Eps 43: Why Ignoring FINANCIAL ADVICE Will Cost You Time and Sales
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Melanie Wagner
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Recognizing that investing is always risky should be a key part of your financial plan for you and your money. While many advisors are trustees who have a duty to put your financial interests first, that doesn't always protect you from inappropriate, outdated or downright bad advice. Getting an expert's advice from a financial advisor can be daunting but not necessary. A good financial advisor can greatly improve your financial well-being and improve your quality of life.
In short - review the recommendations carefully while your consultant reviews your description of the problem to be addressed and if so explain the reasons for this opinion.
A good financial advisor will never tell a client what he wants to hear, just to keep getting commissions from them. Sometimes clients do not discuss important decisions with their financial advisors because they know they are wrong and still intend to move forward. Teresa Niklas, a Boston-based financial advisor, had several intense client meetings that kept things hidden from her and not only from each other.
For the same reason, many clients ignore the advice of their consultants and are not able to adequately compensate biased advice arising from conflicts of interests - even if their advisers have recognized conflicts and potential for selfish reasons. I have heard that more than 80% of financial and wealth planning consultants are ignored by their clients.
Many of these people sell investment and insurance products without fully understanding the implications of taxes, pensions and real estate. Some financial advisers offer free "planning" because they profit from the products they sell.
If you have serious real estate, tax and investment problems and need professional advice, don't try to save a dollar by paying a nominal consultation fee - in the end your costs are likely to be the same but the objectivity of advice can be very different.
Pay attention to fees and commissions when choosing an investment – this is your money and you want to be sure that the money you invest goes towards investments and not high commissions or sales commissions. Spend less time thinking about which of the trillion US stock funds will become the next hot fund, and instead focus on which one has the lowest fees.
Avoiding stock markets because they seem too risky is one of the biggest mistakes investors can make when accumulating funds for retirement. Over the years, I have heard financial experts declare the death of a 60/40 portfolio in which 60% of your assets are invested in stocks and 40% in bonds. Experts say the portfolio is dead for many reasons, from financial theory to personal interests, but I still recommend the 60/40 split for many clients.
If I were running a hedge fund, private equity fund or real estate investment fund, it would not be profitable for my business to talk on TV and in newspapers that a 60-40 portfolio is quite common for most investors as it does not require active management. The founder of the Vanguard Group, the world's largest mutual fund had a really simple portfolio that matched the generally known 60-40 asset allocation: 60% in US index funds and 40% in US index finance...
Malik Lee, a certified financial planner from Kennesaw, Georgia, discovered this because one of his clients cashed out their retirement accounts after work, but didn't really realize that it was important. A good financial advisor may be busy, but if you are not important enough to guarantee a response within a reasonable time period, then the situation is unhealthy.
While most consultants can tell the story of a customer who calls every day, in my experience most customers make reasonable inquiries and deserve a timely answer to their questions. However, in the opinion of the CFP Council, knowing our clients at a deeper level is just good financial planning according to the book. While I am confident that planners are well trained in collecting tangible financial information, I am less confident that consultants are actually collecting intangible personal information about our clients.