Do you pay for financial advice? You probably do if you work with a financial advisor or anyone who sells investments or other financial products. Regardless, I am more interested in why are you paying for advice? How do you know if you are getting your money’s worth? If you do not work with a financial advisor, have you ever wondered if it would be worth it?
I know this is a confusing set of questions regarding a very confusing topic. On the surface, most financial services firms look the same. Picking a financial advisor can be in many ways, like choosing a book based on its’ cover. To quote Warren Buffett, “Only when the tide goes out, do you discover who’s been swimming naked.” Mr. Buffett is referring to the idea that when things are going well, and the stock market is high, good performance is easy to come by – everyone is having fun. But, when things go south, and the market tumbles, or “the tide goes out,” you see who is unprepared in obscene ways.
Value is like beauty, it is in the eye of the beholder, so it is not for me to tell you what you should get from your financial advisor for what you are paying. However, I can share with you what our firm did when COVID-19 caused the proverbial tide to rush out. This may give you a benchmark to assess your own personal situation. Some of these actions are out of order, and I am likely missing some items, but, in general, this is what our team did to make sure that our clients remained confident in their financial futures during the first 5-months of COVID-19.
Constant communication from real people. We believe that when things get bad, when the news turns scary, it is our job to keep things in perspective. Clients need to know what is relevant to their personal situation and how extreme an event is regarding an economic impact on them financially. Our initial reaction to COVID-19 was to get lots of information for all clients quickly. We started with a series of videos focused on how to avoid making emotional mistakes, followed by a series of phone calls to all clients confirming that they were okay and talking through any concerns regarding their personal situations.
Maximized resources to get busy. As a firm-wide effort, we proactively reviewed client situations looking for opportunities to help them take advantage of the market volatility. Since our Financial Planners and Wealth Managers don’t work on commission and are not overburdened from taking on more clients than they can service at an exceptional level, we were able to dedicate time to focus on each client’s unique situation. An added benefit of having a large and talented staff is that we had team members who could be reassigned from growth-related projects to client outreach efforts.
Opportunities for clients. This seems counter-intuitive, but some of the best opportunities regarding wealth creation happen when the stock market goes haywire. The challenge is being prepared to take advantage. We immediately hit the pause button on active financial planning strategies and reassessed. We updated and verified client financial stress tests to confirm if strategy changes were needed. For some clients, this meant halting required minimum distributions (RMDs), maxing out ROTH conversions while the market was low, managing capital gains or losses to reposition a portfolio, and/or changing risk levels on accounts to take advantage of underpriced securities.
More! Constant communication from real people. Over the past 5-months, we posted over 60 videos focusing on the CARES Act, SECURES Act, investment strategies, financial planning topics, tax management, philanthropy, and an occasional “pick-me-up” message. During the first 2-months, we aligned the videos, specifically with the work we were doing behind the scenes as we were getting busy helping clients. This helped clients understand that we were working on their planning, and it gave them important information regarding strategies that we would be recommending. The videos communicated to clients the work that we were doing, the timing for when they should hear from us, and since we were working from home, how they would be hearing from us.
Investment adjustments that matter. Our clients who pay for investment management expect us to be on the front line when things get crazy, not to be hiding in the background with our heads in the sand. “Stay the course” is only good advice if you do not know what to do or if you already have a good plan in place, and nothing has deviated from normal. With COVID-19, normal might be changed forever, so we confirmed with our clients if their individual investment plans were still good or if they needed to be changed, and we made updates where necessary.
Embraced technology to keep people safe and productive. For the past few years, we have been building our firm’s infrastructure to support virtual meetings (securely hosted online meetings), financial advisor mobility (ability to work from anywhere), and electronic document delivery and signature capabilities (to reduce the amount of paper used while speeding up the processing time for client account management activities). When COVID-19 became an issue, we were able to immediately switch 100% of our team to work from home without any interruptions. Clients were able to select between phone and virtual meetings, and nearly all service-related paperwork was handled electronically. We were able to keep our clients and our employees safe and productive.
