At a time when most financial advisers were not offering comprehensive financial planning to their clients, I learned how valuable financial advisers can be in people’s lives by creating quality comprehensive financial plans for them, in addition to providing optimal investment management. I learned how providing clients with just sound investment management is just not good enough.
Years ago, I had a light bulb moment that led to creating a different and better way to help families improve their financial lives. Shortly after, I began financially advising a family which included a grandmother, a mother in her 30’s, and a child. Their only source of income was a large generation-skipping trust, inherited from the mother’s grandparents. The mother had never worked. The grandmother’s business was accumulating debt and not generating any profit. I noticed their large trust fund was on track to deplete in less than 8 years. This was due to a very high level of spending and lack of employment, or any other source of income. Their prior adviser had a sound investment strategy in place for them, but never went the extra mile to help this family avoid financial calamity.
I learned a lot about them while creating a financial plan. Most financial advisors ask people a limited list of “suitability” questions about their financial situation before recommending financial strategy. I believe that is a huge mistake. I could not have connected with this family and had the information I needed to help them avoid calamity, without getting to know them personally and their financial lives thoroughly. I learned the emotional source of their overspending – great loss of loved ones. Logical and objective strategic changes to their lives were proposed in the financial plan; everything from how they could reduce spending to mom entering the workforce. I then listened to what changes they felt were best for their lives. Together we created a plan, solutions that balanced logic with their lifestyle preferences; realistic changes that would prevent them from running out of money with no experience bringing in employment income. The family shared they could not have made the difficult and necessary changes without my care, empathy, and expertise.
So…what about those advisers who only manage people’s life savings via an investment strategy, and do not take the time to get to know them personally or help them optimally by creating a quality comprehensive financial plan? What about the advisers who are salespeople and not complete fiduciaries, and do not provide people with optimal financial strategies? They are failing, or just not good enough.
My advice to consumers of financial advice is this – work with complete fiduciary advisors who provide advice that is in your best interest. Hire someone you feel you connect with. Listen to your gut when you meet with an adviser. Are they taking the time to get to know you and listen to you? Do you feel they care about making the best recommendations for your financial lives? Do they answer your questions thoroughly in language you understand or do they “talk above” you or dodge questions? Do they create a comprehensive financial plan for you from which they recommend an optimal investment strategy and other financial strategies? Are there any conflicts of interest in how they are compensated? People’s life savings fuel their and loved one’s lives, and if they hire someone to financially advise them, the advisor should provide financial advice with integrity, intelligence, and care, as they would for themselves.