Wednesday, December 01, 2004
How too pick an Insurance/Financial Planner www.legacyannuities.com
1. Ask for 5 references. 3 references should be current clients, and 2 references should be other professionals like an accountant or banker. There are three reasons for the professional references. First, any person in business should have at least 3 satisfied clients they can provide you with, therefore, client references alone may not be enough.
Secondly, if a planner cannot produce 2 other professionals that will attest to his ability as a financial planner, he may not be respected by his peers. And last, outside professionals in the community see all kinds of things, and will usually be aware of what kind of advice is available, and what kind of quality is provided by different folks.
2. Call the references you receive. Many people ask for references, but never use them! Call all 5 people. You can never learn too much about the person you are considering using for your major financial decisions. Take the few minutes to talk to these people. It will be worth it!
3. Ask if they charge fees for their service. No one works for free! If they are not charging fees, they must be making money from the sale of products. If they are making 100% of their income from product sales, they must sell enough to make up for the people who did not buy. If there is a price to be paid, it must be paid by either the planner or you. Which one do you think it will be?
4. If they do not charge fees, ask them how you can be sure that the advice they will provide is in your best interests. Make them tell you how they analyze a situation, and what process they go through to arrive at recommendations.
What you want to hear, is that they first find out how you feel about your money anThen, they will get a detailed understanding of your income, assets, debts, company benefits, etc. Finally, they will work up an action plan that addresses all of your concerns, and gives you choices. Choices of the different ways your concerns can be handled, with the pros and cons of each choice.
Then, and only then, will you be able to choose for yourself which way to go.
This process allows you the ability to make decisions from an educated basis, instead of from salesmanship. There is nothing wrong with being sold financial products, as long as they fit your needs, and not those of the salespeople!
5. Ask if they sell products as well as provide financial planning advice. If the planner says "yes", this should not be taken as a negative response. However, you should recognize the potential conflict of interest that exists. Although I have known several financial planners and advisors that did not let the conflict of interest influence their recommendations, those planners were a small minority. Therefore, extra caution should be exercised if the planner also sells the products he recommends.
You must ask the planner if he has any special incentives or reasons to sell you the things he is proposing. If the motivation is to get you what you need, that is fine! If you sense from the answer that there is some hidden reason, you need to move carefully.
6. If the planner sells products, ask if the products can be obtained if no plan is prepared. Buying financial products without a plan, is like having surgery without an exam. Call me crazy, but I sure wouldn't want a doctor to operate on me until he knew what was wrong with me. A doctor who performs surgery without an exam would be an idiot!
The same holds true for a financial planner who sells product without an analysis. If you take away the planning process, you are left with nothing more than a product salesman. Do not let yourself be deceived!
Now, a plan may be many things. It can be a short one pager, all the way up to a thick set of charts and graphs. And, one is not necessarily better than the other. It just depends on how detailed your needs are. Even if the written plan is short, the interview process must not be.
Garbage In: Garbage Out!
The best planning we have seen is not due to the actual written area, but because of the depth of the interview. The planner must ask about all your issues. Not just the ones he can make money on. For example, they should ask about your taxes, education funding, home financing, company benefits, insurance, estate planning, retirement goals, investments, etc.
A good planner knows how to get to know you, your goals, and your fears. If you truly feel he truly understands your emotions, as well as your finances, then you are with a real planner!
7. If the planner sells products, tell the planner you would be more comfortable implementing their strategies with someone else. Note whether the planner starts to squirm at the thought of you buying elsewhere.
If the planner tries to convince you that no one can implement their strategies as well as
he/she can, tell the planner that you will consider that fact after the plan is completed. If they have faith d finances.
in their own ability, the relationship will most likely continue. Otherwise, you have probably taken the first step towards being told that you are not a suitable client for their service.
8. If there is a fee, do not pay more than 50% of the fee in advance. Although a retainer is often requested, most professionals do not require 100% of their fee in advance. Paying the balance upon completion of the plan, assures you that the job will be finished to your satisfaction.
