Despite an abundance of information, most people are confused about financial planning and investments, and where to go to get advice in those fields. There have been tens of thousands of books written about the subjects; numerous periodicals cover each area; and an almost unlimited amount of information on them is easily available via other media, especially the internet. Yet most people are hopelessly lost when it comes to making financial decisions, or choosing someone to help them do it.
In addition to the fact that most of us have no education or experience in financial matters, other than through trial and error, the next biggest reason people don’t know what to do about their finances, or where to go for advice, is that there are very few knowledgeable, experienced, unbiased, independent voices in this area. Most of the people in the financial services industries are selling products that they want you to buy, from the company that they work for. They work for brokerage firms, banks, and insurance companies; and they are in the business of selling stocks, mutual funds, annuities, and insurance, usually for commissions.
You probably don’t know that it exists, but there is a part of the financial services industry that does not sell products made by their companies, and does not charge commissions. These professionals don’t sell products per se, but independent advice; and I definitely think you need it.
Independent financial planning and investment advice is advice not tied to the purchase or sale of any product by the provider of the advice. It is as easy as it sounds, and unfortunately, it’s pretty rare.
The guy who says his advice is free when you buy his product isn’t giving you a great deal. He’s interested in selling the product because that’s his job, and it’s okay that that’s his job. You might ultimately buy his product if it makes sense for you.
What doesn’t make sense is for you to hire him as your “financial planner” when he can’t really give you any independent advice. He has a pretty big conflict of interests in the advice he gives you regarding the products he sells. It’s just human nature.
You need to initially work with an independent financial planner to see what you need, if anything, and then the salesman can help you choose among products that fit within the financial planner’s recommendations. The two-step process may sound inefficient, but most people I work with have spent thousands of dollars on financial products that they probably didn’t need. As with most things in life, a little time and money spent planning is usually well spent.
It might be hard to find a financial planner who will work with you, not contingent on you buying products from him, but a good place to start is with the National Association of Personal Financial Advisors, which is the largest organization of fee-only financial planners. www.napfa.org.