The most common financial planning complaints are not about the financial planning process. The most common financial planning complaints are criticisms about the business and the advisors. When I interview a new client from another financial services company, I always ask, “what did you like about the other firm, and what did you not like?”
Every client has life concerns and goals. Finding solutions to those concerns and helping clients achieve goals is the heart of financial planning. Despite this, financial advisors and their clients sometimes have communication problems that prevent clients from getting what they want. Here are the five most common complaints that I have heard over the years. If you are looking for financial advice, knowing the most common problems ahead of time can save you anxiety, time, and money.
1. Financial Planning Complaints – My advisor didn’t understand my goals and objectives.
Many financial services representatives work to represent their employer first. Selling products is their primary objective. That does not mean that all people that sell financial products are bad. But there is a line between the employer’s economic interest and the client. Surprisingly, some financial services companies use regulations to prohibit their representatives from offering other financial products to clients. The regulation is called “selling away” and can carry a high penalty for representatives that violate the rule.
What’s the difference?
There is a difference between making sure that a financial product is suitable for a client or is the financial product in their best interest. Markedly, some people call that a fiduciary standard. I have worked for financial service companies that expected representatives to promote their products heavily. That is why I decided to be an independent advisor. I do still sell some insurance policies. But I do it without the pressure of a company forcing me to sell their products. When it comes to investing, I no longer sell investment products. I feel that charging a fee for advice and not selling investments is the best way to put the people I serve first.
The first question
When I discuss retirement with a client, my first question is, “What do you want retirement to be like?” Then it is important to talk about what worries them about retirement. Experience has taught me that there are eight issues that almost every person will worry about at some point in their life. Most people’s concerns will lead back to one or more of these issues.
Eight retirement issues to consider
- Family – Family relationships can have a significant effect on retirement.
- Health – Retiree’s health will affect everything from when you file for Social Security to any of the other retirement concerns.
- Home – A retiree’s home can mean many things. Notably, it is one of the largest expenses during retirement. Additionally, where a retiree’s home is could change several times during retirement.
- Legacy – Legacy is more than just leaving money. Legacy is leaving a mark on the world and having a say in how you are remembered.
- Leisure – Leisure takes on new meaning for retirees. As a result, a pastime can provide connections with other people. Plus, leisure can also improve retirees’ health.
- Life’s purpose – Having a sense of purpose is important to retirees. Accordingly, religion, family, or charity can define a retiree’s life purpose.
- Long-term care – If we live long enough, we will all become frail. For this reason, deciding on care should be planned far in advance.
- Work – Work for pay or volunteer can add meaning to retirees.
The best way to address these concerns is with a written financial plan.
2. Financial Planning Complaints – My advisor did not communicate with me
If you’ve ever seen the movie Cool Hand Luke, you know the phrase, “What we have here is a failure to communicate.” The nature of many financial services is transactional and has little communication. You buy a stock, or you buy a mutual fund, and that is the end of it. Look at the nature of the Robinhood app and the way it works. You buy stocks, and that is all there is to it. You’re left to figure everything else out for yourself.
For some people, that is OK. That is what they want. But for most people, buying and trading stocks is like a game of wack-o-mole. They listen to the latest report, trend, or opinion and buy or sell based on a superficial reason. After a while, people begin to find out that they don’t have the time or inclination to dabble in investing. They need someone willing to put the time into guiding and maintaining their finances while they go on with their life.
Open and available
Being open and available to clients after the initiation of a business relationship is essential. Financial planning is much more than products or the initial plan; it is your life! It is always changing and full of surprises. In fact, ongoing communication with a financial advisor helps your financial plan to stay on track.
The Secure Future Plan
I have developed a three-step process I use to guide my relationship with clients. I call it the Secure Future Plan because that is what the process does; it secures your future. Here are the three simple steps:
- We meet virtually and talk through your vision
- I create a custom plan based on your goals.
- We implement the plan, and I keep you updated every step of the way.
