WHEN TO FIRE THE FINANCIAL PLANNER

by **UNEEK** Mon Aug 20, 2012 1:04 am

9 Signs You Need to Fire Your
Financial Planner By Nora Dunn PART THREE

In tough economic times, financial
planners are on the front lines. They are the gateway to investment returns
when the markets are good, and are the buffer against financial disaster when
the markets are bad.

When I was in the financial planning business
and markets experienced corrections of sorts, my colleagues and I would brace
ourselves for something called “statement shock”. Clients would receive and
open their quarterly or monthly statements, and regardless of whether they were
keeping up with the news of market performance and understood the
circumstances, they would experience a certain degree of shock when they
realized how their own dollars and cents were affected.

There were three possible outcomes
from this onset of statement shock:

They would realize that it is a function of the markets and not the
planner and stay the course

The would call their financial planner for some reassuring words of
encouragement and possibly ask for a meeting to devise a new action plan

They would look for a new financial planner

I was lucky. Most of my clients fell
into categories one and two. I worked hard to educate them, work within their
tolerances for risk, and was there to hold their hands when they needed it.
This also usually put me on the receiving end of new clients who were in
category three and displeased with their old financial planners.

But in times like these, when terms
like “Meltdown Monday” and (sshhh…the “r” word) are being tossed around,
financial planners around the world are waking up in the middle of the night in
cold sweats.

Try as they may to buffer their
clients against market downturns, statements will look bad. And they will be
sure to hear about it. And ultimately through no fault of their own, they will
lose clients.

Some planners though, will lose
clients, and arguably deserve to. They will not have performed the proper
amount of due diligence with their clients by assessing their investment
personalities and time frames, and instead of facing the music when their clients
call, they may instead choose to hide under their desks as a way to weather the
storm.

They will not have addressed their
clients’ larger financial situation and dealt with issues like taxation, short
and long term savings, and estate planning, and will instead have simply
focused on returns – something which can never be promised and will never be
predictable (unless you are invested solely in term deposits, in which case
again I would suggest the advisor’s incompetence).

If you are experiencing statement
shock, or are wondering if your financial planner is up to snuff, here are nine
signs you may need to fire your financial planner:

They never asked you about your personal goals
and time frames before recommending investments.

There is no such thing as a
one-size-fits-all investment plan. Although having a standard set of investment
recommendations according to your stated time frame and tolerance for risk is
acceptable, they must do the initial groundwork to determine who you are and
what you want from your money.

Only one company’s products are
recommended.

As good as that company’s products
are, true diversification includes not only a range of asset classes, but also
a range of investment managers. Recommending only one type of or
company-labeled product indicates that the advisor is not providing truly
unbiased advice.

You received no written financial
plan, prospectus, or documentation.

Every investment product should be
accompanied by a detailed written description of the investment, including its
composition, historical performance, and inherent risks and rewards. This is
generally covered in the prospectus, which is a bare minimum of what you should
receive. Better yet though – you should also be given a written financial plan,
which addresses your personal financial situation and outlines a financial road
map to reaching your goals – both short and long term.

You are pressured into making
investments.

Although sitting on the fence forever
is an advisor’s nightmare and sometimes clients need a little extra push, undue
pressure into doing something you are uncomfortable with is not right. Even if
the recommendations are sound, if you get bad vibes from high-pressure sales
tactics, your ability to communicate with this advisor and for them to listen
to your needs is going to be problematic going forward.

Your planner’s recommendations don’t
match your financial goals.

You say you want to save up to buy a
house, and your advisor recommends high-risk long-term investments. Something
is not jiving here, and it is likely that they are either not listening to your
needs, or are not acting in your best interest.

You can never reach your advisor when
you want to, and they don’t return your phone calls.

With an onset of statement shock, you
need to talk to somebody. Often big problems and feelings of discomfort can be
alleviated with a simple phone call and a reassurance that staying the course
is the best thing to do. But if you can never reach your advisor, if they pawn
you off on an assistant, or if they don’t return your phone calls promptly,
they are not doing their job.

They constantly change your
investments.

Seeing a regular list of transactions
coming through may lead you to believe your portfolio is being actively managed.
However a true financial planner (and not a broker, who is
transaction-oriented) should be focused more on the game plan and less on
making money by moving it around. It’s a “slow and steady wins the race”
approach. Too many transactions may also mean that they are making commissions
on each move – a sign that they are not truly working for you.

The plan given to you seems too good
to be true.

If it seems to good to be true, it
probably is. If that tax strategy seems a little lofty, or you are introduced
to a strategy that you’ve never heard of that goes in the face of everything
you know to be true and legal, then you may find eventually yourself in hot
water. Although the advisor may be liable, you are ultimately the one who will
have to clean up the mess if your financial actions were unruly.

They tell you they can time the
market.

don’t care who your financial planner is –
they can’t time the market. If they call you wanting to make drastic changes
based on what they think the market is going to do, run. What they should
really be focused on is you, your goals, and a plan (and portfolio) that will
weather the good times and the bad. Sure – small adjustments here and there may
be prudent, but moving everything in and out of different asset classes is a
losing game. They may get it right a few times, but all it takes is one bad
calculation to lose everything you have gained.

If it is indeed time to fire your Financial
Planner:

Please do them a favour and give them
a call. Sometimes things are lost in translation, or a breakdown in
communication is accidental. In my experience, people can be short-sighted,
focusing on returns and setting unrealistic expectations based on short term
performance.

When the markets are booming, people
expect consistent double-digit returns and forget not-so-distant times when
that wasn’t the case. And vice versa: after a stretch of poor performance, the
same person may be convinced that the bad times will never end and want to
stash all their money under the bed, forgetting to take the bad times with the
good to achieve an overall rate of return that will help them attain their
goals.

By calling your financial planner and
giving them a chance to explain their actions, you may be able to save the
hassle of moving your accounts and starting from scratch with a new planner.

Then again, don’t stick with a
planner because it is the easy thing to do. If your financial planner is the
culprit of any combination of the above mentioned blunders, it is a problem
that needs to be addressed and fixed – either by finding another planner, or by
tuning your existing planner in.

Statement shock stinks, through and
through. But don’t take your eye off the ball because of the initial shock of
seeing your investments lose value.

If the markets are down overall,
don’t blame your financial planner; they don’t have a crystal ball. And if they
pass the acid test above, then keep communicating with them and together you
will weather this market downturn, as with every other downturn.

The media will sensationalize every
market correction and somehow identify that this is the worst, the most
dramatic, or the hardest whatever since whenever. But time and time again, slow
and steady is what wins the race.
UNEEK WHEN TO FIRE THE FINANCIAL PLANNER 4224242810

WHEN TO FIRE THE FINANCIAL PLANNER 4224242810

http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner