed in colors.


Colors Affect Decision Making


The use of color in sales isn’t limited to investment advisors. On the contrary, most advisors have little understanding of the importance of the subconscious on a client’s decision to say “yes” or “no” to a strategy. Yet there’s tons of research available, from color’s role in shopping, to fruit-buying, and even clean energy and cleaning supplies.

Marketers understand the role of color. So should you.


My History of Learning About Color


I was fortunate to work in the office of one of the top advisors in the country. He was a big proponent of neuro-linguistic programming. That’s a mouthful, so I’ll spell it out. Two scientists at the University of California-Santa Cruz, Richard Bandler and John Grinder, studied the practices of leading hypnotists and noticed that language and patterns created reality for people they studied. While they had some startling successes (Anthony Robbins has credited NLP in his work), it has been largely discredited as a sure-fire method to work with people with phobias or other disorders. In sales, however, very successful practitioners have been able to use verbal and non-verbal cues introduced by NLP to uncover subconscious buying criteria of subjects.


Effective Colors


If I had meetings with potential new clients, I’d choose royal blue ties. Royal blue suggests security and trust. My goal with new clients was to be the guy they could hand money over to manage. Imagine that you were meeting with an advisor that you’d never previously met. Would you trust a guy wearing red?

In later meetings, when we’d talk about investing, I’d switch colors to green. Hunter green especially is a wealthy color. This was most effective with clients who seemed to be in love with the pursuit of money. If I projected wealthy colors, they were more likely to accept my counsel and allow me to manage more of their assets inside my firm. Even so, if I wore green to meetings where we were signing contracts, it symbolized that these were going to be big money-making investments.


Avoid These Colors


I owned a kick-ass yellow tie. Nothing ever got done with yellow. Besides being the color of caution, my blondish hair created a pale, washed out look. I seemed like I might be sick. This unsteady, youthful, and pale look decreased sales.

Red was a color I played games with. I had a red marker on my dry erase board. When I was disproving something other advisors had told my client, or I was recommending areas we wanted to avoid, I purposefully used red. I switched to blue or green markers to illustrate my own strategies.


What Does This Have To Do With You?


Colors affect all of your buying decisions. If an advisor is recommending a change in your strategy, be aware of her choice of colors when making an argument. When you’re handed a prospectus for a product, look at the colors they choose. When you go to a financial company website, avoid the urge to choose based on the color pattern.


Let’s look at a few examples: Bright, fresh green. The only orange is the “choose an account button.” Orange is a “call to action” color. Blue is only used in the words “See how Fidelity can help.” Remember what I said about trust? These colors aren’t accidents. Red all over the place. At first blush, this seems like a mistake, but think about what Vanguard sells. They sell lower cost and the fact that you’re probably paying too much if you’re looking somewhere else. Even the key word on the side, “Vanguarding” suggests stopping to think. Red increases your heart rate, gets you excited and creates energy (in fact it also increases hunger, though I doubt Vanguard is hoping you’ll take a lunch break). Red is the perfect color for what Vanguard sells.

Scottrade: An interesting choice….purple. This isn’t a bad move either. First, it’s different from the others, but purple is a calm, soothing color. As a slightly smaller broker, Scottrade’s job is to get you to think of them as a steady ship (often I was surprised that many of my clients had never heard of Scottrade).

TDAmeritrade: Check out all the green.

Ameriprise:  Tons of royal blue. Why? This is an advisor-driven company, so they’re not going to sell red. They’re selling a trusted relationship.

Northern Trust: All blue and green.

E-Trade: Maybe my least favorite color scheme because it’s so busy. Lots of green, some blue, and a little purple all make sense. The black across the top is interesting. Black is a power color. I usually stayed away from it because clients might see me as overbearing. I used it during what we’d call “come to Jesus” meetings (I don’t mean to be offensive…that’s the term every office I ever worked in called it when clients needed to either be given the boot or get on board….). However, it’s also an impulse shopping color (maybe because it’s so aggressive), so maybe E-Trade thinks they have to get people while the impulse is on.

Charles Schwab: Blue, with a big lime button in the middle “get guidance” button and an orange “open an account” button at the top.


The Most Important Point To Remember


As you can see, colors are being used against you all the time. To stay in control of your money, use colors defensively. Or, when you’re up for your next raise, use colors against your boss!

What color are you wearing today?  Is it working?

5 Lies Bad Advisors Tell Clients

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.

Photo: jepoirrier

Okay, those are my five. What are the biggest lies people tell in your industry?

Hiring a Financial Advisor: Clues from the Receptionist

If you’ve ever met with a financial professional, you know how nerve-wracking that first meeting can be. First, you’re unsure of the qualifications of the expert, you don’t know anything about their operation, but mostly, you’re not sure if you’ll like her.

