In one of our recent articles, The Biggest Money Mistake You Can Make, we discussed
the fact that many people spend most of their productive time earning money and little to
none of their time on managing the money they have. We suggested that they either
learn how to manage their money themselves or seek out professional advice. (The
article can be viewed on our website - see link below.) The way we look at it is this: Just
because you are skilled in your profession and make a good living does not mean that
you are expected to be an expert in managing it. That’s like saying that you should be
able to be cure yourself of disease because you know your own body best. After all,
money management was never a mandatory class we had to take in grade school, was
it?
Unfortunately, many individuals are reluctant to seek professional advice for a variety of
reasons. Below, we’ve listed some of the most common reasons and how you might get
over each hurdle:
Overcoming emotions: Some people are ashamed of the state of their financial affairs
or feel guilty about letting their finances deteriorate. They are embarrassed to share the
details of their situation with a financial advisor. If you are in that position, you need to
understand that financial advisors are in the business to help people resolve their
financial problems. They don’t expect people to be perfect or to know everything about
managing money. The majority of planners we know have a true desire to help people
with their money problems and would never belittle or embarrass anyone about their
financial situation.
Worry about the cost: Many people are concerned about how much it might cost to
seek professional help. Costs vary significantly. This is an area you need to pay
special attention to. Some advisors “charge nothing” for financial advice. Beware of this
type of arrangement. These advisors make their money on other fees or commissions
and may or may not be qualified to give comprehensive financial advice. Others charge
fixed fees or hourly fees. Whatever the fee arrangement, make sure it is clearly defined
and get it in writing.
Let’s suppose an advisor wants $ 2,500 for a comprehensive plan. Are the financial
savings likely to justify such a fee? Often a good advisor can significantly reduce taxes
or expenses on one’s portfolio. Even a small reduction in taxes and expenses can result
in thousands of dollars in just a few years. A review of your insurance policies can also
be a potential way to save money. Advisors often help clients reduce their tax liabilities.
Not to mention the cost savings you can attribute to your peace of mind in planning for
your financial future. These are but a few ways a comprehensive financial plan can reap
significant savings.
Procrastination: Some people just keep putting things off. If you are one of them,
remember that each day you wait can be costing you significant savings in taxes,
investment expenses, better investment returns as well as a number of other possible
savings. A portfolio invested in holdings that carry high management fees can be
costing you hundreds, if not thousands of dollars and you may not even realize it.
Aristotle once said: “Well begun is half done.”
Afraid of getting bad advice: Some of you are perhaps worried about getting bad advice,
being taken advantage of or just don’t know where to look to find a financial advisor. To
start with, seek out a Certified Financial Planner®. The Financial Planning Association
website has a “Planner Search” function that can help you identify planners in your area
(www.fpanet.org). You can also visit the Certified Financial Planner Board of Standards
website for information on how to choose a planner (www.cfp.net). Both sites include
interview questions you can ask as you search for a qualified planner. We recommend
that you interview several planners before making a selection. Don’t be afraid to ask
questions!
Keep in mind also, some of the other benefits of seeking help. A financial advisor can
help you take control of your financial affairs and give you a feeling of empowerment.
They can help you clarify your goals and give you a detailed plan to accomplish them.
Hopefully, the information above will help those of you who need some financial advice
get over the hurdles that are currently getting in your way.
David C. Patterson, CFP® and Erin Patterson-Preston, CFP® are the owners of
Patterson Advisors, LLC, a fee-for-service-only financial advisory firm. Patterson
Advisors, LLC is a Registered Investment Advisor, registered with the State of Michigan,
helping clients in Waterford, Clarkston and Royal Oak, Michigan as well as other
Oakland County, Michigan communities . Visit www.pattersonadvisorsllc.com for more
information or call 248-674-2108.
Published in the Oakland Insider, August, 2008
Getting Over the Financial Advisor Hurdles
By David Patterson and Erin Preston (formerly Patterson)