5. Personal Finance Advisor/CPA/Insurance Agent
"There's been some new tax laws passed which will affect you since we last met; we'll go over in a moment. So the good news is that your accounts have been doing well this past year and you're up 14% on a portfolio that's almost 40% fixed-income. Bad news: you're looking at tax bill of over $18,000. We should rotate more of that fixed-income allocation to the municipal bond ladder I mentioned yesterday on the phone, and rebalance your equity portfolio by selling off some of your real estate exposure."
The quarterback to your financial life, a good personal financial advisor is a resource and consultant for your individual investment options and tax-smart tactical planning of your wealth; an individual whose advice can add literally millions of dollars in net worth to your family over the course of a lifetime and ensure your next generation (or charities) are free to receive the fruits of your earnings on your own terms.
There are actually three professional subcategories covered here, and while some financial advisors do hold an insurance license and wear multiple hats, you may very well have three individuals to cover this segment of your life. All that said, the principles outlined below hold true regardless of whether you want an all-in-one CPA/Investment/Insurance guru, or multiple advisors.
Mediocre financial-advisor/client relationships are product-driven; vendors in crisp suits peddling pre-packaged products with little regard to your individual circumstances and goals. They are the punching-bag fodder for those who make a living sneering at the financial services industry (Suze Orman, index-fund zealots, Motley Fool, et al.), who hold them up as straw men to knock down, offering simplistic, strident slogans/proclamations as if they were universal laws ("Never get permanent insurance - buy term, invest the difference!" "Never pay a load!") from their websites and TV specials.
I did mention I was biased in my disclaimer, yes? Har.
In my opinion, the only advisor worth having is one who can work as your advocate - a trusted partner with the breadth of experience you can count on to help you navigate through the maze of insurance/investment/tax laws and options and offer tailored solutions to your individual needs.
So how do you evaluate a financial advisor? A few things can help separate the cream from the chaff of cold-calling stock-jockeys vying for your attention.
- Advocate vs. Salesman When you meet with a potential advisor for the first time, does he show up with a product to pitch, before he knows anything about you? High-functioning relationships with a financial advisor should be driven by the client's needs, not the 'hot product of the month.' Would you trust a doctor who has a prescription with your name on it for you to sign, the moment you walk into his office?
The client-advocate model takes a completely different approach; initial meetings are about understanding needs and sussing out your priorities, both stated and unspoken. It's a delicate dance of na2 nie1 that relies much on observation, empathy and good understanding of human nature before any discussion of solutions are broached.
- Professional designations How do you make sense of the blizzard of acronyms that trail the name on those business cards? Is a CFP better than a CLU? How does a ChFC stack up against a CSA? Each three/four-letter title represents the completion of a set of continuing-education coursework focused on specific issues. The best visual summary I've seen on the topic can be found on this matrix. An advisor with higher-level designations is, at the very least, formally recognized as being educated on the subjects in their specialization and, ceteris paribus, better-informed than his less-credentialed peers.
- The Company You Keep How do you find such an advocate-advisor amid an ocean of smooth-talking peddlers, waiting to place you into some fund you don't understand? Ask the most successful friends/colleagues you know who they use to manage their wealth. Do keep in mind that established advisors often have account-size minimums that may be beyond your means; like any other individual on this list, it may take many interviews with multiple candidates before you find the one you can choose to keep ... but the benefits are well-worth it.
6. Medical Doctor
"Dr. Anderson? Look, this has to stay just between you and me, but I went to med school with Hal Anderson, and while he's a perfectly nice guy, he is a better schmoozer and marketer than he is surgeon. I know he's famous, what with all those ads he runs on the radio, but we're talking about elective surgery on your eyes; I know all the surgeons in the area and sent my wife to Dr. Jonas Lee. He's expensive, but there's nobody else I would trust with the procedure."
A mediocre CPA/financial advisor can cost you money.
A mediocre lawyer can cost you legal trouble (or more money).
A mediocre doctor can cost you your life.
There's an old two line-joke that bears repeating:
Q: What do you call the person who graduates at the bottom of his Medical School class?
Now, how would you like this Doctor to be slicing up your eyeballs with LASIK, or attempting to perform life-saving surgery on your infant son? Joke's not so funny any more, is it?
In any profession, insiders have unique access to assess each other's ability. Think about the people you know in your own profession - those whose skills you respect, those who are merely competent, and those bumbling fools you would not trust even the basics functions of your job. That bell curve exists in every field, but the stakes are substantially higher when it comes to issues related to your irreplaceable body. Like it or not, the hard truth is: not every doctor is equally competent.
Physicians are human, and like anyone else, they are loathe speak ill of their own kind; it is surpassingly unlikely that your personal doctor who runs your annual physical will be willing to share his frank evaluation and opinion of his fellow docs. Having a trusted friend/confidant M.D. who is not your personal physician is absolutely essential to shorten the path between your medical concerns and the one specialist that those 'in the know' would entrust their own family's lives to.
To be continued ...