Let’s give you some clues to look for when you have that first meeting. OG & I have visited plenty of financial advisory offices and can give you an insider’s look:


Financial Advisor Office: The Receptionist


Unless you’ve agreed to meet after hours, there are plenty of clues about an advisor in the reception area. First, there should be a welcoming, warm receptionist. This is a key role in an advisor’s office. Every good advisor knows that new and existing clients might come in with concerns and a case of “nerves.” While we had plenty of routine reviews with clients when I was practicing, there were times that people came in after a loved one died, when kids were headed to college, their company had made a retirement offer, our client had been fired, or a new baby was on the way. These are all nervous times.

The receptionist should welcome you. If he/she seems disgruntled or too busy to notice you, this is a warning sign. Sure, an advisory office is a busy place (I usually received between 25 and 75 emails a day on top of about 15 calls from clients and 6 hour-long meetings….do that math!), but the receptionist’s number one task is to make sure that clients feel welcome. I’ve seen plenty of disgruntled receptionists and can confirm that I’ve never met one that wasn’t unhappy for a reason (usually they hated their boss, the advisor).

A great receptionist is the eyes and ears of a great advisor. My receptionist would let me know if someone seemed especially anxious, so I was armed and ready when the client arrived at the meeting room.


Financial Advisor Office: Surroundings


The office reception area is the first view of the advisor’s office and says a ton about them. Some advisors prefer to fill the walls with professional accolades (I saved that for the actual meeting room). Others stack the area with financial magazines and CNBC on the television. Personally, I prefer anything that helps my clients feel confidence and calm.

The television: If there’s no tv, fantastic. However, there should be some soothing music if there is no television. Actually, if there is only soothing music, I think that’s preferable.

Who the hell wants to watch the market tank and people screaming on the trading floor before they meet with their advisor? Imagine if you’re meeting with your advisor on the day world news happens. Would that make you feel calm? Plus, there are so many pseudo-professionals on those channels who spend their few moments “on air” creating fear and doubt. I don’t want a jittery, nervous client in my office. I want them relaxed! We’d keep the television on either the Travel Channel or the Food Channel.

Check out this space. It's small (advisor is frugal...a good thing) but stylish and comfortable. As long as those files aren't private client info, I'm good with this one!

Check out this space. It’s small (advisor is frugal…a good thing) but stylish, quiet and comfortable. As long as those files aren’t private client info, I’m good with this one! Photo: Dwonderwall

We hired a designer to tackle the reception area. Her job was to decorate the walls with relaxing images. Our chairs were big and firm, like the kind you’d find in a nice family room. We removed the overhead flourescent lights and used lamps instead. We’d lay out magazines such as Travel and Leisure, Golf, or high end fashion stuff.

Advisors playing CNBC, in my opinion, are big on timing the market, pretending they know what’s going to happen next, and playing “the game.” No thank you. And advisors playing political channels such as FOX News or MSNBC were complete morons. The clinic my wife works at has FOX News on the television and a big sign that says “Do Not Change the Station.” What does politics have to do with my flu shot (please don’t answer that in the comments….consider it rhetorical). Why do I want my left-leaning multi-millionaire prospects to hate me before they actually shake my hand because FOX News was on the television (or, swinging the other way, right-leaning clients while I’m playing MSNBC….). Politics don’t mix with good business (at least on the retail level).


Financial Advisor Office: Amenities


The receptionist should offer you drinks and possibly light hors d oeuvre’s. Let’s be clear: I want my advisors to be successful and spend a little money on my comfort without going over the top. I don’t want a cheap paper cup. Is the advisor broke? Are they one step from going out of business? On the other hand, if I’m being offered lattes or espresso out of an expensive machine, that’s too far. We offered soft drinks, bottled water, and a variety of Keurig coffees, served in nice recyclable cups with lids or mugs with our firm’s logo. That way, clients who wanted one for the road after the meeting could have another.

One time our receptionist, to cut costs, decided to buy these little tiny cups. We were serving clients these tiny drinks the size of Costco samplers. No thanks! Big cups for us!

Do I think this is important to notice? From a guy who’s been in hundreds of advisory offices: Absolutely! EVERYTHING is a hint about how the advisor values you, your money, and their own business. My gut instinct about advisors was usually right on after I looked at their reception area. I want an advisor who has pride in their operation and gives top customer service without being over-the-top. If they offer me a drink “to go,” I think they’ll definitely call me when I need to know about some new law that affects my goals or money.


Financial Advisor Office Clues: Take Away Tips


Here are clues to look for when you walk into an advisor’s office:

– How are you greeted? Is the receptionist worried most about you or are they focused on other tasks?

– What does the reception area look like? Is it worn out or overly expensive? Does it seem like someone thought about your comfort?

– How is the media offering? Are there magazines, television, music that are calming?

