What about, what we need?

 In The Gratifying Harvest

Efficient Wealth Management has created a new coaching program called The Gratifying Harvest.  The program helps you enjoy your future by carefully harvesting cash flow from your lifetime of savings or preparing you to do so.  We thought a column devoted to this pleasing idea would be great.

Three times this week, I was reminded that financial planning is very misunderstood, by both households and investment professionals alike.  Not only is it misunderstood, it can also be a challenge to obtain financial planning if investment professionals dismiss it as unnecessary or compromise it with a continued focus on product sales.  When is the investment community going to realize that there is value in good financial planning? When they do, maybe, they will even learn what financial planning really is and how to deliver it in an unbiased fashion.

Earlier this year, I was approached by two different prospective clients that were seeking some financial planning.  I refused to help them.  I thought I was doing them a favour by refusing their business.  Both clearly needed financial, tax and estate planning, but since both had significant portfolios being managed by large investment firms, I suggested they go back to their investment advisors and obtain the services they needed.  Fees are already too high across the industry and nothing is gained by paying twice to obtain the needed services, the advisors through their existing fees and then us for our time as well.  In both cases these planning services were essential to do a proper job for these households, so we thought.  It seemed right to send them back to whomever they were already paying substantial fees to.

Recently, I saw them both again.  This is what they told me.  The first informed me that their large well known national provider, involved in mutual funds and private client services could not provide them with a comprehensive financial plan, since, they also had US citizenship and they were not familiar enough with the US tax and estate laws to adequately prepare one for them. Huh?  The company has hundreds of advisors, even an estate and trust department.  We are one local office and we were prepared and capable of doing one. Funny how, they did not offer to pay someone capable, reduce the monthly fees or of course suggest they go elsewhere with their investments.

The second informed me that their large well known brokerage company’s advisor, did up a quick financial summary for them and said they had enough money and were fine.  This without even being aware of the clients other assets held at other institutions.  When asked about some estate planning, the advisor informed them (and I am paraphrasing from a second hand conversation), “Don’t bother.  The people that do that for us are insurance advisors and you will just get a plan to buy insurance.  You do not need any insurance!”  Well at least they did not get sold some insurance they neither needed nor wanted.  I am not sure I can sort out the advisor’s reasoning about no insurance though, since sometimes you want insurance for business, tax or estate planning purposes.  It is not always needed but sometimes desired.   It would also reduce the assets managed by the broker…hum!   Anyways, I can tell you that this client is very much in need of a complete comprehensive plan, given there is a small corporation, investments at multiple institutions, charitable giving plans, a diverse group of heirs and most important, a lack of comfort with how to deal with all the issues.  Certainly, some education on why they are fine would have been an important start.  Again, no offer to hire competent help, just the same high fees.  Oh did I forget to mention?  They are also dual US citizens with assets that were in the US but were moved to the brokerage account recently.  I wish you could see my head shaking!!

Lastly, an ominous warning from the July 12th issue of The Economist under the subtitle Investing in Retirement. Stating, “What to do with your money when you retire…a question that fascinates the financial-services industry, which would love to get its hands on people’s retirement pots.” Furthermore, “A pot is not a pension…the vast majority…will try to convert their pots into income…on which they will struggle to get independent advice (many intermediaries get paid more for selling higher-charging products).”  The Economist finished with, “…translates into a licence to print money for the financial industry.  What people need is truly disinterested advice (columnist note – as in unbiased), so they can pick inexpensive, diversified products to keep them in old age”.

They also need access to comprehensive financial planning provided or promoted strongly, by the investment industry.

Our Gratifying Harvest notion.  Our clients are just like you.  Middle class families, with hard earned and hard saved retirement assets, that is essential to the enjoyment of their lives each year.  Understanding the utility and power of their wealth and how to access it well, brings great comfort.  Life has to be lived and FUNded.

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