Whenever I surf the cable news channels, I can’t help but notice the plethora of advertisements for financial planning.
Some of them sound convincing, even to me. I often find myself thinking, “Dang, that’s exactly what we’re doing.”
Then I notice the incongruity because in almost all cases the ads are run by companies that sell financial products or are owned by huge insurance companies.
Their advisors are promised to be financial experts who will take the big picture of your finances and dreams to help you get what you want out of life. They’ll create a personalized financial plan that shows all the possibilities and strategies suited to your goals, and they’ll protect you now and in the future against the unexpected.
Sounds good, but a closer look shows that this company specializes in the sale of life insurance and mutual funds, earning most of its revenue from the sale of these products. Chances are their “advisors” and “financial experts” will recommend a “financial plan” that includes a variety of life insurance, mutual funds, private real estate investment trusts, and annuity products, which pay all generally lucrative commissions. These “advisors” have a significant conflict of interest, since most of their personal income comes from commissions.
Some discount brokerages and other financial services companies also advertise “financial planning”. Yet the services they offer, such as the following examples, are often not complete financial planning, but only components of it.
A review of your investment holdings
It can be little more than a pitch to sell you financial products that pay hefty commissions to “investment advisors”. Even when performed by a fiduciary investment advisor who puts clients’ interests first, investment planning is not synonymous with financial planning. Comprehensive financial planning goes beyond a person’s investment portfolio to manage assets such as real estate, business property, and job skills, helping clients use all of their assets to achieve their retirement goals. life.
Insurance planning
Again, this is often a sales pitch for insurance products. When done as part of overall financial planning, it includes an analysis of existing insurance policies and strategies to avoid and reduce risks that do not necessarily involve purchasing insurance and often include giving up unnecessary insurance.
Tax planning
Comprehensive financial planning goes beyond tax-efficient investments or immediate strategies to reduce this year’s income taxes. It examines longer-term issues around capital gains taxes and tax deferral, as well as gift, inheritance, and estate taxes.
retirement planning
This important aspect of comprehensive financial planning goes beyond accumulating as much as you can in a retirement account. According to Tim Maurer, Head of Wealth Management for Triad Financial Advisors, in a February 20, 2022 email newsletter, it’s also about “finding a career you can enjoy indefinitely so you’re always employable,… and save effectively for financial independence, while allocating dollars to enjoy life today…”
One of my consistent themes is advising consumers to learn the differences between financial planning, investment advice, and selling financial products. When you want real comprehensive financial planning, my advice is to start with the National Association of Financial Advisors. The website is NAPFA.org. Members are paid financial planners. Better yet, find a financial life planner at KinderInstitute.com or the FinancialTherapyAssociation.org.
While you’re researching, be sure to evaluate any company’s website and marketing information with your skeptic’s hat on. Keep this caveat in mind: Just because a company advertises “financial planning” does not guarantee that financial planning is actually what it does.
Rick Kahler is president and owner of Kahler Financial of Rapid City.