The reception area can give you huge clues about whether this is the advisor for you. Often, because I think we did such a great job on our reception, I had a real leg up on gaining a new client even before they met me for the first time.

Do you have an advisor? Have you met with one before? Let’s share some more clues in the comment section!

Photo: jepoirrer

In The Trenches: New Advisor Tales

I’ve been traveling across the country this week, so I haven’t read enough blogs to decide on a Blog Post of the Week! Instead, how about if Uncle Joe tells you a story about the good ol’ days….

I’ve had requests from people who read this blog for stories about how advisors are trained. I obviously can’t put a dot on “the one way” people are trained. Even within the organization I worked in, some were trained well and others poorly. Some came with great skills and others with none.

Here’s how my journey began:

I always imagined that anyone working in the financial planning business spent most of their day either in meetings with clients or in a room full of computers drawing up strategies or watching them unfold.

Yeah, that stuff happens.

In fairy tales.

Nope. Conditions in my office were so bad initially that I’ll tell everyone reading this not to follow my route. It was an ugly way to start a career.


How We Spent Our Days


My early clients would never want to hear that I didn’t have time to prepare adequately or follow up enough with their plans. We spent about 80 percent of our time making phone calls. By “we” I mean me and about 12 other brand new recruits who were trying to break into the business. We’d gather daily in a large conference room, pop a film like Rambo or Wall Street on a television and call as many people as possible.


Young Financial Planners

Why we wore suits is still beyond me. I could have been in sweatpants and felt more comfortable while I cold called hundreds of people a night.


Why didn’t we work on strategies more? The reason is simple: I couldn’t survive on three or four clients and the management machine knew it. Sure, I was ignoring my early clients, but I needed to still have a job in the future if those first clients ever expected to get decent help from me.

When people tell you that you should hire an advisor who’s been in the business 10 years, it’s for two reasons: first, they’ve been in the trenches and have probably seen damned near everything. Second, they don’t have to worry so much about marketing and actually DO spend time on client strategies.

When did we work on a client’s business? Maybe for about an hour each morning. They weren’t very well thought out. We had calls to make.


Our Marketing Strategy


The call strategy, no longer used by the company I was with, was called “A/B.” On call A we’d offer free literature about tax planning, retirement planning, or college planning, whichever the victim of my call thought might be most helpful.

How did we get names? We used phone books.

If someone took us up on our offer, we’d call back after sending them a generic brochure to see if they had questions about the literature and just exactly “why they requested it.”

Here’s a typical call. This happened about 24 Million times:

Me: So, why did you request the information, sir?

Them: I didn’t request the information, you called and asked if I wanted it. I said I don’t care.

Me: Well you must have thought tax planning was important at some point.

Them: Listen, I just declared bankruptcy. I don’t really care about taxes.

But, once in awhile, I’d hear this response:

Me: Why did you request the information.

Them: I’m not happy with my financial advisor and I was hoping your firm would do better.

Me: (pause. I’m pissing my pants. Somebody said something positive.)

Them: Hello? You still there?

Me: Uh…yeah. We’re really good advisors. (why did I say that? I’m such an idiot.)

Them: Can I  come in and meet with you?

Me: (I just want to do a dance right about now) Sure. When would you like to stop by?

Them: I’m sure you’re pretty busy. What times do you have open.

Me: Pick a time next week and I’ll be here waiting.

I was that desperate.

So was everyone else in the room. Most people washed out.

Why did I stay? How did I make it?

It was because of a woman we’ll call Renee.


Renee’s Story


I earned the nickname Gepetto because Renee, this older, gray haired Russian woman who sat next to me during the end of my first year, was a liar. She escaped to her car a few times every day to drink vodka, and come back glassy eyed and give every guy in the place back rubs. It was more than a little uncomfortable.

Worse? Wait til you hear what she’d say to clients on the phone.

Renee: What rate you get on CDs at you bank

(everyone in the room would stop talking because we knew there was a whopper on the way) She’d listen on the phone, unaware that we were all hovering around.

Renee: 4 percent? You get 4 percent? We give you 6 percent. Guaranteed. I guarantee you that when you come in, you get 6 percent here.

(I’m not making fun of her accent here…there was plenty about Renee that I could make fun of, but the way she spoke wasn’t one of them.)

I felt bad for her, so I didn’t want to hurt her feelings. But on the other end, being one of the senior people in the room (I had the second highest seniority in my office once I hit the one year mark), I had to help her learn that it wasn’t acceptable to just throw out a rate of return. Plus, we were planners, not brokers. Regardless, I didn’t know of ANY CD at the time that paid better than 4 percent. Anywhere.

So, to save her feelings, I started to call her Pinocchio. It was a way of hinting at the fact that she might not be entirely truthful.

So, the crazy people I worked with started calling me Gepetto.

