3 Things I Didn’t Tell Clients as a Financial Advisor

December 02, 2015

Joining the planner team at Financial Finesse was a game-changer in my career and in my life. After years of frustration and creative effort to find ways to provide people with unbiased truth about how to make the right financial decisions for themselves, I’m finally free of the shackles of compliance, the pressure to sell and the need to gather assets. The sad reality is that there are very few avenues where financial planners can provide unbiased information while making a living and staying within the regulations of their industry.

In fact, my CEO actually wrote a book about this, called “What Your Financial Advisor Isn’t Telling You: The 10 Essential Truths You Need to Know about Your Money,” and reading it has me reflecting on some of the things I didn’t tell clients back when I was a financial advisor. A couple of years ago, I wrote a Wish List blog post that included a few mulligans in life, I’d like to add to that list this year. If I could go back and do it over again, here are some of the things I wish I could have shared with the world sooner:

There’s no such thing as a free financial plan. Back in my trust officer days, I worked at a bank that offered our wealthy clients the opportunity to receive a totally free financial plan, which many of them took advantage of. I sat in on a few presentations and was disappointed to learn that the suggestions for improvement always included additional revenue opportunities for the bank. Whether we were recommending they move their cash to our new banking product or suggesting life insurance to be written by one of my colleagues, the end result always ended up with a product sale.

Having a financial planner look over your stuff and make recommendations is a great way to get a handle on what you have and what you might need to do. Just know that if you aren’t paying a fee for that plan, take any suggestions with a grain of salt. They may indeed be the right thing for you to do, but know that they likely come with a bias toward that company’s products and services.

You can actually open a 529 account on your own, without help from an advisor. When 529 college savings plans were first introduced, clients signed up in droves to fund their kids’ and grandkids’ future college costs. My colleagues in the brokerage arm of the bank were busy opening accounts and plowing client money into the mutual funds available in what they said were the best states’ plans at the time.

It was only years later that I learned that the “best states’ plans” were often the plans that paid the best commission to advisors, even if the client could receive a state income tax deduction by contributing to their own state’s plan. Some states only offer their plans through advisors, while most also offer direct-to-consumer options. I had no idea that people could actually open their own 529 plans and choose much lower cost investments without the help of an advisor.

You may choose the advisor-directed if you want help selecting the investments. Just know that it isn’t your only option. If I could go back again, I’d direct clients to www.savingforcollege.com to look for the plan that offers the lowest-cost funds coupled with a possible state income tax deduction.

Your employee benefits are actually the first place you should look to invest your money. As a financial advisor, I only got paid if people invested money with me, which meant that I was actually incentivized against having clients fund their 401k accounts or choosing the HSA option for health insurance. Every dollar diverted to benefits was a dollar I couldn’t invest for a fee.

Now I know better. In Liz’s book, she discusses how employees can leave up to ONE MILLION DOLLARS on the table by not taking advantage of benefits throughout their career. I’d love to go back and sit down with some of those early career clients and make sure they were making the most of their benefits. I have even looked at my own past benefits choices and wished I could turn back time and choose differently.

This isn’t a confessional. I honestly was doing the best I knew how for clients at the time. I just wish more people understood the bias that is inherent in the financial services industry so that when they do receive a recommendation, they’ll know how to evaluate whether it really is the best for them.

The system is broken, not the people who work in it. The people I know in financial services are some of the most caring, service-oriented people I know. They truly do want the best for their clients and guide them to the best choices that they know of. I just wish the industry didn’t require so much product-pushing and focused more on providing unbiased, personalized guidance – the kind I’m lucky enough to give to our client employees on a daily basis.