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 Because the advisor hadn’t prepared for the meeting at all and his file with my wife’s information in it was out of date, there was nothing else to do during this time other than to sit there and make small talk.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.