MONEY 401(k)s

What Bill Gross’s Pimco Departure Means for Your 401(k)

The people who tell companies what retirement-plan investments to offer employees are questioning the value of the giant Pimco Total Return bond fund.

Bill Gross’s sudden departure from Pimco and the Total Return Fund he ran for 27 years was the last straw for Jim Phillips, president of Retirement Resources, a Peabody, Mass. firm that advises 401(k) plans with $50 million to $100 million in assets. He’s advising clients to head for the exits.

After 16 straight months of outflows and a 3.5% return over the past year, worse than 75% of its peers, the $222 billion Total Return Fund is failing Phillip’s standards when it comes to meeting the retirement needs of his customers.

“We do not have ongoing confidence in the way the fund is being managed,” Phillips said. “We are recommending to clients that we replace this fund with another one.”

Philips said he joined a conference call Monday with Pimco chief executive Doug Hodge and some of the company’s portfolio managers, but said the conversation “doesn’t change any actions that we have planned.”

About 27,000 of the largest corporate 401(k) plans in the country had money in the Total Return Fund as of the end of 2012, according to the most recent data from BrightScope, which ranks retirement plans. The roster includes Walmart’s $18 billion plan, the largest in the country by assets, as well as Raytheon’s and Verizon’s.

Total Return holds $88.3 billion of the $3 trillion in 401(k) assets listed in BrightScope’s database of more than 50,000 of the largest plans, the biggest mutual fund in the database.

Walmart didn’t return calls, and Raytheon and Verizon declined to comment for this article.

Phillips isn’t alone in his dissatisfaction with the fund — investors have pulled $25 billion from Total Return Fund so far this year. But a bad year that began with a public falling out between Gross and top deputy Mohamed El-Erian in January and has now seen the Pimco co-founder quit is causing many 401(k) plan consultants and advisers to put the Total Return Fund on their watch lists, and in some cases start replacing it.

Though companies usually make decisions about where to invest their retirement funds during investment committee meetings, which typically occur quarterly, Gross’ exit could prompt companies to have meetings or calls sooner than scheduled, said Martin Schmidt of H2Solutions, a Wheaton, Ill. consultant for 401(k) plans with assets from $150 million to $4 billion.

“I have sent out emails to clients telling them that we need to start looking at alternatives,” Schmidt said. He said he hasn’t heard from anyone at Pimco.

Once an employer decides to switch a fund out of its plan, it can take three to five months to make the change and give employees the required 30-days’ notice.

Jump Ship

Gross’s new fund, the $13 million Unconstrained Bond Fund from Janus Capital, is unlikely to be the destination for any funds that decide to jump ship on Total Return, given that it’s only been in operation since May and has produced a negative 0.95% return since inception, according to Morningstar.

“We have to see at least a three-year track record and we actually prefer five,” said Troy Hammond, president and chief executive officer of Pensionmark Retirement Group, a Santa Barbara, Calif. adviser that serves over 2,000 small 401(k) plans across the country.

There is also the question of whether Gross will have the same level of support and resources at Janus as he did at Pimco.

“If Bill were leaving with the top 10 people from Pimco, like Jeffrey Gundlach did when he left TCW, that would be different,” said Mendel Melzer, chief investment officer for the Newport Group, a Heathrow, Fla. consultant to institutional investors, including 401(k) plans with assets between $20 million and $1.5 billion. “But this is just Bill Gross leaving on his own, and it is hard to say that the track record he accumulated at Pimco should translate into the Janus fund.”

Melzer is advising clients to see how the new Pimco team does with the Total Return Fund, which has been on Newport’s watch list since earlier this year.

“We will keep it on a very short leash,” Melzer said. “If it does not improve in the next two quarters we will look at alternatives.”

MONEY Financial Planning

Why Financial Planning Needs More Religion

In God We Trust on a coin
iStock

Acknowledging faith and spirituality helps people better understand their financial goals — and stick to them.

As part of my getting-to-know you interview with new clients, I ask about their faith. Most are caught off guard. “Why do YOU care?” was one client’s response.

Such a reply comes with good reason; my clients hired me to talk about money, not religion. But there are many advantages to discussing spirituality with clients before we address their finances.

