Find an Ethical Financial Advisor FFS!

Seems like once a week I hear some crazy story about a financial advisor ripping off a client. Like this guy.

Signing paperwork on their clients’ behalf. Using their money for personal purchases. Trading their money in crazy speculative investments. Churning. Or pushing weird investments that they get kickbacks on.

It makes me wonder: Why do people find it so hard to hire decent, ethical advisors?

I don’t know the answer,  but I think you can increase your odds of working with someone you can trust if you follow a few steps.

  1. Look them up: Google them. Research the company they work for, or the broker-dealer they are attached to. Is it a reputable firm? Have you ever heard of it? Has it/they been in business a long time?
  2. Check their business reputation. Go to brokercheck and see if they have lots of business issues. If they have been in the business at least 5 years, and they are a bad one, there will be marks on their record. Conversely, if they have little or nothing on there, that’s probably a good thing.
  3. Obviously they should be licensed for investment or insurance products they sell, but if they’ve been in the business for any more than a couple of years, they should have some advanced education. CFP, ChFC, CLU, MSFS, and some other specific designations exist that can help you feel comfortable they at least are willing to work at being better advisors.
  4. Meet them through referral. Ask your accountant, lawyer or someone you think has a good head financially who they recommend.
  5. Meet them in person once, maybe twice before pulling the trigger. Your gut instinct about someone is usually right.
  6. Make sure you always understand what they are doing once you’re in the relationship. Meet at least annually and get a detailed and clear accounting of what’s going on with your money.

If you follow these steps, I think you have a pretty good chance of finding someone you can trust and work with for years, without getting ripped off.

Good luck out there!

What Counts as Saving and What Does Not?

People I talk to are always confused about what counts towards “savings”. You may have heard my reference to saving 15%-20% of your gross income to be successful in your financial plan, but here is the list of items that count and the ones that do not.

Here’s what counts:

  • Retirement account contributions (like 401k, 403B, 457, pension plans, IRAs of all types, etc).
  • Permanent life insurance (that has a cash value).
  • Non-qualified investment accounts.
  • College savings accounts like 529 plans.

That’s it! But extra credit for 401k match (as long as you get it), and any other retirement contributions your employer gives you, like pension, stock, stock options, etc.

Here’s what does not count:

  • Regular savings accounts you use for everyday expenses and emergencies or expenses that pop-up.
  • Mortgage payments, real estate down payments, additional mortgage payments, or accelerated mortgage payments! Your home is not a “bank that you live in” as one client once told me and many learned the hard way.
  • Investment or assets held within your own business: the real estate your business owns, or any hard or soft assets therein do not count. You can’t use your restaurant inventory to pay for your kids college!
  • Any speculative investments that you are making: If you have a brokerage account that you like to buy individual stocks on hunches or tips; or you own gold because you believe that the financial system is going to collapse; or you have friends who have an idea and you put money with them hoping for some kind of return; or your buddy opened a restaurant and you want to take on 5% so you could sit down and get free drinks and say you’re part owner of the place. All things like that you should not consider long-term savings. They are too risky and too illiquid. I hope you do well with them but they can’t be counted on to produce the resources for the future needs that you have.

I hope this helps you stay clear about what is really helping you win financially in the long term!






The Three Basic Steps to Financial Success

When I first meet with clients, especially young ones in their 30’s and 40’s, who have all of their financial life ahead of them, they’re wondering what they need to do to be successful.

They think it’s harder than it really is or at least more complex. I can understand why.  I’ve read a million articles and heard a million pundits talk about detailed things they need to do with their money in order to be successful.

A 15 year mortgage, not a 30. Term, not Whole Life. ETFs, not mutual funds…on and on and on.

But in reality, there’s only a few simple steps you need to follow in order to be financially successful, and here they are.

Step 1:  Save at least 15% of your gross income. This will account for retirement, weddings, second home, and education for your children. All of those future needs can be paid for if you’re saving 15% of your gross income.

Step 2: Insure your life for at least 10 times gross annual earnings, and perhaps more based on personal goals and needs. Remember to account for all the expenses that you had planned to provide for your family, like education, a second home, weddings etc.

