If You Want A Well-Manicured Front Lawn, Don’t Hire A Financial Advisor.

I'm consistently frugal which can be a blessing and a curse. Maybe you can identify with someone who is vigilant about saving a dollar. I’ve been blinded to the consequences of prioritizing cost over quality many times and it took the wisdom of an avid spender to change my thinking.

The benefit we derive from an experience or an item is separate from the price we pay, but we often confuse value with cost.

Our front yard was the scourge of the neighborhood, and I was confident I could make it beautiful. Armed with You Tube videos, a 10% discount at Lowes and relentless determination, my short project began on a Wednesday evening. We had people coming over Sunday afternoon, so I had to be done on time.

After several setbacks that night, I was at it early Thursday morning—confident it would be done before dinner. That Friday evening, I skipped dinner with friends, brought out some extra lights and worked until my body quit on me, around 10pm. Saturday morning, I bought more tools, rented some equipment and dug deep to find what fumes remained of my determination. It was buried by heat exhaustion, patches of sunburned skin and hands full of blisters. Each day, my fiancé Sara was there to support me and gently encourage me to hire professionals. But I remained certain that I could do just as good a job as them.

It was late Saturday night when it finally hit me…I’m still not done and it’s possible that someone else might have done a much better—and quicker job, with a lot less pain and frustration.

Sunday, when the alarm went off, I cursed that lawn but had to finish what I started. When I was done, just before our friends were to arrive, we had a Frankenstein-esque patchwork of a front lawn and I needed a long nap.

This experience forced me to learn some hard truths:

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There are things I do very well.

There are things I can do well in my mind, but not in reality.

It’s Wise to leverage professionals to do what I should not do myself.

When is something worth paying for? When the sum of its tangible and intangible value to you and your family exceeds its cost.

Three questions to keep in mind: 
     What’s your time worth?
     How much would you pay to avoid or reduce stress to you or your spouse?
     What is your happiness worth?

     “A cynic is somebody who knows the cost of everything and the value of nothing.” –Oscar Wilde

The value we deliver to our clients far exceeds investment advice and is one reason they choose to stay with us. We've developed and refined a process that puts all the pieces together for you as your life unfolds and your needs evolve—so together, we never lose site with what Matters and what we can Control.

At FWI Wealth Management, our focus is getting to know you, starting with your values and dreams, so our recommendations are purposeful.  We counsel you in all areas of your financial life—your goals, risk management, estate planning, active investment management, tax planning, business planning and even financial literacy for your children and grandchildren. We treat our clients as part of our Family.

Shrewd Decisions Part 3 – What should you pay your advisor?

In the third and final part of our Shrewd Decisions series, we explore how to fairly pay your advisor. In this day and age especially, we all want to be shrewd and intelligent in terms of how we invest our money. The value of expert financial advice, custom tailored to help secure the financial security of you and your family can be significant. At the same time, you’re not looking to single handedly buy someone else’s beach house. How do you fairly compensate your advisor for the value they provide?

What are you getting?

That’s the million dollar question. See our articles, What is Financial Planning and Choose the Right Advisor For You, for an in depth look at these important issues. At a high level, it’s important to realize there is a tremendous variation in what people who call themselves “financial planners” actually do, which is why choosing wisely is an important step.

You’re paying for their expert advice, which must be based on your values and goals, unbiased and delivered timely. It’s not about piece-meal implementation like whether you should buy Apple or open a 529 for your child or buy a life insurance policy. It’s about making comprehensive, big picture decisions that will give you the highest likelihood of accomplishing your goals and realizing your future aspirations, balanced with managing risks so you can sleep soundly at night.

Myth: Investment management is comprehensive financial advice.
Truth: Investments are often the first thing we think about because they’re sexy—they’re flashy. However, investments are only one piece of a comprehensive financial plan.

Myth: All advisors are held to the same standard.
Truth: Certified Financial Planners (CFPs) are held to the highest standard. We are judged by the “Prudent Expert Rule” while traditional brokers and insurance agents, many of whom call themselves advisors, are held to a much lower “Suitability Standard.”

Myth: All financial advisors are created equal.
Truth: Many advisors are great salespeople and tell a fantastic story. However, what makes someone a worthy to be your trusted advisor is experience, credentials and shared values.

Myth: All financial plans are focused on your best interests.
Truth: Many “financial plans” are actually sales tools, carefully designed to sell you something.

 How much are you paying?

This can be more difficult to determine than it sounds. When you negotiate a price for a new car—that should be it… But it’s not. The dealer slips in things like a dealer fee, documentation fee, delivery fee, title fee, registration fee, dealer prep fee, or others, all on top of the price you thought you agreed to. If that seems like dirty business, many “financial advisors” are more sophisticated about how they disguise their fees. Be especially cautious with advisors who claim to be salaried and do not get paid based on what their clients do.

