Where Financial Advisors Drop The Ball

We see a lot of people who aren’t getting the kind of advice and service from their financial advisor that they should be. In a lot of cases, the advisor is only “managing the investments,” but not providing guidance in other areas. Let’s talk about some of the things that your advisor should be doing.

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Website: http://www.yourplanningpros.com

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Transcript Of Today's Show:

Speaker 1: Hey everybody, welcome back to Plan With the Tax Man with Tony Mauro. It is mid- to late November here on this episode of the podcast. Thanksgiving is just around the corner and we're going to talk about advisors who might drop the ball, or maybe in this case, drop the turkey. That'd be bad juju. You don't want to do that. So Tony, what's going on, my friend? How you doing? You all right?

 

Tony: I'm doing good.

 

Speaker 1: Yeah?

 

Tony: Getting ready for the holidays and Thanksgiving here. So-

 

Speaker 1: Yeah, I love Thanksgiving.

 

Tony: ... on my end.

 

Speaker 1: It's my favorite holiday, I think, Thanksgiving.

 

Tony: Oh, Thanksgiving is?

 

Speaker 1: Yeah. What about you? You got a favorite?

 

Tony: I like Christmas, but I do like Thanksgiving as well. I just like to hang out with the family and sit back and just know that the rest of the world pretty much is doing the same thing. And it's nice.

 

Speaker 1: True. I feel like Thanksgiving is Christmas-ish without the pressure. Christmas gets a little pressure-y. The gift giving and holiday parties and this, that, and the other. I think it's a little pressure-y. I kind of like Thanksgiving. It's the beginning, I guess, of that cycle. I think after Thanksgiving is when we start to feel the pressure, so maybe that's one of the reasons I enjoy it. That, and of course, let's be honest. The food.

 

Tony: Yeah. Well, I think this Christmas is going to be very much different because of the whole supply chain and people hoarding.

 

Speaker 1: Well, it's par for the course at this point.

 

Tony: It's going to be crazy, I think, this year.

 

Speaker 1: I mean, last Christmas was weird, no get-togethers. And then this Christmas is weird.

 

Tony: Yeah.

 

Speaker 1: We'll see. But anyway. Well, I guess that's maybe the world dropping the ball, if I want to use for a cheesy segue way there. But we're going to do that to get into our topic of financial advisors who, well, I don't know if drop the ball's a good term, but there's just a lot of people out there that aren't getting the kind of advice or service from their advisor, Tony, that maybe they should be.

 

Speaker 1: In many cases, I guess we tend to think of, or the general public tends to think of, an advisor as someone who just manages investments. But there's a lot of guidance in other areas that you do as a certified financial planner. You don't just manage the investments. There's a lot of other things. I got a list of some stuff that an advisor should be talking to you about. If they're not, maybe they're dropping the ball. I'll let you expand upon these, Tony. And if there's something I miss, feel free to chime in with it.

 

Speaker 1: Tax returns, obviously. Clearly, the show's called Plan With the Tax Man. You definitely review tax returns, but is that something that most or all advisors should at least be doing?

 

Tony: I think all advisors should be doing it to an extent, yes. And they may, at the end of the day say, "Look, you need to check with your tax advisor," especially if they're not a tax pro.

 

Speaker 1: Sure.

 

Tony: Some aren't and that doesn't mean that they can't advise you.

 

Speaker 1: Looking at things with a tax slant, right?

 

Tony: You got to look at it like that because everything revolves around tax. It really does. Everything we do. And so if they're just not doing that, I think that they're not giving you the full service that you're paying for because they should at least be able to recognize things that maybe you're overpaying taxes on or give you some ideas on how to cut them even if they say check with your tax advisor, if they're not that guy. And most of our clients' cases, I'm that guy, so it's just kind of natural for us, but they should be doing that, yes, because there's a lot of things on there you might be overlooking.

 

Speaker 1: Okay. And so that's one that can ebb and flow if they're not a tax professional as well, but they should still be looking at things through a tax lens and then, to Tony's point, referring you out if need be.

 

Speaker 1: Evaluating fees and costs seems like a no brainer. Every advisor should be doing this, but maybe sometimes brokers just aren't. They're kind of just, "Hey, I'm just transactional, so let me put you in X, Y, Z product." And they're not really taking a look at the fees and the costs.

 

Tony: Yes. I think that the client needs to look at that, but the advisor really should be transparent about this because there's no shame in me telling you, I get paid just like everybody else, every other advisor, "Here's what it is." And that way, you know how it is, you know how I'm paid. But at the same time, we've got to work to try to keep costs down so that we're not just basically decreasing our return, I should say, unnecessarily. So it is an important point. We make it a point to bring it up every year. Here's what our investment fees were in the last year. Here's the percentage. And they seem to still be in line and then let the client take it from there. I think it's something that both clients need to ask and then I think more advisors need to divulge.

 

Speaker 1: Well, depending on how they're getting paid, right, Tony?

 

Tony: Yeah.

 

Speaker 1: So if it's a situation where the advisor... If you do better, I do better kind of situation, then yeah, they're going to want to be keeping those costs and fees down as well because the more money they make their client, then the more they're doing as well.

