February 16, 2022 – One’s financial life can be complicated, even if you don’t have “a lot of money.” Pretty much everyone needs a tax preparer, life insurance agent, auto and homeowners insurance agent, an estate planning attorney, and maybe an investment manager. Then there are the professionals who help you with big-ticket purchases, such as a real estate broker and attorney, car salesperson, or home contractor. What follows are some considerations for how to deal with outside professionals:
How do you know when you need one?
In my experience with clients, there are typically three reasons that people seek third-party professional services:
- A life event occurs, or you have a financial objective and need someone to sell you a product or provide a service to complete a transaction.
- There is a mandatory obligation to retain a professional.
- You have a long-term view of your life and would like to establish a relationship with a professional to provide some guidance.
In almost all circumstances, the need for professional services is an outgrowth of life events. When you realize that others are dependent on you, e.g., when you get married or have a baby, you start to think about the need for life insurance. As both you and your children get older, you might want to consider drawing up a will with provisions that appoint a guardian of your choice for your children. Buying a house contains many steps that will require a real estate agent, a mortgage broker, a homeowners insurance agent, and a real estate attorney. Buying a car is slightly different, as the product you buy brings along its salespeople and references to leasing and loan institutions.
Some of these situations require a professional to be involved. To obtain a mortgage, you must have title insurance, a contract of sale, an appraisal, and usually an inspection. Getting a HECM (Home Equity Conversion Mortgage) requires holding a session with a certified HECM counselor. And having documents notarized is often needed.
If your need is to achieve some short-term objectives in the context of a longer-term plan, seek a professional who is willing to develop a relationship. Typically, professionals are compensated by selling a product or executing a transaction and might not be proactive with you. But if they have done an excellent job, keep their contact information for future reference.
How do I find a professional that is suitable for my need?
We are all familiar with this situation. Our first inclination is to act on a referral from someone we know. People are usually willing to share information about their service providers, and professionals are also quick to refer other professionals in a related field. Real estate agents are noted for this, as are doctors. Referrals are the #1 source of new business for most providers.
In second place, and becoming a go-to source for many, is the internet search. Google is the new “Yellow Pages” complete with descriptions, customer reviews, and directions. Local Facebook groups are becoming a great source of information for those seeking professionals working in their community.
Do you help your clients select and manage their professionals?
We certainly do! As Financial Life Guides, our mission is to help our clients live an optimal life – whatever that means to them! Being competent in financial, tax, and investment planning, and knowledgeable about the importance of behavioral finance in sound decision-making, we are uniquely qualified to deliver on that mission.
One crucial attribute of being a Financial Life Guide, or any advisor for that matter, is to 1) know what you don’t know, 2) help clients find the best professionals who do know, and 3) coordinate and monitor execution across multiple professionals to ensure consistency and outcomes in the best interest of the client.
We guide our clients’ investigations for more straightforward transactions, becoming more involved when clients have little knowledge about a particular aspect of a transaction. One client’s passion is another’s poison. I love the car-buying process, including research, negotiation, and financing. For some clients, this process is intimidating and one they avoid at all costs – including not getting the best deal. I have visited car dealerships with clients to “seal the deal.”
Another way we help our clients is what we call the “good cop, bad cop” scenario. We all have friends or distant relatives who are in the business of selling a product, including financial products such as insurance or annuities. It could also be real estate, a timeshare, or other “opportunity made for you.” Instead of having to say no, or worse, saying yes without all the facts, we have clients say, “Sure, I am interested. Why don’t you send the information to my advisor, and we can discuss it together.”
Are there risks to having relationships with multiple professionals?
Our High Net Worth clients face an additional level of complexity in achieving their financial objectives. Estate planning, tax management, investment strategy, and risk mitigation not only present complexity within their discipline, but also possess interdependencies that often require decision-making based on priorities rather than individual “best strategies.”
Our role as Financial Life Guides brings genuinely differentiated value in these situations. Our approach to life planning allows clients to articulate the meaning of their “optimal life.” We then address any obstacles and set a realistic plan to be successful. This plan will undoubtedly require the help of multiple professionals with expertise, products, or services to facilitate meeting the objective.
And there are many to consider, including attorneys from various disciplines, insurance agents, tax experts, bankers, trustees, real estate agents, mortgage brokers, charity/development officers, and many others. In some situations, professionals in the medical or care-based communities will be involved, including doctors, therapists, geriatric care managers, and others.
There are three risks in dealing with multiple professionals:
- You do not include one that is needed.
- You include one that is not suitable for your needs.
- The professionals do not know enough about your situation to offer the best guidance, and you do not have the time or expertise to coordinate individual efforts.
Working as Financial Life Guides with our High Net Worth clients, we can assess the need, identify and vet suitable candidates on our clients’ behalf and coordinate or “quarterback” the different efforts to vastly improve the chance of a successful and cost-effective outcome.
Feel free to share this perspective with family or friends facing complicated situations who are unsure how to move forward.