My financial advisor isn't listening to me
I hired my FA for one thing—to manage my retirement investments. Outside of retirement I have a plan for how I manage my cash flow that fits with my personal lifestyle choices, but I feel my FA wants me to change to fit an investment plan he has picked for me.
We have been saving for retirement about 30 years. One day he called us into his office so he could model our retirement expenses. He asked a number of questions but ignored my answers. Then he came up with a model based on a lavish lifestyle that showed my 30 years of savings would be gone in just one year if I retired early.
I should have fired him on the spot. Apart from not listening to my answers, it’s demoralizing to feel like I have worked a lifetime to support myself for just one year. I felt angry and discouraged.
His plan must have been to convince me to maximize my retirement contributions. I was not ready to do that, and I had told him why. When I was younger I had done that, but got badly burned when my finances went sour and I had no emergency funds—everything I had was locked into an untouchable retirement.
Since then I shifted my finances into six parts:
- Money I need to live today, month-to-month
- A decent rainy-day savings for major purchases or emergencies
- Aggressively paying down all debt, including mortgage debt
- Helping my three children as young adults, buying their first car, providing their college education
- Saving a little in a (matching) 401k
- Enjoying life at middle-age, spending time with family and friends
The last point in particular I am not willing to compromise on. I don’t want a lavish lifestyle but I should be able to travel and enjoy activities. I have minimized personal expenses and nearly eliminated all debt. Today we could live comfortably on $3,000 a month. I am not willing to see my children take on further student loan debt, as I consider 5% interest rates criminal for an investment in our future.
We are not maximizing our tax-deferred contributions today. We did when much younger, but accumulated debt in doing so, and became “house poor”. I’ve learned from our mistakes.And there’s no shame in paying taxes. Part of the point of increasing retirement contributions is to lower my tax burden, I get it. But unless I am also debt free I am losing the game—I would lose far more to interest payments than I would ever pay in taxes.
I need to find a financial advisor who is on board with my plan and will work to maximize the return on my retirement investments and my savings funds. I lack the time to figure this all out for myself. But I don’t need an FA who is set on changing my ideals.
My First Financial Advisor's Churning Taught Me to Take Control of My Investments
A lonnnng time ago, my financial adviser (my first brokerage account) churned my account. That means that he traded frequently, just for the purpose of generating commissions. In those days, there was no such thing as the low deep discount commissions that we pay today (and no internet). When I eventually figured out what he was doing, I began the process of learning about the financial markets and I have done it myself for 40 years.
Dodging Disaster: The Terrible Mortgage Advice That Almost Led Me Into the 2008 Crash
Some idiot financial advisor came to my workplace circa 2006 advising everyone to take zero-downpayment, interest-only mortgages, which were widely available at the time and were what fueled the housing bubble.
Then use the proceeds to buy life insurance as an investment.
I recall asking him, what happens when the interest-only period expires and you're required to start paying principal? "Oh, don't worry, you can always refinance into another interest-only loan. "Obviously I did not follow his advice, and we all know how the real estate market ended up after the 2008 crash. (I ended up buying my house in 2012.)
Pressure Tactics and Poor Advice
I had one guy INSIST that I buy a costly Variable Life insurance policy. “Don’t read the prospectus! TRUST ME!” Sorry. “We’re not leaving until you sign!” Okay well you may want to order a pizza, because it’s gonna be a looooooooooong wait!
Another time I met with reps from a major financial firm who asked how my investments had been doing. “For the past ten years my compound returns have been 27%.” (That is, my portfolio was up 10x over ten years.)
This upset then tremendously, like I had just told them I kidnapped babies to use as firewood. “Well, THAT’s totally unsuitable!”Well, what do YOU recommend? “We have a program that will deliver 7% a year. But no promises!” (Perhaps double over ten years.) Okay! We’re done here!
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The Impact of Bad Financial Advice
Getting poor financial advice can have serious consequences, from financial loss to emotional distress. More and more investors are choosing to take matters into their own hands – and we're here to help.
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