As an In-House Tax Strategist for a “Wealth Management” office, I needed the unique perspective of watching and observing the gyrations a wealth advisory team will go through in order to “land a client”. My job, needless to say, was to bring useful services to the existing and potential clientele. Well, not exactly. I had the mindset of that purpose but in truth, it was just one more means for the Stockbrokerfraud Tulsa to get in front of another new prospect. In reality, that one purpose “get in front of another prospect” was the driving force in every decision. Think it over this way. A Financial Advisory Firm will make thousands of dollars for each new client “they land” versus a few hundred dollars more for doing a better job with their existing clientele. The thing is, depending on how a monetary advisory firm is constructed, will dictate what is most significant to them and how it will greatly affect you as the client. This is one of the many reasons why Congress passed the new DOL fiduciary law this past spring, but more about that in a latter article.
Each time a financial advisory firm concentrates their resources in prospecting, I could assure you that this advice you are receiving is not really entirely to your benefit. Operating a successful wealth management office takes a lot of money, especially one that has got to prospect. Seminars, workshops, mailers, advertising along with support staff, rent and also the latest sales training may cost any size firm hundreds of thousands of dollars. So, since you are sitting over the glossy conference table from your advisor, just know that they are considering the dollar amount they need from your procurement of your own assets and they can be allocating that into their own budget. Maybe that’s why they get a little ‘huffy’ whenever you tell them “you must consider it”?
Concentrating on closing the sale as opposed to making it possible for a natural progression could be like managing a doctor’s office where they spend all their resources how to usher in prospective patients; how you can show potential patients just how wonderful they are; and the easiest way for the doctor’s office staff to close the offer. Could you imagine it? I bet there will be less of wait! Oh, I could just smell the freshly baked muffins, hear the noise of the Keurig in the corner and grabbing a cold beverage out from the refrigerator. Fortunately or unfortunately, we don’t experience that whenever we go to a doctor’s office. In reality, it’s quite the contrary. The wait is long, the room is simply above uncomfortable as well as a friendly employees are not the norm. That is because Medical Service Providers spend their time as well as resources into understanding how to take care of you as you are walking the door as opposed to inside it.
As you are looking for financial advice, you can find a hundred things to take into account when growing and protecting your wealth, especially risk. You can find risks in getting the wrong advice, there are risks in getting the correct advice but not asking an adequate amount of the correct questions, but many importantly, there are perils of not understanding the true way of measuring wealth management. The most frequent overlooked risk is not understanding the net return on the cost of receiving good financial advice. Some financial advisors feel that if they have a great office having a pleasant staff along with a working coffee maker these are providing great value to their clients. Those same financial advisors also spend their resources of money and time to place their potential customers through the ‘pain funnel’ to create the sensation of urgency that they must take action now while preaching building wealth takes time. In order to minimize the potential risk of bad advice would be to quantify in real terms. A good way to find out in case you are receiving value to your financial advice is to measure your return backwards.
Normally, whenever you arrived at an agreement having a financial advisor you will find a ‘management fee’ usually somewhere between 1% and twoPer cent. Actually, this management fee can be found in every mutual fund and insurance item that investments or links to indexes. The trouble I observed repeatedly when i sat through this carnival act, was that management fees, although mentioned, were merely an after-thought. When presenting their thorough portfolio audit and sound recommendations, the sentence utilized to the unsuspecting client was that the market has historically provided around 8% (but we’re planning to use 6% because we want to be ‘conservative’) and we’re only going to charge 1.5% as a management fee. No big deal, right?
Let’s discover why understanding this management fee ‘math’ is very important, and exactly how it could actually save your valuable asjoir. This might actually prevent you from going broke utilizing a financial advisor by simply measuring your financial advice in reverse. Let’s take a look at an example to best demonstrate an improved way to look at how good your financial advisor does.