The financial services industry is riddled with confusing and misleading information about what it means to work with an advisor and create a financial plan. Here are five misconception advisors hear from their clients:
- Only wealthy people need financial planning. This myth is dead wrong. Financial planning is a broad topic and therefore varies in need from person to person. Everyone needs financial planning, but to what extent and what items are needed varies by individual. David Silversmith a financial planner from New York said, “The truth is that everyone needs to do financial planning no matter your degree of wealth.”
2. Financial planning is a one-time event. It’s not that simple. As advisors know, securing a financial plan is a process that is done over time, so try to help clients understand that creating a plan doesn’t mean you are done planning. Karl Hicks of Leonard Financial Group, LLC in Riverside, Calif. said, “So many people seem to be looking for that one fix that will solve their financial issues, when it’s more of a change in habits and disciplines. Improving your personal financial health is just like improving your personal physical health,” he said. “It’s accomplished with better and (financially) healthier habits done consistently day in and day out. This is the issue I am constantly trying to get across to people and how I’ve focused my planning practice.”
3. You need a lot of money to work with a financial advisor. Not true! With the rise in fee-only and fee-based business models, there’s a wide-variety of advisors to choose from all with different minimum AUMs and income requirements. “I have made a career out of helping ordinary people live extraordinary lives by helping them deal with the fear and problems they have with their money. So many times clients tell me they wish they would have come in sooner but did not because they did not think a professional would be willing to help or would be out of their price range,” said Sarah Carlson of Fulcrum Financial Group in Spokane, Wash.
4. All advisors are fiduciaries. It’s complicated. For advisors, it is easy to tell what role and duties they have to a client just by their titles, but don’t assume that all or even most clients know this information. Sallie Thompson, principal at Sallie Mullins Thompson, in New York said, “If the person wants a holistic, comprehensive financial plan that includes all areas of his/her financial life, then only professionals with the CFP, CPA/PFS, and CFA credential are educated, skilled, and certified to do this work. Stock brokers and insurance agents (unless they have the ChFC or CLU credential) are not, regardless of what they call themselves.”
5. Financial planning is one dimensional. Advisors frequently have clients see them for budgeting or investing, giving little thought to retirement planning, estate planning or other facets that together make a comprehensive financial plan. “It is extremely important for people to understand all aspects of a comprehensive financial plan and how these components work together to build wealth,” said Martisha Patterson of Patterson Plans in New York.
Understanding the misconceptions and stigmas about advisors and planning that your clients may believe is part of fixing the problem. When your client mentions one of these or others, be sure to give them accurate information so as not to perpetuate a myth. Remember, clients are your best referral!
AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.