By the time she was fired, this woman had eight clients. Eight people had sat across from this woman who CLEARLY lied and definitely was drunk a fair amount of the time and said “She’s the kind of help I need.”

So when people ask me how I succeeded and made it through the system without any really successful planners to emulate and only spotty product training, for the most part it was because of Renee. I knew if I worked hard enough, no matter how bad things got, that I was better than Renee and she had eight whole clients. If she can get eight, I should have 800.

It’ll work for you, too. I think in any field if you work hard and realize that life is about pressing on, you can find your opening and build a career.

How about you? Any horror stories about where you work/worked? Let’s hear about some in the comment section. I’d love to know how you got started in the trenches….


Photo: Businesspeople, Businessman: Victor1558

Meeting an Advisor? Understand Fees by Bringing This Checklist

Yesterday I posted a riveting story about advisor fees.

How do you know all the fees an advisor may charge?

The good news: this isn’t my first fee-rodeo, so I’ve meticulously prepared and will present to you, hot out of the oven, a fee checklist. Now when you meet an advisor you can ask intelligent questions about what fees you may pay.

Isn’t this exciting? Of course it is. Let’s begin:


___ Advisory fee. This fee is an umbrella fee for services rendered.

What services are included?

  • Financial plan?          Yes  /  No  (how often is the plan updated?)
  • Budget review?         Yes  /  No  (will you advise on line items?)
  • Net worth review?     Yes  /  No  (do you make suggestions on assets for the fee?)

Often advisors say they will recommend new homes for assets, however, those new places are through them, garnering the advisor another fee. Will they make recommendations of funds/ETFs/other investments outside of their control?

  • Insurance review?     Yes  /  No  (In many states advisors can’t review insurances for a fee. However, they can make recommendations on appropriate amounts of insurance.)
  • 1040 review?             Yes  /  No (Again, advisors have to be careful here. Some aren’t allowed to give specific tax advice.)
  • Tax strategy?             Yes  /  No (Will you recommend comprehensive tax plan?)
  • Asset allocation?       Yes  /  No (Many advisors will calculate where your assets lie on an Ibbotson efficient frontier and recommend asset changes based on your goals.)
  • Estate review?           Yes  /  No


___ Wrap fees on personally managed funds. Sometimes an advisor will charge fees based on the percentage of assets inside of an account. Often, these fees range from 0.5% to 2.0% Remember that funds inside these plans have fees also, so ask what the average fee is for funds inside the account and add it to the fee.


___ Wrap fees on outside managed funds. Often advisors will recommend outside advisors to manage all or a portion of your assets. Fees generally range from 0.5% to 3.0% of assets managed, per year.

Wrap accounts are easy to remember if you think of plastic wrap around your assets managed in the account. Instead of trading and holding fees, you’ll pay the “wrap” fee on the entire amount inside of the wrapper.


__ Trading costs. Are there commissions for trades? What would those be?


__ Commissions to buy funds. Does the advisor use mutual funds? Are there fees to buy, sell or hold the fund? What are those fees?


__ Insurance commissions. If the advisor completes an insurance analysis, are you expected to buy insurance through them or do you go outside? What types of insurance does the advisor make recommendations on?

When I was an advisor, I’d recommend an insurance amount needed. Then I’d prepare quotes through companies I represented and recommended my clients shop other firms, such as Zander insurance (Dave Ramsey’s company).


__  Annuities, Private REITs and Limited Partnerships. Does the advisor recommend these product types? Do they receive commissions when they recommend these products? Annuities may pay up to a 9 percent commission. Often REITs (real estate investment trusts) will pay nearly the same amount to the advisor.


__ Cash products. Do you recommend savings accounts, CDs and other similar cash accounts? Are these through you, banks or credit unions? How do they work?


__ Mortgages, auto loans and revolving credit. Do you recommend these products for a commission?


__ Other outside experts. Should I expect to pay other experts, such as attorneys (estate plan) or CPAs (tax review)? If so, it’s important to know that there may be even more fees after you write your first check.

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In Defense of Financial Advisor Fees

I was a fee hater.

Like a younger, more handsome John Bogle, I would rail on fees. I’d stand on every rooftop screaming about avoiding fees at all cost.

For this reason, when I was a financial advisor, I provided what I thought was top-notch service and undercharged for it every day.

How much did I charge? My minimum fee was $500 per year.

Undercharged? There is no such thing, Joe! Less fees = better. Duh! You should have charged $300!

Think so, do you? Sit close, young padewan, while Uncle Joe tells you a story:


My Experience With Fees


Early in my career I lucked into the opportunity to give speeches on behalf of one of the top advisors in the country. I’d fly wherever he wished and spoke to rooms full of people about good planning. In exchange, he allowed me to move my offices into his suite.

Awesome! What a break for a new advisor; I’d get to see the inner workings of a well-honed operation and maybe glean some tips.

