By Mike Gertsema, CEO & Wealth Advisor
There are a lot of investment firms out there and they all say the same thing in different ways.
They all say they have great customer service, get to know you, your goals, and they put a plan together. Some firms may tout their expertise in investments, combined years of industry experience, their holistic planning approach, their long-term approach, and how long their firm has been in existence.
Firms advertise words like their trust, integrity, wisdom, experience, longevity, superior approach to investing, peace of mind, and the list goes on.
They’re forgetting one very important ingredient and that’s YOU! Is your financial advisor providing value for you?
Your Advisor Should be About You
While most firms promote all the above and their goal is to do all the above, the question remains: Why does the public perceive the industry so badly and have trust issues regarding the industry? According to the American Association of Individual Investors, 65% of consumers don’t trust financial services to some degree.
Part of the problem is that it’s perceived as an industry and not a profession. The industry is trying to sell you something and that’s why regulators are getting involved with terms like Best Interests Standards. It’s part of a movement to change the industry with Reg BI which establishes the standard of conduct for broker-dealers and associated persons when they make a recommendation to a retail customer.
The industry has a noble goal, but if a broker/advisor is getting direct compensation or commission for selling an investment product, it will continue to struggle with the public perception.
I think as we progress, the financial services industry will become a profession, with trained individuals that have designations to verify qualifications for advising, have compensation more in line with serving the customer’s needs, and provide much more value than the broker of the past that has a license to sell.
What is an RIA?
So as the industry struggles with its image, the RIA profession is moving forward at a very fast pace. A Registered Investment Advisor (RIA) is a person or firm who advises individuals on investments and manages their portfolios.
RIAs have a fiduciary duty to their clients which means they have a fundamental obligation to provide investments advice that always acts in their clients’ best interests. They may charge per hour, a flat fee per customer, on assets under management, or a combination. They generally provide a comprehensive financial plan, give advice and recommendations, and keep in touch with you on a regular basis to update you on your progress and notify you of changes that may affect your plan.
3 Unique Qualities
To differentiate our practice from the RIA pack, Gertsema Wealth Advisors tries to cultivate three unique qualities:
- We provide Value Above & Beyond Investments
- We Educate and Advise Our clients
- We Provide Proactive Planning and Collaboration, not Reactive Selling
Above and Beyond Investments
When working with clients and prospective clients, our conversations begin with the client’s goals. Most clients or prospective clients expect us to go into the investments from the beginning of the meeting but soon discover that there is so much more to investing than just money.
If the goal is retirement, we discuss what the client is currently living on today, net of all taxes and deductions from their paycheck. Our goal is to replace the income you’re currently living on and continue with your current lifestyle. Most clients find that they’re actually living on 60% to 70% of their gross income.
Next, we discuss Social Security and all the options available on when to start taking their benefits. We then go to pensions if they have any, plus additional income in retirement such as rental property or inheritance. We also go over the previous year’s income taxes to determine the income tax bracket and the effective income tax rate.
Educate and Advise
The next step is to illustrate your financial plan digitally so that you can see the results of the basic information.
We also start the process of illustrating all the variable options of taking Social Security benefits. There are so many options available to consumers that most people are not aware of and once they’re given the information on their specific situation, it’s much easier to make a good decision.
We can also help our clients understand options with their pensions, non-qualified assets, tax-deferred investments, IRAs, qualified assets, and required minimum distributions (RMD) from their qualified assets at age 72.
It’s helpful to illustrate to clients the impact on the distribution amounts and the income tax liability coming down the road. This is the time we discuss taxes on qualified assets in their lifetime and for their beneficiaries.
Legacy Planning
Eventually, we discuss with clients what happens to their investments after they die and what we should be doing now to optimize the future.
Many times, when we illustrate the estate distribution at death, clients are appalled at the income tax liability they’re leaving to their beneficiaries and want options because leaving Uncle Sam part of their legacy is not part of the game plan.
Long-Term Care
The next concern is what if we live too long and need skilled care? In some cases, clients are self-insured and, in some cases, there is a need to fill the gap if there’s a cashflow shortage. Nobody wants to go to a skilled care facility and prefer other alternatives, so planning for a cashflow need in the future, without over-insuring is important.
Do you realize up until now, the investments are a number needed within your plan, just like the rest of the information? It’s important for clients to understand that making investment decisions separately from the other decisions can be detrimental to the success of your game plan.
We Provide Proactive Planning and Collaboration, not Reactive Selling
Our final step completes the unique picture of our approach as financial advisors providing value for you. It’s to provide proactive planning, collaboration, and not reactive selling.
We will always continue to add value beyond the investments, educate, and advise, but proactive planning is the real game-changer. Your plan was not completed as a once-and-done event to sell you something. That’s why the brokerage industry is struggling with its image. Your plan has to change with what’s going on in the economy, tax law changes, and as your goals change in life.
It’s all about YOU! As your advisor, when we see opportunities to enhance your plan, your investments, your strategies, tax savings ideas, we will proactively meet with you and collaborate with you, your CPA, or your attorney to move you forward.
Your success is our success – as you do better, we do better. It’s not all about expertise in investments, combined years of industry experience, holistic planning approach, long-term approach, and how long their firm has been in existence. It’s about you and your success!
Get in touch today and let’s start the conversation!
For a comprehensive review of your personal situation, always consult with a tax or legal advisor.
