The First Day
If you are like me this time of year you are wondering where all the money for political ads comes from. Furthermore, you are wondering if that money would’ve been better spent on…well pretty much anything else and had a higher return on investment. All these advertisements caused me to think about how a lot of people’s relationship with their financial advisor is a lot like their relationship with their favorite politician. The best day of the relationship is day one. Yes, that’s right, it’s all downhill from there. Time becomes the enemy of your relationship because it just further demonstrates how neither of you were on the same page. Not just your expectations were misaligned, but your core principles were misaligned.
?In an election year an example of this is a campaign platitude that sounds good which you’ve always wanted. The person on the stump in front of you finally seems to “get it” because they are speaking directly to you about issues which affect your family. You are excited about said candidate and see them as representing you. The only problem is that with time you come to realize that what they were mentioning required changes to the budgetary process which requires buy in from both Houses of Congress and millions of competing interests. And so the political cycle continues.
Like I mentioned earlier, this happens in wealth management as well. If you aren’t aligned with the right team for the right reasons, time is your enemy because it has a methodical way of breaking down the air castles you’ve built. Don’t get me wrong, you are talking to the fount of positivity. Just ask my wife when the football season for Nebraska rolls around! But, just like me, eventually time reveals things you overlooked. Blocking and tackling don’t tend to get better as the season drags on and you if find yourself praying every time the punt team takes the field…might I suggest having one of your kids tell you how it turned out. The sad part is that if you partnered with the right team, the opposite is also true! Time and opportunity just reveal more and more how you made a wonderful decision. It becomes incredibly obvious.
If you are reading this and wondering if you are in a good relationship or not, I’ll give you a few signs you may want to consider as well as questions you may want to ask.?
Service
Yes, I know, this is basic and it pains me that I need to start here, but, if you’ve partnered with the right folks, they are easily reachable. They have time for you and they are eager to serve you. On the flip side, if your calls or emails are not promptly returned, that probably doesn’t bode well for other details you’ve outsourced to them. Perhaps you should ask how many clients they have and why they are interested in growing further?
The same person who told you that they provide boutique, customized service starts to surprise you with higher tax bills than you’d like, longer response times, and perhaps you can’t even get ahold of someone when you call to set up your next review meeting. Slowly what time and opportunity are reminding you of is that if someone has been in the business for 25 years and they “only take on 6 clients a year” and have “only lost a couple”, they now have 150 other clients with family members each vying for their time. You do the math. The best interaction you were going to have with them was your first. It’s all downhill from there from a service perspective.
Planning
Coming from the Planning side of the house, this is a pet peeve of mine. Planning is something near sacred when done correctly. It speaks to some hopes and dreams that people haven’t even admitted to themselves or each other. Another sure-fire sign that your first meeting was your best meeting, is when your financial plan is never again referenced after you’ve signed on the dotted line. A truly caring relationship, reviews that plan and ensures that it is up to date. This is a sign that you are partnered with someone who cares about your “return on life” and the investment of your time as much as your return on financial investment.
Investments
If you hear things like: “We are trying to mirror the S&P” or “we’ve outperformed fill in the blank index”, it may be time to walk out the door. Imagine anything remotely close to that being included in your eulogy. Or maybe envision that being written on your tombstone. “He outperformed the S&P”. You get my point. I would hope that your financial satisfaction does not rest upon keeping up with the Jones but has to do with your unique vision in life for yourself and for your family. What kind of income is going to be needed for that vision? What kinds of companies are you comfortable owning and for how long? I won’t belabor this now, but viewing yourself as an owner vs a participator is a key distinction.
Tax Planning
If you are partnered with someone who has never read or does not ask for your tax return, your first day may have been your best day. To be fair, if the trend continues and no one ever reads your tax return, you’ll be blissfully unaware of how tax inefficient your portfolio is. This should give you some comfort at least, however negative. If you are not understanding why this is a big deal, just think logically and walk through the following exercise. Calculate how much money you need today. How much you are receiving in income from work consulting, social security etc. Then calculate how much in dividends and interest you are receiving each year and then calculate how much in required minimum distributions you’ll be required to take out some day. If you are not watching this, it quickly adds up and can throw you into a new marginal tax bracket, not to mention, cost you needless tax expense for income that you didn’t need. Which further means you forever lose the horsepower of those tax dollars on income you didn’t need.
Estate Planning
If you are partnering with someone who has never asked if you have an estate plan, this will eventually become an issue. If someone cares about you, they are looking for ways to help you plan ahead and do the hard work today so as to avoid inconvenience tomorrow. Walking through your estate plan with your attorney and ensuring that your financial plan and estate plan are working cohesively is something I think you should expect.
On the other side of all this is the positive experience. The one that either by intent or by sheer providence is based upon an alignment of first principles and a shared vision for the world. Because this relationship is built on a stable foundation, it only gets stronger with time. The urgency, care, concern and initiative of the team you are partnered with will continue to astound you. You may hear that they got out of bed at 3 in the morning to fix something in your plan or check on something for you because they thought of it. This team thinks about your welfare even when you are not aware enough to think of it yourself. Because well, they care about you at a shared foundational belief level. The trust that you feel for them is reciprocated with gratitude that is palpable. If you don’t currently have this type of relationship, I pray you find it.?
I’m doing my best in bringing all this up in such a way that it is somewhat positive and somewhat humorous even though it is deadly serious. Any of the things that I’ve outlined above could cost you untold dollars not to mention the pain of doubt, fear and buyer’s remorse along the way. Please choose to partner with someone who you are aligned with at a core principle level. You’ll be glad you did!?
That’s all for this week. Thank you for reading. Please reach out with questions and remember that I’m wishing you and your family continued Truth, Beauty and Goodness on the read ahead.
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