Getting the right financial planner
Long-time readers of this column know how much I love a good financial plan. Some people think a financial plan is just about dollars and cents. They are wrong. To me, a well-designed financial plan is a thing of sublime beauty. It is like poetry or a beautiful painting or stunning architecture. A well-designed plan is a synthesis between the world around us and the way a life is lived.
Now, I know I am a total nerd and I don’t expect anyone else to feel as passionately about financial planning as I do. But, if I can get you to see the value of a financial plan and embrace the power of the planning process, I know your life is going to be richer and fuller for it.
You can think of a well-designed financial plan as a roadmap to the promised land. It is detailed enough to lead you on a journey that can sometimes last for years. On such a journey, you need a map that will give you confidence and inspiration even when the journey may be difficult. On the other hand, a poorly-designed financial plan is like a map sketched out quickly on the back of a dinner napkin. You might trust such a map to guide you on a quick trip to the grocery store, but you would be crazy to rely on something like that if you were going to drive to Buenos Aires.
The powerful financial planning experience I am talking about starts with the right kind of financial planner. Not all financial plans are equal and neither are financial planners. Some “financial planners” use the planning process to sell financial products. They are generally paid by commission and usually emphasize products from the companies they represent. In most cases, that kind of planner is not going to be able to deliver the kind of powerful financial planning experience you want to help guide your life.
This point was reinforced to me this past week when I met with a young couple to talk about their financial plan. The husband works as a computer engineer for a well-known firm in Silicon Valley and the wife is a public school teacher. They make a very good income and have been wise about debt and savings. In short, they are making really good decisions about their financial life right now, but they wonder if they are on track to eventually escape the Silicon Valley rat race. They look forward to a more settled family life.
In their search for clarity, they were referred to a financial planner in San Jose. They answered his questions, provided the information he needed, and eagerly anticipated the plan he promised to deliver.
After a few weeks, the financial planner scheduled an appointment to deliver their plan. It soon became apparent that their “plan” was really just a way to sell financial products, mostly insurance. It seemed like every recommendation involved variable annuities or universal life or whole life or some other product with the insurance company’s name on it. The couple was disappointed and skeptical and decided to look for something better.
If you want something better, I suggest you look for an experienced, well-established, fee-only planner. Fee-only planners are paid only by their clients. They do not accept commissions, so you never have to worry that their advice is tainted by commission-led incentives. At the same time, fee-only planners are usually independent, meaning there is no corporate overseer requiring them to recommend in-house products.
A good place to look for fee-only planners is at NAPFA.org, the website for the National Association of Personal Financial Advisors. NAPFA advisors must adhere to certain standards, including being fee-only. In addition, they cannot work for any firm that accepts commissions, rebates, awards or any form of revenue sharing from financial product companies. In addition, NAPFA members are required to maintain their professional expertise through 60 hours of continuing education every two years.
Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey. He welcomes questions that you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or email them to firstname.lastname@example.org.