Listeners to my radio show may have heard me say that traditional financial planning is the source of much of the distress that people feel in their financial lives. Why is this the case when it seems so logical to hire a planner to escape our financial difficulties? The root of the problem lies in the way planning is carried out.
First, it is often used as a marketing tool to sell financial products. The reason? To generate commissions on the recommendations. The individual working with the planner generally has little way of knowing whether the recommendations are in their best interest or the best interest of the planner. They also have little way of knowing whether the products could have been obtained elsewhere at lower cost.
The majority of planners actually work for a brokerage firm or a broker/dealer and don't really work for the client. The brokerage firm actually controls what products can be recommended.
Second, the traditional planning process does little to educate investors and help them deal with the instincts and emotions that are at the root of the poor investment returns that they experience. How can you tell if your advisor is helping you avoid these problems? Simply take the "Investor Quiz" on this website. Answering these questions, I believe, is the key to having true peace of mind in an uncertain world. If you would like a second opinion about your investment choices, call me for a complimentary initial consultation.