By Brittany Goodwillie, CFP®
There are many valid concerns people have about talking with a financial advisor. Chances are if you aren’t having these concerns now, one of these thoughts has at least crossed your mind in the past. Maybe you’ve heard about negative experiences from friends or family, or maybe you’ve worked with an advisor that led you to think a certain way about all financial planners. Instead of ignoring it, let’s talk through each reason you may not want to talk with a financial advisor.
1. “I can handle my finances all by myself.”
That’s very true. You can most certainly take the time to learn everything you need to know. However, is that how you want to spend your time? If you already have a job and family, it is likely you may not have the time to also learn everything you need to know about financial planning and investment management. I’m sure if I wanted to I could learn how to change my oil, but it’s much easier to pay someone with the knowledge to do that for me.
2. “My friends and family can give me all of the financial advice I need.”
Unless you have friends or family members that are financial advisors providing you with comprehensive advice, it can be dangerous to rely on generalized advice. Maybe your best friend has a great advisor and instead of hiring an advisor for yourself, you think you should just talk to your friend and follow the same advice. Just like the one-size-fits-all dish gloves that I bought were swimming on me, one-size-fits-all financial advice is far from perfect. The appropriate advice is not always the same for everyone, and most of the time it’s very different.
To give you an example, I might recommend that one couple maximize both the husband and wife’s qualified retirement plan contributions. In a different situation that may seem identical at first glance, another husband and wife may have great pensions or other income in retirement, and I may recommend not maximizing the retirement plan contributions. Doing so could push them into a higher tax bracket than necessary in retirement, and the tax expense could outweigh any savings generated from putting the money away pre-tax today. Or maybe the amount of life insurance one family needs is far less than another family. If the second family implemented untailored advice they could be in a devastating financial state if an unfortunate event were to occur. There is no one-size-fits-all when it comes to financial planning.
3. “I’m not rich, and only rich people need a financial advisor.”
It is a common misconception that only those with a lot of money can benefit from working with a financial advisor. There are so many items an advisor can help a middle-income family or young professional with. Have you had someone look over your employee benefit options? Have you maximized your tax savings? Do you have the correct insurance and estate planning documents in place? Would having accountability to save be helpful? Are you confident in the investments you chose in your 401(k) plan? The list goes on and on.
It is true that some people just getting started may not benefit as much as others from a comprehensive financial plan. You may have recently graduated from college and need to focus on paying off debt before you can think about saving, but it’s still helpful to get some general feedback and have a relationship with an advisor early on. That way, when a comprehensive plan makes sense, you will have someone to talk to.
4. “Retirement is so far away; I can figure it all out later.”
This is like any other reason to put something off, and just because you don’t want to deal with it doesn’t mean you shouldn’t. It’s like saying “my health is fine for now, so I don’t have to worry about eating healthy until I have a heart attack” or “I don’t have to get a new roof, I’ll just wait for it to cave in.” You get the idea. It might not be fun to take a real look at your finances and plan ahead, but it is very important and you won’t regret it later on. The earlier you start, the better.
5. “Financial advisors are very pushy.”
You’ve all probably encountered a pushy salesperson, and it’s never any fun at all. And you’re right, some financial advisors are pushy. “You need this NOW, it’s the best for your situation, buy today and save, time’s running out, etc…” Many advisors sell commission-based products for a company they work for and they get paid for their sales, so of course they are “pushing” their product on you. This is why working with an independent, fee-only planning firm, like Autumn Financial Advisors, LLC, can be beneficial. We don’t make any money by selling you a product. You pay us a fee for honest, unbiased advice and we won’t push products aggressively because we don’t have products to push on you. It’s as simple as that.
6. “After they sell me a product, I’m worried I’ll never hear from my advisor again.”
The reason many clients leave their financial advisor is because they don’t hear from them. Maybe it’s because the advisor sold a product where they received their commission right away, and they have no reason to reach out again. Or maybe they work at a huge firm and you are just a number and not a name to them. Or maybe they don’t have the processes in place to make proactively reaching out to you a priority. Whatever the case, it’s important to find an advisor that will keep up to date with your financial situation, hold you accountable to take appropriate actions, and provide the support and knowledge you deserve, not just up-front, but throughout your entire life.
At Autumn Financial Advisors, LLC, we are passionate about providing personalized, ongoing support. If there is a dollar sign in front and a question mark after, call us, we want to help. And there are many other advisors that provide the same support, so let us offer a referral for someone who cares if we aren’t the right fit for you. You deserve to be more than just a number.
7. “I don’t trust a financial advisor will have my best interests in mind.”
