There’s a good chance that the first financial planner you talk to will sound perfect, like the ideal helper leading to your financial goals.
And they might actually be the right person, but the truth is that you don’t know and are in no position to judge if they’re the first and only adviser you talk to while seeking help.
Of all of the blunders an investor can commit, few could have more impact or influence on their future than hiring the wrong adviser. And yet, when it comes to picking a partner to help plot a financial course, most people put less time and effort into the selection than is involved in planning a short vacation or buying a new kitchen appliance.
It’s a story I’ve heard often, largely because I wrote two books on choosing and working with financial advisers; decades of speeches on the subject have shown me that most people get it wrong.
But I got a strong reminder close to home last week when I sat in on a conference call with my youngest daughter. Whitney graduated in December with her doctorate in physical therapy, and the school had hooked students up with financial planners to talk about student-loan forgiveness programs and starting to build an investment plan. Whitney – who still has the stock portfolio I built up for her with gifts as a youngster – wanted me to listen in to help size up the quality of the advice she was being given.
Beyond the family connection, however, I have heard in the last few weeks from several readers who recently hired financial planners.
Ruth is a 60-something widow from the Richmond, Virginia, area who wants to work with an adviser to determine the right time to retire from her job as an educator, when to start Social Security and how to make sure her investments will last a lifetime and ensure she is never a burden to the children.
Kevin and Jeanine are in their 50s, live in the Toledo, Ohio, area and wanted to get a handle on their money and prospects with their youngest son about to complete his college education, “freeing us to focus financially on ourselves.”
Ted is a young millennial who last year graduated from medical school, moved to the Seattle area to be together with “my long-suffering girlfriend” so that he could “start my career, my real adult life and my first 401(k) plan.”
From what they each wrote me, they don’t have much life experience in common. They are at different points in their lives financially and personally.
What all have in common — excluding my daughter, who has yet to make a decision — is that they went looking for financial adviser, found one mostly through luck, coincidence or happenstance, immediately became a customer and now are having second thoughts.
That’s natural, and also a problem.
By the time a saver/investor decides to seek out financial help, they have some idea of what they are looking for. They are trying to get some specific answers.
At that point, any financial adviser doing a basic job of getting at that information, offering suggestions and evaluating any investments and holdings is going to sound savvy and on target.
But Providence didn’t smile on Kevin and Jeanine when they met a wealth planner at a Christmas party in 2018. It was a chance meeting.
Yes, their adviser is qualified, has no black marks from state or federal securities administrators and regulators. But when Kevin didn’t want to do absolutely everything that the wealth counselor suggested, he started feeling friction; he feels like he isn’t asking questions or having all of the conversations he wants to, yet feels tied in to the adviser.
Had the couple interviewed multiple advisers before signing up, they would have a better idea of the “bedside manner,” rather than being focused entirely on the adviser’s ability to check all of the boxes based on their financial needs.
Similarly, Ted’s adviser wants him to hammer ahead on investing, and to start in annuities, whereas the young doctor wants to work his way out of debt while laying down a financial foundation. He needed to be matched with an adviser like the one chatting with my daughter, who fully understood the debt-reduction options, and who was less focused on sales.
Whitney, by the way, needs more information too. Her adviser effectively was offering cookie-cutter advice, invoking the guidance of the firm’s chief investment officer, who just happens to be a regular guest on my podcast, “Money Life with Chuck Jaffe.” It sounded fine to Whitney, but questionable to me, if only because her finances are not standard for someone of her age.
Finally, Ruth picked a young adviser, the niece of a friend who is relatively new in the field. That woman works mostly with younger clients and is not particularly familiar with the teachers’ pension system and other issues that are crucial to Ruth, though that lack of comfort didn’t come out until after Ruth had signed up as a client.
The moral of these stories is that advisory relationships are personal and individual.
You wouldn’t accept your mother’s planner or your neighbor’s financial adviser any more than you would want their interior decorator or personal chef. Your tastes, preferences and needs are your own, and go a long way toward determining if you can live with and follow the advice you’re getting.
Meet at least two advisers before hiring one; the second interview may confirm the first one as fantastic or expose it as a bad match. Meet enough advisers to understand the process and to feel like you can differentiate them based on what they emphasize in their promises and discussions.
If you don’t take solid control of the process, don’t expect to feel like you have full control of your money, even though that is precisely what you wanted when you set out to find help in the first place.