At first I was disappointed. All I saw was what looked like a cookie-cutter assembly line of advice and deliverables. Many clients received offshoots of similar advice. The firm never stuck their neck out. They avoided complex situations at all cost.

That lead me to believe that he was among the best in the country only because he could “sell” people on ways he’d jack up their fees.

…and jack he did. I rarely saw him charge less than $2,500 for planning, then garner asset management fees on top of that. He was a fee-based selling machine.

One day the operations manager and I were talking. I asked a polite question about how redundant their process management workflow seemed. To give you an idea of what I thought about this guy: I’m sure the term “cocky smartass” wouldn’t be far off the mark.

He said, “Have you noticed that we charge five times what you charge?”

I smiled. “Yes.” What a loser. I could never charge what they did! They were just leeches, skimming off of their client’s blood.

He said, “We charge five times more because we’re five times better than you.”

I took it personally.

I shouldn’t have.

Three months later, we were in agreement:

he was five times better than me.


Why He Was Better


This planner was so good, I’d worked right under his nose and hadn’t noticed his skill. The systems were sublime. Where I’d seen cookie-cutter assembly lines before, now I saw a brilliant asset allocation arrangement. Where I’d believed he was charging excess dollars to put boring plans in place, he was dotting every “I” and crossing every “T” for clients…mostly doing the boring stuff that usually was swept under the rug.

In short, he had a proven system of asset management and plan building. If you wanted that service, he covered his costs with his fees. If you didn’t want it, you should probably look elsewhere.

He didn’t try to be everything to everyone.


What You Can Learn


You don’t have to pay $2,500 or more to some advisor if you’re willing to perform the critical tasks that this advisor captained for his clients:

1) Design a plan that covers the six areas of financial planning and rigorously maintain the plan according to a set schedule. Make sure everyone involved is up-to-speed with the details.

2) Build a system to check and maintain your assets against your plan. He had systems in place to notify him when assets deviated too much from the plan. Build your own set of alarms.

3) Carefully guard against taxes and excess fees. This seems like an oxymoron, because this advisor charged a ton of money, but his fees were largely performance based. To increase his fees (and his client’s net worth) he had to ensure the plan was a lean-mean-return-gathering-machine. The only way to do that was to develop a comprehensive tax strategy (example: tax efficient investments outside of IRAs while tax-eaters inside shelters) and low-cost investments.

4) Scour insurances for opportunities. This advisor would review all of his client’s insurances regularly (every two years) to find wasted money. He’d also use insurances wisely to plug holes. One place he nearly always recommended: disability coverage.

5) Build legacies. He was the adamant that everyone either had a family or charitable organization they’d want to have flourish if they couldn’t use their own money. He’d make sure that the estate plan was air-tight and (as with insurance) review these plans every two years.

6) Set communication systems. Clients received a newsletter every six weeks. There was a conference call scheduled for two quarters of the year, along with two face to face meetings. Generally, the face to face meetings were comprehensive and the phone calls were “just checking up.” While he “allowed” only one member of a marriage to take part in phone calls, he was adamant that both spouses attend meetings. He’d become especially irate if one didn’t understand finances and didn’t want to participate. His thinking: if the knowledgeable spouse passed away, the other was screwed.

He also wasn’t afraid to call every client when markets imploded. During the 2002 and 2008 crisis, his whole team was on the phone non-stop, sharing information and passing along strategies. Usually, he wasn’t changing course, because his asset allocation model was already designed to weather downturns. However, clients loved hearing from him.

Was some of this overkill? Maybe. Often insurance and estate planning needs didn’t change. However, when something did, the advisor was on top of it fairly quickly.


It’s a Choice


During my 16 years as an advisor, there were many clients who refused to pay fees even though they would have been far better off had they paid this advisor. It’s fine to accomplish your financial goals without an advisor (in fact, if you’re willing to complete the six steps above, I’d recommend it). But if you decide not to, make sure you’ve designed systems for success and aren’t just being cheap.

Financial planning is just one example. Are there areas of your life where you’d be better off paying a fee and you just can’t do it? Are you cheap?

(Photo credit: Hands Clenching Dollars, Muffett, Flickr; Couple and Advisor, Jerry Bunkers, Flickr)

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What Type of Advisor Has Your Best Interest at Heart?


I’m busy kicking my nephew’s butts at board games, so you’re off the hook this week. Instead of me blathering on about some inane topic, Tom Cleveland from Forex Traders wrote us a nice piece about verifying the credentials of your investment advisor. Take it away, Tom!

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What Type of Advisor Has Your Best Interest at Heart?


