As an In-House Tax Strategist for a “Wealth Management” office, I needed the unique perspective of watching and observing the gyrations a wealth advisory team will go through in order to “land a client”. My job, obviously, was to bring useful services to the existing and potential clientele. Well, not exactly. I had the mindset of that purpose however in truth, it was just one more method for the Mugshot to get in front of another new prospect. In fact, that one purpose “get in front of another prospect” was the driving force in every decision. Think it over this way. A Financial Advisory Firm will make tens of thousands of dollars for each new client “they land” versus a few hundred dollars more for doing a better job with their existing clientele. You see, depending on how a financial advisory firm is constructed, will dictate what is most important to them and how it will greatly affect you as the client. This is probably the many reasons why Congress passed the new DOL fiduciary law this past spring, but a little more about that in a latter article.
Whenever a financial advisory firm concentrates their resources in prospecting, I will guarantee you that the advice you are receiving is not entirely in your benefit. Managing a successful wealth management office takes a lot of cash, especially one that has to prospect. Seminars, workshops, mailers, advertising together with support staff, rent and also the latest sales training could cost any size firm hundreds of thousands of dollars. So, since you are sitting across the glossy conference table from the advisor, just know that they are considering the dollar amount they need from the procurement of your assets and they can be allocating that within their own budget. Maybe that’s why they get a little ‘huffy’ once you let them know “you have to consider it”?
Centering on closing the sale as opposed to making it possible for an organic progression would be like operating a doctor’s office where they spend their resources how to usher in prospective patients; the best way to show potential patients exactly how wonderful they may be; and the easiest way for that doctor’s office staff to close the sale. Are you able to imagine it? I bet there could be a smaller amount of wait! Oh, I could just smell the freshly baked muffins, hear the sound of the Keurig inside the corner and grabbing a cold beverage out from the refrigerator. Fortunately or unfortunately, we don’t experience that whenever we walk into a doctor’s office. Actually, it’s quite the exact opposite. The wait is long, the space is simply above uncomfortable as well as a friendly employees are not the norm. This is because Health Care Providers spend their some time and resources into learning how to care for you since you are walking out the door rather than within it.
As you are interested in financial advice, you can find a hundred things to consider when growing and protecting your wealth, especially risk. You can find risks in getting the incorrect advice, you can find risks in getting the correct advice although not asking enough of the correct questions, but most importantly, there are risks of not knowing the real way of measuring wealth management. The most common overlooked risk is not comprehending the net return on the expense of receiving good financial advice. Some financial advisors think that when they have a nice office having a pleasant staff along with a working coffee machine they may be providing great value to their clients. Those same financial advisors also spend their resources of time and money to put their prospective customers with the ‘pain funnel’ to create the sensation of urgency that they have to take action now while preaching building wealth takes time. So that you can minimize the chance of bad advice is to quantify in actual terms. One of the ways to learn should you be receiving value for your financial advice is to measure your return backwards.
Normally, whenever you come to a contract with a financial advisor you will find a ‘management fee’ usually somewhere between 1% and twoPer cent. Actually, this management fee are available in every mutual fund and insurance product which investments or links to indexes. The trouble I observed repeatedly when i sat through this carnival act, was that management fees, although mentioned, were merely an after-thought. When presenting their thorough portfolio audit and sound recommendations, the sentence used to the unsuspecting client was that the market has historically provided typically 8% (but we’re likely to use 6% because we wish to be ‘conservative’) and we’re only planning to charge you 1.5% as a management fee. No problem, right?
Let’s discover why understanding this management fee ‘math’ is so important, and just how it might actually save your asjoir. This could actually stop you from going broke utilizing a financial advisor simply by measuring your financial advice in reverse. Let’s examine a good example to best demonstrate an improved way to look at how good your financial advisor is performing.