The Little Known Tale of the Three Businessmen and the Financial Planner
Once upon a time, three businessmen were talking together and discovered that each of them had encountered a financial planner. However, each had a different experience, so they decided to talk further to see if they could agree on the definition of a financial planner.
The first one said, “I own a small business. The retirement plan I had was sold to me by an insurance agent who was unable to offer personalized advice to me and my employees. When I began to work with the financial planner, I learned what I was getting and exactly how much it cost. Finding someone who knows investments and is able to provide planning advice to my staff has been a great help. All of my costs are clearly disclosed so I know what I’m paying and what I receive for my fees. A financial planner is like a detective who can figure things out for his clients.”
The second businessman responded that the first man must have been mistaken and told his story. “My wife and I met a financial planner who took time get to know each of us. She asked us to complete a risk tolerance questionnaire to see what type of investments might be most suitable. Then the planner recommended specific stocks, bonds and mutual funds to meet our needs. She got to know us as individuals and handled our investment management needs so that we were comfortable with the level of risk we were taking while keeping our costs as low as possible. I would say that a financial planner is more like an investment expert who places a client’s needs ahead of her own. That’s a financial planner.”
The third businessman disagreed, saying neither of the others had described what he had experienced. “We didn’t need advice about either retirement plans or investments but the financial planner we met helped us through several of life’s transitions. There was the time our kids left for college, then the time we received an inheritance, then my retirement. The planner reviewed our insurance coverage, filled-out our children’s FAFSA forms, answered our questions about the estate, then helped us make the transition into retirement. I think a financial planner is more like a great travel agent. Figuring out where we are going and helping us get there – that’s a financial planner.”
This story may remind you of the slightly better known fable in which three blind men each felt part of an elephant. The first described the animal as being like a tree after touching its legs. The second said it was like a wall after touching its body. And the third said it was like a snake after touching its tail. No one of them had a full picture of the animal until they shared what they had learned. Financial planning is not unknown to most people but neither is it as well understood as professions like dentistry or architecture. It may be news to some but there are many aspects of people’s lives in which financial planning can be useful.
If your own situation involves a retirement plan with details you are not certain you understand, it might make sense to ask for some advice. We regularly discover extremely high costs, often not clearly disclosed. Other times, the fund choices are average or even below and it’s rare that advice is available from the sales person. If, as a business owner, you are not certain of your plan’s 404(c) compliance, you may also have personal liability should problems with the plan be discovered sometime in the future.
If your investment decisions are driven to any extent by headlines, it might be a good idea to develop a long-term plan based on managing risks as well as trying to maximize profit. There is almost unlimited information available but few have time to read, let alone digest it. Managing investments is a key component of financial planning and is a specialty of Warren Ward Associates.
Life transitions can either be expected or appear out of the blue. It’s possible to anticipate at least some of them through preparation of a financial plan but it’s always going to be easier to face one, whether expected or not, with a competent, knowledgeable advisor at your side.
Should any of these situations seem familiar, please consider taking advantage of one of our free, one-hour “get to know you” consultations. Like your CPA and attorney, WWA always puts a client’s interests ahead of our own standing by our motto: “Financial planning as individual as you are.”
One Day You’re Eighty . . .
I was having dinner with a friend not too long ago. He had recently visited a woman he’d known for many years who now lives in a nursing home. While they were talking, she spoke about how quickly time seems to pass, commenting: “One day you’re eighty and the next you’re ninety-four. Where does the time go?”
Five years ago, a childhood friend suffered a heart attack and died at the age of fifty-seven. As I shared the news with some other friends, I said it didn’t seem fair – heart attacks were supposed to happen to older folks, going on to define older with an age younger than some of those in the group. As you might suspect, this led to some bemused comments around the table. For many people, the definition of old is “about twenty years older than I am right now” and rich is “about twice what I have”.
As I found out when sharing the news of my friend’s death, age is relative. Back in 1909, 62 was pretty old. Today, with all the advances in nutrition and health care, those of us who are that age may not feel quite so old. This was brought to mind recently as I read an article in Science News about different ways that age can be measured. One of the newer approaches is to consider both a person’s current age and the number of additional years she or he is likely to live. This research suggests that the world’s average age is about 30 (with 44 years left to live) and North America’s average age is about 37 (with 43 years left to live). While it’s not surprising that we are among the group with the longest expected life span, that fact certainly influences the way financial planning must be approached.