Well, I hate to say it, but sometimes you shouldn’t. Financial advisors that make money off of commissions may not have your best interests in mind, even if they don’t realize it. Imagine that you work for a shoe company; let’s call it ABC Shoes. Everyday, you learn how ABC Shoes are the best shoes in the world. You spend all day in training sessions learning about how they are the most comfortable, last the longest, and look the best. You only wear ABC Shoes and come to believe they are the BEST in the world. When you sell them, you convince customers that they are the best shoes for them because they are the only shoes that you know and you really believe they are the best. That’s how it can sometimes be for a financial advisor working at a big company and selling you a particular product. They may actually believe, like an ABC shoes salesperson in my example, that a certain insurance or annuity is the best product for you. Similar to how people have different feet and use shoes for different reasons, people also have different financial situations. The same product cannot always be the best for everyone. When you work with an independent advising firm that doesn’t work under a big company, the advisor should have a broad knowledge of a large number of products and not be blinded by his or her intimate knowledge of one particular product.
8. “Hiring a financial advisor is too expensive.”
Financial advisors charge for their services in a number of ways. You may pay a flat monthly fee, a percentage of the assets that are managed, or a combination of both. It can be dangerous to compare different advisors solely based on how much they cost. An advisor could charge nearly nothing, but offer you hardly any support. If that’s the case, what’s the purpose of the advisor to begin with? Or an advisor could charge way too much for what they are providing. How much you should pay depends on your specific situation and the services provided by the advisor.
In my opinion, hiring a fee-only planner that isn’t trying to sell you more products to earn commissions is probably in your best interest. If you are paying based on a percentage of assets being managed, also known as an AUM (assets under management) fee, then your interests are aligned with the advisor. The better your investments perform, the more your accounts are making, and the more your advisor is making. The AUM fee you pay can vary depending on if your advisor is actively managing the funds or not and if financial planning is included in the fee or not.
Though the cost of professional financial advice may seem expensive, this advice has the potential to both provide you with the peace of mind that you are on track financially and help you avoid making financial mistakes that could cost you much more than the advice.
9. “I don’t want to have a stranger managing all of my money.”
A lot of people reach a point in life where they decide they could use professional help with their investments. Maybe you are just now saving enough money where you are ready to invest and you’re not comfortable enough with the market to choose your own investments. Or maybe you’ve been managing your money yourself for a while but you’re coming to a point where you’ll be going through a lot of significant financial decisions and you’d be more comfortable putting your family’s financial future in the hands of an expert. Or maybe you would be able to sleep better at night knowing that someone else is looking over your investments daily and watching out for risks, so that you don’t have to.
Once you’ve come to this conclusion, deciding who to choose to manage your money can be quite scary. You want to get to know the person you are giving so much responsibility to. That’s why our first step at Autumn Financial Advisors, LLC is to work with you to create a comprehensive financial plan. During this process, we will get to know you more and understand your financial picture so we can know how best to manage your money. After this process, we won’t be a stranger to you anymore. If you decide to move forward from there and invest your money with us, we would be happy to continue working with you. But we aren’t going to pressure you to if you decide we aren’t the right fit for you. After all, we want to create a long-term relationship with our clients and want you to trust and act on the advice we provide.
10. “I can’t trust a financial advisor will actually have good advice.”
We’ve all experienced bad customer service in the past. Maybe a salesperson convinced you to buy a shirt that they assured you would last forever, and after the first time through the wash it was completely tattered. Or maybe you paid a lot of money for an appliance repair person, only for the item to break weeks later. You get the idea. How can you know that an advisor will actually be knowledgeable and provide the right advice? No one is perfect and no advice about the future is perfect, because nobody can predict the future. But there are some precautions you can take to try to ensure you work with a knowledgeable advisor.
The first recommendation I would make is to hire a CERTIFIED FINANCIAL PLANNER™ professional. CFP® professionals have extensive training and are held to extremely high ethical and educational standards. We also have to pass a six hour exam. In addition, CFP® professionals must have three years of relevant work experience. Visit the CFP Board’s website to learn more about why you should consider choosing a CFP® professional.
On the same note, I highly recommend choosing a CFA charterholder to manage your investments. The Chartered Financial Analyst® (CFA) designation is the credential most rigorously focused on investment knowledge. To become a CFA charterholder, one must pass a series of three six-hour examinations and have four years of qualified experience. You can hopefully trust that a CFA charterholder has the necessary knowledge to invest your assets appropriately. Ask your financial advisor if there is a dedicated, qualified person managing your assets. At Autumn Financial Advisors, LLC, Erik Ringo is the dedicated CFA charterholder focusing solely on your investment management.
Finally, I think it’s a good idea to ask your advisor if they are involved in any organizations or study groups. For example, I’m a part of The National Association of Personal Financial Advisors and XY Planning Network, which both have hundreds of other like-minded advisors and many platforms and conferences where we can learn from one another and grow together. Being a part of associations and study groups can help advisors stay connected about important changes that could impact your finances.