Examples of disguised compensation:

High expense ratios (can exceed 2%)
Mutual fund 12b-1 fees
Revenue sharing between mutual funds and advisors (never disclosed)
401(k) or 403(b) plans usually pay a portion of fund expenses to the provider
Proprietary investments often pay the advisor bonuses (closely guarded secret)
Bonuses for meeting sales quotas
Insurance and Annuities have the highest fees, which you often don’t see
Mutual fund load fees (front and/or back end up to 5.75%)

To eliminate all uncertainty, it’s best to go with a fee-based advisor. You’ll know exactly what you’re paying and it may qualify as an itemized tax deduction. Nothing hidden, no surprises.

How much should you pay?

Ultimately, it depends on what you’re getting. Many firms separate planning fees from investment fees, so again it can be a little murky. You’ll have to first understand all the fees you are paying, then consider what services your advisor provides to you and how much benefit you get from them. Advisors are not all created equal. Vetting their qualifications and how much they care about your family’s success should be a primary consideration in determining value.

Our clients are all highly intelligent. They could organize, plan, execute and maintain their financial matters on their own. One reason they choose to partner with FWI Wealth Management is because it frees them to focus on their passions and their family.

We believe the fee you pay should be a win-win for all parties, driven by the value delivered. It should be a single fee that is easily calculated and clearly indicated on your statements.

At FWI Wealth Management, we charge a single, transparent fee and provide our clients unbiased advice across all parts of their financial life. We focus on the lifetime of the relationship. We’re not asking our clients to buy something, we’re asking them to buy into something. The value we deliver to our clients far exceeds investment advice and is one of the main reasons they choose to stay with us. We've developed and refined a process that puts all the pieces together for you as your life unfolds and your needs evolve—so together, we never lose site with what Matters and what we can Control.

Shrewd Decisions Part 2 – Choose the right advisor For You.

Welcome to part two of our three part series, Shrewd Decisions, where we’ll explore how to choose the right advisor For You. There are thousands of advisors out there and we are not created equally. Have you ever had a bad experience with a doctor or have to hire a second tradesman to fix someone else’s mistake? You’re making decisions that will impact the lives of you and your family. This point that cannot be understated. You deserve expert advice and can’t afford to rely on anything less.

It’s important to first appreciate how important your choice of advisor is. You’ll share your experiences, hopes and dreams, fears and feelings. They need to get to know you deeply and will be involved in many important life decisions. If you’ve ever had an advisor who didn’t take a sharp interest in you and your family—you had an inadequate advisor.

“For You” is a critical part of the equation. You are unique and choosing the right advisor is not unlike dating… You have minimum requirements to get a conversation started but beyond the tangible factors is who feels right, who do you trust and who makes you feel safe.

Myth: Advisors do not get emotionally connected with clients.
Truth: You deserve an advisor you feel comfortable opening up to. Advisors who fail to develop an emotional connection are missing a key element of a successful relationship.

Myth: Investment management is the core of a good advisor relationship.
Truth: Your values, goals and aspirations are the core of a good partnership with an advisor. All recommendations, including investments, should be made with the sole intention of improving the likelihood of achieving your goals.

Myth: Your financial plan and investments should be similar to your friends.
Truth: You are unique, with your own set of values, beliefs, goals, concerns, etc. Your plan must be custom tailored to your situation.

If you don’t have a high level of confidence and trust in your advisor, it’s time to reevaluate the relationship.

The more direct part of the equation is making sure your advisor has the necessary expertise, experience and held accountable to the highest standard of care. Below are links for two external resources to help you evaluate advisors:

http://www.letsmakeaplan.org/cfp-pros-their-expertise/selecting-an-advisor

http://guides.wsj.com/personal-finance/managing-your-money/how-to-choose-a-financial-planner/

Questions to ask your potential financial advisor:
     How do you get paid and what am I paying for?
     Are you accountable to a fiduciary standard?
     Is it possible you might leave and I’ll get assigned to another advisor?
     Are you a Certified Financial Planner (CFP®)?
     Do you recommend any proprietary products?

At FWI Wealth Management, we believe in goals-based financial planning, that begins with getting to know you far beyond a risk questionnaire. We are fee based planners who treat our clients like Family. Learn more about what we do and how we do it.    

Shrewd Decisions Part 1 – Do you need a financial advisor?

At some point, you’ve probably considered working with a financial advisor. Most people I’ve met over the past 16 years in finance have expressed thoughts like: “I’m smart, have been managing my money all my life and nobody else will ever care about my money as much as I do.” While I agree, such an important decision is worth additional consideration.

In this three part series, we break down an involved decision process into bite size pieces. As we step through each part, you’ll learn industry secrets, dispel some myths and ultimately make an informed decision.

Do It Yourself vs Hiring a Professional

You may not need a financial advisor—not everybody does. It’s a very important and also a very personal decision. Let’s take an honest look at this decision and some common myths.

I know how to frame a wall and hang drywall. However, I haven’t built any walls in my house because a professional will do it better, faster and prevent me from getting yelled at. Just because you can do something doesn’t always mean you should. Your family’s financial security is as high a priority as it gets and the value of doing it right cannot be understated.