While providing planning services to our clients we often hear the desire expressed to “not be a burden” on anyone, especially children. That requires us to plan so that our client’s assets last as long as they do, even when they live to age 94 or beyond. One of the strategies we sometimes suggest is purchasing long term care (LTC) insurance as retirement nears. Although I once shied away from recommending it, a couple of things have changed. First, some insurers have now been offering such policies for almost 30 years. Hopefully, that gives them enough experience to calculate premiums with a reasonable degree of accuracy. Second, Indiana was one of the very first states (and is still one of only about twenty) to have joined the government’s Partnership Program. This allows a certain level of LTC coverage to exempt an individual from Medicaid’s spend-down requirement. These changes combine to make LTC worth considering by most of our clients as they approach retirement.
Another way to “not be a burden” is by being candid with your family. This usually means that, at some point, parents must have that often difficult discussion about finances with their adult children. In our experience, people are generally reluctant to speak about their financial situation, even with family members. Perhaps they have been raised to hold that type of information closely or are simply uncomfortable revealing that there’s either more or less than might have been expected. Whatever the cause for reticence, holding back is rarely a helpful strategy. Trusting your family with such information is likely to have a positive outcome. While every situation is unique, we have helped people hold this discussion many times and might be useful in facilitating a meeting. Interestingly, we have been asked to help about an equal number of times by each generation.
Several years ago, I wrote that dying is not a decision we are allowed to make, although we are often able to make certain choices about how we live our last years. I was reminded of that by this quote from George Burns, which provides a fitting way to close this article.
"You can't help getting older, but you don't have to get old."
Poor Man Wanna be Rich, Rich Man Wanna be King
I am not an expert on TV programming but according to Wikipedia, winning money has been a theme since the advent of “Cash and Carry”, hosted by Dennis James on the DuMont network in 1946. The great popularity of “Who Wants to be a Millionaire?”, first in the UK and then the US, suggests that becoming rich remains of interest to many. However, defining rich may not be as simple as it seems.
Money is obviously important. We all understand that not having enough to meet basic needs is unpleasant. On the other hand, we might suspect that the wealthy already have all the money they need and getting even more wouldn’t make much difference. Interestingly, that’s rarely the case. Hard as it might be to imagine, even those featured in magazines and tabloids are often living paycheck-to-paycheck or nearly so. Just as things have a way of expanding to fill all available space, spending has a way of expanding to consume available income – and often a bit more.
Even though the rich and famous appear to enjoy lifestyles quite different from the rest of us, their lives touch ours in ways that may not be obvious. By regularly enjoying gourmet meals and attending the theater, they help ensure the availability of that fancy restaurant or play we might sample during a visit to the big city. Their flying first class reduces the cost of coach seats. And, don’t forget that the top 5% of US earners pay over 60% of all income taxes.
Warren Ward Associates’ clients are quite diverse, encompassing a wide range of financial situations. Naturally, they have varied attitudes about money and risk-taking. Some feel confident regarding their current and longer-term finances while others feel less secure. Regardless of their circumstances, our process allows them to step back and put their entire financial picture into perspective. Using the wide range of tools at our disposal, we help all of our clients find a balance between their hopes & dreams and income & assets.
While markets tend to dominate the headlines, we have learned that we can’t discuss people’s investments intelligently without an answer to the underlying question of what it’s going to take for them to feel comfortable. In other words, how rich do they need to be? Once we understand their goals, we suggest strategies to move them in the right direction. In fact, the longer we know each of our clients, the more we learn about them. Over time, their responses guide us toward the most appropriate strategy for each stage in their lives. Sometimes, people are further from their goals than they hoped which might lead us to suggest a different investment strategy. Other times, we are able to begin conserving assets even before retirement. Regardless of what we discover, we always structure investment accounts to reduce market volatility.
Bruce Springsteen probably believed that he was describing all of us when he wrote the line I borrowed as the title of this article. In real life, Jalene and I have learned that people can adjust to almost any situation, once they understand the facts and we understand their resources and goals. Financial planning is not the process of making poor clients rich or rich clients royalty but of helping all clients find peace of mind with what they have or can reasonably hope to amass.