Know Thyself

Spiritual thinkers from Socrates to John Calvin advocated the importance of introspective familiarity in the pursuit of wisdom. Certainly, in the financial realm, the client who understands why he behaves the way he does will be more successful in achieving goals. Asking him to articulate the spiritual beliefs that drive him is a great exercise for him as well, even in cases where those beliefs are simply, “I don’t practice any sort of spirituality.”

If you don’t practice your own spirituality, or you simply don’t want to talk about spirituality with clients, a discussion of values can be an effective start to the relationship. Everyone has values, regardless of their stated faith or religion. Even old Ebenezer Scrooge valued wealth, frugality and financial independence. My clients receive a list of 140 common values from which they select the most important. I then have them narrow the list down to 20, then 10 as they look at themselves in a completely new way.

Integrating Faith into Financial Plans

As many advisers have learned by experience, it is the long term that will make or break a client’s financial goals. When our assets serve a larger purpose, we experience a deep inspiration and motivation over the long haul. By incorporating the big picture into our planning, we have better success with helping clients implement behavior changes. Rather than saying, “You need to spend less next month, and every month thereafter,” we can include a client’s faith to motivate a greater level of intentionality: “I know you want to be able to provide XYZ for ABC. That will be much easier if you spend less in the short term.”

Putting money in its place

Maybe money shouldn’t be the key ingredient in our financial decisions. Where strong values are present, ideally our financial life will reflect them. When your money is in service to your values, it becomes a supporting cast member of a show where your values play the leads.

In a fast-paced, credit-loving society, it is easy to let money guide our decisions. We make risky investments in hopes of large payoffs with money we can’t afford to lose. We take jobs that pay well but require such dedication of time that we begin to lose touch with the people we love. We constantly seek “more” without taking the time to be grateful for what we have.

But when values take the lead in our decision-making, our behavior finally changes for good. Investments no longer cause insomnia, jobs support a worker’s lifestyle, and gratitude becomes a regular part of life. Clients will appreciate an adviser who cares for the whole person and advocates that kind of wellness.

I have one client who took a different view of money; she hated it. Despite tremendous earning potential, she considered wealth the cause of greed in this world. In what she deemed acts of faith, she continually put herself in positions to earn very modest amounts. Is she wrong? That’s not my place to determine, but I do have a responsibility to help her understand her default reactions so she can evaluate whether or not they reflect her core beliefs.

I knew she was a Christian, and her upbringing took place in a notoriously upper class town. I suggested she examine her religious teachings for more detail on the topic of wealth. She eventually decided that her attitudes don’t reflect the actual teachings of her faith. She read of biblical figures who used the power of their wealth to serve God and in so doing, mightily improve the lives of others.

My client’s entire financial plan changed once she acknowledged her attitudes toward money were more reflective of her teenage response to her home town than they were an outcropping of her faith. She has accepted a new mantle; while avoiding monetary entrapments, she wants to make more money so she can use it to improve the lives God brings into her path.

It’s About Our Roots

I liken our spirituality to the root system of a tree: It gathers nutrients and supports the weight of the tree. In nature, what we see above ground only partially represents the root structure we can’t see. Everyone has roots, and ignoring those root systems can lead to ineffective attempts to grow.

As much as we hate this fact, we grow in leaps and bounds when we suffer. For those who dedicate their lives to a higher purpose, even life’s pitfalls present growth opportunities; we learn to grapple gracefully and walk out of those pits with our soul intact. I frequently mention to my clients my own financial struggles due to two chronically ill family members. While I wouldn’t want to relive those life setbacks, their spiritual benefit seriously outpaces the dollar signs. Where the prudent financial plan would create such stability that you never find yourself in a financially precarious position, there still is beauty in those down times, and they serve to forward our purposes for being in this world.

Certainly, knowing your client’s faith is not a shortcut; there are as many varieties of beliefs among denominations as there are types of trees and root structures. But it helps you know the right questions to ask. Perhaps you are wondering why there is a disconnect with a longtime client of yours. When you look at her, could there be something underground that will give you a better understanding of the whole person? How much more effective could you be if you brought your advice under the umbrella of her faith and spirituality?

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Candice McGarvey, CFP, is the Chief Story Changer of Her Dollars Financial Coaching. By working with women to increase their financial wellness, she brings clients through financial transitions. Via conversations that feel more like a coffee date than a meeting, her process improves a client’s financial strength and peace.

