Wise Bread Picks

In tough economic times, financial planners are on the front lines. They are the gateway to investment returns when the markets are good, and are the buffer against financial disaster when the markets are bad.

When I was in the financial planning business and markets experienced corrections of sorts, my colleagues and I would brace ourselves for something called “statement shock”. Clients would receive and open their quarterly or monthly statements, and regardless of whether they were keeping up with the news of market performance and understood the circumstances, they would experience a certain degree of shock when they realized how their own dollars and cents were affected.

There were three possible outcomes from this onset of statement shock:

1. They would realize that it is a function of the markets and not the planner and stay the course
2. The would call their financial planner for some reassuring words of encouragement and possibly ask for a meeting to devise a new action plan
3. They would look for a new financial planner

I was lucky. Most of my clients fell into categories one and two. I worked hard to educate them, work within their tolerances for risk, and was there to hold their hands when they needed it. This also usually put me on the receiving end of new clients who were in category three and displeased with their old financial planners.

But in times like these, when terms like “Meltdown Monday” and (sshhh…the “r” word) are being tossed around, financial planners around the world are waking up in the middle of the night in cold sweats. Try as they may to buffer their clients against market downturns, statements will look bad. And they will be sure to hear about it. And ultimately through no fault of their own, they will lose clients.

Some planners though, will lose clients, and arguably deserve to. They will not have performed the proper amount of due diligence with their clients by assessing their investment personalities and time frames, and instead of facing the music when their clients call, they may instead choose to hide under their desks as a way to weather the storm. They will not have addressed their clients’ larger financial situation and dealt with issues like taxation, short and long term savings, and estate planning. and will instead have simply focused on returns – something which can never be promised and will never be predictable (unless you are invested solely in term deposits, in which case again I would suggest the advisor’s incompetence).

If you are experiencing statement shock, or are wondering if your financial planner is up to snuff, here are nine signs you may need to fire your financial planner:

They never asked you about your personal goals and time frames before recommending investments.

There is no such thing as a one-size-fits-all investment plan. Although having a standard set of investment recommendations according to your stated time frame and tolerance for risk is acceptable, they must do the initial groundwork to determine who you are and what you want from your money.

Only one company’s products are recommended.

As good as that company’s products are, true diversification includes not only a range of asset classes, but also a range of investment managers. Recommending only one type of or company-labeled product indicates that the advisor is not providing truly unbiased advice.

You received no written financial plan, prospectus, or documentation.

Every investment product should be accompanied by a detailed written description of the investment, including its composition, historical performance, and inherent risks and rewards. This is generally covered in the prospectus, which is a bare minimum of what you should receive. Better yet though – you should also be given a written financial plan. which addresses your personal financial situation and outlines a financial road map to reaching your goals – both short and long term.

You are pressured into making investments.

Although sitting on the fence forever is an advisor’s nightmare and sometimes clients need a little extra push, undue pressure into doing something you are uncomfortable with is not right. Even if the recommendations are sound, if you get bad vibes from high-pressure sales tactics, your ability to communicate with this advisor and for them to listen to your needs is going to be problematic going forward.

Your planner’s recommendations don’t match your financial goals.