The rally in stock prices that began last October has been nothing short of outstanding. The S&P 500 index has risen more than 27%, sitting just over 1,400. This rise is even more impressive because it has happened when volumes were low and without any kind of recovery in the housing sector. Europe seems to have temporarily stopped the bleeding, removing much of the market uncertainty and volatility in the process, but the global economic recovery is still straining to “get legs” and produce prosperity for all concerned down the road.

Where will the markets go from here and whose advice counts most when trying to find this answer? Do you want to believe someone that is looking out for your financial interests or someone trying to sell you securities on the side? Investors need consultants that they can trust that accept their fiduciary duty to assist you in planning your financial future, taking into account every variable that may have an impact going forward.

This person is surely not a broker/dealer.

Marketing types in the investment industry often disguise themselves in a “cloak of authenticity” when they approach you with the latest and greatest stock to own. They may claim to be an “adviser”, using the term quite loosely to gain your confidence and make a sale. They get away with this subterfuge because the average retail investor, as confirmed by study after study, rarely understands the various professional designations in the investment industry.

A financial planner or analyst must pass rigorous exams and educational requirements in order to earn the coveted “CFP” or “CFA” certifications. The simple fact is that the proposal from your broker/dealer may actually be a good one, but prudent due diligence would suggest that you first review the sales proposal with a professional advisor that will not bias his opinion due to some unseen commission structure.

What are the differences between these two professionals?


Put quite simply, a “Certified Financial Planner” deals directly with the public and a “Certified Financial Analyst” deals primarily in a corporate setting. Each has completed a strenuous college curriculum, steeped in investment issues, mathematics, insurance, and complex methods of fundamental and technical analysis. Professional examinations, actual focused time in the workplace, and continuing education round out the necessary knowledge and experience components.

A CFP will typically possess very good communication skills and enjoy working directly with clients. He will help you develop a financial plan for the retirement, protect your assets and family from risks with insurance, and advise you on proper ways to manage your portfolio of investments. Estate and tax planning are also topics within his area of competency. He has been trained to understand complex financial issues and know how to describe them in layman’s term for your benefit.

A CFA generally pursues a career more corporate in nature, performing similar functions that require complex analysis in a corporate setting. Whether managing the assets in a retirement trust for optimum return, hedging a currency risk when FX charts deems it appropriate, or minimizing the risks surrounding a business activity, he or she has the ability to use the tools of the trade to guide firms in the most prudent financial direction. Their backgrounds of study tend to be more in depth than that required for a CFP, since the amounts of money involved can be significant in the corporate world and the legal and financial issues, broader than with most individuals.

In either case, you are in good hands when you are dealing with a truly certified professional in the investment industry.

The Worst of the Free Financial Advisor #2: Top 5 Reasons We Like the Roth IRA – Are Tax Refunds Bad? – Hiring an Advisor


Holy big topics, Batman! We’ve got a great show for you today.

First – Joe & OG talk Hiring an Advisor. Should you hire one? If so, what should you look for? What questions should you ask?

Then – Len, Carrie, Dom  and of course Dr. Dean discuss tax refunds. Should you avoid one?

Finally – Our top 5 reasons we love the Roth IRA.

Subscribe to the show (or just listen) on iTunes here.

Download the show directly by right-clicking here.


Hiring an Advisor BrokerCheck

CFP – Questions to Ask When Hiring a Financial Planner

5 Jaw-Dropping Financial Advisor Interview Questions

Ric Edelman: The Truth About Money (Amazon page)

Our Roundtable Members Sites:

Carrie Smith =

Dominique Brown = YourFinancesSimplified

Dr. Dean = The Millionaire Nurse Blog

Len Penzo = Len Penzo (dot) Com

The article we’re discussing: Tax Refunds Are Not Taboo





5 Good Reasons to Hire a Financial Advisor and 2 Bad Ones

The decision to hire an advisor to help with your financial planning isn’t a step I recommend lightly. I’ve been lucky: over 16 years of practice I was hired mostly for good reasons, although some others were….not so much.

Most people don’t need a financial advisor.

I’d tell individuals before they hired me that 90 percent of what I did, they could do themselves. My job was to guide them through sometimes stormy financial waters. As a bonus, I’d save them time and money by already knowing tricks they could probably find online. My staff would fill out annoying paperwork, and we had access to the best professionals in related fields. If you needed good advice, I either could provide it or knew how to find it fast.

In fact, at some points I was more of a concierge than a financial advisor….while most of my contacts were finance-related, I knew good babysitters and how to get a table at the top restaurants in town!

Here are five good reasons to hire a financial advisor:


1) You don’t have time.

I worked with many successful people who could have easily completed their plans alone. Most of my clients were engineers or executives working for Microsoft and Chrysler. These were intelligent people (often financially savvy, too).

They recognized that they needed a good plan drafted that they could examine and sign off on. They also needed someone to facilitate the legwork. It had to be someone knowledgeable who had their back. They needed to be able to review everything on a plane or between meetings.


