Why It’s Worth Your Time to Meet Your Financial Advisors

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A few weeks ago, my wife and I planned a meeting with a financial advisor that was the representative for her 403(b) plan. Due to some rule changes, she was no longer eligible to receive an employer match with this plan, but she had been happy with their offerings and performance, so we had made the tentative decision to leave her supplemental 403(b) savings with that company.

Her advisor wanted to meet with us to facilitate all of these changes. I thought it was a good idea, since I hadn’t actually met the advisor face to face and my wife had only met him a few times for very brief meetings.

During the meeting, however, it became obvious that we needed to choose a different direction with our money.

We spent the first fifteen minutes of the meeting waiting for his computer to start up and run “updates.” Because the advisor hadn’t prepared for the meeting at all and his file with my wife’s information in it was out of date, there was nothing else to do during this time other than to sit there and make small talk. Red flag #1

He spent most of the meeting attempting to sell us on a whole life insurance policy. He kept showing us how great the returns were, but he refused to compare the amount being spent on the policy each month to a comparable term policy. Red flag #2

When he did finally get around to the actual purpose of the meeting, he had my wife fill out incorrect forms not once, not twice, but three times. Red flag #3

He argued at length with my wife about whether or not she should get a traditional IRA or a Roth IRA instead of the 403(b). He argued that we should use a traditional IRA because our income was relatively low. My wife (and I) repeatedly insisted that the Roth IRA is better in that case. He argued with us for several minutes, insisted that she fill out the forms for a traditional IRA, and then eventually looked up the information. “What do you know? You’re right – the Roth IRA is the one you should be using.” Red flag #4

Needless to say, we took our forms with us and then quickly shredded them upon arriving home. My wife is now opening a Roth IRA through Vanguard independently.

The real lesson of this story? Just because someone has the title “financial advisor” and has all of the appropriate certifications does not mean that that person can effectively and efficiently meet your needs. You should always meet with any and all of your financial professionals and draw your own conclusions.

It never hurts to know your stuff. Because my wife and I have been intimately involved in our personal finances for years, we knew what kinds of questions to ask and what to look for. We knew our stuff – and it revealed that our “advisor” did not.

After that meeting, my wife felt more competent and ready than ever before to take control of her own retirement savings and manage them herself through Vanguard. In the end, our disastrous meeting actually ended up being a confidence-builder, putting her in a place where she felt much more sure of herself than before.

Meet with your advisors. You might learn things you never expected to learn.

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32 thoughts on “Why It’s Worth Your Time to Meet Your Financial Advisors

  1. Wow. How insightful. Face to face can reveal so much. It’s appalling what folks qualify as a ‘financial advisor.’ I like your ‘red flag’ comments. I wonder how many people just ‘take their advice’ because they have a ‘title.’ Good illustration of how a financial advisor should NOT act.

  2. Honestly, I’ve never met an “advisor” administrating a work retirement scheme who WASN’T that salesy. It’s a shame, because as you say most people aren’t savvy about this stuff.

  3. Most financial advisors attempt to sell investment products where their primary objective to receive commissions, not ensure your financial well being. Buyer beware!

  4. It is part of my job to refer clients to our financial advisor, who (compared with Trent’s example) I do believe to be quite knowledgable and professional. While our FA is commission based, I have sat in on some of his appointments with clients and he is not pushy at all. He presents the information and leaves it to you to make your own decision. I advise people to meet with him because often they don’t know about the kinds of products he can offer. I tell people it is worth their time to go learn about what he can offer them…if it is not right for them, at least they know they have explored all of their options and made an informed decision.

  5. I would have left after Red Flag #2.

    I hate when someone is unprepared for a pre-scheduled meeting, and even worse, I hate being upsold in a business meeting when I came for something entirely different.

  6. I’m currently on track to become something like a financial advisor and I think that meeting was probably a bad day for him.

    @guinness416 That’s because those are the traits that business schools foster in their students. If you can’t sell, then you get out of business school and do something enjoyable instead.

  7. I remember when I met with my first adviser after starting my first job out of college. I was 22 and had very little idea what I was doing. At the time I had a little credit card debt and some student loans (all paid off since).

    I remember she asked me about my situation and I gave her my background and that I didn’t have much in savings because, well, I was 22.

    Her exact response was, “So… basically you’re worthless.”

    I told her that I didn’t have much money, but I didn’t quite see myself as worthless.

    Needless to say even though I’m with the same company, I use the individual brokerage option with my 401K to buy vanguard funds instead of the ones she was peddling.

  8. Yes, definitely better that you left and made your own choices. Your meeting reminds me to a certain extent of a meeting Hubby & I had with the colleague of his financial advisor, who called us in specifically to try to upsell Hubby to whole life from his term plan.

