The Future of Financial Planning

Imagine a future, if you will, where you can hire a CFP® professional to prepare a Goals Based Financial Plan for you. Where your identity is protected. Where you do not have to give the CFP® professional your Social Security number. Where you do not have to disclose any of your account numbers. Where you are totally protected from a Ponzi scheme.

It is kind of hard to imagine, isn't it? The reason it is hard to imagine is because you have been trained to hand over you Social Security number, make copies of all your account statements and blindly hand them over to a financial advisor so they can give you a free financial plan. You as the client hope that:

1. That you can trust the financial advisor.
2. They will not charge you too much in assets-under-management fees.
3. They will not sell you too many products that pay a commission.
4. They will not stick you in products with no liquidity.
5. They will act as a fiduciary.
6. And, they will not steal your money.

All that just to get a free financial plan.

Why do you think financial advisors want to see all of your accounts? The more money you have, the more it benefits the financial advisor. Further, your financial advisor may be slanted towards selling you products that pay him or her commissions, too. Of course, do not forget that you have to transfer some, if not all, of your accounts in order to get this free financial plan.

Think about this business model for a moment. Step outside of the box that we have all been taught for years and years. Broker-dealers want you to move your accounts to their firm. Financial Advisors want you to move your accounts to their firm. Insurance agents want you to move your accounts to their firm. The reason? They all want to make money from your money. This is their primary goal. Either they want to charge you an assets-under-management fee, or sell you products that pay commissions. It is all about generating revenue from you. Sure you get that free financial plan, but what is the real cost of it?

What if there was a better way? Thankfully, now there is.

At our firm, we can provide you with a Goals Based Financial Plan and we do not need your accounts. We do not need your account numbers. We do not even need your Social Security numbers. Why? Because, we are not making you move any accounts to our firm. We are not selling you any products, nor charging you any assets-under-management fees.

How is this possible? With technology. Technology that allows you to authorize us to design our Goals Based Financial Plan by sending us only what we need to design it for you. For example, when you authorize us to see your IRA or 401k for example, we only see the holdings, ticker symbols and values. We do not see your account numbers or Social Security numbers. You simply log in, create your own password, and then authorize the accounts that you want us to see in order to design your Goals Based Financial Plan. This whole process takes less than two minutes. The only thing you do is name the accounts for us, so we know what it is, like an IRA or 401k, for example. If your situation changes, like you inherit some money, then all you have to do is hit "sync" and let us know that you need an updated Goals Based Financial Plan.

Imagine the old way that most financial advisors operate under today. They commit you to the time consuming and tedious process of gathering all your information. You may not even be fully sure if you trust them yet. After all, you are handing over your Social Security and account numbers, are you not? The old ways of financial advisors have not even proven themselves to you at this point. Again, thinking outside the box, is this a good way to do business? We do not think so.

With our firm, a couple of clicks, name your accounts such as joint account, IRA, Roth or 401k, and then you are done. We can get to work right away.

Here are the pluses of our model:

1. We act as a fiduciary.
2. We can give you investment recommendations on the investments in each of your accounts.
3. We design a thoughtful Goals Based Financial Plan for you.
4. We do not need your account numbers.
5. We do not need your Social Security numbers.

Of course, we do need your goals. Think about this fact. We have essentially removed every conceivable conflict of interest from our Goals Based Financial Planning service. If we think your Roth account is not properly diversified for example, we will give you advice on how to properly diversify it. We are not going to try and get you to move your Roth into an annuity, or an assets-under-management account. Where is the conflict of interest? There is none. Imagine it. Pure advice without any hidden agendas. Isn't this what you wanted in the first place?

I know what you are thinking. How do we get paid? It is simple. We charge a flat fee retainer of $1,200 per year to design a Goals Based Financial Plan that can be updated on the fly as your situation changes. We will even let you pay us semi-annually, quarterly or monthly. We can bill you via Square® or Quickbooks® which allows a draft from your bank account or a debit/credit card.

The only caveats are that we are doing a pilot program in Florida only right now. We will expand it to other states in the future.

Hopefully, this sounds intriguing and you will agree with this outside the box thinking. If you want to get started, then call me, Rick Johnson at 904-547-2913.

