[?] Subscribe To
This Site

Things Your Financial Planner Will Not Tell You

1. Your financial planner or advisor is mostly an insurance salesman.

Financial planners or advisors earn their largest fees on insurance policies.

Insurance certainly has its place in your portfolio. However, your financial planner will most likely recommend that you place your entire portfolio into investments which repackaged but are actually just universal life or variable universal life policies.

Yes, there are hidden fees and commissions associated with the sale of these products. The more complicated and longer-term investments set the financial planner up to collect large management fees.

Larger financial planner or advisor firms may pay financial planners or advisors more for selling the firm's insurance and mutual fund products.

Your financial planner or advisor gets a residual payment in addition to his commission on most of these policies. As long as you own the product, the financial planner earns an override.

The huge commissions (80% or more) paid on a first year policy plus the residual incomes reaching as high as 10% each year mean that you better have a personal interest in the management of your money. With the huge potential incomes available, it is no wonder that many financial planners tend to find an insurance solution to every financial challenge their clients face.

2. A financial planner's main qualification is that he can sell.

The insurance industry is rife with conflicts of interest. Signing bonuses and higher commissions for initial periods of employment with a new firm lay the groundwork for the financial planner to sell you products that may or may not be what you need.

It is imperative that you know how your chosen financial planner is compensated so that you may determine if he/she has your best interests foremost in mind. You must be sufficiently educated and informed so that you can make responsible decisions and not leave the decision on how your money is invested entirely in the hands of the financial planner.

Don't forget the financial planner works for you. You hire him/her to execute your wishes (unless you intend to go out and get insurance and securities licenses).

The incentives that financial planners receive to sell an insurance companies policies often are so lucrative that the shine of gold may (and frequently does) alter subjective judgment. Do you get excited when your financial planner wins a fantastic vacation to a beautiful resort destination because he was able to convince you to buy a product that may or may not be the best for you.

While commissions are highest during the first month and first year with a new company, the financial planner strives to garner as much commission as possible before commissions drop. Financial planners don't want you thinking about these things or about their frequent sales contests.

No one objects to a professional being fairly compensated for services rendered. You can be sure the less you understand and the less you are informed; the more it will cost you.

The best investment that you can make is to get educated and acquire a better understanding of how to manage your money. Two things that will help you are right on this website. 1. Go to the Navbar, select Get Started, and follow the step by step directions that can help you protect and grow your 'nest egg'. 2. Read Ron Firmin's book, "Fire Your Financial Planner". Use the book as a guide while you gain an understanding of how to work with financial planners. No one is more interested in protecting and growing your portfolio than you are.

3. Your financial planner often puts you at way too much risk.

When I first started working with a financial planner, he assured me that the best policy would be to allow him to place my investment dollars in mutual funds. He was also quick to say, "You are in this for the long haul. Don't bother with looking at your investments too often. There are always ups and downs in the market."

Well, there is no way you can deny that but I can tell you that I did not need any help to lose money. I had already mastered that skill. At the very least, I chose the financial planner to protect and help me grow my investment dollars.

After several years and fearing the worst for my hard-earned dollars; I went to see my financial planner. His high rise office was in the big city about four hours distance from my home.

The warm, pleasant greeting of my financial planner still did not set me fully at ease. After a beverage together and exchanging some pleasantries, my friend went over to his desk and pulled my portfolio up on his computer.

He said, "Good news, Ron." That is just what I wanted to hear. After all, I had turned over fifty percent of my assets for him to manage for me.

He continued, "The market has lost over 38% - your portfolio has only lost about 30%." Now, I never claimed to be a mathmatic genius. But, I had learned about the Rule of 72 (determines how long it takes for an amount of money to double at a given rate of interest). I realized that I had not just lost a huge amount of money but I had also lost a lot of time when that money could be growing.

The quote of comfort for 'experts' is, "You have not lost any money until you sell. Hang in there and the market will come back. Look at these charts that show the decades long fluctuations in the markets."

It could be put another way - I say that the foregoing mindset is determined to lock in your losses. Do you know how long it takes to recover a 30% loss in your portfolio? It may not even be possible in a decade or more. (more on this topic in another report)

So, I replied to my friend, my financial planner, "You're fired!"

He said, "You can't fire me, Ron. I am your friend."

I said, "You're still my friend. You're still fired!

There are many investments that limit or mitigate your risks. That is why during the Get Started process you are helped to determine the level of risk vs. reward that meets your criteria.

It is your money, your PRA. You should be the one to determine how much risk you are willing to take. The percentage of your portfolio that you place in higher risk investments depends on a number of factors that a competent financial planner can help you with.

In spite of this, you must retain control of your investments. Ask plenty of questions and do research. Don't buy any investment product until you understand how it works. Don't be surprised when the financial planner seems pained that you ask 'too many' questions. He may even suggest that the small print is just there to satisfy legalities. He may say that there is no reason to read too thoroughly. I call that a 'clue'.

4. It does not take much to be a financial planner.

A few business licenses, a short five day course, a few fees, take a test - go to sales training and sell, sell, sell. Few financial planners are certified and even certification is no guarantee of competence.

To further complicate matters, there are some excellent financial planners who carry no certification. My financial planner is not certified but he leaves no stone unturned in being informed. Perhaps his best skill is that he listens to what his clients have to say.

Most financial planners never really learn real financial planning strategies. They don't have time because they have to reach their sales quotas if they are to continue to represent various companies.

That's it - that is all it takes to be a financial planner.

Remember, no one is more interested in the success of your personal retirement account, your own PRA, than you are. You are the only one who has no conflict of interest.

Am I suggesting that you need to become an economist, get a degree or get Series 7, 63 and 65 certified? NO! You spend a lifetime learning how to make money. Doesn't it make sense to spend some time educating yourself and learning how to manage your money. And, if you choose to work with a financial planner, you will be in a position to judge whether what he is offering to do is in your best interests.

Since I have made it my business to personally manage my PRA and use my financial planner as the employee he is; he is only here to execute my wishes. I often point him to new strategies that he has never heard of - he has learned to listen when I speak because I do a lot more research than he does. He also knows that if he doesn't listen, I will find someone else who will.

NOTE: Ron Firmin is a financial planning consultant. Ron does not sell insurance, stocks or any other financial product. If you wish to take advantage of current savings on 30 minute and 60 minute Custom Coaching Session; go to the Navbar and select Coaching. After having acquired your chosen session, select Contact Us and explain your areas of interest. Provide complete contact information and our office will be in touch with you to determine the best time to schedule your session.