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Financial Salespeople, Advisors, and Planners
Member advice on sorting out the different types of financial salespeople and advisors. (Updated Aug 18, 2020.) Questions or comments to: firstname.lastname@example.org
This topic can be discussed in the HPAA Finance Forum. (Due to the very personal -- and usually geographic -- nature of a relationship with a financial advisor, we don't get into specific financial advisor recommendations on the HPAA Finance Forum.)
"Managing Your Money Manager -- Demand these things from your financial adviser" by AARP financial columnist Jane Bryant Quinn: https://jbquinn.com/?p=921
Understand the role played by each company or person you deal with. For example, as EDS alumni discussed a pension lump-sum buyout offer that was made by HP to certain EDS retirees, it became clear that Fidelity was acting as HP's financial advisor, not the retirees' advisor. For example, key information required to evaluate the offer -- such as the 5% annual fund growth, dependent coverage, and the Federal pension plan insurance -- is only covered in a legal "Summary Plan Description" that is not included in the mailing.
The "Opportunity is here" color brochure said:"...speak with a Fidelity Representative at no cost to you... help you understand how this decision may affect your personal financial situation and help with your overall retirement planning and investment strategy." A member reported: "The agent did say a risk is the fact that the fund is backed by HP." -- but didn't mention the Federal insurance.
A post from the HPAA's Finance Forum... (Updated Aug 16, 2020.)
Subject: [HPAA Finance] How to Choose a Financial Planner
Some people want to invest the time to learn and keep current to manage their own finances, while others want to hire someone to help them, either for a financial plan and then they take over from there, or they hire a planner for an on-going basis. Both are very valid approaches and the decision of which is best for you is very personal indeed.
Remember too that if you hire a planner and it doesn't work out, you can terminate the relationship. Each quarter you'll want to review your portfolio with your planner and be sure to evaluate the performance of each investment against a relevant benchmark. This is the only way to determine the quality of the results. This is also an important periodic activity if you are managing your own portfolio.
A good financial planner should be able to help make recommendations to you about investments as well as key areas such as tax planning, education planning, insurance planning, retirement planning and other financial aspects of your life. It is not just about your investments, although that is a very important area.
An often overlooked value that a financial planner can bring to clients is a third-party experience that can help you from being overwhelmed by the two human emotions that can sabotage the very best laid plans, fear and greed. Fear and greed are among the reasons that many people buy at the top and sell at the bottom.
People tend to pile in near the top and panic out to lock in losses at the bottom. This is human nature. I would point out that unlike a sale at a store that attracts customers, the stock market may be the only market in the world where people want to sell or shy away when an investment is on sale. Everything is always a matter of timing and judgment so I'm not suggesting something should be bought strictly because it is on sale. Everyone needs to make up their own mind based on their own strategy, risk tolerance and financial situation.
Financial advising can be very confusing because there are many folks out there trying to sell you products, strategies or other approaches.
Financial planning is a process and not a product. This doesn't mean that all financial planners will always agree. While many financial planners will agree on major tenets, especially in non-investment areas, financial planning is not a science. Anyone telling you that they are always right and they know everything, in my opinion should be avoided. If it sounds too good to be true ...
Searching for a financial planner that meets your needs takes time, but I suggest you approach it much like you do with any other important service.
I would suggest you interview at least three financial planners. It is important to work with someone who has your confidence. Some planners work on a commission-only basis, which means they get compensated from sales commissions by having you buy specific products or investments. The "Fee-only" compensation model means the planner gets compensated only from the client, usually by either a flat fee, hourly fee or what is called an AUM or assets-under-management fee (fee is based on the size of your portfolio). The third compensation model seen widely is called "fee-based", and is actually a combination of fee-only and commission-only. All three compensation models are widely present in the marketplace.
You can use the following links to locate a local Certified Financial Planner, understand what this certification means, and find sample interviewing questions:
Ten Questions to Ask Your Financial Advisor [Page comes up slowly.]
A survey done a few years back showed that the average adult spent more time every year planning their vacation then they did planning for their retirement. I would encourage everyone to either put in place a plan to do it themselves or consider engaging a certified financial planner to assist them.
For more mutual help on this topic and many others, join the independent HP Alumni Association. If you were formerly a regular, direct employee of HP, HPInc, or HPE -- or are in the process of leaving -- join the HP Alumni Association. No charge, thanks to HPAA members.
As financial, legal, and personal advice must be tailored to the specific circumstances of each case, and finances and laws are constantly changing, nothing provided here should be used as a substitute for the personalized advice of competent financial, legal, and personal advisors.
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