Contrarian Advice on 401(k)'s Investing

Are you one of the myriad of Americans who max out their 401(k)? If so, this article is for you.

The financial media publications that are directed to consumers tell you to max out your 401(k). Perhaps, even your investment guru has told you to do the same. They scream loud and hard that you should sock away the maximum into your 401(k) each and every year. Well, I beg to differ. I will explain why after a little background on the 401(k) landscape.

The majority of Americans try to max out their 401(k)'s, based on my experience. Some 401(k) adviser comes into to your company and tells you to put all you can into your 401(k). Why? Because, the more money that goes into the company 401(k), the more money that 401(k) adviser makes. This is one conflict of interest. But, wait there is more.

What makes matters worse is that the investments that have been offered to company employees have been loaded up with commission splits and revenue sharing from the mutual funds that are recommended. So, these 401(k) advisers not only make money by the total amount invested in the 401(k), they have also structured these 401(k) plans so that they make the most commissions and fees possible. Further, they design them to appeal to the employer. The employer is sold the 401(k) plan so it cost little or nothing to the their firm. Instead, the costs are built into the company's 401(k) plans via additional expenses to the employees.

Keep the faith. The Department of Labor, who is in charge of ERISA based retirement plans, has become keen to these pad the pockets and shift the cost activities. The whole landscape has changed.

I remember when I was the Branch Manager II at Charles Schwab & Co. Inc. in Jacksonville. A 401(k) adviser came in to speak to my team about their 401(k) plan. Of course, you know what they say..."We are the best and to hell with all the rest." My skeptical nature, however, kicked in and I asked a simple question to this 401(k) adviser. "How does the revenue sharing breakdown?" The 401(k) adviser could not answer this simple question. It seemed like a simple enough question to me. How much does a 401(k) participant (employee) have to pay to be in this 401(k)? The answer I got was ..."it is all built in. Its no load to the participant."

What a lie! No Bank, Insurance Company or Wall Street firm is going to sell a 401(k) plan unless they get paid. No third party administrator will do the record keeping for a 401(k) for nothing. No 401(k) adviser is going to work on implementation of a 401(k) which can take a year or more, for nothing. No mutual fund family is going to put their mutual funds into a 401(k) plan for nothing. No attorney who works on the 401(k) is going to do it for nothing. The point is that there are a lot of hands in the cookie jar. Up until now, all of this has been hidden from view. Thanks to the Department of Labor, this is all about to end.

The Department of Labor is going to make all these hands in the cookie jar tell you, the 401(k) participant, how every cent is allocated. How much the Bank, Insurance Company or Wall Street firm gets. How much the 401(k) Third Party Administrator gets. How much the mutual fund company gets. How much the attorney gets. How much the 401(k) adviser gets and if there are any other hands in the coookie jar, then they too will have to disclose how much they will receive.

These changes are all good, but sadly, we will still see the same pad the pockets and shift the costs 401(k) plans. When you see the breakdown of your 401(k) plan, you may want to take a hard look at how much in expenses it is actually costing you.

After a little background on 401(k) plans, I really wanted to show you why maximizing your 401(k) may not be a good idea. Do you have any debt? Like a credit card or two or three? A Home Equity Line of Credit? A Mortgage? Car Loans? If so, then you have absolutely no business putting a nickel into a 401(k) or any type of retirement plan where you cannot get your money out without penalty and taxes.

Let me break this down for you. Forget about your first mortgage for a minute. Let's assume that you have $50,000 in debt and $50,000 in your 401(k). What is your net worth? It is zero. Yes, I know. You are real proud of yourself for saving the $50,000 in your 401(k). I hate to say this, but this is a big mistake.

You need to see my quick slide show on The Taking Control Plan.

Go to my web site  at http://www.marianfs.com/ and click on Services, then the link for the Taking Control Slide Show.

Look at this issue. If you have $50,000 in your 401(k) and $50,000 in debt, then what if you got laid off from your job? You may need to access your 401(k). If you are under 59 1/2, guess what? You have to pay penalties and taxes on the 401(k) withdrawal. Do you really have $50,000 saved when you may have to pay penalties and taxes on the money? Ten percent of that is $5,000. If you are in the 25% tax bracket, then that is another $12,500 off the top. Depending on what state you live in, it might cost you another 3 to 10%. The $50,000 that you saved in your 401(k) is now down to at least $32,500 and possibly more. You are not so proud of saving that $50,000 in your 401(k) now are you?

