Summary
You may be skeptical of the financial industry and it could be for good reason. Maybe you or a close friend or family member has had a bad experience with a financial professional or gotten bad advice.
There are great people out there giving sound advice in their clients’ best interests. Unfortunately, I can also tell you that I’ve seen the opposite, people who give advice that is not in line with the client’s best interests or on a subject that they aren’t knowledgeable about, yet they do it anyway and end up leading the client astray.
If you go through these 4 questions, chances are that you will get good financial advice from someone who really knows what they’re talking about which is critically important to your financial success.
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Question 1: Can you understand the financial advice that someone is giving to you?
The financial industry is full of intimidating jargon that makes some people feel like they’re not smart enough to understand it. Some people are afraid to ask questions because they feel like that will show the other person that they’re not that smart.
But you are smart enough to understand these concepts, and it’s really important to ask questions.
Examples: “I’m really not quite understanding this. Can you explain it in a different way?” or, “Why would you do this instead of that?” or, “Can you help me understand this better?”
There’s absolutely nothing wrong with asking questions. I do it all the time. if anyone makes you feel silly, then frankly you shouldn’t be working with them. A good person is going to be supportive and help you understand the concept until you’re comfortable.
If you can’t understand it, you probably shouldn’t do it.
Question 2: Are you working with someone who’s knowledgeable and competent in the advice that they are giving?
Check out their LinkedIn page, and Google their name. That might give you a sense of what they know and what their experience has been.
I also like to ask, “How did you end up in this job?” Someone who is enthusiastic and passionate with their answer is more likely to seek out new information, be on the cutting edge, and really care about their job and you.
Question 3: Are their interests aligned with your interests?
Your best interests should be in their best interests. There are some financial industries, products, and advice where the incentives may appear to help out the company or the salesperson more than the end client.
Here’s a hypothetical example of buying $1,000,000 of life insurance coverage:
A person can buy a term policy for $50/month or a whole life policy for $500/month with the same death benefit. The salesperson may make the same percentage commission of the $500/month as they do of that $50/month. In other words, the salesperson could make 10x the commission if you buy the whole life policy vs the term policy. Isn’t that important to know? They are incentivized to sell you the more expensive policy. There are plenty of good insurance agents out there, but it’s important to know how they are financially incentivized.
Also, are they taking their own advice? Do they eat their own cooking? If it’s good enough for you, it should be good enough for them. If they’re not in your situation, did they take the advice that they’re giving to you right now when they were? If the answer is no, you have to run for the hills.
Question 4: What are the total fees and commissions that you will have to pay as a result of taking this financial advice?
Ask about the total fees that you will pay. Not only the explicit ones like a $2,000 financial planning fee, but also the other fees and commissions along the way. This will be disclosed in the documentation they give you to review, but it’s much easier to ask them rather than sifting through the pages and pages of disclosures.
Here’s the recap:
- Understand the advice.
- Work with someone who is competent and knowledgeable.
- Make sure their interests are aligned with yours.
- Know the full cost of taking their advice.
If you do those 4 things, you’re going to be in a better position to know that you’re getting sound advice from someone who knows what they’re talking about.
Special announcement:
You’ve taken the time to give me feedback and tell me what you want to learn more about. Thank you! So, I’m putting out a free 3-part training video series covering the areas you told me were most important for you to learn more about.
- How to cut $2,500 of spending over the next year that you’re not going to miss. I’m not talking about cutting the stuff you enjoy most. I’ll cover the framework and guide you through the process in that first video.
- Now that you’ve found this money, we will figure out the best place to put it. I’ll guide you through a framework that will take you step by step on how to prioritize saving, paying off debt, and investing.
- Wealth building and investing demystified and de-jargoned. I’m going to help you understand how to build wealth, how to invest, and explain some the different accounts you can use.
Since this is a training series, I want to make sure you get all 3 videos, so there will be a place to sign up for it. That way, you can be sure to get all 3 videos without missing one.
I’m really excited to give it to you and I greatly appreciate the feedback letting me know what you want to learn about, so look out for that next week.
Again, thanks so much for taking the time. I’m here to help you on your financial journey, and I can’t wait to talk to you next week.
Thanks!