Step 3: Look closely at your situation regarding a loss of income, particularly due to disability. If you work in a decent-sized company, you may be provided with a disability plan. Read it carefully to understand how much benefit you would get, when you would get it, how long you would get it for and whether it’s taxable or not before comparing that income source against your income needs. Again, remember your kids education and future goals like weddings etc. would need to be paid for regardless of whether you’re healthy enough to work or not. If the group benefits do not meet your needs, because of the definitions, or the payment terms, or both, consider a personal insurance plan to supplement the work plan.

That’s it! It’s that simple!

Save money.

Make sure you are protected in the case of a disability or death.

The rest is details. Now those details have to be handled well and I highly recommend that you work with professionals to get those details handled well, but it can be done. It is done consistently, by many people throughout this country.

You can do it too!

The Smart Estate Plan, Part 2: What to do with the Money

In Part 1, we covered the basics of your will, including guardianship and execution of the will. Now let’s get into how to handle the money.

Here’s the reality. Premature death by a spouse is usually a devastating event for people. First, they’re overwhelmed, then disoriented, depressed, confused, lonely. Children are acting strangely, impacted by the event in ways that neither they, nor anyone around them can understand. On top of this, there’s only one person caring for the kids now, and maybe they have a job that’s asking “when will you be back?”

Does this seem like a time when you’d want your spouse having to deal with the complexities of the finances and investments? No.

Now picture this, your spouse suddenly, within weeks of your death, has $2M, $3M or $10M sitting in their checking account.

Maybe they never handled the bills.

Maybe they never handled the investments.

You expect them to handle this well? I’m sure you think your spouse is smart, level-headed and can learn quickly right? But remember, they just lost the love of their life, partner, father or mother to their children.

What’s going to happen when they go to the bank and talk to the teller? “Mrs. Smith, I see you’ve got quite a large account with us suddenly. Would you like to meet with Matt, our investment professional?” Compelled by the itch to ‘get the money working’, might they invest with this person?

What about that old friend who has always had that great idea to open a combo taco stand-nail parlor and now finally has friend who has the money to fund it? Think there might be a financial mistake made here?

What about when your spouse eventually is ready to date, and meets someone. Is it good for that person and your spouse to both know in the back of their minds that millions of dollars are in the bank? Couldn’t that make things weird? Won’t that cause icky conversations like a pre-nup to be discussed at some point?

Not to mention if they got deeply involved, married this person, realized it was a mistake and divorced; guess who could get a good piece of your money?

What about if the circumstances of your death, say a bad car accident, was your fault, and your estate is facing a lawsuit.

OK, enough already…what am I getting at?

Getting the money outright vs getting it in trust.

Now imagine this scenario. You died. Your spouse called the lawyer, financial advisor and insurance agent, as mentioned in Part 1. They help process beneficiary claims, transfer accounts and process life insurance payouts.

But the assets DO NOT go into the checking account, they are automatically invested, and all the bills get paid, starting immediately.

There is no pressure to start handling the finances.

There is no pressure to “get it invested”.

The money is shielded against any lawsuits or creditors.

Since it’s not in your spouse’s hands, it’s not available for any creep to get a hold of, even if there’s an emotion-driven relationship mistake made.

What am I talking about? The smart way to handle the assets after death. Having as much as possible paid directly into trust for the benefit of you spouse (and kids).

How does this work?

Step 1: You get your wills done (see Part 1.) and include a “testamentary trust” provision.

Step 2: You agree on who will be the co-trustee, along with your spouse, of the trust.

Step 3: You inform that co-trustee and ask them to accept the responsibility.

Step 4: In the event of your death, the co-trustee carries out the process of investing the money, paying the bills and supporting the beneficiaries.

Pro tip: Caution against naming your brother, financial advisor, accountant or pastor as the co-trustee. There are all kinds of problems with this. They get old. They may not be qualified to do a good job. They may be prone to conflicts of interest. 

What should you do? Pick a professional trustee. I prefer a trust company.

Trust companies have the highest level of responsibility to manage the investments appropriately, distribute the funds according to the trust document, prevailing customs and law precedents, and are impartial. And it won’t cost you more to employ them in this role. They charge a similar fee, based on assets in the trust, as advisor would. Trust companies don’t get old, they’re qualified to do a good job, and they don’t have personal, potentially uncomfortable relationships with the beneficiaries.

What about control?

Ah yes, that comes up all the time, and here’s what I tell people: Anything GOOD your beneficiary could do with the money in their possession, they can do with it in trust.