    I just sat there and politely shot him down over and over and over again. Hello. My Hubby smokes. He’s 50 years old. A whole life plan would be prohibitively expensive. Asking me if I’d like to switch was, in some ways, even funnier. I have only one more premium adjustment in my term before I hit retirement (Hubby’s plan adjusts more frequently) and I’m paying $32/month right now. Pay a lot more for very little benefit? I don’t think so, thanks.

    The upside was getting a printout of Hubby’s RRSP contributions, which they also handle.

    Know what you have. Know why you have it. In our case, we have term until our youngest child hits adulthood and we hit retirement all at the same time. I’m not planning on providing a huge inheritance to the kids, just providing security until they can manage on their own. And no, I’m not interested in a fund that may lose value so close to retirement, especially when the “benefit” of it (and of the proposed insurance switch) is probably the commission the advisor will make.

  9. An adviser is there to provide advice and assist you in making an informed decision. The person who should be most familiar with your goals and assets is yourself.

    This means that you need to be educated on the material at hand, but need not be and expert like the financial adviser. This way, you can understand the pros and cons of different investments and gear your allocation to your wants and needs.

    Ignorance is not an excuse. Because Trent and his wife are informed, they realize what a moron this financial adviser is, in regards to his career.

    But, I don’t agree with criticizing the guy on the computer problems. I’ve seen many facilities automatically push updates at the most “convenient” times, or force updates to install which require rebooting and lengthy installation times.

    Many times, the disconnect between IT and the users is huge. At a place-that-shall-remain-anonymous, we were instructed to shutdown all computers at 5:00 PM sharp and push updates on Monday morning at 10:30 AM. Given that this was a 9-6 facility, I told the IT manager he was an idiot and quit after 2 days. Apparently he was infamous around town, brilliant on paper, not an ounce of common sense.

  10. I work for a school district that offers 403(B)’s and life and disability insurance through various outside companies. Every time I meet with an “adviser” they are always more like a “salesman.” Thanks for sharing how your wife and you decided to open a Roth IRA with Vanguard. This is something I need to look into this year.

  11. Yet another anecdote to add to the enormous pile, all vividly illustrating that “Financial Advisors” are nothing more than pushy, commission-driven salesmen.

    Financial Advisors operate in a perpetual conflict of interest. The products that make the most money for themselves are the ones that provide the least benefit to their clients. They cannot possibly provide objective advice in your best interest when their entire compensation structure encourages them to promote the most expensive products.

    Here’s another anecdote: Shortly after we got married, my wife and I got a phone call from a “financial advisor.” We knew we needed to save for retirement, so we agreed to meet with him. He showed us some mutual funds that were guaranteed to always be worth no less than the sum of our contributions, although they’d grow with the market if the market happened to rise. They’re called “segregated” mutual funds. It sounded fantastic! Mutual funds that are always worth at least what we’ve put it? Where do I sign up! Why doesn’t EVERYBODY buy these funds?

    Years later, when I learned more about investing, I discovered what an MER is. Out of curiousity, I decided to check the MER of our “segregated” funds. The MER was 3.75%. For those who don’t know, that’s outrageously high, and a total ripoff.

    I further learned that “segregated” funds are great for older people, closing in on retirement, with low risk tolerances. For them, preservation of capital is key. But my wife and I were 25, and explicitly said our risk tolerance was high. This guy was simply harvesting massive fees off a couple naive young professionals. We ditched him.

    Don’t trust people with an obvious conflict of interest, particularly when money is involved. Nobody cars more about your money than you do. A Financial Advisor’s primary motivation is to make HIMSELF richer, not you.

  12. This just another example of why I prefer to do things for myself. I know more about my situation than they do and if I make a mistake I have no one else to blame. I have always been skepticle of these so called “Financial Advisors” and had one be really pushy with me one time. Glad I stood my ground.

  13. The term “financial advisor” is not anything regulated. I could go out today and hang a shingle up promoting myself as such, despite the fact I have no training or background in the field.

    I have some money in a small IRA thru a vendor. Last year, the vendor has changed some of its direction in how they provide service. It had been more hands off, but now they want to work with each investor as to specific money goals. It has been a comedy of errors trying to get together to review my financial situation and our family’s goals. Something always seems to come up for me or him at the 11th hour and its been rescheduled about 6 times!

  14. This is pretty much why it’s worthwhile to meet anyone you are going to to do business with, not just a financial advisor.

  15. I would actually like to have the advice of a financial advisor because I do my research but still feel a bit over my head. But I haven’t met one that I have felt comfortable about…so I muddle along on my own.

  16. There are Financial adviser’s that charge by the hour. You go see them quarterly or yearly and bring in your portfolio and go over it with them to make sure your staying balanced or positioned appropriately for your risk tolerance. They will also take your call and talk you off the ledge when the market drops 200 points.