9. Ask about the planner's financial background. As a rule of thumb, if you have significant wealth, consider only planners that have been providing financial services for at least 5 to 10 years. (Or whatever time period you choose.) Although there may be some very good planners with less experience, why take the chance. I was once an inexperienced planner, and when I was, I got my experience working with people who were also just starting out. Select an advisor that has more financial experience than you do.
10. Receive a 100% guarantee of unconditional satisfaction. If they are so sure they can help you, they should back up that promise with an iron-clad guarantee. The benefits you receive must exceed the cost of the planning.
You are the only person that can determine the amount of help you have received. And, the benefit received can not be determined until the plan has been completed. There should be no question in your mind that you have received more benefit than cost. If not, then the fee should be adjusted. If the planner thinks he/she can provide sufficient benefit to you to justify the cost, let them say so in writing.
11. Ask them how they keep up on the constantly changing financial environment. Do they get research from their parent company? Do they attend workshops or go to classes? Are they studying for an advanced degree? Do they subscribe to financial publications other than general media? (Reading trade journals, as opposed to "Newsweek" or "The Wall Street Journal.")
Let me assure you this is an important question. there is no way on Earth anyone can be
excellent at planning unless they are excellent at obtaining up to date, accurate information!
12. Ask to see the financial strength of the companies they recommend. Not just a simple "rating," but some details about their assets, and how their debt load is set up. Ask how the company invests their own money. Do they buy US Government bonds, for example, or risky real estate?
Remember that most of the companies and banks that went under in the last few years, were loaded up with huge debts, and bad investments in junk bonds, real estate and the like. While there is nothing wrong with some debt, and some higher risk investments, THEY MUST BE REASONABLE!
Just like your mom told you, too much of a good thing is usually bad!
And, also like your mom told you, look before you leap!
13. Ask the planner how many clients they have, and how many new ones they take on. It is impossible for anyone to handle thousands of clients with a high level of personal service. Make sure you feel you will be getting excellent service and advice, and won't be just a number, in a too busy planners schedule.
And, it's true that every planner can handle a different client load. It depends on their personality, staff, resources, outside professionals, etc. Be sure to find out how they get things done, and how fast
they can respond to your needs.
Which leads to another question:
14. Which outside professionals do they bring in on cases, and when do they bring them in?
No one person can know everything about money. It is impossible. Therefore, a good planner will have one or more outside professionals they work with, such as attorneys, accountants, pension experts, mortgage brokers, and so on.
A planner who says that he "handles everything" is fine. Just make sure that he brings in outside advisors when the need arises. (And believe me, it arises every day!)
Anyone who does not have relationships with these other folks, is not going to be able to get you the best answers in a timely fashion. Someone who works with these specialists, will always know when they are in over their head in an area, and get you the right help. This is the mark of a smart planner.
We know that these are sometimes hard questions to ask, because you may feel you are going to be insulting the person.
DON'T HESITATE TO ASK THESE QUESTIONS, EVEN IF IT FEELS
UNCOMFORTABLE!
We are talking about your money here.
Being shy has no place in this process. If you feel too embarrassed to ask the questions
yourself, have a trusted friend or relative ask for you. Whatever way you get this quizzing done, just be sure to GET THE QUESTIONS ASKED AND ANSWERED!!
Why am I so insistent about this? Because getting the right help is so important! For example, did you know the government tells us that:
94% OF ALL AMERICANS WILL NOT BE ABLE TO RETIRE ON THE SAME STANDARD OF LIVING THEY HAD BEFORE THEY RETIRED! (Source- Social Security Administration)
Why is this the case? Possibly because most people spend more time planning their vacations and evenings out, then they do planning their family finances!
Vacations, for example, are planned very carefully.
When will you leave. What do you need to do before you go. What will you bring with. How will you get to the airport. What will you do when you get there. How you will get to the hotel and around town. Where you will eat. And so on.
