What Kind of "Financial Planner" Do You Have?

More and more, the term "financial planner" is being overused and misunderstood. When is the last time you heard anyone introduce themselves as an insurance salesman, stockbroker, or annuity salesman? Those terms are increasingly rare because the individuals in those professions now refer to themselves as "financial advisors" or "financial planners." Yet, what financial planning do these people provide? If you speak to someone who generates their living from selling annuities, they are likely to suggest an annuity is perfect for you, regardless of your situation.

Consequently, the title "financial planner" has been diluted to the point that most consumers don't really know what a financial planner does. In fact, many "financial planners" don't even know what a true financial planner does.

Last night I attended a webinar hosted by a "financial planner" who promised his services were one-of-a-kind. This individual stated that 99.9% of financial planners spend 100% of their time managing their clients' portfolios, and that he was unique because not only did he manage investments, but he worked with clients to lower their costs of living. This individual promised he would examine ways to lower clients' insurance bills, taxes, and mortgage payments. He also promised he would educate his clients about opportunity costs, inflation, and retirement planning. Is the wide range of services offered by this individual beneficial? Absolutely.

However, the statement that 99.9% of financial planners spend all their time on investments is entirely false. I believe this individual was confusing the titles "financial planner" with "product salesman" or even "investment advisor." In fact, all true comprehensive financial planners provide the type of benefits discussed by this individual.

True financial planners help their clients determine where they are in relation to their financial goals, plot a strategy to help their clients obtain those goals, and monitor their clients progress to maximize their probability of success. This includes providing advice on all elements of a true financial plan: retirement planning, insurance coverage, estate planning, investment analysis, education planning, and other topics. Additionally, true financial planners educate their clients about the process of making wise financial choices and provide them with the tools to understand the implications of the decisions they make.

So what type of financial planner do you work with? First and foremost, do you have a financial plan? If not, how much planning can your advisor be providing? Also, if you meet with your advisor less than once per year, consider the possibility that he is more a product salesman than a financial planner. Additionally, research how your advisor is compensated - do you pay him directly to represent your best interests, or is he paid by the products he "recommends" to you. Finally, how much advice does your advisor actually provide? Does he simply recommend investments that should make you money, or does he help you identify your goals, teach you strong financial habits, and guide you towards the life you've imagined.

National CFO Survey Results

Today Grant Thornton LLP released the results of a national survey of U.S. Chief Financial Officers (CFOs) and senior comptrollers. The study concluded there is growing optimism about the U.S. economy as 48% say it will improve over the next six months (up from 30% six months earlier).

While still tepid, 39% intend to increase head count (up from 28% six months earlier), and 54% are optimistic about their own company's outlook over the next six months (up from 46% six months earlier).

Regarding the disaster in Japan, 94% say it will at least be somewhat impact the U.S. economy. Meanwhile, the majority believe that Japan will not fully recover for at least 3-5 years.

Although probably expected, it is interesting how concerns seem to be growing over inflation. 50% of survey respondents say their company intends to raise prices for its goods over the next six months. That figure is up from 31% six months ago and 24% one year ago.

Is Your Home Included In Your Trust?

My fee-only associate Michael Chamberlain brought up a great point concerning your estate plan. I thought it was worth re-posting:

Having a living trust allows your appointed trustee to control your assets if you become incapacitated. This trust also enables you to avoid probate upon your passing.

When you establish your trust, your attorney will prepare a quit claim deed that transfers your home to your trust. No problem, all is good…until you refinance.

Most lenders want to place the mortgage onto the property when the home is not in trust. The lender instructs the title company to take the home out of trust and then completes the mortgage. There is no problem with this, but you must instruct the title company to transfer the home back into your trust immediately after the refinance.

When interest rates hit a recent low late last year, many people refinanced and the majority failed to put their home back into their trust!

If you have a trust and you own a home, check with your county recorder to verify that it is in the name of your trust. If you are uncertain, check with your estate planning attorney. Be particularly vigilant if you have refinanced since your trust was established.

An ounce of prevention can save tens of thousands in probate fees and prevent delays in estate closure.