    The whole relationship is established with the fact that I will never buy anything from you except help and advice.

  17. I have worked with a Investment Advisor for the last 5 years. An Investment Advisor is different than a finanical advisor in:
    1. Fee is based on Portfolio value (at end of month). If the portfolio does not increase, neither do the fees.
    2. A meeting where NOTHING is prepared is Very
    Unacceptable !!!
    3. We do not sell products.
    4. Financial advice is geared to the client – such as age, financial investing knowlegdge, life experiences (i.e divorce, job loss, etc.

    As so many people stated in their comments, know your financial stuff and instead of going to a financial advisor, try a Investment Advisor.

  18. Kind of like that old question of what do you call the person who graduated last in their class at Medical School? Dr.!

    Yeah, that was pretty much the worst possibly example of a financial planner you could possibly imagine. It is so sad to know that people like that are advising others on what to do with the money that is supposed to be their lifeline in later years…

  19. My parents met with a financial adviser once that I remember. My Dad said at the end of the meeting the guy basically told him he was doing fine and didn’t need any outside help.

    Part of my job is to refer clients to financial advisers (since I don’t have the required licenses to sell investments), we’re very careful who we recommend. If you want to find someone good, ask for a referral from another professional you trust – such as a CPA or attorney. They usually won’t risk damaging their reputation by recommending someone shady.

  20. This is why we see a CFP! Actual education with someone who is interested in planning not selling.

    Our guy is great – but then he has also switched companies 3 time in the last 8 years because the firms he worked for started using quotas to tell him how much he needed to sell. He is now with a group of other CFPs who banded together and formed their own company to fight this very issue.

    Investment Advisors and Financial Advisors are usually just salesmen with confusing titles. Look for a fee for service Certified Financial Planner if you want advice and are willing to pay for it. Worth every penny!

  21. If they’re trying to sell you something as opposed to teaching you and letting you make the decision… bypass the red flags and just leave!

  22. I always wanted to be an independent CFP and charge by the hour… Screw commission-based positions, they aren’t for me. Right now, I’m in a partial commission-based job, and I get pressure all the time to sell things to people… But I don’t. I told myself when I got the job that I wouldn’t ever compromise my own integrity to keep a stupid job. Even with all the company’s pushes in the last year or so, I’ve stood my ground.

    Funny enough, even the low commission stuff adds up a lot faster over time if you get a good enough reputation. I may only make a bit off of one person in a visit, but if I provide good service and take care of them… Well, repeat customers trump single good sales. Too bad these advisors don’t understand that.

  23. Be glad that your wife can choose Vanguard. Our 403b plan, as of now, only has one mutual fund company; the rest are annuity providers.

  24. Pam, I think Trent infered that his wife was going for the Roth IRA such as shifting the 403(b) to it. Not selecting the Vanguard family of funds under the 403(b). I shifted my 401(k) to Vanguard and it is finally back to what I put into the 401(k) less dividends.

  25. The “financial advisor”s job is to take money from your pocket and put it in his. If he was a really brilliant financial advisor, rich people would hire him to manage their money and he would not deal with you. If you insist on a financial advisor, choose one who is FEE BASED. That is, he charges by the hour for advice and does not sell things. When CDs were bringing 5%, my 40 year old friend, who had always been on the edge financially, inherited about $200,000. I said, “Put it in CDs for now and you’ll earn some money and preserve your capital, you’ll have time to decide whether to pay off your condo, invest.” Well, she worked as a customer service rep for American Express who gave her a “free” consultation with one of their advisors who told her he could make her money grow faster than 5%. He put her in risky stuff (and pockedted a bunch of commissions.) Then when she lost a bundle, he put her in “more conservative” stuff (and pocketed a bunch of commissions.) My advice was free, and it would have preserved all her capital and made her 5%. His advice lost her a bundle and transferred a lot of money from her to him. YOU DON’T NEED A FINANCIAL ADVISOR. And most likely you won’t get a good one. If these guys know so much about making money grow, WHY WOULD THEY WANT TO WORK FOR YOU AND YOUR SMALL AMOUNT OF CAPITAL?

  26. Financial Advisors are like professionals in all professions, 10% are consistently outstanding, 10% are totally incompetent and the other 80% have their strong and weak areas, good and bad days. The advice to become knowledgeable and know the questions to ask and how to listen for red flags can’t be overstated. And whether it’s your money or your health, if something can have dramatic consequences, get more than one opinion.

  27. On the Roth vs Traditional… I thought a rollover IRA had to be a traditional IRA? Or are you paying the tax penalty now (and assuming taxes will be higher later) to rollover the funds into a Roth?

    Or am I misunderstanding and this isn’t considered a rollover?

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