 

Tony: The more they're making. Which is the case for asset based management, is that, you get a very small percentage, but does the advisor fee grow over time? Sure, when the sure portfolio grows, just like you said. You have a vested interest in that. And when it goes down, and there'll be times that it does, well, then the advisor shares in that some as well. Most advisors are moving that way. It used to be in the days where you never want to talk about fees because you didn't want to tell people, "Oh, my God. Look how much money I made. I really didn't even provide anything." And it's changed now. We're providing year-round service. Not only advice, but managing the plan, doing the investments, things like that. It's just something to be aware of.

 

Speaker 1: Okay. All right. So speaking of plans, since you brought that up, if we're talking about making sure that it's more than just managing the investments... Well, you do got to talk about income. Now, Tony, you work with people who are retirees, but do you also work people who are still working? Pre-retirees or even some younger people discussing and planning, we'll just say, income, period, is important.

 

Tony: It is important. And everybody we plan with, even if they're in their twenties or thirties, we're still taking them through a plan, a financial plan, to start so we have a roadmap. It may not be as complicated as somebody that's 50 or 60, but we at least are having conversations about why are we doing this, what's the end game and based on where you're at now, because you ask young people, they have no idea of what I want in retirement, but it gets them thinking early on. But you've got to have those conversations and if your advisor's not, I think you need to have them no matter what your age is, because that's where the value really comes in. It's really not managing the investments, the pros do all that. It's trying to keep you on track and making sure that you get to where you need to be.

 

Speaker 1: Yeah, definitely. And that way... Because you got to have the income, folks. I mean, the income is the outcome. So if you want retirement to be whatever you want it to be, without that flow of dollars coming in, you're not going to have the retirement that you want.

 

Tony: Yup.

 

Speaker 1: Number four, clarifying the target and/or the goal for your invested dollars. This is that whole put your money to work for you kind of thing, right?

 

Tony: It is. And like I said, with the last point, really is... A lot of people, especially if they're young, they just start throwing money into an account and it's supposed to cover everything. Retirement, emergency fund, kids' education. They don't segment it out. And you need to have that and the different goals, and I think the different funds, to accomplish those goals. The more you can keep it separate inside the big plan, the more clarity you're going to have on where you're at towards that target, rather than just throwing everything together and hoping for the best. That's something that a good planner's going to do for you.

 

Speaker 1: Yeah. Long gone are the days of throwing it in a coffee can and just taking it back out later on and thinking, "Hey, I've got all this money" because, especially right now, inflation is just eating away at that.

 

Tony: That's right.

 

Speaker 1: You want to clarify the target of what you want your dollars doing. You got your now dollars, you got your later dollars that kind of thing. That way that they're working as efficiently as they can for you. And that's all part of getting a good strategy in place with your financial professional.

 

Speaker 1: And then, finally, Tony, where advisors drop the ball, especially if they're really just more about accumulation, is there's virtually zero conversation about the family goals or even the legacy planning. So whether you're still working or talking about leaving things behind or whatever the case is, you're not even really scratching that conversation piece often with some advisors depending on, again, the type of advisor they are. That's that fifth piece that many people want to finish with when they're putting all this plan together is, okay, here's what we got, here's what might be left. How do I give this to my family efficiently?

 

Tony: Yeah. And this is more prevalent with people, I would say, at least starting to think about it, maybe 40, 45 and older. Even they don't have a real vision of that yet, but it's good to get them to start thinking about that. And of course, especially as you get a little older, in your fifties and then sixties, because it's so important to have all that so that as you age, number one, there's no pressure to be worried about it, that it's all set up and you know it's ready to go in case something happens to you. And eventually it's going to happen to all of us. That way, you can feel at ease, enjoy retirement, and know that your wishes are honored as far as that goes.

 

Tony: We spend a lot of time with our retirees, even besides just the legal stuff, the wills and the advanced directives and stuff. I think I've mentioned it before, we try to get them to do what we call a life book, meaning that... Something online that's going to be accessible by either spouse, that you know exactly what to do, where everything is at, all the way down to what you want said at your funeral. And then some of the goals after that. How are you going to live on one income? Is it going to be enough after the dust settles after all of that. Something I think everybody needs to think about before they're 70, 75, because you never know what could happen suddenly in your forties or fifties. It doesn't happen often, but it's out there. It's possible.

 

Speaker 1: Very true. Yeah. So these are some things advisors should be talking with you about. If they're not, if they're just talking about the investments only, well, then you might not be working with the type of person that you need as you're approaching into your golden years. So make sure that you're working with a kind of advisor that serve those needs.

 

Speaker 1: And of course, if you're already working with Tony, maybe you know someone who is not, and they're in a similar situation that you might have been at one time and they need to start talking with somebody who is looking at the whole picture, not just the accumulation of the money. Make sure you share the podcast with them.

 

Speaker 1: Of course, you can subscribe to the podcast, or anybody else can, by simply going to yourplanningpros.com. You can find it all there. There are a lot of good tools, tips, and resources at yourplanningpros.com. That's Tony's website there. He's been helping families get to and through retirement for 20-plus years here in the central Iowa area. He's an EA and a CFP. Of course, he has clients all over the place. Don't let the location hold you up, reach out to him if you've got some questions, subscribe to the podcast, get some help if you know you need it or if you think you might need it.

 

Speaker 1: And you should always check with a qualified professional before you take any action. So we'll get up out of here this week. Tony, thanks for hanging out, my friend. Have a great holiday. I hope you and the family enjoy your time.

 

Tony: Yeah, you do the same and will talk to you next month.

 

Speaker 1: Yeah and we'll see you in December here on Plan With the Tax Man with Tony Mauro from Tax Doctor Inc.

 

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