Rob Bertman, CFA, CFP®
Founder & CEO
Money With Impact
www.moneywithimpact.com
Click & Connect: Instagram Facebook Twitter LinkedIn YouTube
Transcript
Hi there. I’m Rob Bertman, Founder of Money With Impact, and today we’re going to talk about the 4 things you need to know before taking someone’s financial advice.
Now, you may be skeptical of the financial industry and it could be for good reason. Maybe you or a close friend or family member has had a bad experience with a bank, dealing with credit card companies or student loans. Maybe you’ve heard of someone getting bad advice from a financial advisor or life insurance salesperson. We all remember the housing bust, the stock market crash and all these things, right?
I can tell you because I’ve been in the financial industry for more than 15 years that I’ve networked with a lot of financial professionals. There are a lot of great people out there doing hard work for their clients in their client’s best interests and giving them sound advice.
But I can also tell you that I’ve seen the opposite. I’ve seen people who give advice that is not in line with their client’s best interests. It’s more in line with their best interests if you know what I’m talking about. I’ve also seen people who give advice that aren’t that knowledgeable about the subject they’re giving advice on, yet they do it anyway and end up leading the client astray.
This is one of the reasons I started Money With Impact. Although I’ve been lucky enough to work for a lot of the good guys out there, I also know that people can get no advice or bad advice, and I want to make sure that people have access to good sound financial advice that they can actually understand and implement that isn’t intimidating to learn about.
So I’m really excited for this one because if you go through these 4 things we’re going to talk about and you get the answers, chances are you’re getting good financial advice from someone who really knows what they’re talking about which is critically important. No one cares more about your money than you do right? But if you need to work with someone else, you want to make sure that they are very closely aligned with you, and that you’re getting advice that’s right for you.
Question 1: Can you understand the financial advice that someone is giving to you?
It’s my philosophy that if I can’t understand or if someone can’t explain it to me in a way that I can understand, I’m just frankly not going to do it. The financial industry is really known for having this intimidating jargon-y language that makes some people feel like they’re not smart enough to understand it, but you’re smart enough to understand this.
What some people do when they’re getting a concept explained to them or given financial advice, they just kind of nod their head, hoping that the other person doesn’t know that they don’t understand what the other person is talking. They are afraid to ask a question because they feel like that will give them up and the other person will feel like they’re not that smart.
But you are smart enough to understand these concepts, and it’s really important to ask questions. If someone is explaining something to you and you don’t quite understand it, just ask something like, “I’m really not quite understanding this. Can you explain it in a different way?” or, “Why would you do this instead of that?” or, “Can you help me understand this better?”
There’s absolutely nothing wrong with asking those questions, and if anyone makes you feel silly for asking the question, then frankly you shouldn’t be working with them. You shouldn’t be talking with them. They probably shouldn’t be in your life.
A good person is going to be supportive and help you understand the concept and they’re not going to try to intimidate you with this jargon-y language. Even after that, remember that If you can’t understand it, you probably shouldn’t do it.
Question 2: Are you working with someone who’s knowledgeable and competent in the advice that they’re giving to you?
This is just really important. Notice I didn’t say experienced. I do think that experience is important, but I don’t necessarily think that 30 years of experience is much more important than 10 years of experience, because we all know that there are younger people in a field that might know more than those who have been in the field for a while.
Here are a couple ways to know if someone is really competent and knowledgeable. Check out their LinkedIn page. Google their name too. That might give you a sense of what they know and what their experience has been.
Another question I really like to ask is, “How did you end up in this job?” You can tell if someone is going to be knowledgeable and competent by the enthusiasm and the passion with which they tell that story. Someone who’s says, “Well, you know, I just kind of fell into it and got this job offer and you know so I took it.” Chances are they’re not going to be that knowledgeable and competent because they may not be that driven to get the latest and greatest information and to be on the cutting edge, right? You want someone who’s excited to tell you the story of how they got to that job.
Question 3: Are their interests aligned with your interest?