MONEY financial advisers

Why Financial Advisers Should Discuss Their Own Money Problems

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FineCollection—Getty Images

Talking about medical bills, divorces, college funds, and past money mistakes can help an adviser and client connect.

Recently, a prospective client of financial adviser Robert Wyrick Jr. wanted to know exactly how Wyrick handles his own finances.

Wyrick, of MFA Capital Advisors in Houston, wasn’t fazed; he had plenty to say. Seven years after spending more than $1 million for his wife’s costly and ultimately losing battle against ovarian cancer, he still had managed to start his own company and make sure his two kids had enough money for college. He felt confident he could share the bad and the good, so he answered the prospect’s questions, even sharing screenshot of his investments. And Wyrick won the client’s business.

“I say, ‘Why not?'” said Wyrick. “If a person is sitting there with their life savings, and they’re interested in talking with an adviser, everything should be on the table,” he added.

It can be tricky for an adviser to introduce his or her own point of view and experiences into the conversation — after all, the focus needs to remain on the client — but advisers say dropping a veil or two goes a long way to building trust and the client relationship.

The key is making the conversation about the client, and picking up on cues. Some clients may want to know everything, down to the last mutual fund sale, while others may just want to hear that they are understood.

David Edwards, of Heron Financial in New York, lets prospects and clients know that he went through a divorce, and that he has kids in college. He said it helps to establish commonality.

“People feel very vulnerable,” he said. “They are in their underwear. And anything I can do to get into my underwear with them goes such a long way to easing the conversation.”

Of course, it’s easier to share financial successes, such as fully funded college accounts, than it is financial missteps, but Rick Kahler of Kahler Financial Group in Rapid City, S.D., has learned to be open even about those. He often emphasizes to his clients that most millionaires have more financial failures than less wealthy people.

“I tell my clients, ‘My job is to make every mistake I can possibly make, so you don’t have to,'” he said. Kahler, who’s 59 and been in the business over 30 years, said he used to think it would be bad to admit missteps to clients, but he’s changed his mind. “Now I’ve done a 360. It comes with the gray hair.”

Emily Sanders, a managing director at United Capital in Atlanta, has also found that sometimes, sharing a personal story can help a client avoid a misstep.

When she was married to her ex-husband, for example, Sanders contributed less to her 401(k) than her husband did to his, because she of course did not guess the marriage wouldn’t last. When she sees women making the same mistake, she gently refers to her own experience and suggests a more practical course. Relating her own experience makes it a friendly conversation, not a scold, Sanders said.

“It comes down to being a genuine person,” Sanders said. “Even though I’m a financial adviser, I’m not perfect.”

MONEY financial advice

Why Won’t Advisers Disclose Their Investment Performance?

Prospective clients want to know how good a financial adviser is at investing, but information about returns can be incomplete and misleading.

Some financial advisers don’t mind sharing information about the performance returns they have pulled in for clients. Those numbers, nonetheless, may come with a caveat.

Clients of Jim Winkelmann, an adviser in St. Louis, Mo., can request a free performance report through his website. It lists details about six model portfolios including their ten-year annual returns, and year-to-date returns.

But a warning in bold, red letters reminds clients that little to nothing can be learned from past performance. “Do not base decisions on this information,” it says.

Winkelmann, who oversees $130 million in assets, is among a minority of advisers who share their investment track records. Yet some financial services professionals believe the practice should be more common because it can help prospective clients determine if an adviser will do a good job.

Some advisers, nonetheless, say they are skittish because of a maze of rules and guidance from the Securities and Exchange Commission and state regulators that make advertising tricky. The Financial Industry Regulatory Authority, Wall Street’s industry-funded watchdog, also warns on its website against advisers boasting “above-average account performance.”

Regulators typically prefer, but do not require, that advisers who advertise returns follow the Global Investment Performance Standards, the king of performance guidelines, say securities industry experts. This set of principles helps advisers calculate and report results. The group that developed the GIPS standards also recommends that advisers hire a reputable, independent firm to verify those figures.

While using GIPS is optional, advisers who do not use it may soon be at a disadvantage because it will be harder to distinguish themselves from competitors, said Michael Kitces, an adviser in Washington and industry blogger.

