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Your Financial Advisor Is A Dinosaur If…

By Scott Melbrod

Warning: Not all financial advisors are created equal. That’s right. You may think you’re making a smart financial choice by hiring a financial advisor, but you need to be careful. This isn’t quite yet a profession, like law or accounting, due to varying licensing requirements and a smattering of outright shady salespeople (brokers) who highjacked the term “advisor” in the late 1990s and do everything they can politically to hang onto this great “marketing title.” As the proper term “broker” suggests, they are just selling stuff, and if there was a clear way to delineate that to the public, I would not be about to go on the following rant. You can look for a firm that is a “Registered Investment Advisor,” or RIA, but even that search isn’t perfect due to the rise of “Hybrid RIAs,” which enable an advisor to switch hats mid-meeting if they want, from investment advisor back to broker. Back in pre-internet 1990, everyone needed a broker to get access to the stock market; today this is a commodity and what people truly need from their “advisors” is advice. The following is a checklist you can use to really see if your “financial advisor” truly has your best interests at heart.

1. They Pester You To Schedule “Quarterly Review Meetings”

These are simply unnecessary. If your advisor is doing their job correctly, you should have a clear plan established after your initial set of meetings and know exactly what types of life changes warrant adjustments to your plan. That being said, when your situation does change, your advisor better be available. They should always be “on call” via email or text and offer you video conference meetings after normal work hours for your convenience.

2. They Never Ask To See Your Tax Return

I’m always shocked at how many of my new clients report that their previous advisor never asked to see their tax returns. It’s one of the first things I ask for. A tax return can give a bigger picture as to the client’s financial situation and open up more conversations about financial habits. While it doesn’t give you the only picture of a client’s finances, it can help an advisor come up with a more personalized financial plan that can point their client in the right direction. Think of it as the financial equivalent to an X-ray where the financial plan we draw up is the MRI.

3. All They Talk About Is “Investment Performance”

This is a big red flag. A trustworthy financial advisor does NOT push you into investments. A trustworthy financial advisor offers ADVICE. They LISTEN to your concerns. Then, with your unique goals in mind, they help develop a cost-effective and tax-optimized plan to help you achieve those goals.

4. They’ve Never Reviewed Your Mortgage

Your mortgage may make up a huge piece of your financial planning puzzle. So why do many advisors skip over it? It’s simple, really. They are putting their interests ahead of your well-being. Why is that? Well, if they determined your best financial option was to pay off your debts, then you will have to take money out of the accounts they manage to do so. This means less income for your advisor so it’s better to simply not talk about it. #HUGEFAIL

5. They Recommend Using Insurance As An Investment

This is not a wise move unless you are a high net-worth individual and want your insurance integrated into your tax and estate plan. Otherwise, you’re better off contributing more to an IRA or 401(k), where you’ll still benefit from tax-deferred growth but without the high fees associated with insurance policies.

6. They Roll Over All 401(k) Accounts Without Reviewing Them

Before rolling over a 401(k), an advisor should always review the underlying investments and asset protection features. In some states, 401(k)s have much better protection from creditors than IRAs. Therefore, it is actually dangerous for someone in a litigious industry (like a doctor or even an Uber driver) to allow those funds to flow out of the protection of a 401(k) or 403(b) to an IRA. Most advisors skip the review because, in order to get paid, they have to move the funds to their primary custodian and “manage” them.

7. They Don’t Make It Clear How Much You Are Paying Them

Before deciding on an advisor, ask them to spell out for you exactly how much they will charge you—both in terms of percentage of assets and dollar amount. Sadly, the financial advising business was founded on hidden charges and fees. The hope is that clients will just “go with the flow” and not ask questions. At Accumulation Wealth Partners, we believe that just because everyone else is doing it, it doesn’t make it right. That’s why we clearly state how we charge for our services right on our website: https://accumulationwealth.com/services-and-fees/financial-planning 

8. They Charge For A Percentage Of The Assets They Manage Regardless Of Your Net Worth

Oftentimes, the fee we quote our clients is more than what they pay their current advisor. And yet, these clients still move over to our firm. Crazy, right? Wrong, our fees are based directly on the complexity and value we provide. We aren’t the cheapest out there (you don’t want the cheapest doctor either), but we offer more customization and can show clients what value they receive for their fees. Oftentimes, I can look at a client’s 401(k) or tax return and recommend a few adjustments that pay for our fees many times over just like that. Not only that, but we also strive to create real personal relationships with our clients. This is not the case in lower-cost platforms which turn your relationship into a commodity. At Accumulation Wealth Partners, we basically took the old financial advisor model and tore it up. We asked ourselves, “How can we provide more value to our clients while eliminating any conflicts of interest?” That led us to Flat-Fee Wealth Management engagements. This revolutionary advising model ensures that the client's interests are always put first. Moreover, the model allows us to better listen to our clients and deliver customized, tailored advice according to where they are at in life and answer those specific questions they have.

Next Steps

So, before you pull up Google and choose the first financial advisor that pops up, run them through this eight-question test. If you have questions about any of this or just want straight answers regarding your financial questions, call us at (858) 255-4475 or shoot us an email to scott@accumulationwealth.com. We are doing our part to change our industry so that people get the advice they need at any stage of their financial life.

About Scott

Scott Melbrod is the founder and CEO of Accumulation Wealth Partners, an independent wealth management firm in San Diego, CA. Working with a wide array of clients, from families to young Millennials just starting their careers, his mission is to provide impactful and targeted financial advice at a transparent cost to people in their accumulation phase of their lives. With more than 15 years of industry experience, he uses his knowledge to develop for his clients a structured and tailored plan designed to guide them toward financial freedom. Learn more about Scott by connecting with him on LinkedIn or emailing him at scott@accumulationwealth.com.