I am thankful and honored to present this guest post from my colleague and friend, Josh Klooz. I hope you enjoy the written content and the associated audio (podcast) as much as I did.
– Trevor Cummings
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Today’s topic is one that came to me over the past few months. Once I started thinking about it, it just kept nagging at me.
I’ve been wrestling with this very question:
Were you oversold and underserved?
This question is specifically addressed to investors regarding where they are getting their advice from. I came across a lot of investors who signed up to work with some who claimed to be a “specialist.” They hired an advice-giver who said something like this: “I specialize in serving folks in your line of work who are facing the same obstacles and financial complexities as you.” Yet, these investors are still feeling overrun with information and a bit uneasy every time they turn on the news. The goal was to incorporate a professional to ease the burden and relieve the anxiety, yet this hasn’t become a reality.
People typically give me a funny look when I tell them that I love the financial services industry, but I despise the marketing strategies used by much of the industry. There are a plethora of reasons for this, but I’ll be concise for today’s purposes.
Let me paint the picture. Imagine an investor who is hard at work and happens to catch a daytime TV commercial in passing. The commercial is targeted at someone just like them – age, economic status, career, etc. – and promises to solve all of their financial burdens. What I just described is both common and dangerous.
Let me be clear: it’s impossible to hear a 40-second jingle on TV that sounds a lot like your situation, make a phone call, and get curated service from a call center. That’s not how financial advice works for most people. Just like gym memberships, financial advice works best when accountability is personal and proactive. A call center is not going to ensure you a thorough review of your estate plan, guidance and advice regarding tax strategies, help you craft your family vision meetings, etc. That’s just not what they do. Most call centers are not equipped to provide the personal and in-depth financial guidance you will need along life’s journey. If periodic advice is all you want, that is fine, just realize that it isn’t a long-term continuity plan for your family.
Next, the industry is full of people who claim specialization in a niche people group. It is not uncommon to hear advisors claim they work with “executives,” “business owners,” or my favorite, “oil and gas” retirees (reminder: I work out of our offices in Texas). These advisors then proceed to say that they specialize in the exact questions that you are asking at that specific moment in time. Whether it’s NUA (a specific tax strategy for investors with company stock in their work retirement plan) or the “complexities” of your retirement plan in general. Then you get the age-old sales technique of magnifying the problem in dramatic fashion and positioning themselves as the “only person sophisticated enough” to solve a problem like yours. Call me cynical, but I’m looking on from a distance, wondering what kind of standup routine Jerry Seinfeld could come up with about the ironies of it all. The truth is, your company’s retirement plan doesn’t make you unique or complex any more than the watch on your wrist or car in your garage ensures you get somewhere on time. It’s the people that make the plan unique and sometimes complex. It’s the life circumstances and market events overlaying those circumstances that require the partnership of someone who understands your situation.
Why do I dislike this so much? It is because these relationships are based upon short-term problems, not long-term value. I fundamentally believe that something like an NUA (Net Unrealized Appreciation) strategy does not make your family’s wealth needs any more similar to someone else’s than the fact that you both vacationed at the same place in the past.
When you are oversold, you are often making a choice based on a small speed bump in the road, not the ultimate destination. If you doubt me, ask yourself why studies have repeatedly shown that around 70% of estate plans fail not because of managerial incompetence or malpractice but because of the next generation having values amnesia (Bridging Generations, Roy Williams 2017). When someone says they specialize in a certain market segment, please realize that most of the value they are selling is momentary. There will come a time when you stop being an oil and gas executive or stop doing whatever it is you are doing. What then?
Does that expert in your company’s retirement plan have expertise in your family’s needs, wants, and wishes? Think back to your first meeting with your chosen advice giver. Did they ask about your family before they asked for your financial information? Have they asked to meet with your kiddos (the next generation) or even offered to help them along the way?
If you are reading this and are thinking, “Alright, I get it, I’ve been oversold, how do I know if I’m underserved?” Good question, I am glad you asked 😊. Here are a few questions you should ask yourself regarding your advice relationship:
- Whose idea is it to meet?
- Do you have a semi-annual review process?
- Has your advice team asked for your tax return?
- Is there a system and a process for reviewing your tax plan, philanthropic plan, financial plan, gauging your current cash flow, your estate plan etc.?
This is all just as important as your returns and portfolio composition. But if you find that after your first year or two of being with an advisor, they are not reaching out to you, it may be time to ask them how many clients they have. If you are competing with 250 other clients for attention at any given moment,t that will eventually be a problem.
Another way of gauging if you are underserved is if you turn on the TV and wonder how the current headline affects your financial plan. I say this because a lot of my job, both today and in the future, is coaching clients to a place where they understand that news is designed to be sensational and dramatic, not informative, insightful or even useful. Step one in this process is telling clients that daily doses of financial media are usually not helpful. Step two is teaching them why and how to roll their eyes at the scrolling red “breaking news” banner. It’s always the worst crisis since the last cataclysmic crisis we’ve experienced. And we will remember this current one until we can’t even remember it a few weeks from now because it was five “breaking news” cycles ago. When I think of this, I’m reminded of former President Calvin Coolidge who once said, “If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.” I find a lot of wisdom there. You can’t worry about everything all the time; living in constant worry and dread is no way to live. But that is what often happens when you are underserved. One might say that financial television programs prey on the underserved, taking advantage of their vulnerabilities and anxieties.
So, if you’ve read this far, you may be asking, what should I be looking for? My answer to that question is simple: partner with someone who understands the critical four quadrants of your life and how they all connect:
- Your Financial Plan
- Investment Allocation
- Tax Plan
- Estate Plan
Our job, as advisors, is to equip you and your family to live life well with the tools and resources you have. My hope is to see a generation of investors seeking advice from advisors who share compatible beliefs about wealth. I want to see a generation of investors who understand the power of money and its influence on their families and seek advice on how to prudently pass down that wealth and wisdom.
I’ll leave things there for today. If you have any questions after reading this, please reach out! As always, know that I wish you and your family continued Truth, Beauty and Goodness on the road ahead.
Josh Klooz
Private Wealth Advisor