But the steep price tag — roughly $5,000 to $10,000 to put a system in place and hire staff — is keeping some advisers away, Kitces said.

Instead some advisers use their own calculations. But those can mislead investors or land advisers in hot water with regulators. Some advisers, for example, may showcase only the years of their best results.

Clashing Viewpoints

Many advisers avoid performance advertising, but not because of the rules or GIPS expenses. Rather, they do not believe the figures are an accurate reflection of their client portfolios. That is especially true of advisers who offer financial planning services and who must often work with some assets clients already have, said John Clair, an adviser in Midlothian, Va.

Some types of assets that advisers can get stuck with include retirement plans that offer poor fund choices or mediocre employer stock the client wants to keep, Clair said. Those investments can skew returns, which would make them of little value to potential clients, Clair said.

Other factors that can also sway performance returns include the wide range of investment goals and risk tolerances among advisers’ clients, said Dave O’Brien, another adviser in Midlothian.

What’s more, overall performance numbers alone do not explain two important strategies that may be boosting returns: an adviser’s ability to reduce tax and transactions costs, O’Brien said.

Clair and O’Brien both have software that lets clients track real-time performance of their individual portfolios. But advertising historical track records is more suited to hawking a product, such as a mutual fund, instead of comprehensive advice, said O’Brien.

“We’re providing a service that’s unique to each client,” O’Brien said. To the layman they may seem the same, but they’re not.”

MONEY early retirement

It’s Time to Rename Retirement

Senior doing yoga on beach
Image Source—Alamy

People change their minds — a lot — when it's time to stop working. Let's acknowledge how flexible retirement can be.

Some clients dream of retiring early. Others would like to work forever if they could. And a third set of clients…well, they’re on the fence.

Let me tell you about one of my clients who falls in that third category, and what my experience with him says about retirement.

When John and his wife (I’ll call them John and Jane) became clients of my firm two years ago, they were both in their early 50s. John, who had been retired for eight months, wanted us to evaluate whether he would be able to stay retired comfortably. Jane, who was still working, planned to stay at her job for another five years.

After crunching the numbers and running through several scenarios, we found that John — and Jane, too, if she wanted to — could retire immediately and most likely not have to work again.

The joy in the room was palpable as John described all the things he wanted to do with his time: Spend more time with his aging parents and his college-age daughter, spend more time fishing, and manage his real estate investment properties.

Fast-forward six months later. John called to let us know that he was going back to work for the same company from which he had retired. “One myth I’ve found out: You think you’re going to catch up on all those projects you’ve put off,” he told us. “You don’t.”

So we revisited John and Jane’s financial plan. Of course, more income made their situation look even better. John felt satisfied and happy to have his old routine back.

Ten months later, we got another phone call from John. He had changed his mind. Once again, he decided he was ready to retire. So we revisited the plan another time. Again, it was all systems go.

“Man, you just made my day,” said John. “No, I take that back. You just made my year!”

Sometimes, like John, we don’t know what we truly want. We grow up thinking we will work as hard as we can, so we can reach our golden years and retire to a life of vacationing, fishing, biking or fill-in-the-blank. And then, like John, we realize we’re not so sure.

For many retirees this is becoming more common. Having time to truly dissect your desires often helps to further clarify your true passions and what fulfills you on a deeper level. Walking through options can help provide peace of mind through these transitions. In today’s world we are seeing more and more of this type of trial-and-error decision-making about retirement. Retire for a while, only to go back to work, and then retire again so you can have control of your time and do things you truly enjoy.

Retiring these days is really just gaining the freedom to do what you want, when you want. It could be part-time work, volunteering, starting a business, or, in John’s case, going back to your old employer for a while.

Going forward, maybe retirement should be renamed “flexibility,” since that seems to be a more appropriate description for the way retirees are actually treating it. So right now, I think I will go spend some time planning my own “flexibility.”

——————–

Smith is a certified financial planner, partner, and adviser with Financial Symmetry, a fee-only financial planning and invesment management firm in Raleigh, N.C. He enjoys helping people do more things they enjoy. His biggest priority is that of a husband and a dad to the three lovely ladies in his life. He is an active member of NAPFA, FPA and a proud graduate of North Carolina State University.