2) You aren’t going to look at the stuff yourself.

Some of my clients were smart people, but in completely different areas. I had a client who was a very well-known artist. He needed to be forced to have consistent meetings about his meetings. Without me, he wouldn’t ever review how he was doing.


3) You don’t want a full financial education.

This type of client would sometimes frustrate me, but I had a large number of them as clients. Different from my artist and executive clients who were generally well educated, financially savvy people, these clients would just rather pay me to do it.

These clients were very happy to meet with me and talk financial planning. They’d listen and nod. I was pretty sure that they were getting the basics about what we were talking about. I tried to keep it entertaining, because I knew they hated being in my office.

Some were looking for the concierge treatment. For those people, we had client dinners, good coffee in the lobby and occasionally went to sporting events or concerts. They didn’t care about how the money was managed, as long as it was done with as little input on their end as possible.

These clients sometimes scared me, because if things went wrong, they had no idea why and didn’t want to learn from anyone but me. If this sounds like you, it’s better to hire a good advisor than wreck your financial ship because nobody’s at the helm.


4) You want a smart coach in your corner…

to steer your plan in the right direction.

Some of my clients I knew were only going to be with me for a short time. My job was to educate them how to do it themselves. Some advisors won’t do this. I was happy to help. I liked talking strategy anyway, so if I had a willing client who was coachable, I’d take them through the process. As a bonus, I handled most of the annoying parts (like filling out Roth IRA forms) because they were paying me a fee. It wasn’t why they wanted me as an advisor, but it was definitely icing on the cake.


5) You want an ally to point out flaws in your strategy.

This was probably my least profitable type of relationship, but the one I appreciated the most. I had a few Do It Yourself investors who already had a complete strategy and just wanted to hire me for a couple of hours a year so they could tell me their strategy. I always had questions, then feedback, and nearly always, adjustments I’d recommend.

One client, Paul, said he specifically hired me because our philosophies clashed and he wanted to make sure his strategy looked good from the other point of view. He thought about his plan so often that he usually had a winning approach, even though I definitely would have rarely completed the plan the way he did.



There are a couple of important reasons NOT to hire an advisor:


1) You want someone to do it for you.

There’s a subtle difference between this person and the one in #3 above. The person in #3 was happy to meet with me every few months and talk about money. They wanted some small amount of “here’s why we’re doing this.”

Then there’s the person who just wanted “take this cash and make it work.”

I care about my former clients. I never can care about your money more than you do. I’m the money babysitter, you’re the parent. Act the part.


2) You want to day trade with a partner.

I had two clients who could never get through their skull that I was very happy that they day traded…but leave me out of it.

Initially we’d separate the portfolio into two sections: the “long term investment” portion, that I’d help steer, and then the “play money” portion that they’d day trade. I’d make clear that they were on their own with the play money account.

Invariably, these two clients would call in a panic and tell me that Jim Cramer had just said something on television and they needed to sell…but what did I think first? Should they sell? Should the go contrarian and buy more? Could I look up some charts for them? Maybe call a couple fund managers and ask their opinion off the record?

No thank you.

The math on my practice worked this way: 150 families, all of whom paid for and should demand my attention.

If I met with each client on average 3 times per year for an hour and a half, that meant 675 hours of meetings. Additionally, I’d call each client twice a year minimum and talk for 20 minutes (assuming there weren’t urgent financial events afoot or you hadn’t called me first). That was another 50 hours.

We won’t even approach all of the emails I sent or returned daily. Remember that I mentioned Microsoft employees? Those people love email.

After 10 hours of preparation time a week and 10 hours of strategy/internal and analysis time (not to mention any marketing we were doing), that left 30 hours for client meetings. After holidays, I worked about 48 weeks a year.

Where was I going to find time to day trade your account?



That’s my story. Now it’s your turn: have you interviewed advisors? How did the meeting go? What did you like/didn’t like about their approach?


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5 Jaw-Dropping Financial Advisor Interview Questions

Some people need professional help–not the type I’ve been told to find–but financial help. I’ve met many of these people firsthand. Over my years working as an advisor, it was difficult watching people walk into my office grossly underprepared for a meeting with an advisor know what to expect. I could tell by the look in their eyes that they hoped I was honest and actually knew what I was doing.

I know the look because it’s the same one on my face when I’m talking to an auto mechanic.

Luckily, you’ve come to the right place. There are five questions that are important to ask a financial advisor.

But is that all I need to ask? Five questions?

Nope. Hopefully these start you on the right track to building a dialogue with the advisor about your personal financial circumstances and dreams.

Whether you’ve found the name of an advisor from a friend (good idea), by their reputation (scary), or even through an internet, mailing or yellow pages search (most frightening), you’ll want to still ask these specific financial advisor interview questions. You have seen in the media that well respected names with degrees, certifications and mountains of clout have ended up as bad people. Although these questions won’t make sure that you won’t get ripped off, they will give you a better idea regarding your advisors methods and whether they’ll fit with your long term and short term plans.

