Dec 192023

We read a lot today about seniors being taken advantage of by all sorts of scam artist and con-men. It is truly disturbing and a trend that law enforcement continually deals with.

Unfortunately, it has also been found in the financial community where brokers, agents, financial advisors and financial planners have also dealt in a dishonest or crooked way. It should not be tolerated by the financial community and breach of trust of the client or questionable integrity of any rep should be dealt with in a serious manner that would keep the reputation of the rest of the financial community in tact.

The first line of defense should be proper education of the senior community. If seniors are educated about some basic ideas and have the right questions for the financial advisors, the problems will be minimized. I would like to share some ideas that could better prepare seniors in rooting out the reps that should be leaving the business anyway.

Before I get to the strategies I would like to make a disclaimer. I do not believe that all financial advisors are bad. As a matter of fact, most of them are honest hard working people that are trying to build the same qualities that most of us want in our lives. Too many people want to throw out the baby with the bath water. Unless you want to become really educated in investments, tax law, asset allocation, economic theory and more really excited stuff like that, you should work with a trusted financial advisor. The real question boils down is how do you know if you have a good rep or not?

Before we continue I have a news flash. Everybody sells. A salesman by any other name is still a salesman. Everybody sells and is compensated based on how well he sells. If he gets an ongoing fee or a commission it doesn’t really matter. He is going to get paid! Otherwise there is no reason for him to be in business.

There are many “financial advisors” that explain they are different. They are not salesmen they are advisor. One local radio show host (a show he pays for by the way) has a saying, “Money looks better in your pocket than it does anywhere else.” Does he feel that way when it comes to his fees? Or is it only when another professional is trying to make a living? Rather than get into the Advisor – Salesman tug a war, let’s find out how to know if you have the right financial professional to work with.

A more important question than “How is he paid” is “Is this the person that I should hire?” If a financial profession does his job well, he should be paid well. And if not, why hire him? You want the best that there is working for you! And the best that there is, is never cheap!

To me it boils down to two main questions. Is this person’s integrity above question? And secondly, does he know what he is doing?

You must be fully and completely comfortable that this person has unquestionable integrity and is totally honest. You must know that if there is ever a question to your best interest or a higher payday for them that they will take your best interest 100% of the time. You must have a high level of trust for someone that you are going ask advice about your money.

If you have doubts about this persons integrity DO NOT give him your hard earned money. Listen to your gut. Do not minimize that little inkling or a funny feeling. DO NOT give your hard earned money unless you are completely comfortable that this person is completely honest in his business dealings. Far added measure, ask for references.

Now the problem is just because someone is completely honest and has a high degree of integrity does not mean that they know what they are doing. That leads us to our second question. Is this the person I should be doing business with?

It is much harder to ascertain competence than integrity. Start off by asking the financial professional why you should hire them. Ask them to explain their financial strategy. Ask them to explain how they come to their decisions. Ask them what their specialty is and why. Make sure their philosophy fits with your own. If they are speaking industry jargon and you don’t understand what they are talking about, ask for clarification. Understand how they work before you hire them. That doesn’t mean you should baby-sit their every decision or suggestion. Rather, before hiring them you should make sure that you are on the same page.

If their discussions are all about product and not about strategy, you can probably find someone better. If they cannot clearly articulate what they do different from everyone else, they are probably not focused enough. If they can’t explain how they look at money and how to allocate it they are micro thinkers not macro thinkers. Micro thinking, meaning thinking about a small part of the financial picture vs. Macro thinking, meaning how all the assets work in symphony is a tremendous distinction. You want someone that thinks MACRO. The discussion should include your assets and liabilities, your insurances and you future plans. They all need to fit together to create a synergy that will make them work better and harder.

It’s also important to find out if they have a specialty and if they use other professionals in their practice. If they do it’s a good sign, it means they have other specialist that they work with for the betterment of the client.

Make sure you discuss you relationship with them. How often will you hear from them? How often will you meet? What do you expect from them? What do they expect from you?

If this is done correctly you could have a long term smooth sailing relationship. If not, you could have a rocky or costly short term relationship.

There is an old saying good fences make for good neighbors. Really that’s about managing your expectations. Finding the right professional and managing those expectations can be the most rewarding thing that you will ever do.

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