MONEY financial advisers

Why Financial Planners Have Such a Hard Time Explaining What They Do

Jumble of wood letters on background
Milos Jokic—Getty Images

Everybody has a good idea of what a CPA or a DJ does, but what about a person who says, "I'm a CFP"?

We financial planners have all been there. At some point in a conversation — it could be at a cocktail party, a networking event, or an airport terminal — someone asks you, “So what do you do?”

You share your well-crafted 30-second infomercial explaining what you are and what you do. It’s just vague enough so that it elicits a follow-up question from the other person about your work. But when you say, “I’m a CFP — a certified financial planner,” chances are you get a puzzled look. Saying “CFP” doesn’t clear things up; it makes people more confused.

Other professionals, such as CPAs, attorneys, and even DJs, can simply state their profession. Period. The people they’re with then assume they’re qualified to address any topic related to law, taxes, or music.

It would be great if the CFP mark inspired such instant faith in our expertise, but it doesn’t. And why? Part of the problem, I think, is that we ourselves are creating confusion.

While some of us might hold the CFP mark, we also call ourselves “financial advisers,” “wealth managers,” “investment managers,” “certified retirement specialists,” or maybe even “college specialists.” The list goes on and on. End result: Confusion.

From a marketing position, it might be considered brilliant to keep what we do sufficiently vague in order to elicit more interest. Once someone expresses interest in gaining a better understanding of our work, we can dive right into determining if the person’s needs are in line with what we have to offer.

But that strategy, I believe, does very little to build the profession. In most people’s minds, a profession’s title should clearly convey exactly what the person does, even if that professional has a specific area of expertise. As a practicing CFP professional, I often inform individuals that I am a “CFP” followed by “certified financial planning professional,” followed by my area of expertise. By the time I’m at 32 seconds, the person receiving my infomercial is still asking, “So what is it you actually do?” Clearly I need to work on my 30-second delivery.

But if I were to start by informing individuals that as a CFP, I help people organize their finances by following a six-step process, which involves first establishing their goals and the scope of our engagement; next gathering all of their financial documents…well, you get the point: The cocktail party would be over before I could even get around to talking about my obligation to act in clients’ best interest.

Without a doubt it will be a challenge to educate the public on what we as CFP professionals do, and to be consistent enough that people have a greater understanding of the profession. This will happen, but it will take a lot longer than a 30-second infomercial.

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Frank Paré is a certified financial planner in private practice in Oakland, California. He and his firm, PF Wealth Management Group, specialize in serving professional women in transition. Frank is currently on the board of the Financial Planning Association and was a recipient of the FPA’s 2011 Heart of Financial Planning award.

MONEY financial advisers

Help! How Do I Break Up With My Financial Adviser?

Here's your chance to give your financial advice in the pages of MONEY magazine.

Did you ever want to be a personal-finance advice columnist? Well, here’s your chance.

In MONEY’s “Readers to the Rescue” department, we publish questions from readers seeking help with sticky financial situations, along with advice from other readers on how to solve those problems. Here’s our latest reader question:

We feel guilty about it, but we’d like to replace the financial adviser we’ve had for 30 years. How do we tell him and do this with the least anguish?

What advice would you give? Fill out the form below and tell us about it. We’ll publish selected reader advice in an upcoming issue. (Your answer may be edited for length and clarity.)

Please include your contact information so we can get in touch; if we use your advice in the magazine, we’d like to check with you first, and possibly run your picture as well.

Thank you!

To submit your own question for “Readers to the Rescue,” send an email to social@moneymail.com.

To be notified of future “Readers to the Rescue” questions and answers, find MONEY on Facebook or follow MONEY on Twitter.

MONEY Financial Planning

Why Financial Planners Should Be More Like Hairdressers

140904_ADV_Hairdresser
Valentine—Getty Images

If cosmetologists have to be licensed, why not financial planners?

In Massachusetts, where I work, if you want to be a cosmetologist, you need a license. To get that license, you need two years of supervised work experience, and you need to take a practical exam.

No special license exists, however, for financial planning as a separate profession.

Recently, I and some of my colleagues from the Financial Planning Association visited Capitol Hill in Washington, D.C. and the State House in Massachusetts to advocate for better recognition of holistic financial planning as a profession.

