January 19, 2022 – You work hard; always try to do the right thing; know the importance of balancing your personal and work lives, though it is often hard to do; and you make your fair share of mistakes but take them as a learning opportunity. Maybe you run a successful business or have risen to your company’s C-suite. Perhaps you have created a unique product or service which has become the new rage. It could be that you have a knack for real estate. However you got here, you finally feel successful, congratulations! Be proud of your accomplishments and the fact that you have attained financial freedom – the essence of wealth!
But wait a minute: you may not be on Easy Street just yet. Life still has its challenges, even for the wealthy who have done things the “right way.” These fortunate individuals have worked hard and are in a place to reap the benefits of having money, but while they may understand what they have, they don’t always know what they’re missing. Often, they are not prepared to make decisions about their wealth because they haven’t had the resources or guidance of professionals that can help. They may struggle with some of the emotions listed below, and may not know what to do now that they are wealthy:
- Concern – “I need help with my overall finances, not just investments. I have worked too hard to take unacceptable risks or miss opportunities for growth.”
- Confusion – “There are so many firms offering help. How can I find the right one for my specific needs?”
- Mistrust – “If I am going to seek financial advice, I deserve an advisor who will listen to my goals and not try to sell me anything. How can I feel comfortable that my interests are first?”
These emotions are not uncommon and are rooted in people’s perceptions of the financial services industry, one of the least trusted in the professional services industry. Whether accurate or not, these emotions are often corroborated by their personal experiences or those of someone they know. This situation may come from a lack of trust—perhaps they’ve worked with an advisor whose primary goal was to sell a product, regardless of whether it was appropriate for them.
Given the importance of being on a sound financial footing, and the incidents of stress and anxiety for those who are not, you would think that the financial services industry would rise to the level of a recognized profession, much like the critical services provided by doctors, nurses, teachers, or accountants.
On the contrary, the financial services industry has not effectively managed itself or its practitioners. There are a confusing set of credentials and designations, minimal education or experience requirements, confusing job titles, a lack of service delivery standards, confusing ethical requirements often argued within the industry, and many instances of self-regulation.
Despite what the industry lacks, two situations still motivate people to seek financial guidance:
1. They need help now or recognize the need for a change to occur, and do not feel confident or qualified to get through the transition alone. Often, coping with meaningful life transitions is the trigger for seeking support.
2. They come to realize that the essence of wealth is in the financial freedom it provides. Preserving and protecting wealth can be a more complex undertaking than generating it in the first place. Many in this position do not have the necessary skills or do not wish to give up the time required, to achieve continued success.
What’s next? Consider a financial life guide.
An advisor who views themselves as a guide understands the complexity of money and its impact on someone’s life. Their role in the relationship changes with the circumstances presented. They are educators who share understanding, advisors who impart expertise, and coaches who provide an empathetic perspective to facilitate decision-making. They are competent in a wide variety of personal finance topics. These advisors have earned credibility by attaining recognized designations, published thought leadership, and notably successful professional experiences in situations like your own. They assume accountability by viewing your success as a measure of theirs. They are willing to participate, on your behalf, with other financial and legal professionals to ensure your best outcome. They maintain a very diverse set of skills and, when used in tandem, are the essence of a financial life guide.
People with wealth understand that navigating the intersection of their money and their life can be highly challenging. Many are seeking essential financial organization and structure. Knowing “what they have” and seeing it “in one place” can be liberating and the first step in developing a sound life plan. They realize that managing the complexities associated with wealth – both technical and behavioral – is best supported by a trusted professional. These people seek a guide who puts their best interests first and is willing to listen more and speak less. They have neither the time nor the inclination to practice “DIY finances” at this stage of their life.
Financial guides are not just financial advisors. Financial guides hold themselves accountable to the highest standard of being fiduciary. They believe that designations are essential, as is maintaining the highest ethics. Financial guides provide comprehensive financial life guidance and are entirely transparent concerning your services. Their transparency includes the nature and amount of their compensation, none of which comes from product sales, but rather from the guidance they provide.
How do you find a financial guide?
So, you are sure that you need help with your finances and the concept of having a financial life guide intrigues you! If you already have “a financial guy,” you may be OK. But then again, having this concern may be a signal you need a different type of service. If you don’t “have a guy,” buckle up – you will need to find one, which may not be a desirable experience.
Your first thought may be to start looking at online reviews. Unfortunately, financial services industry regulators have strict rules against publishing client testimonials. It’s easier to find an excellent restaurant or a plumber via Yelp than it is to find a financial advisor who you will trust with your hard-earned money.
The next step might be making inquiries to friends or family. Reaching out to people you know is certainly a worthwhile exercise. Still, any intelligence gathered should be framed by the following factors: 1) your unique financial situation rarely resembles theirs, despite what you perceive, and 2) they may possess inherent biases given the personal nature of their relationship. Regardless, most prospective clients do come from referrals.
Given what is at stake, you may require some additional due diligence. After all, a decision that impacts your money and life should be a well-informed one.
As your search begins, you will notice the business cards you receive indicate professionals with very different titles. You will meet advisors, planners, managers, representatives, preparers, or an agent. Their primary focus will be on your money, your finances, or your wealth. They usually pay particular attention to your assets, investments, or your portfolio. Often, they may specialize in various forms of insurance, tax, or estate products. The learning experience is a far cry from reading a nutrition label!
You may consider a formal license or designation to help narrow down your search. It would help if you felt confident that any professional you chose had demonstrated competence in delivering your required services. Your guide should take a multi-disciplinary approach, being educated in a broad range of technical topics, trained in effective behavioral finance techniques, and experienced in facilitating communication across all the professionals you may require. Again, things are not as easy as they should be. The Financial Industry Regulatory Authority (FINRA) lists more than 200 designations available to financial professionals, all with varying requirements and degrees of industry reputation. FINRA regulators do not approve or endorse any of them!
Fees may factor into your final decision, so an effective cost comparison to help whittle down the choices would be a sound approach. Would you think there is a consistent method of compensation to compare one professional to the next? Not really! There are commission-based, fee-based, and fee-only programs. You can pay a commission on transactions completed, a variable fee based on the value of managed assets, a flat fee based on your Net Worth and perceived complexity, or an hourly basis based on time spent. The lack of fee transparency, coupled with inconsistent service standards, makes the cost/benefit comparison extremely difficult to perform.
Trust is an essential ingredient in your relationship with any person helping you direct your finances. First, does your guy “sell products” that would affect their or their firm’s compensation? Are you confident in their ability to provide competent advice, recommendations, and execution? Are they held to the highest fiduciary standard of placing your interests first, before their own or their firm’s interest? Are they transparent in disclosing any real or perceived conflicts of interest? Do they disclose the method and calculation of all fees you are directly paying or receiving from others handling your account? Would you feel comfortable having conversations about the priorities in your life?
Final thoughts before making a decision
Before your final decision, be thoughtful and evaluate whether the person and firm have sufficiently demonstrated the following traits that are essential to a successful relationship:
- TRUSTWORTHY – Deserves your trust, obligated to act as a fiduciary.
- COMPETENT – Able to accomplish what needs to happen.
- TRANSPARENT – Clear on services and fees and discloses conflicts of interest.
- MEANINGFUL – Shares accountability for your success.
Falling short in any of these areas can be costly because, in life, nothing is more expensive than a missed opportunity.