Planning matters

5 (and one-half) Myths about Financial Planners

Unlike physicians or auto mechanics, financial planners have a hard time boiling down to a word or two that it is we do. Fixing hearts or repairing engines is something just about anyone can understand and appreciate. But building financial security is necessarily imprecise and subjective leaving folks unsure where to put us in the spectrum of valuable human undertakings.

Another problem we face is that we’re often the first of our kind ever encountered by the people we meet. Just about everyone has a doctor at the ready, and it’s a rare American who gets by without needing a mechanic. But financial planners are relative newcomers to the professional arena. While many people have already discovered the value of enlisting a financial planner, others may need one but don’t know it yet.

In the absence of widespread knowledge about financial planning and its practitioners, it’s inevitable that certain misconceptions exist. Here, we attempt to dispel some of those myths:

Myth #1: If you are not rich, a CFP® professional won’t work with you.

Unfortunately the fallacy that financial planners only work with the wealthy prevents a lot of people from asking for help. It’s true that some advisors take clients based on the size of their investment portfolio. Ask about this up front. If you don’t meet an advisor’s minimum, don’t assume there is no one who will work with you. Keep looking for those advisors offering advice on a different basis, such as hourly or for a flat fee to provide planning analysis. And although many financial planners focus on pre-retirees and retirees, it’s not just because they have a larger pool of retirement assets. It also happens that retirement involves the more complicated technical areas that CFP® professionals are trained in, such as portfolio management, taxes, and estate planning. Nevertheless, there are planners who aren’t waiting for you to become wealthy, but want to help you get there.

Myth #2: You have no consumer debt, you’re maxing out your retirement plan, and even saving some on the side, so you do not need a planner.

You don’t have to be in crisis mode to benefit from working with a financial planner . CFP® professionals not only cure financial problems – they, more importantly, help prevent them. Establishing a relationship with a planner when things are going well may in fact be the ticket to keeping your financial life running smoothly.

Myth #3: Why hire a planner when there are online tools and financial websites practically for free?

The expression “you get what you pay for” has relevance here. While many of these tools and sites offer helpful information and broad guidance, they cannot personalize advice to fit your unique circumstances. They cannot make eye contact with you, which many people find prerequisite to trusting the advice they receive. Finally, they cannot exercise judgment or discernment, which only a CFP® professional with years of practical experience can do.

Myth #4: The best way to find a trustworthy planner is to ask your friends.

While it’s fine to get a name from someone you know, you still need to do some preliminary research on the planner’s experience, education and training before hiring. You will want to know if the planner is bound by a professional code of ethics and whether he/she practices as a fiduciary, putting your interests ahead of his own. Don’t forget, many people hired Bernie Madoff, no questions asked, because he worked with others in their religious and social circles.

Myth #5: Be sure to ask a prospective planner about his or her investment performance.

Many planners cannot answer this question, not because they are being evasive, but because the question is irrelevant. Yes, financial planners help clients with investing, but the performance of those investments can be as different as the clients holding them. A CFP® professional is not the same as a
money manager, who invests money according to a specified specialty or style. Rather, they will build portfolios based on individual clients’ needs and objectives. In some cases, a low-risk portfolio is called for; in others, a high growth portfolio. A better interview question would be: “How have you helped your clients invest to achieve their goals?”

One other misperception of planners might be added, but it’s not entirely a myth.

Many people believe that financial planners are pretty much alike; if two people say they do financial planning, then they probably offer the same services. But anyone can call themselves a financial planner, without having to meet legal or regulatory requirements or standards. This means that a professional who does little but sell specific financial products, and another professional who reviews and advises on all aspects of a client’s financial life, can both be “financial planners.” With CFP® professionals, however, the consumer can count on the fact that they are uniquely qualified to help individuals pull all their finances together, solve financial problems, and make a plan to achieve their financial goals. They are also required to provide their financial planning services as a “fiduciary” – acting in the best interest of their clients. In other words, CFP® professionals are more alike than they are different, in that they are held to the same high standards of education, experience,
examination and ethics.

The day will come when we can simply respond “I am a CFP® professional” when a stranger asks about our occupation and the story will be fully told. Until then, we are happy to elaborate about the services we provide. Please refer to our website, johnsonbixby.com, or visit LetsMakeaPlan.org, which has a variety of resources to educate consumers on financial planning and help them find a CFP® professional that’s a good fit.