This is How Financial Advisors Should EARN Your Money

If you currently have a financial advisor, how much are you paying
them and what are they doing to earn that money?

I recently had a new client come in because he was nervous about
the risky investments his advisor had set up for him. We looked
over his portfolio and discovered he had paid his advisor over
$8,250 in the last year.


This is a serious problem.


Most of the financial planning industry is run on a
suitability standard. This means when you sell an
investment product, your advisor gets all of their commissions
upfront. If they meet with you again the next year and you decide
not to sell anything, they don’t get any money. The suitability
standard is a bit tricky because it encourages advisors to make
their customers sell before they should so they can receive a
commission.
The suitability standard is a bit tricky because it encourages
advisors to make their customers sell before they should so they
can receive a commission.

Many advisors, myself included, instead have a management fee. My
fee starts at about 1% and drops with the more money you have.
Management fees work better, because you know that your
advisor’s interests are in line with yours. The more money you
make, the more money I make.

This client was paying his advisor a management fee of more than
1.5%, which is higher than average. The client had over $550,000
in an IRA, so the fee he paid annually close to $8,250.


Overall, that doesn’t seem like much, but that was more than he
earned each month.


It was also more than he paid for any vacation that he had ever
taken.


That was more than he paid on his mortgage all last year.


A fee of 1.5% sounds small but was actually a large chunk of his
savings.
A fee of 1.5% sounds small but was actually a large chunk of
his savings. It Get's Worse For Him...

What I found as I dug deeper into this client's accounts was even
more disturbing. He was on regular, boiler plate mutual funds
that he could have signed up for on his own. What’s worse is that
90% of his portfolio was sitting in stocks or in equities, even
though he was nearing retirement. That’s extremely aggressive and
dangerous.


Think of the percentage of your savings in equities like a
speedometer. The faster you’re going, the faster you’ll get to
your destination. If there is an accident though, the damage will
be much worse. If something bad were to happen to his
investments, he would lose almost everything he’d saved for.


He also hadn’t spoken to his advisor in about 15 months.


He had never done income planning with his advisor or even went
by to see him for a review.


He was put into a basic investment plan and never adjusted.
The advisor hadn’t done much more than he could have done for
himself, but was getting paid over $8000 a year.

This customer was making good money from his advisor, but was
also risking most of his retirement funds. The job of a good
advisor is not to make the most money possible. It is to make
sure their customer is set up for a comfortable retirement.
The job of a good advisor is not to make the most money
possible. It is to make sure their customer is set up for a
comfortable retirement.

I understand more than anyone that financial advisors need to
charge fees. I have a business to run. I have a family. I want to
make money and save for my future just like everyone else, but
it’s important to me that my customers know what I’m doing to
earn the money they give me.


Part of the problem is that people don’t realize how much
they’re paying their advisors because they don’t write a check to
them each month like you do for many other services.
Instead, it’s taken out of the money that you earn and is in the
fine print of your monthly statement. If you currently have an
advisor, do you know how much you’re paying in fees? If you don’t
know, you need to pull up your statement and figure it out.


I give you permission, whether you’ve been working with me or any
other advisor, to ask questions during your annual review. Do not
let the meeting stop with “Everything is good! We’ll see you next
year.” Ask how much you paid your advisor in the last year and
what they are doing to make sure you’re ready for the future.


Please let any fear that you’ll be offending your advisor
melt away. It’s your money and your retirement on the
line, so you have the right to ask.
I give you permission, whether you’ve been working with me or
any other advisor, to ask questions during your annual review. What
Your Money Should Earn You

If you are paying a financial advisor, you should expect:


ongoing and regular meetings to monitor your progress.

a comprehensive financial plan not only a solitary financial
tool.

a team to surround you with support.

an invested interest in your personal success.

explanation to how he or she is paid.



If you need a second opinion on your current retirement plan or
need someone to analyze your agreement with another advisor,
please reach out and take advantage of our free consultation.
We can meet in person, on GoToMeeting or over the phone to
address your specific situation and the long-term goals you have
for your life.

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