In meetings with legislators and aides, we talked about how the financial planning profession as a separate discipline isn’t well defined. We spoke about how individuals who perform such services are overseen by a number of regulatory bodies. We explained that the public often doesn’t understand that planners aren’t specifically licensed as such.

The legislators were surprised to hear this. And when I’ve raised the subject with some of my clients, they’ve been just as surprised.

People assume that financial planning — in its most comprehensive form, helping clients manage all elements of their financial lives, from budgeting to retirement and estate planning —is governed by formal professional standards in the same way that CPAs and attorneys are.

To be clear, many elements of the financial planning process have notable regulatory oversight. Activities such as providing investment advice or selling insurance or investment products are all regulated.

And on the surface, having a Certified Financial Planner credential would seem to signify that a financial professional is practicing a specific profession, “financial planning.” Most of us in the financial industry, however, know that holding the CFP mark doesn’t necessarily mean that an individual is providing truly comprehensive financial planning for a client. That would require inclusion of all elements of the financial planning process, from goal-setting to implementation to tracking a plan’s progress.

Providing only one or two elements of the financial planning process — say, just recommending investments — doesn’t qualify as full-scale financial planning, even if you have the CFP credential.

I happen to be a financial planner who also is licensed to sell certain kinds of financial products. These are two separate parts of my job. When I’m working with clients, I make clear what “hat” I’m wearing at any given time, whether it is as their financial planner or as their broker. These are not the same thing.

I can imagine this isn’t always easy for my clients to follow what this really means to them. Most people think their financial professional is acting in their best interests. And really, when you are trusting what is sometimes your life savings to another person, why wouldn’t you expect that level of care? I know most of my clients have a high level of trust in me to do the right thing for them.

But being trusted may not be enough; what may be more necessary is to be trustworthy. It means trusting that I will take their best interests first, over my own. I would prefer to be specifically licensed as a financial planner, so when I’m providing comprehensive financial planning my clients understand the differences even better.

So the conversations are getting out there about what can be done to bring better recognition and perhaps regulation of the profession of holistic financial planning. The end goal is to help the public better understand distinctions among financial professionals and empower them to make the choices that best suit their needs.

This is all a work in progress, and I suspect will never get 100% agreement on what’s best for the public. But we have to keep trying so that our clients are well served by a profession they understand to be one.

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Stuart Armstrong, CFP, is a member of the Financial Planning Association Board of Directors.

 

MONEY Estate Planning

When Tragedy Strikes a Young Family

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Fuse—Getty Images

A cancer diagnosis prompts a financial planner to reflect on the fragility of life and the importance of preparing for the worst.

I have a client who is 39. He’s married and has two young children. He has an extremely successful career. He and his family are really hitting their stride.

One day he started to feel unwell. Eventual checkups led to a diagnosis of cancer. His wife called me on a Saturday morning to discuss the shock of what they were going through, and to get some basic sense of what to expect next, financially.

There’s no way to prepare yourself for this kind of devastating news. Brené Brown discusses this eloquently when she talks about “foreboding joy” — the sense we sometimes have, when things are going well, that something terrible will happen to us or someone we love.

This mental rehearsal for the worst-case scenario doesn’t make it any easier when we get tragic news; instead, it gets in the way of our truly feeling joyful and present in the moment right now.

What can give us a lot of peace of mind is financial preparation — the knowledge that our families will be taken care of if something happens to us. Here are some important elements of that planning:

  • Life Insurance: If you have young children who are depending on your income, a good 20- to 30-year level term policy is a solid foundation to help support your family through the children’s school years.
  • Disability Insurance: Being injured or sick and unable to work is often more financially catastrophic than death, since your expenses have likely increased to deal with your treatment, but your income has gone away. A good disability policy through your employer or through a private insurer is great protection, since it will provide at least part of your income while you’re unable to earn a living. This coverage is more expensive than life insurance, since it is far more likely a person will become disabled rather than die early, but disability insurance has substantial benefits.
  • Emergency Fund: A baseline amount of cash is the protective foundation to any financial plan. This isn’t because cash is such a great deal, since returns in savings accounts nowadays are minimal at best. Emergency funds are a great deal because they allow us to weather financial storms — for example, covering waiting period before the benefits on a disability insurance policy kick in — and ultimately to take advantage of opportunities when they present themselves.
  • Wills, Living Wills, and Powers of Attorney: If you have young children, this is essential. The issue isn’t if you or your spouse die; it’s if both of you die, since those kids will inherit life insurance proceeds, retirement plan benefits, and more. If you and your partner both get run over by the proverbial bus, you need to make provisions for who will take care of your children. You should make that decision, and not leave the courts to decide if you’re not around. Living wills allow you to state your end-of-life choices; while never easy to carry out, they always provide a level of peace to families who know they’re carrying out their loved one’s wishes.