All their costs of living will be paid for. Housing, education, clothing, travel, health care, and “others”, in line with the lifestyle they are used to. They could start a business (after a real business plan process has been completed). And beneficiaries are ALWAYS entitled to 5% of the principle regardless.

But if there’s ever a problem, your spouse or children can have the right to fire the co-trustee at any time.

All the potential problems are avoided. It doesn’t cost more. It’s the right thing to do.

I always tell clients your will is not about you, it’s about how you leave the situation behind for the people you love. Do you want to add stress to an already awful situation or make it as stress-less as possible? Do you want the process to be difficult or easy? Expensive or inexpensive?

Consider having your assets paid into trust, and your family will thank you.

Let’s do it!


Wells Fargo Wealth Management, what the hell?

Ugh, read this…



The Smart Estate Plan, Part 1: The Basics

As a financial planner, I help people figure out a plan for the entirety of their financial needs. I help them figure out how much money to save for their typical goals, like retirement, education, weddings, bar mitzvahs, etc. I help them put together insurance plans to cover the financial boogeymen that can ruin everything, death or disability. Finally, we handle their estate planning, and things often get weird. You’ve got a 401k, maybe some non-qualified investments, a home and a big chunk of life insurance, adding up to millions of dollars. This is not unusual.

The first problem: They’re not sure they need a will. Many people confuse the need for a will with extreme wealth, as in an estate big enough to be exposed to estate tax. But the primary needs for a will (and the related ancillary documents) have nothing to do with wealth.

First and foremost: Guardianship

Picture this: You finally take that weekend away from the kids. Toes in the sand in the Bahamas, fruity cocktail in hand. But on the way back, your plane doesn’t make it. Who’s taking care of your kids? Some people think about their own parents,  or more often, a sibling and their spouse, but there are common problems with these solutions. Your parents may be pretty old already, or will be by the time your kids are grown. Your sibling may get divorced. So here’s some guidance:

  • Pick the person, not the couple: when you choose your brother John and his wife Mary, chances are you’re actually choosing your brother John. If you name them both, and they divorce, or he dies, you could have a custody mess, with all best intentions (your sister-in-law and your other siblings ALL love your kids right?). This is a mess we want to avoid.
  • Pick the person who best represents your values about raising kids. Don’t worry so much about location. Your kids will get over changing schools, states, even countries! And don’t worry about financial circumstances. You should have taken care of the financial needs of your kids through your financial plan, life insurance and proper trust planning (more on this later), so this shouldn’t be an issue.

Pro tip: If you and your spouse are struggling with agreeing on whom to pick. Sit down in different rooms and make a top 3 list. There is usually at least one person on both your top 3 lists, and the first one “wins”.

Second: Executor

This person’s job is to get the will and do what it says. No special skills are necessary to do this, but a familiarity with the family certainly helps. Simple solution: Spouses name each other, and a close sibling as a contingent.

Pro tip: Have a contact sheet with the names and phone numbers of your attorney, financial advisor and insurance agent handy. Also keep some kind of semi-organized inventory of the policies, accounts and group benefits info in one place for easy processing.

Third: Trustee

Here’s where it gets complicated; handling the money. In most cases, I find my client prefer to go with a testamentary trust plan that I help them develop, explained in Part 2.

Some things to scare you into action!

The state you live in already has a will written for you. Typical provisions will include provisions like:

  • Equal distribution to your kids, or to your siblings if you don’t have kids (or they took that ill-fated trip to the Bahamas with you).
  • Because the state follows a pretty set protocol, the one guardian you WOULDN’T want could be the one the state chooses.
  • Dying without a will (intestate, as the court calls it), could mean maximum time in courts over the next year or so, and maximum costs (easily thousands) of court and possibly lawyer fees.
  • While your kids are minors, their will be a trustee named to handle the money you leave behind (God knows who that could be!), and the money will be flushed out to them after they reach adulthood, like age 18! Millions of dollars handed to an 18 year old. What could go wrong?

Finally, the ancillary documents: 

Health Care Proxy: Someone to make health care decision for you if you are incapacitated. Name your spouse, then a sibling who lives nearby.

Living Will: Directions for if you want to be kept alive by artificial means. Remember Terri Shiavo? Don’t do that to your family.

Durable Power of Attorney: Similar to the Health Care Proxy, but authorizes someone to make your financial decision if you can’t.

Happy Planning!