If I may borrow a line from AFLAC. "What if you got sick and couldn't work?" Again, if you had to access your 401(k), then you are going to be penalized with a 10% penalty and taxes to boot.

If on the other hand, you had saved $50,000 in cash and you were laid off or sick and couldn't work, then you would be much better off. You would have a net $50,000 (instead of $32,500 or less) to help you get through a job loss or a sickness. Sans the fact that you might want to buy some disability income insurance to cover the sickness issue.

The bottom line is that every Bank, Insurance Company and Wall Street firm wants to convince you to max out your 401(k). Now that you know the contrarian viewpoint of yours truly, is this the right thing to do? If I might borrow a line from a Microsoft phone commercial, "Really?"

Investor Coach vs. Financial Planner

I read trade publications from the financial services industry from several different sources. Some of the publications that I read to stay on top of things are:

The Journal of Financial Planning
Financial Advisor Magazine
Investment Adviser Magazine
Senior Market Advisor
Futures Magazine
Benefits Selling Magazine
Journal of Indexes
The Register
Life Insurance Selling

I also read information from blogs such as:

fi360 Blog
RIABiz Today
Calculated Risk

I also subscribe to Bob Veres' newsletter entitled, Inside Information which is a fabulous read for people in my industry.

The point that I wanted to make is that I am on top of what is going on in the financial services industry.

I have noticed an unfortunate trend by some to abandon calling yourself a "Financial Planner." In addition, they have begun to try and discredit Financial Planning and Financial Planners altogether. It is in investors interest that this effort does not succeed.

You see, if you call yourself a "Financial Planner," then you are regulated by either the states that you do business in or the United States Securities and Exchange Commission (SEC). You have to be registered as an Investment Adviser Representative and affiliated with a Registered Investment Adviser in order to use the terminology of offering "financial planning services," "financial plans" or calling yourself a "Financial Planner."

Something that bothers me is that as long as you are properly registered, then you can call yourself a "Financial Planner" even if you do not hold the Certified Financial Planner™ license like me. This is ridiculous in my opinion, but I will save this argument for another day.

If this fact is not bad enough, I am now seeing a trend towards Investment Adviser Representatives and Registered Investment Adviser firms shifting away from using the "Financial Planner" title. As a mentioned earlier, they have resorted to bashing the designation and are proclaiming that financial planning is dead. They have discovered something new. Something fashionable. Something that lends them credibility in the world of advice. This new term is "Investor Coach."

Investor Coach? I wonder what the qualifications are for you to call yourself an "Investor Coach?" None. That's right. None. Nada. Zilch.

You may be asking yourself, like me, what's up with this? Almost every state has rules revolving around the misleading use of financial designations. You may have heard in the past that there were significant problems revolving around the use of senior designations. The states nipped this activity in the bud by passing regulations to ban the use of designations that did not meet certain national standards. The states did a good job in this area.

However, the people touting the use of "Investor Coach" have apparently found a regulatory loophole. Since, "Investor Coach" is not a professional designation, it is not subject to the state regulations. Pardon me, but I beg to differ.

I believe very strongly that if an advisor suddenly becomes an "Investor Coach" without any training from a nationally accredited institution and no continuing education requirements, then he or she is being misleading to the investing public.

Calling yourself an "Investor Coach" is no different than calling yourself a "Senior Advisor." There are no qualifications around the use of "Investor Coach," nor are there any continuing education standards. Therefore, from my compliance viewpoint, it is easy to see that using the term "Investor Coach" is a violation of most every states regulations for financial service professionals.

Are you using this terminology in your financial services business? If so, then I would advise you to quit doing so immediately.

So, let me ask the question to potential investors. Would you rather work with an "Investor Coach" who is skirting the rules or a Certified Financial Planner™ who is regulated and abides by the rules? If your "Investor Coach" is skirting the rules on the use of misleading designations, then it kind of makes you wonder what other rules are they skirting? Just a thought.

Be careful out there.