Money Magazine Ask the Mole

What a good financial adviser can do for you

There are plenty of good planners out there. You just have to know what to look for.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By The Mole, Money Magazine's undercover financial planner

Have future topics for the Mole to address? E-mail him at themole@moneymail.com.
CLICK HERE

NEW YORK (Money) -- Question: I am a financial adviser, and I feel it's easy for you to be critical of our practices when you are at your desk and not in the field trying to help actual human beings. Can't you find just one testimonial or write one article reflecting a scenario (and there are a lot of them, believe it or not) in which an adviser has helped a person achieve their financial goals?

The Mole's Answer: Actually, I happen to be a practicing financial planner and am trying to help human beings every day. That's what distinguishes me from other financial columnists.

Still, I think your point is well taken. I do know many good financial advisers who help their clients achieve their financial goals. I'll get to why I don't write about them in a moment. But first, I'd like to address your point on what a good adviser can do for clients.

Good advisers know how to take a step back and look at a client's overall financial situation and let them know whether they are on track to meet their goals. They can then look at several areas of the financial plan and make recommendations on changes to increase the likelihood of reaching those goals. Some of the areas I've seen good planners address and add value to include:

Investments. Helping the client develop a low cost, tax-efficient, broadly diversified portfolio that meets the clients need and willingness to take risk. I've seen good advisers help their clients stay the course and stick to a long-term investment policy rather than reacting in a follow-the-herd manner.

Risk management. Part of managing wealth is protecting that wealth. A good planner can take a look at the insurance you need and make sure you are getting it in a cost-effective manner. I'm not talking about selling insurance investments, also known as "permanent insurance," I'm talking about pure, transparent insurance.

Estate planning. Making sure the client can pass on their wealth is another critical aspect of financial planning. Most advisers, like me, aren't lawyers but we can work with attorneys to make sure this aspect of their plan is in place.

Taxes. Taxes are costs too and they can take from our nest egg. To the extent that we can help our clients maximize their after-tax dollars, we provide value to our clients.

Retirement planning. We can then take all of the above and let the client know what they need to do to meet what is usually the number one financial goal - having enough money for retirement. In this capacity, good planners just give the facts without value judgments. We take the client's cash flows and model projected results, and tell him or her what needs to change in order to reach retirement goals.

So why don't I write about good planners?

First of all, I think other Money magazine writers deliver outstanding advice when it comes to these areas. My area of expertise is making readers aware of what planners, and even the clients, usually get wrong. That's the insight I can offer.

There is a second reason as well. In real life, my practice preaches the virtues of low costs, diversification, blah, blah, blah. This means that I tend to get clients that have had financial planners who have placed them in expensive, underperforming products. Their previous financial planner was often acting as a "life coach" to build trust, even though they, like me, have no qualifications whatsoever to act as such a coach. None of the Mole columns presume to tell readers how to live their lives.

My advice

Your question is a good one. The method to my madness, however, is not to convince consumers to avoid financial planners and advisers. There are many good ones out there.

Rather, I'm trying to create a "buyers beware" approach to educating the consumers on what may be driving our recommendations. My advice is to ask tough questions before selecting the adviser. Make sure the adviser really knows finance, rather than just sales, because what your adviser doesn't know may hurt you.

When your adviser gives you an important decision to make, think about it. Tell your adviser you'll sleep on it and get back to her. Always look for warning signs whether it's time to fire your adviser and get a new one, or even do it yourself.

It is my hope that consumers can use these tips to select a better adviser and to keep him on his toes. I firmly believe that an informed consumer base benefits the clients, the industry and the planning profession as a whole. To top of page

Send feedback to Money Magazine
Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More


Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.