As I talk to my colleagues and people who work with financial advisors or financial planners, I have learned some very interesting things. Some financial advisors don’t want you to know they don’t really do financial advising. No one financial advisor is the same. In fact, it would be extremely hard to find an advisor who does the exact same service, research, comprehensive review and offers the same set of skills, products and level of financial plan.
Not only is this a huge failure on the part of our industry but the consumer/client (you) has no idea there even exist a difference between financial advisors. There is an understanding among some that independent is better than not, but I’m talking about what they do for you. I’m assuming you know you always want independent advice, instead of some biased person getting a better commission for recommending his products.
You see, some of the older advisors I’ve noticed mainly do one thing. Tell you how to invest your money. They listen to your dreams and goals, but in the end, they are just managing your money. They should be called investment advisors, because they aren’t helping you build a financial plan.
Then there are what I call the “wannabe” advisors. Advisors who offer to help create a financial plan. This is the guy who hands you a 75 page financial plan based on one meeting with you. Sure, he tells you he will review with you every year to make sure you meet your goals but in the end he doesn’t follow up with you to see if you are really meeting your goals. You pay him a fee and you are on your way. No one wants a “wannabe” advisor.
The last set of advisors are those who take the time to review with you multiple times a year. They help you implement strategies to the goal timeframe that you are comfortable with, using products that may not provide the advisor with any compensation. They also have financial planning software and tools then can use with you right there in the meeting, being as transparent as possible. They don’t give you a 75 page financial plan, instead they help you update yours every time you meet with them. It’s not a plan that can be printed, because goals change and you may not want to pay for your kids’ college anymore. Sure, you pay for their service, their advice, but if you are going to pay for those things anyway, why not get an advisor who does it in the most helpful way?
Can you guess which type of advisor I am and maybe which type I think you ought to work with?
There can be great mystery involved in working with a financial advisor. How do we work, what do we do? Unless you have worked with multiple advisors you may never know the differences between them.
It took me 4 years to figure out that there are different types of advisors. Just because a financial advisor is independent doesn’t mean he does financial planning. If you are working with a financial advisor, ask them what financial advising means to them. How many meetings a year do you get, how does he charge, what assumptions are he/she using in the plan, what kind of items does he review with you, etc.
Of course if you want to talk to someone who will be transparent and walk you through a plan that you can actually implement, schedule a free strategy session with yours truly. If not me, then make sure the advisor you go through isn’t trying to fool you!