New laws creating huge changes. The SECURE Act was passed into law at the end of 2019. Coming into 2020, we had two big themes to plan around. We needed to help clients set expectations regarding the likely stock market volatility due to elections, and we needed to re-address tax and estate planning due to the profound ways that the SECURE Act impacts so many of our clients and their children. While we were preparing to release information regarding these two key topics, COVID-19 showed up, soon after, followed by the CARES Act. These issues were and still are extremely important, but we needed to make sure that they did not overshadow the former issues that still maintained significant relevancy. Taking advantage of our diverse team, we were able to create articles, videos, and virtual presentations on the topics and, in a timely fashion, account for them as we worked one-on-one with our clients to update their financial and investment plans.
Why conflicts-of-interest matter. Many people ask, “What is the difference between commissions, fee-based, and fee-only advisors?” One of the most important differences is that fee-only advisors do not rely on commission-generating transactions as part of their compensation. This is important because what our clients needed most during the first 5-months of COVID-19 was advice and guidance, not a sales-person concerned about their own personal compensation who could profit from tapping into the anxiety of the situation. Since all our employees are on salary, none of them were placed in a situation where they were pressured to sell anything. The entire team was able to focus 100% on clients, and that matters.
My intention is to leave you with some ideas or conversation starters. Do you feel like any of these actions would have helped you or may have improved your overall situation? Do you know how the CARES Act and SECURE Act are going to impact you and your children, and have you made any adjustments? Did you look at your income tax situation (not just today, but projected into the future as well) and take advantage of the volatility in the stock market? Do you feel like every time you engage with an advisor, that they seem like they are trying to sell you something? Is their only advice “stay the course,” even though you never understood the course to begin with, and the path forward has obviously changed? Are you nagged with requests to introduce your friends and coworkers while your head spins after meetings where you are intimidated or degraded if you ask a question pertaining to or challenge their advice?
Ultimately, your business with a financial advisor comes down to one thing. “Your money, your life.” It is not a financial advisor’s job to tell you yes or no or to make you feel inferior or afraid. Our job is to provide you with information regarding how things may materialize depending on your decisions and to watch out for the things that might hurt or help you that you are not aware of. Objective guidance is why you hire a financial advisor.
Please, use the actions I have outlined above as a benchmark. If you are confident that these actions were taken on your behalf, wonderful! You are in a great place. If not, make changes. Your money, your life!
We have released a series of articles describing the types of relationships you could have with financial advisors and professionals and the ways you can engage in business with them. Here are three other resources that could help you on your financial journey:
- Fee-based or fee-only financial planner – what’s the difference? Read here.
- Does the age of your financial advisor matter? Read here.
- The effects of fees over time. Read here.
Would you like to speak to our team? We offer a no-cost, no-obligation first discovery meeting to learn if planning is appropriate for you. We have video-conferencing technology and are not limited geographically. Wherever you are, if you need help, we can help you! Connect with us by filling out our form at www.seedpg.com/contact.
S.E.E.D. Planning Group LLC (S.E.E.D.)is a Registered Investment Advisor (RIA) with the Securities Exchange Commission. S.E.E.D.’s team provides investment fiduciary and fee-only financial planning services to clients. Our fees are disclosed, easy to understand, and not predicated on product sales.
Travis Maus is the managing partner and a wealth manager at S.E.E.D. Planning Group, LLC. He earned the Accredited Investment Fiduciary Analyst® (AIFA®) designation from the Center for Fiduciary Studies®, the standards-setting body for Fi360. The AIFA designation signifies the ability to perform fiduciary assessments measuring how well investment fiduciaries are fulfilling their duties to a defined standard of Care. As a wealth manager, he is also a member of the firm’s Financial Planning team where he provides coordinated and strategic financial planning and investment services to families and small businesses.