Over the last few months, most people were not sure whether their investments would still be with one of the large brokerage houses, or sold at auction to the highest bidder. With Merrill Lynch, Morgan Stanley, Lehman Brothers, AIG, Bank of America, Barclay Bank and Washington Mutual in the headlines, following on the heals of the purchase of AG Edwards by Wachovia and Legg Mason by Citigroup, the question is “where IS your money?” In light of the current divestitures, bankruptcies, mergers and acquisitions, there has never been a more important time for affluent investors, who own corporations that provide jobs to others, give large amounts of their savings to charities, and take care of family members who need their help, to take stock (pun intended) of who your financial advisor is now representing with his/her financial advice. If the top household names in the industry can’t manage their own finances, how can they manage yours?
You may be perfectly fine working with Citicorp, Bank of America or Wachovia Bank in the future, or you may prefer to put your future in the hands of an independent financial professional. I recommend researching your options but there is one obstacle you need to be aware of. This mass exodus of wirehouses will be a magnet for unscrupulous and unethical, independent financial “salesmen” to target the clients for their own gain, especially the wealthiest ones. Does this mean there are no competent, ethical, and efficient independent financial professionals out there? Absolutely not. However, since 9 out of 10 financial “advisors” are really financial “salesmen”, you need to know how to tell the difference. Many surveys prove that the number one fear of the wealthy is a reversal of fortune, or losing their wealth. Their two biggest concerns are reducing the impact of taxes on their income and their estate, and, providing for their heirs.
Therefore, it would be valuable to seek the help of a financial professional who can illustrate their past performance and investment strategies used with other clients like yourself. It would also be wise to find a financial advisor who is experienced in making recommendations regarding saving income taxes, as well as the various strategies allowed by the IRS to reduce or eliminate estate taxes and increase charitable giving. The best scenario may be working with a financial planner who is associated with an Estate Planning Attorney who specializes in this area of law, and a Certified Public Accountant or other tax specialist.
Looking for a management team that specializes in life-cycle planning and wealth solutions for the affluent can be a difficult process. Most financial planners do not specialize in advising the affluent as this requires intense knowledge about taxes and estate planning.
If you are in the market for a new financial professional, you will want to keep a few thoughts in mind. You will want to work with someone who has a professional office with a professional staff and modern technology as opposed to someone who comes to your home. You will want them to be experienced with a wide range of products and services offered in the financial industry, and, have a pricing strategy that is consistent with the value they bring to your situation.
But most important, you want to know how many times a year they will be meeting with you. You want to meet with your advisor at least 3 or 4 times a year to review your progress and compare your performance to other strategies and market indices. This is necessary as your situation and/or the markets will change periodically and your financial plan may need to change as well. One of these appointments each year should be to review your estate plan for any changes in the distribution of your assets to heirs, which may require changes in beneficiary designations.
The second most important benefit you want from your financial professional is recommendations that do not charge large penalties for many years for early withdrawal. You want to make sure you can walk-away from an investment, or an advisor, that does not meet your expectations without costing one arm and two legs.
In summary, if the advisor is not afraid to face you several times a year with the recommendations they’ve made, and if you are not locked into any products or accounts with hefty penalties for early withdrawal, the advisor and their team are pretty confident with their recommendations.
Having the right team of advisors working for you to give you peace of mind, knowing you have the appropriate professionals leading you in the right direction? Priceless!
Robin Davis is a CERTIFIED FINANCIAL PLANNER® leveraging 24 years of experience in the business. She is the owner and top advisor of Davis Wealth Enhancement Group in Stuart, FL. She has been advising retirees and those nearing retirement since 1984, helping her clients work toward their financial goals. A member of the Financial Planning Association®, Davis had held hundreds of public seminars around the country.
Robin is the author of an award winning book titled, “Who’s Sitting on Your Nest Egg? Why You Need a Financial Advisor and Ten Easy Tests for Finding the Best One”, which is endorsed by the Financial Planning Association®. The book reveals the importance of working with a competent, ethical advisor and offers readers 10 easy tests for finding the best financial planner. She hopes to aid investors in discerning between the “salesmen” in the financial industry- those who have dollar signs in their eyes instead of your best interest in mind-and quality financial planners.
Davis is a contributing author for Affluent Magazine and has been a guest on numerous radio shows including Oprah & Friends.
She currently resides near West Palm Beach in Stuart, Fl., with her husband and two children.