Our single greatest enemy is emotion. Fear and greed are powerful emotions that often leave behind pain and regret. Television exploits our emotions to keep us tuned in, so they can sell advertising time. Consider the last time you made a decision while you were angry or scared. Now ask yourself if you would make the same choice today?

“It is more easy to be wise for others than for ourselves.”  --François Duc de La Rochefoucauld

One myth I hope to dispel is that smart people don’t need an advisor. The most intelligent and wealthiest people around the globe surround themselves with advisors—people with skillsets they don’t have. They recognize the value of leveraging experts—for both their knowledge and their freedom from emotion. However, they don’t blindly follow their advice. Instead, they consider it to make an informed decision. Even professional athletes have coaches.

“To accept good advice is but to increase one’s own ability.” – Johann Wolfgang von Goethe

How much time did you spend planning your last vacation? Compare that with the amount of time you spent thinking about how to save on taxes or planning for retirement over the past year? Other questions might be: Is your estate plan adequate, are your goals defined and realistic, are you comfortable with your risk management plan, do any of your investments overlap and how often do you monitor your total family portfolio?

If any of these questions give you pause, what are you willing to do about it? When you get sick or break a bone, you go to a doctor. If your car breaks down, you bring it to a mechanic. But when it comes to money, we’re bombarded by people like Jim Kramer, Suzie Orman and countless others who sell us on the concept that it’s easy to take care of it ourselves.

Some questions to keep in mind:
     Do I have the time?
     Will I actually spend the time on planning for my goals?
     Do I have the ability to thoroughly research issues to make wise decisions?
     Will I maintain my plan and portfolio vigilantly?
     Can I do it as well as the experts?
     Would it help to have impartial guidance?

I’ll bet that you are intelligent and could learn how to take care of everything yourself. All of the clients we work with are highly intelligent and successful people who could figure things out on their own. However, they realize that their time is better spent focusing on what they’re best at and on enjoying life.

It takes wisdom and courage to seek advice in areas we are not expert or able to address without emotion. It’s far more productive to focus on our strengths and leverage others in areas we’re not so strong. Focus on what you’re best at and passionate about.

At FWI Wealth Management, we help people leverage their time, to spend it on what their best at. We are private wealth advisors, primarily for a select group of very successful business owners and professionals... who, among other things, strive for a work-optional lifestyle--who want to face the future with anticipation rather than apprehension. So we have developed and refined a process that puts all the pieces together for our clients as their life unfolds and as their needs evolve. 

What is Financial Planning

Financial Planning is this term that is thrown out into the public eye but which very few people actually agree on the true definition.

We’ve found that most clients, at first, mentally-account for the term financial planning in terms of implementing something:  a budget, investments for your portfolio, applying for life insurance because you’re expecting or determining how much you’ll need for that beach house you want to enjoy while in retirement.  Yet, this acceptance that you’re going to implement something also sets the stage for being sold something that may, or may not, actually help you. 

Most advisors use the term “financial planning” in their marketing activities because it’s the current buzz word.  So the question remains:  “What is Financial Planning?”

Financial Planning should represent the culmination of your entire situation:  personal, financial, family, religious, etc. incorporating all of aspects of your life which are meaningful and might impact your financial situation.  Your plan along with the projections generated by it, coupled with your advisor’s recommendations, should provide the framework for all of your financial decisions.

Your plan should be customized to your situation.  You are unique and have your own goals, values and priorities.  On the surface, your friend’s situation is similar to yours until you dig deep and uncover the many differences which separate you.  As people, we may have commonalities but, we’re all uniquely individual; your financial plan should be as well.

True financial planning starts with developing an understanding of who you are, what you’re about, your family, goals, dreams and aspirations.  It should account for your values and priorities, your professional status and trajectory, the people directly tied to your life and many additional factors. 

Your actual plan should provide you with a detailed (current) projection of how you’re doing.  It should also acknowledge that your situation will change over time:  your goals, values and priorities will change; so the projections have limited long-term benefits without being monitored and updated. 

Your plan should talk to you by saying: 
     “Here is where you are compared to where you want to be.”
     “These are the things which you should consider changing, and this is why.”
     “Here are financial concepts to consider which will help you to improve your overall situation.”

True financial planning is not a set of pre-built solutions for you to implement. 

True financial planning backs into ideas, guidance and recommendations only after analyzing your situation in totality.

As a financial professional genuinely concerned about my profession’s public perception, I am deeply concerned about the mentality that financial planning is merely the implementation of something.  It is my humble opinion that your financial plan is much more important than individual, sales-based implementations.  It’s the key to unlocking your potential for success.

At FWI, we believe that financial planning, and each client’s financial plan, provide the framework from which we make purposeful decisions for our clients.  Our plans are developed using our clients’ goals, values, priorities and desires…not products.  Our plans are individual, unique and thoughtful. 

We strive to ensure that our clients are comfortable with our ideas, guidance and recommendations because we take the time to understand their complete financial circumstances.  Our clients know that we’ve done the analysis based on their goals, values and priorities.  The partnership we share with our clients is founded in mutual understanding - to help bring them to a better place.