When People Say They Already Have a Financial Advisor…

Written by Kyle J Christensen, CFP, April 5, 2023

As a financial planner who continues to grow my clientele, I run into this response from a surprising number of people, even though statistically, in the United States, only 35% of Americans report having worked with a financial advisor (see statistics from statista.com or motleyfool.com).

I think the disparity could be that someone is just using the “I already have an advisor” response as a brushoff. It’s understandable. When I don’t want to talk with the cell phone or internet salesperson at the front of the grocery store, I tell them almost anything in order to move on. When I go to the grocery store, I’m not searching for a new internet provider.

But, possibly, the disparity is caused by a general misunderstanding of what a “financial planner” is or what a “financial planner” does.

Financial planning is not any of the following by itself:

  • Investment management or advising.
  • Retirement planning.
  • Life insurance advice.
  • Disability insurance advice.
  • Medicare Supplement advice.
  • Debt management advice.
  • Budgeting advice.
  • Estate Planning.
  • Tax Planning.
  • College Planning.
  • Property and Casualty Insurance advice (auto, home, liability, farm/ranch, etc).
  • Group Benefit Planning.

Many in the financial services industry that do one or a few of the things on the list, call themselves “financial advisors” or “financial planners”. They do that because the words “financial planner” sounds better to the public than “fee-charger”, “investment salesman”, or “transactional insurance agent”. Those terms are generally turnoffs to most people. They’re a great way to end a conversation or avoid making friends on an airplane.

Some regulatory authorities have also tried to commandeer the words “financial advisor” or “financial planner” and have tried to outlaw anyone else from using those terms (i.e. some states say that you can only call yourself a “financial advisor” if you sell Wall Street securities – or are securities licensed). Again, investing is only a piece of the puzzle when it comes to financial planning. It’s not, in and of itself, true financial planning.

Most people have never really ever met with a real financial planner. In fact, a huge majority of people in the financial services realm are not financial planners. Real personal financial planning encompasses all areas of a person’s plan (everything a person is doing or could be doing). A real financial planner always starts by finding out the clients wants, desires, and concerns. Real financial planning always begins with finding out everything there is to know about the client’s current financial situation. So, if you’re reading this and you believe you have a financial planner, but you’ve never provided every financial detail of your current financial situation to your planner, you aren’t really working with a financial planner. You’re working with someone who only addresses part of a financial plan.

Now, don’t confuse how a financial service provider gets paid with what they do. There are several ways a financial planner can get paid. Even the CFP Board of Directors recognizes this fact. I bring this up because there is purposeful confusion (aka marketing) around this issue. Because the majority of the financial planning industry wants to get paid regardless of whether the client likes or benefits from the advice and they want to appeal to high net-worth or high-income individuals, and they don’t want to take the risk of not getting paid, they have pushed the idea that being “fee-based” or “fee-only” is what “real” financial planners do. Everyone else is sort of a lower form of life, and for sure compromised from a “conflict of interest” standpoint. That’s an inaccurate judgement and the CFP Board is clearly stating that it is. Nevertheless, the marketing of this difference in compensation method continues to be an effective sales technique.

Financial planners are not obligated to charge fees or get paid by commission. They can choose to do either or both. When they charge fees, they tend to promote the idea that they aren’t “biased” in their advice, because they don’t receive compensation from a financial institution. However, they may be biased toward certain types of investments (generally, Wall Street products and the Accumulation Theory – saving money in retirement accounts, etc). If a planner is fees-for-assets under management based, the planner is for sure (not just likely) biased toward Wall Street products and the Accumulation Theory. I say that, not as a slam, but as a matter of fact. If a person is licensed to sell securities (assets under management), they usually can only sell Wall Street investments (aka registered securities). They can’t also sell real estate, or franchises, or private placements, etc. If a planner is commissions-based, they could be biased towards whatever financial products they are licensed to sell. In fact, I would say they are likely to be biased towards those products. They chose to be compensated in those areas because they believe they are generally a valuable part of a person’s plan (or possibly, because they get paid better for it – this may unfortunately be true in some cases). The reason they are commissions-based is not generally because they are not smart enough to pass the Securities license exams or the exam to become a Certified Financial Planner.

Some in the financial industry charge fees, and they are truly financial planners. Some in the financial industry charge fees, and they are not actually financial planners. Some in the financial industry get paid via commissions, and they are truly practicing financial planning. Some in the financial industry get paid by commissions and they are not truly financial planners. There’s a phrase from the bible that comes to mind, “By their fruits ye shall know them.”

I personally have chosen to get paid by commissions. I am a CFP. I’ve been a CFP since 2003. I’ve been practicing financial planning since 1999. There’s definitely a danger in being commissions-based, from the perspective of the fact that there’s no guarantee that I will get paid when I work with someone. There’s also an advantage that I see with being commissions-based, and that is that I can work with anyone. I don’t need the client to have a certain net-worth or a certain level of income to be able to work with me. I believe most people in the industry that charge fees actually do it for a completely selfish reason. It’s because they only want to work with people who make a lot of money already. And they want to get paid for sure. As I said, it’s a risk being commissions-based. But over the past 24 years, I have worked with a number of people who had very little in terms of net worth and income, and now they have over a million dollars, and now they make high six figure incomes. It’s extremely satisfying to think that I might have played a role in helping them get there. Most of the financial planning industry simply lives on rollovers of existing wealth. They aren’t there to help the client create it (as a “financial planner” on LinkedIn once quipped back at me “Duh, that’s why they call it asset management and not asset creation.” – haha, so true.)

Back to the main point of this article. Financial planning is holistic. It covers all the bases. If you are working with a so-called financial planner or advisor, and he/she hasn’t covered or reviewed every aspect of your plan, he/she is not a financial planner. Our process is holistic. We start by sending a person a questionnaire that leaves no stone unturned. We invest almost the entire first meeting on the learning the client’s concerns and objectives. Then, we go through a unique process of teaching and applying financial principles (I know of no other financial planning group that does this). It’s a process. It takes time (usually 4-6 meetings). We don’t charge for our time. So, we invest whatever time is necessary. Our most selfish goal in the process is that the client has a great experience, and wants to tell everyone else they know about us. And generally, and thankfully, that’s what happens.

I was working with a client the other day and asked him, after we had covered in detail his auto, homeowners, liability, and disability insurance (some of the areas of protection), if anyone had ever gone through those things in that sort of detail before. His answer was, “No one has ever gone through those things with me before.” This is a more common response that I hear from clients than I think anyone would like to believe.

People really can benefit from true financial planning. It’s the financial education that you don’t get in your formal education. Without it, people are making individual product decisions or strategy decisions without considering the whole plan. It’s like trying to build a house without a blueprint of the whole house. It’s pretty easy to imagine the outcome of that type of planning. It’s a disaster waiting to happen. You can choose to work with a true financial planner. I encourage you to do so. If you are looking for one and don’t know where to turn, message me and I will help you myself, or point you to a financial planning firm that I know will do a thorough and excellent job.