By Mike Gertsema, CEO & Wealth Advisor
Raise your hand if you like the experience of buying a car.
I don’t know about you, but I did not raise my hand and I bet a lot of you didn’t either.
However, I think the buying process is changing because of all the bad experiences people have had over the years. Technology now plays a major role in the experience of vehicle purchasing, as well as vehicle trade-in.
I like to do a lot of my research on what I want to buy from a series of different sources from the internet to friends and family. I try to take advantage of online tools to become an informed buyer.
Once I narrow it down to what I want and what I can afford, it comes down to where can I find the vehicle that has everything I am hoping for at the right price.
I usually buy a used vehicle instead of a new one because having a shiny new car isn’t a strong value for me. Vehicles depreciate in value and if you borrow money to buy the vehicle, we’re also paying interest on the money borrowed for a depreciating asset, which is adding insult to injury.
By the time the vehicle is paid for, it has high mileage, may start needing repairs, and is worth little to nothing. I realize we can’t live without a vehicle, but it’s one of those items that we need to understand gets more emotional than logical.
An Unfortunate Comparison
Unfortunately, the financial services industry gets compared to the auto sales industry sometimes – and sometimes for good reason.
It’s upsetting to hear when new clients have had bad experiences with other firms. Many people who purchased an investment are sometimes confused on why they said yes and wonder if it’s really what they needed, or if it was what the advisor wanted to sell them.
My advice: If you have an initial meeting with a financial advisor and find they start by asking how much money you have to invest and then start making recommendations, you should just get up and leave.
It’s an obvious tip that they care more about their income than your needs. I think it’s one of the reasons our profession gets compared to the car salesperson.
We’ve had the pleasure of meeting and working with a lot of new clients and they are shocked at the initial meeting because we discuss everything but the investments in detail. Most clients think we’re going to focus on the investments and go into a sales pitch because that’s how we’re paid in some way, shape, or form.
Our Focus as Wealth Planners
Instead, we focus on the more important issues that really concern them.
They want to discuss:
- Retirement income
- Retirement travel
- Social security benefits
- Pension options
- Different types of investments and risk
- Health insurance costs
- Life insurance
- Long term care insurance
- Income tax ideas
- Vacation homes
- Estate planning
- Gifting money to their children
- Charitable giving
- And, the list goes on.
Money is a tool that allows people to live out their life dreams.
We find that people are extremely happy when they realize the pressure’s off, and we’re not here to hard-sell them. Instead, we are going to put a complete gameplan together and keep everything organized and updated as their life changes.
The First Step in the Process – It’s about You
Once we have everything compiled, we bring our prospective client back to illustrate all the issues they wanted to discuss on our large touch screen or in a virtual Zoom Meeting. Here We can illustrate all the concerns and issues the clients have in mind, offering advice and recommendations along the way.
This overview step is vital because so many components of the financial plan are interconnected. For example, taking social security early without considering cash flow, pensions, income tax brackets, effective income tax rates, distributions from IRAs, and the age and benefits of the spouse could be a game-changer.
We’re able to weigh the pros and cons and collaborate with our clients on how they feel and move forward.
We can be proactive instead of reactive on income tax planning as well. Most clients struggle to understand their income returns, but with the help of technology, we’re able to break it down to simple terms, explain what the tax returns are telling us, what to avoid, and help us plan ahead. This helps to avoid those surprises come tax time.
When we get to investments, we’ve determined the rate of return needed for the success of the plan. We’ve also had the client complete a risk tolerance quiz to help guide us to portfolio construction. While making money is critical to our client’s success, managing the risk is just as critical, let alone the stress of volatile markets.
Our goal is to make the complicated simple, so everyone understands what’s going on and why.
The financial service is changing at a rapid pace and the financial advisors who are salespeople will be exposed and the fiduciaries will move forward and continue to grow.
A Fitting Comparison
I like to compare it to a doctor in the medical field because they will run tests before making recommendations.
If a doctor recommends a medication for example, they must know how it may affect other medications or other health conditions. Your financial health is no different because one move financially affects the other and without a complete picture of your financial health, it’s impossible to give good advice.
We are striving to make our industry better, creating more value above and beyond investments, educating and advising our clients, and providing proactive planning and collaboration.
Let’s talk about how to get your plan in place today to prepare for the future.