3. Financial Planning Complaints – Financial planning is just about selling products
Financial services have had a hard time shaking its origins. Brokers sell products for a commission. The nature of commissions has changed to some degree, but it still exists. I do not take commissions for individual investments because I do not sell them. I offer investment and financial planning advice for a fee. But there are other aspects of my business where I do still charge commissions. Life insurance, disability insurance, and company retirement plans are still predominantly sold with a commission. These are areas that are still well served through a commission model. Depending on how technology and people change, the commission model may vary in the future. However, for fee-based clients, I offer them the option of buying insurance products from any source they choose.
The Secure Future Plan I created is a consultation service. It is not a financial product. Accomplishing your goals may involve financial products. But the products are secondary. If you need insurance products, you can purchase my advice and acquire the products wherever you like.
4. Financial Planning Complaints – Lack of an accredited designation
Over 600,000 registered representatives sell investment products, and about 30,000 investment advisor firms charge fees for advice. Specifically, the highest level of accredited financial services professionals that focus on financial advice are the CFA (Chartered Financial Analyst, the CFP (Certified Financial Planner), and the ChFC (Chartered Financial Consultant). There are about 227,000 individuals with the CFA designation worldwide; there are about 87,000 CFP designation holders in the US and about 40,000 ChFC designees in the US. So, you can see the majority of financial representatives do not have an accredited designation. You can verify your financial advisor’s designation on a worldwide database at http://www.designationcheck.com/
I was a registered representative for years and decided not to continue my registration. Since being a registered representative was primarily to sell securities, I wanted to distance myself from selling investments. My primary goal is to put the client’s interest first. I feel that I can best do that by charging a fee for advice.
5. Financial Planning Complaints – Promising Unreasonable Returns
Unreasonable promises are bad for the entire financial services business. Many unreasonable promises are related to products. And those promises are usually made by people selling the products. This is not to say that a fee-based advisor has never made an unreasonable promise. But most unreasonable promises relate to two problems. Number one, making promises to entice people to buy the products. The second reason for unreasonable promises is a lack of understanding.
In the late 1980s, I saw mutual fund companies teach their representatives about the security of dividends. The assurances of bond dividends lacked the explanation of what happens to the value when interest rates change. In the 1990s, I saw life insurance companies tout guaranteed insurance products with dividends. They did not sufficiently explain that the dividends are not guaranteed. Brokers implied unreasonable promises because they wanted to make sales and did not understand their products.
Seeing these problems has taught me that products are rarely the first place to start with financial planning. As a result, I created the Secure Future Plan to avoid promising unreasonable returns. That planning process first focuses on the clients’ risk preferences. There are two ways to design the Secure Future Plan; a probability-based approach and a safety-first approach.
The probability-based approach
The probability-based design is primarily based on investments that have varying degrees of risk of principal. For the probability-based approach, I do not predict an expected return. I give you a possible range of returns and a projected probability of success. The likelihood of success is based on thousands of simulations derived from historical returns. However, the return on an investment is not guaranteed. There is a probability of loss of principal.
The safety-first approach
For the safety-first approach, I primarily use guaranteed products such as bonds or annuities. If a guaranteed product is used, the returns are clearly stated. Plus, I discuss the quality of the guarantee. I also research guaranteed product’s financial rating from companies such as Moody’s Investor Services or Standard and Poors.
I clearly explain that I cannot be responsible for the guarantees of any financial products that a client may purchase. Important to realize, the client bears the risk of loss of principle in all investments and insurance products. That probably doesn’t sound very encouraging. But it is a reality. Financial advisors should guide clients. They should give clients alternatives for risk and reward. Then provide them with the information they need to make pragmatic decisions
The way to avoid false expectations is to map out alternatives to financial goals. I work with a client to create a financial plan based on their vision. Then I thoroughly research and explain the options. And lastly, I remain available to review and make adjustments along the way.
Change will be constant
The only promise I can make is that change will be constant. On the positive side, the only way to accommodate change is to plan for it. Plus, be proactive in discussing your current circumstances. The Secure Future Plan service can help you overcome the anxiety of retiring and have a happy retirement.
If you’d like to learn more, click below to schedule a fifteen-minute conversation. We can discuss your questions and see if a get-to-know each other meeting would be appropriate. While I am glad to share information with anyone, anywhere. I can only offer personal service to Texas residents.
I look forward to hearing from you. Schedule a Call to Learn More