Are you that detailed with you personal finances? Be honest now. Do you really take the time to
1. Ask for 5 references. 3 references should be current clients, and 2 references should be other professionals like an accountant or banker. There are three reasons for the professional references. First, any person in business should have at least 3 satisfied clients they can provide you with, therefore, client references alone may not be enough.
Secondly, if a planner cannot produce 2 other professionals that will attest to his ability as a financial planner, he may not be respected by his peers. And last, outside professionals in the community see all kinds of things, and will usually be aware of what kind of advice is available, and what kind of quality is provided by different folks.
2. Call the references you receive. Many people ask for references, but never use them! Call all 5 people. You can never learn too much about the person you are considering using for your major financial decisions. Take the few minutes to talk to these people. It will be worth it!
3. Ask if they charge fees for their service. No one works for free! If they are not charging fees, they must be making money from the sale of products. If they are making 100% of their income from product sales, they must sell enough to make up for the people who did not buy. If there is a price to be paid, it must be paid by either the planner or you. Which one do you think it will be?
4. If they do not charge fees, ask them how you can be sure that the advice they will provide is in your best interests. Make them tell you how they analyze a situation, and what process they go through to arrive at recommendations.
What you want to hear, is that they first find out how you feel about your money anThen, they will get a detailed understanding of your income, assets, debts, company benefits, etc. Finally, they will work up an action plan that addresses all of your concerns, and gives you choices. Choices of the different ways your concerns can be handled, with the pros and cons of each choice.
Then, and only then, will you be able to choose for yourself which way to go.
This process allows you the ability to make decisions from an educated basis, instead of from salesmanship. There is nothing wrong with being sold financial products, as long as they fit your needs, and not those of the salespeople!
5. Ask if they sell products as well as provide financial planning advice. If the planner says "yes", this should not be taken as a negative response. However, you should recognize the potential conflict of interest that exists. Although I have known several financial planners and advisors that did not let the conflict of interest influence their recommendations, those planners were a small minority. Therefore, extra caution should be exercised if the planner also sells the products he recommends.
You must ask the planner if he has any special incentives or reasons to sell you the things he is proposing. If the motivation is to get you what you need, that is fine! If you sense from the answer that there is some hidden reason, you need to move carefully.
6. If the planner sells products, ask if the products can be obtained if no plan is prepared. Buying financial products without a plan, is like having surgery without an exam. Call me crazy, but I sure wouldn't want a doctor to operate on me until he knew what was wrong with me. A doctor who performs surgery without an exam would be an idiot!
The same holds true for a financial planner who sells product without an analysis. If you take away the planning process, you are left with nothing more than a product salesman. Do not let yourself be deceived!
Now, a plan may be many things. It can be a short one pager, all the way up to a thick set of charts and graphs. And, one is not necessarily better than the other. It just depends on how detailed your needs are. Even if the written plan is short, the interview process must not be.
Garbage In: Garbage Out!
The best planning we have seen is not due to the actual written area, but because of the depth of the interview. The planner must ask about all your issues. Not just the ones he can make money on. For example, they should ask about your taxes, education funding, home financing, company benefits, insurance, estate planning, retirement goals, investments, etc.
A good planner knows how to get to know you, your goals, and your fears. If you truly feel he truly understands your emotions, as well as your finances, then you are with a real planner!
7. If the planner sells products, tell the planner you would be more comfortable implementing their strategies with someone else. Note whether the planner starts to squirm at the thought of you buying elsewhere.
If the planner tries to convince you that no one can implement their strategies as well as
he/she can, tell the planner that you will consider that fact after the plan is completed. If they have faith d finances.
in their own ability, the relationship will most likely continue. Otherwise, you have probably taken the first step towards being told that you are not a suitable client for their service.
8. If there is a fee, do not pay more than 50% of the fee in advance. Although a retainer is often requested, most professionals do not require 100% of their fee in advance. Paying the balance upon completion of the plan, assures you that the job will be finished to your satisfaction.