The 3rd thing to know is very important. Are their interests aligned with your interests? In other words, your best interests should be in their best interests. There are some financial industries, financial products and some financial advice where it’s the opposite. It’s more to help out the company or the salesperson than to help out the end client. Here’s an example:
Let’s talk about life insurance. Let’s just say that someone needs $1,000,000 of coverage and they can either get a term policy for $50/month or they can get a whole life policy for $500/month. Both have $1,000,000 coverage, right? There may be other reasons for buying one over the other but I’m not going to get into that right now. Did you know that people who sell life insurance get the same percentage cut of that $500/month as they do of that $50/month in most cases? In other words, if you buy that $500/month product, they’re going to make 10x the commission and money that they would of that $50/month policy. Now I’m not saying that the people who sell these policies are bad people because there are plenty of good ones out there. But isn’t it just good to know that? Don’t you think their tendancy might be to push that 10x dollar amount so that they can make 10x the money? I’m not saying they do all the time, but it is something to be aware of.
Another way to find out if someone’s best interests are aligned with yours is to ask them if they are taking this advice too. Are they actually doing what they are recommending to you? Do they eat their own cooking? They should, because if it’s good enough for you, shouldn’t it be good enough for them? If they’re not in your same situation, when they were in your situation, did they take the advice that they’re giving to you right now? If the answer is no, you have to run for the hills.
It is so important that the person giving the advice would take it themselves and that they’re compensated in a way that’s in your best interests. That’s the 3rd point. Are their best interests aligned with yours?
So far we’ve talked about understanding the advice that’s being given to you, about working with someone who’s knowledgeable and competent, and someone whose best interests are aligned with yours.
Question 4: What are the total fees you will pay if you take this advice?
The 4th and final piece is knowing what the total fees and commissions that you will have to pay as a result of taking this financial advice. There may be some upfront fees. Maybe someone will tell you that to do your financial plan will cost you $2,000. But maybe what they don’t tell you is that if you invest with them as well, you’ll be paying 1% a year for the money you have invested with them. I’m not saying that one is good or bad, but just know the upfront costs and the ongoing costs, and make sure they can explain to you. Not only the fees that are only explicit like the $2,000 financial planning fee, but also the things that are behind the scenes like if you buy this product, how much in commissions are you paying to them. Understand the fees.
Ok, so here is a recap of the 4 things: 1. Make sure you can understand it. 2. Make sure you’re working with someone who’s competent and knowledgeable. 3. Make sure their interests are aligned with yours, and 4. Make sure you understand the true cost of taking their financial advice.
If you do those 4 things, you’re going to be in a better position to know that you’re getting sound advice from someone who knows what they’re talking about. These are 4 things that are very important to follow.
I’m sure this has helped clarify things for you. When I was putting this together, when I was thinking about this in years past, these are the things to really hone in on.
I also want to make a special announcement. Next week I’m going to be doing something a little different based upon your feedback and feedback from other people who have been watching these videos and others who have contacted me.
I put together a free training series of 3 training videos will take you through 3 areas that people expressed the most interest in learning more about.
Video #1: The first one will teach you how to find money that isn’t there, specifically how to find $2,500 in the next year of spending to cut that you didn’t know was there and that you’re not going to miss. I’m not talking about cutting out the stuff you enjoy in life. I’m talking about a way to find $200 or more a month of money that you’re spending that you really won’t miss if you cut it out. I’ll cover the framework and guide you through the process in that first video.
Video #2: The 2nd video, now that you’ve found this money, will be helping you figure out the best place to put it. I’ll guide you through a framework that will take you step by step in how to prioritize this extra money that you’re going to be finding.
Video #3: The 3rd video is going to be about wealth building and investing, demystifying and de-jargoning this whole investing thing. This is where a lot of intimidating language is used and it may be hard to understand. But like I said before, you should be able to understand this, and I’m going to provide you with a way so you can understand how to build your wealth, how to invest, and explain some terminology of the different accounts you can use.
Since this is a training series, I’m going to be doing it a little bit differently. When this training comes out next week, there will be a place to sign up for it. And the reason I’m having people sign up for it is so that you make sure to get all 3 videos without missing one.
If you want to make sure you’re one of the first ones to know about this free training series I have coming out, make sure that you sign up below on this blog. Enter your name and email below to get these blogs on a regular basis, and I’ll also make the announcement when the free training comes out next week.
I’m really excited to give it to you and I greatly appreciate the feedback letting me know what you want to learn about, so look out for that next week.
Again, thanks so much for taking the time. I’m here to help you on your financial journey, and I can’t wait to talk to you next week.
Thanks!
Rob Bertman, CFA, CFP®
Founder & CEO
Money With Impact
www.moneywithimpact.com
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