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5 Misconceptions on Working with a Financial Planner

In today's post, I'm going to cover five misconceptions that I’ve heard from people regarding working with a financial planner.


1) We're all product pushers

During my time at university, I majored in accounting and finance. Following graduation, some of my finance cohort went on to work at well-known financial and insurance organizations. As I was starting my career in public accounting, I would inevitably get calls from my former finance comrades that would pitch that I and my other friends needed $1 million in life insurance, including some whole life, right out of school. Uh, I need to pay off my car, my student loans, contribute to my 401(k), get an emergency fund going, buy a house, and the list goes on. Can you help with that? By the way, who's going to receive this $1 million if I die? Or they’d try to sell me a complicated variable annuity. Hmm. Pass.


Maybe you occasionally get phone calls about a hot new stock, this great new mutual fund, this trendy new investment, or some sort of guaranteed income product. Couple that type of experience with how media portrays many advisors (e.g. Boiler Room, Ozarks, Millions, Wolf of Wall St., the list goes on), it’s no wonder why the industry can get a bad rap. Many of these “recommendations” come from commissioned product sales. To make matters worse, many of the companies that these salespeople work for limit their recommendations to only certain products.


When the answer to any of your financial questions is the same (e.g. buy life insurance) then it seems reasonable to question the source. As a fee-only fiduciary, I make my recommendations in your best interest based on your goals and needs. I can recommend the right tool for the job rather than always responding “hammer” when you really need a saw.


(By the way, yes, life insurance is important when it fits into your overall financial picture, especially if you have children or other dependents. There's a difference between needing some insurance and using it as your only investment strategy but that's a different post for a different time.)

2) Can’t afford one or the need to be rich to benefit from financial planning

Indeed, there are many advisors out there that have certain asset minimums in place. This means that if you don’t bring to the table a certain amount of liquid, investable assets, then that advisor will not or cannot work with you. This usually starts at $1 million but can often be higher.


There are good reasons for this business model but where does that leave the rest of us? What about the working professional couple that’s in the process of building their nest egg but need advice on how to do that and how to save for their children’s education? What about the closely-held business owner that plows profits back into her business and her employees? What about the newly minted physician who is trying to balance student loan repayment, buying a home, and starting a family? What about the near-retirees that have diligently saved and invested their whole lives?


Fortunately, there are financial planners that are willing and want to work with people that haven’t been served well by the traditional model without product sales (see #1 above). For example, there are fee-only advisors that provide objective advice on a project basis, like an attorney or CPA, a subscription basis, like your rock climbing or yoga gym membership, as well as on an asset under management (AUM) basis.


3) Need to be older and close to retirement

Certainly, retirement is one of the most common reasons someone seeks out financial advice. Understanding how and when you can retire is important. It’s always great to be able to someone transition into the retirement phase of life. However, those of us in our 30s and 40s have a long time horizon with a lot that happens between now and then. Having good financial advice throughout our lives can pay dividends.


A good financial planner can be there to help you build your financial foundation early. For example, cash flow planning, debt management, and practicing good financial behavior are all things that will serve us well later in life. Additionally, financial planners can help you as you make major life decision like starting or buying a business, how to handle your stock options, optimize your work benefits, tax planning, and of course helping you form an investment strategy that will suit you for the long term.


While many advisors focus on near-retirees and retirees because that’s where the assets are (see #1 & #2 above), there is a group of us that enjoy working with the next generation.


4) Financial advice only involves investment advice

As mentioned in #3 above, retirement has traditionally been the area that receives the most focus and attention. Having an appropriate investment plan in place by utilizing stocks, bonds, mutual funds, and ETFs are how advisors help people accomplish this very important goal. But investments are not the only area that planners can provide value.


Comprehensive financial planning involves a whole suite of topics including: cash flow planning, education planning, risk management, business planning, benefits optimization, rental real estate analysis, estate and legacy planning, for example. Traditional investment advice is applicable to some but not all those situations.


5) We'll do everything for you My goal is to provide the best financial planning possible to clients that I want to work with and who want to work with me in order to build a long-term relationship. Just like in any relationship, success is predicated on mutual communication and commitment from both parties, including both the planner and the client.


I’m here to help facilitate the process and do some of the heavy lifting but I simply cannot do everything. Some tasks will be my responsibility, such as the investment management, some will be that of a third-party, such as an estate planning attorney drafting the wills, and others will be your responsibility including deciding which professional to hire and which parts of the plan to work on first, if at all.

I’m the quarterback, not the running back. I’m the belayer providing the guidance, support, carrying the ropes, helping you find the right holds but you must make the moves. I’m the fly-fishing guide that gets you out on the right water, puts you in the right holes, helps you select the right fly pattern, assists with landing your trophy fish, celebrates with you but you must put the fly on the nose of the trout. Last one: I’m the caddy scouting out the course, carrying your gear, managing unruly fans, making club recommendations but the final selection rests with you and you must swing.


Ultimately, this is your life and your plan. Fortunately, I’ll be there next to you as your guide to help keep you on path and moving in the right direction.