Red Flags in Financial Planning
Mike Mazzei

Mike Mazzei, CFP®, is the President of Tulsa Wealth Advisors. He graduated from George Mason University and the College for Financial Planning. Mike created The Financial Freedom Process™ to help individuals leverage their wealth in order to achieve their lifetime visions. He enjoys helping retirees and entrepreneurs develop comprehensive life, financial and investment strategies that enable them to reach greater success, enjoy life to the fullest and leave lasting legacies. Since 2010, Mike has been named by Barron’s as one of the nation’s Top 1000 Advisors based on assets under management and quality of service. He is an Oklahoma State Senator representing Senate District 25. Click here to learn more about Mike.

The following points are from Mike Mazzei’s book, “Solving Your Financial Planning Puzzle.” Click here to find out more about this book.

Red Flag: If your financial planner focuses all of his or her attention on the firm and not on you, you have the wrong financial advisor!

Red Flag: If you are married and your financial advisor does not include both spouses in the financial planning process, you have the wrong financial advisor!

Red Flag: If your financial planner is constantly trying to predict the future and build a portfolio around this prediction, you have the wrong financial planner. If your financial planner uses historical-average returns to calculate cash flow projections, you have the wrong financial planner.

Red Flag: If your financial advisor promotes average investment performance without discussing risk or possible negative outcomes, you have the wrong financial advisor!

Red Flag: If your financial planner says that couples traditionally need 75 to 85 percent of their pre-retirement spending, you have the wrong financial planner. What about changes in healthcare expenses? Inflation? The extra traveling you
might do in your free time?

Red Flag: If your financial planner spends more time selling products to you than collaborating with you on your financial strategy, you have the wrong financial advisor! Likewise, if your advisor is constantly discussing the latest hot investment product, you have the wrong financial advisor. In either case, the advisor earns commissions by selling products, and he or she is likely more interested in earning commissions than helping you reach your goals. If you are paying an annual management fee, but you are not meeting with your financial advisor for regular progress sessions or ongoing financial planning, you have the wrong financial advisor! If you pay a fee based on your portfolio’s assets, and your financial advisor meets with you at least every six months (though preferably every quarter) for regular progress sessions, then you might have the right financial planner!

Red Flag: Always find out how your financial advisor is paid. If your advisor receives commissions when selling you a product, you might have the wrong financial advisor. You might not see a bill or receive an invoice from a commission-based financial advisor, but you are paying through the cost of the product. Under this scenario, an advisor has little interest in re-evaluating your plan because he or she will be paid regardless of the strength of your portfolio. If your advisor charges you by the hour, your advisor’s goals may not be aligned with your goals. So long as the advisor meets with you, she or he will be paid, regardless of whether your portfolio is successful.

Red Flag: If your financial planner is a captive agent of a single insurance company, you might be sold a cookie-cutter policy that does not fit your specific needs. Insurance agents can be a great part of your team, but rarely can they serve as a financial planner.

Red Flag: If you have complicated insurance needs and your financial planner does not collaborate with an insurance specialist, you might have the wrong financial advisor.

Red Flag:If your accountant does not merge your goals into your tax planning needs, the strategies might not reflect your values and beliefs.

Red Flag: If your tax planner waits until March to start your tax planning, you have the wrong advisor! By March, the previous year is already over, so the tax consequences cannot be changed much. Your tax preparation should start in October or November so that you can change an unfavorable outcome.

Red Flag:Some advisors advise against paying home loans because this eliminates money that the advisor gets paid in fees. Beware of a financial advisor who is more concerned about keeping your investment dollars than focusing on important goals such as being debt-free. A good financial planner will strongly consider the benefits of paying a mortgage in full, as this lowers monthly expenses. This is a particularly smart strategy during financially turbulent times.

Red Flag: If you have complicated legal issues and your financial planner has never communicated with your attorney, you have the wrong financial advisor.

Red Flag: Funding of the irrevocable life insurance trust should be one of the last steps of estate planning. If your advisor simply delves into a life insurance sale as the primary strategy for managing your estate tax liability, you have the wrong advisor. An ILIT is considered only after the legacy components of the estate plan have been determined.

Red Flag: If you have not heard from your financial advisor in the past six months, you have the wrong financial advisor!

 

This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It is shared with the understanding that neither the author nor Tony Cooke Ministries is engaged in rendering legal, accounting, psychological, medical or other professional services. Laws and regulations are continually changing, and can vary according to location and time. No representation is made that the information herein is applicable for all locations and times. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

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