A few weeks later, I had lunch with this couple. The husband was about to have surgery. “If I don’t wake up,” he asked, “what’s going to happen?”

It was the best of a bad situation: He had insurance. They had an emergency fund. They had the necessary end-of-life and estate-planning documents. Were he to not pull through, his wife and children would be in a position to try to find a new normal. (In fact, he did pull through, and he’s working on his recovery.)

The most important thing for any patient with a long-term illness is to focus on his overall health and mental outlook. Having financial plans in place allows a patient to set other worries aside. He can tell himself, “In the worst-case scenario, my family will be all right. Now I can focus on ‘What can I do to be well?'”

All our days are numbered. The question is, can you be present for the time that you have? The right financial plan can ease the way.

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H. Jude Boudreaux, CFP, is the founder of Upperline Financial Planning, a fee-only financial planning firm based in New Orleans. He is an adjunct professor at Loyola University New Orleans, a past president of the Financial Planning Association‘s NexGen community, and an advocate for new and alternative business models for the financial planning industry.

MONEY financial advisers

How to Be Nosy About Your Financial Adviser’s Finances

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LM Otero—AP

You probably want to know how rich your financial adviser is. Here are some better ways to pry about his or her money.

What’s your net worth?

We financial professionals think nothing of asking clients this question. If the tables were turned, though, and clients or prospective clients asked the same question of us, how would we respond?

Every now and then this issue comes up in conversations among financial planners. Some advisers think their net worth is none of their clients’ business, any more than doctors’ cholesterol levels are any business of their patients.

Others are concerned that a single number like net worth is incomplete information and can even be misleading. Knowing a financial professional has a net worth of, say, $5 million doesn’t necessarily mean the person is a trustworthy or capable financial planner. Net worth tells prospective clients nothing about where the money came from. The planner may have inherited it, won the lottery, made it through a business other than financial planning, earned it from commissions on poor investments, or even obtained it illegally.

Nor does net worth reveal anything useful about someone’s understanding of money or knowledge of financial planning. I’ve worked with plenty of multi-millionaires who were horrible money managers and inept at investing. There are also many brilliant young planners who haven’t had the time to accumulate a large net worth.

I suspect that most clients who want to know about their planners’ net worth actually have several deeper questions in mind. Some may be asking if the professional actually follows his or her own advice. Imagine how troubling it might be to find out your financial planner doesn’t have a retirement plan, is a habitual over-spender, or hasn’t gotten around to making a will.

Another reason for the question may be a concern whether the planner is financially stable and will be around in the future. During the Great Recession, many financial professionals saw their revenues fall by 30% to 40%. Some who did not have a business emergency reserve had to resort to laying off staff, cutting services, or in some cases closing their doors.

Still another concern may be whether the planner is familiar with a potential client’s particular financial issues. This is especially true of high-net-worth clients. They need to know a planner can relate to the complexities, responsibilities, and emotional challenges of managing wealth.

All of these are legitimate concerns. Knowing a financial planner’s net worth, however, doesn’t address those concerns. It would be more useful for clients to get answers to questions like the following:

  • Do you follow the same advice you give clients? Give me some examples.
  • Do you have six months’ living expenses in an emergency account?
  • Do you invest your money in the same manner you will invest mine?
  • If I were to run a credit report on you, what would it tell me?
  • What are some of the things you have learned from your financial mistakes?
  • Tell me what your company has in place for emergency planning and succession planning.
  • Tell me why you can relate to someone with my net worth and the issues I am facing.

Very few prospective clients are likely to ask questions like these. That doesn’t mean they don’t want to know the answers.

Planners who want to provide exceptional service to their clients might consider providing such answers freely and transparently, without waiting to be asked. We expect clients to trust us with their financial information. One way to build that trust may be to share some information of our own.

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Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the president of the Financial Therapy Association.

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