9. Ask about the planner's financial background. As a rule of thumb, if you have significant wealth, consider only planners that have been providing financial services for at least 5 to 10 years. (Or whatever time period you choose.) Although there may be some very good planners with less experience, why take the chance. I was once an inexperienced planner, and when I was, I got my experience working with people who were also just starting out. Select an advisor that has more financial experience than you do.
10. Receive a 100% guarantee of unconditional satisfaction. If they are so sure they can help you, they should back up that promise with an iron-clad guarantee. The benefits you receive must exceed the cost of the planning.
You are the only person that can determine the amount of help you have received. And, the benefit received can not be determined until the plan has been completed. There should be no question in your mind that you have received more benefit than cost. If not, then the fee should be adjusted. If the planner thinks he/she can provide sufficient benefit to you to justify the cost, let them say so in writing.
11. Ask them how they keep up on the constantly changing financial environment. Do they get research from their parent company? Do they attend workshops or go to classes? Are they studying for an advanced degree? Do they subscribe to financial publications other than general media? (Reading trade journals, as opposed to "Newsweek" or "The Wall Street Journal.")
Let me assure you this is an important question. there is no way on Earth anyone can be
excellent at planning unless they are excellent at obtaining up to date, accurate information!
12. Ask to see the financial strength of the companies they recommend. Not just a simple "rating," but some details about their assets, and how their debt load is set up. Ask how the company invests their own money. Do they buy US Government bonds, for example, or risky real estate?
Remember that most of the companies and banks that went under in the last few years, were loaded up with huge debts, and bad investments in junk bonds, real estate and the like. While there is nothing wrong with some debt, and some higher risk investments, THEY MUST BE REASONABLE!
Just like your mom told you, too much of a good thing is usually bad!
And, also like your mom told you, look before you leap!
13. Ask the planner how many clients they have, and how many new ones they take on. It is impossible for anyone to handle thousands of clients with a high level of personal service. Make sure you feel you will be getting excellent service and advice, and won't be just a number, in a too busy planners schedule.
And, it's true that every planner can handle a different client load. It depends on their personality, staff, resources, outside professionals, etc. Be sure to find out how they get things done, and how fast
they can respond to your needs.
Which leads to another question:
14. Which outside professionals do they bring in on cases, and when do they bring them in?
No one person can know everything about money. It is impossible. Therefore, a good planner will have one or more outside professionals they work with, such as attorneys, accountants, pension experts, mortgage brokers, and so on.
A planner who says that he "handles everything" is fine. Just make sure that he brings in outside advisors when the need arises. (And believe me, it arises every day!)
Anyone who does not have relationships with these other folks, is not going to be able to get you the best answers in a timely fashion. Someone who works with these specialists, will always know when they are in over their head in an area, and get you the right help. This is the mark of a smart planner.
We know that these are sometimes hard questions to ask, because you may feel you are going to be insulting the person.
DON'T HESITATE TO ASK THESE QUESTIONS, EVEN IF IT FEELS
UNCOMFORTABLE!
We are talking about your money here.
Being shy has no place in this process. If you feel too embarrassed to ask the questions
yourself, have a trusted friend or relative ask for you. Whatever way you get this quizzing done, just be sure to GET THE QUESTIONS ASKED AND ANSWERED!!
Why am I so insistent about this? Because getting the right help is so important! For example, did you know the government tells us that:
94% OF ALL AMERICANS WILL NOT BE ABLE TO RETIRE ON THE SAME STANDARD OF LIVING THEY HAD BEFORE THEY RETIRED! (Source- Social Security Administration)
Why is this the case? Possibly because most people spend more time planning their vacations and evenings out, then they do planning their family finances!
Vacations, for example, are planned very carefully.
When will you leave. What do you need to do before you go. What will you bring with. How will you get to the airport. What will you do when you get there. How you will get to the hotel and around town. Where you will eat. And so on.
Are you that detailed with you personal finances? Be honest now. Do you really take the time to
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