  1. Tell me about your education. Listen to their experiences, any testing they’ve taken and professional credentials, such as a Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) or one of a host of other designations. For “vanilla” financial planning, the two listed above (CFP and ChFC) are the two broad certificate designations. Others, such as a Chartered Retirement Planning Counselor (CRPC) or Chartered Financial Analyst (CFA) either are more narrow designations or focus on one aspect of a financial plan.
  2. How long have you been practicing? Suze Orman recommends hiring an advisor who’s been practicing for at least ten years. Back when I started, I thought that advice was complete baloney. Once I’d been an advisor for ten years, I completely agreed with her. Why? Because there are so many nuances and situations that are new in the wide world of financial planning that for the first ten years you’re often running into brand new situations. Your financial life is important enough that you shouldn’t have your paid professional help “practicing” on you.
  3. How does your financial planning process operate? Here’s the scoop: you can throw investment darts as well as any advisor, so you aren’t hiring him for that purpose. People hire an advisor not for the 80 percent of stuff you can do easily yourself, but for the 20 percent that he can do with far more accuracy and efficiency than you.
    • The base of any advisor’s work should be encompassed in a written financial plan that’s backed up by hard data. You’ll use this to mark your progress toward your goals and to hold the advisor accountable to their promises.
    • This plan can only be written if you’ve taken home some type of survey about your expenses, income, assets and liabilities.
    • Finally, you don’t want an advisor who’s only concerned with your assets (unless that’s all you’re concerned about….but I dare anyone to tell me that your budget, estate plan, insurance needs and tax situation don’t all tie into your asset mix). Your plan should place weight on those areas of your financial house that need work now. If you’re talking budget and he’s talking Roth IRA, you know it isn’t a match.
  4. Who will be working with me? In larger practices, experienced advisors often have less-knowledgeable associates who work with some clients. I don’t want to hire one advisor only to find out later that I’ll end up working with another. Make sure you know how the relationship will work before entering into an agreement. The advisor might also have specialists that help out in areas outside their knowledge base. Ask how referral arrangements work between the advisor and any other professionals they recommend.
  5. How are you compensated? Advisors are paid three different ways:5 Financial Advisor Interview Questions
    • Fee only. Some people prefer these advisors because they’re only paid to dispense advice. You decide whether to take it or not and generally implement solutions on your own. Although I understand this thinking in a perfect world, I’ll tell you that the people who hired me did so NOT because they weren’t smart enough to plan on their own. On the contrary, I worked with people who were CEOs and CFOs of corporations, experts in taxation, engineers and entrepreneurs. These people had drive. I learned that they didn’t just hire me for knowledge. They hired me to make sure they took the time to implement the plan.
    • Fee based. These advisors charge a fee for planning, but may charge an additional fee for managing assets OR receive commissions for some products. I was this type of planner, charging anywhere from $750 per year to $5,000 per year, then collecting both fees and commissions. Critics say these types of advisors “double dip” on charges, and you can end up paying large sums of money. That’s all correct, if my client wanted it that way. I ALWAYS told my clients how to avoid my fees and commissions, and often helped them set up accounts at other places. Once again, it depended on the client. My job was to identify strengths and weaknesses. If they wanted me to babysit their money or there was a product through me that helped better than those elsewhere….I was paid for that additional support.
    • Commission only.  These advisors will perform financial planning analysis for free, and are only paid when you implement solutions through them. Critics (like me) believe that these plans have to be slanted toward the methods supported by the advisor’s company, because that’s the only way they’re going to bring home a paycheck. I must say, though, that I knew some commission-only advisors who were top people in their field. They would only support a product they sold in the correct situation, and would actively refer people away from their product if it didn’t fit the need.

As you can see, it’s difficult to find a “perfect” set of financial advisor interview questions for your needs. But by asking these five questions, you’ll gain an understanding of the process the advisor uses, their fee structure and how their practice operates. You’ll also see the advisor’s personal history and gain an understanding of their personal feelings. This is a good start. Once you’ve asked these five questions, move toward your goals and find out how you like the advisor’s answers. It’s like hiring a coach: if you don’t listen to them, it was a big fat waste of money.

Want more questions? Try these resources: (National Association of Personal Financial Advisors) How to Find a Financial Advisor (Certified Financial Planner Board of Standards) Questions to Ask When Choosing a Financial Planner (.pdf document)

Photo attribution: Icon Checklist (Wikimedia Commons, Ckepper), Discussion (Wikimedia Commons, HBS1908)

That’s my story, now it’s your turn: have you interviewed an advisor before? Any good questions or stories from that experience that our readers might like?

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