I am not referring to the “financial advisor” who advises you to double down on a stock or buy an annuity or insurance product while requesting your signature.
I am referring to the financial advisor who communicates with you that you’re not saving enough for the goals you’ve laid out, that you’re not taking action on things to which you committed, who provides meaningful support in helping you move closer to your goals.
The financial industry has been trying to find its voice from the root of a business that was originally created to sell products — and is now moving towards providing objective information, guidance and appropriate support — in an effort to legitimize itself from a sales force to the professional ranks.
Transitions, by nature, are challenging; but attempting to recreate the core of an industry that was once focused entirely on self-interest (commissions earned for products sold) to fiduciary (acting in the clients’ best interest) shakes the very core of our great institutions that have been built on manufacturing and selling products that impact their bottom line as primary consideration.
When selecting a financial advisor, you want someone with the intelligence and courage to look you in the eye and tell you there’s disparity between your words and your actions. Hey, no one likes to be ‘called out’ when they don’t follow through on something, but in reality, it’s exactly what you want. The question from the financial advisor’s perspective is: Can bad news be presented in a manner that is professional, kind, supportive and, most of all, honest, without the fear that the client will become angry, resentful, or, worse, move on to another advisor who will tell them exactly what they want to hear? Beware: Everything is rosy, especially when rose-colored glasses are properly in place. Would you trust a doctor who didn’t provide an honest opinion or diagnosis?
Here is an abstract of a recent meeting: A couple in their early 50’s (we will call them Hank and Karen) came into my office to discuss their progress.
“Karen-Hank, we’ve reviewed the information you sent in for this review. We’ve looked at your spending, savings and the progress of your employer sponsored retirement plans. Before we begin, will you share how you feel about your progress?”
Hank began, “I think we’re ok. Maybe our spending on extras have expanded a bit, but, I don’t think it moves the needle.”
“Let’s back up so we have the proper frame for our conversation. Your plan was created as a roadmap for you both to accomplish what you indicated are your most important goals. You both want to retire when you hit 66, you don’t expect to move or downsize to any significant degree, and you want to provide a level of support for your children and future grandchildren. You want to maintain your current lifestyle and most importantly, you don’t want to outlive your money. Did I miss anything?”
Karen and Hank both agreed that the objectives were still the most important and that nothing was missed.
“Based on our review, it appears that your increased spending has side-tracked your ability to retire when you specified. If all things remain relatively constant, you should be able to stop working at 68. Is that ok?”
Hank and Karen looked panicked. Karen asked, “How is that possible? We didn’t expect this!”
“Well, your discretionary spending last year was substantially higher than you provided and you actually dipped into savings to support that. I am not judging your decisions or actions. My question for you is, if you expect to maintain this level of spending, what are you willing to change to accomplish the goals to which you both agreed? Our job is to help you get where you want to go. How can we support your efforts better?”
Being a true advisor means being responsive to your clients and their goals; it means being honest and straightforward with integrity and, most important, acting in your clients’ best interest. If the message causes discomfort or pain, don’t shoot the messenger when the advice is aimed to help you live your dreams.