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For this month, I thought we'd go back to
the basics. Hardly a day goes by that I don’t either meet
with someone or hear a new story about someone who has made a
classic investor mistake. While most of us would like a simple rule
of thumb to help us avoid these mistakes, one does not exist. Over
the years, however, we have discussed in this column several
guidelines that may help you in your quest for financial security.
Here is a partial list.
Stop buying the “sizzle.”
Whether it’s weight loss, investments, or many other things,
we all long for a short cut. Many of us try fad diets or buy the
latest herbal weight loss plan even though, deep down, we know they
won’t work. It’s not that we are really fooled; we just
want to believe they’ll work. We don’t really want to
diet and exercise — at least not for long — so the idea
of a “magic pill” is very appealing.
When it comes to investing, many people
fall prey to sales pitches over and over. At first, the idea of
finding the investment that can make us rich (or at least richer),
without much work on our part, is very appealing. Later, when one
or more of these “magic investments” puts us further
behind, we buy into the new pitches with even greater fervor
— because we really need to believe in the magic this time.
Bottom Line: If you keep “buying the sizzle,”
you’re going to get burned.
The next guideline is there is no free
lunch. Again, this is something we all inherently understand, yet
seem to forget from time to time. In the financial services arena,
free lunch or free dinner seminars are a very popular way to
attract new clients. Some very honest and ethical advisors hold
seminars. However, the majority of the “exclusive”
invitations that you (and all of your friends and neighbors)
receive in the mail are for meetings that are thinly veiled sales
pitches. Even though they all say “nothing will be
sold,” most of the presentations focus on the
“wonderful” benefits of a specific product. And,
unfortunately, the sales pitch is often for a product that pays a
high commission to the salesperson/presenter, and leaves the buyer
stuck with drastic penalties to undo the sale. In retirement
communities, the game is to get as many free meals as possible
while refusing to buy anything. The problem is, someone always
forgets this strategy and succumbs to the sales
pressure/presentation — they couldn’t keep feeding
strangers for free if someone didn’t buy something. Bottom
Line: That “free meal” may be the most expensive of
your life.
Financial planners do not pressure you to
buy anything. Recently, financial salespeople of all types have
begun referring to themselves as financial planners. People often
ask us on our radio show for a shortcut-guideline for how to
distinguish between a true planner and a product salesperson. Is
there a designation that guarantees the advisor is an honest,
ethical planner? Is there one company where all of the advisors are
honest, ethical planners (besides, obviously, Rogan and
Associates)? Sadly, the answer to both questions is no. While
designations can prove commitment to the profession, they do not
assure ethics. And there are good and bad advisors at all firms,
regardless of size. (Also, please remember that advisors have
significant leeway in their recommendations no matter where they
work, so the important relationship is always between you and the
advisor, not you and the firm.) The best way to know you are really
working with a planner and not a salesperson is to step back and
ask yourself, “Are they practicing planning, or are they just
trying to close a sale?” In other words, did they start by
asking me many questions about my life, career, family, cash flow,
and more, or did they make small talk and segue into a sales pitch?
Bottom Line: Creating a financial plan is important, but it never
involves urgency, pressure or scare tactics.
We know that creating a comprehensive plan
for your family’s long term financial success is not nearly
as exciting as buying into a magic sales pitch, much like the idea
of a prudent diet and exercise program isn’t nearly as
appealing as a magic diet pill, but the results are the same.
Creating your plan takes some time up front, but like the prudent
diet, once you have achieved your goal, the maintenance is fairly
easy. The alternative for both takes much less time up front,
yields inconsistent and temporary results, requires much more
effort down the line, and is much less successful or satisfying.
So, if you are tired of the results you have been getting, this may
be the time to resolve to change things. If, on the other hand, you
wish to keep getting what you’ve been getting, keep doing
what you’ve been doing.
For a list of questions designed by the
Financial Planning Association to guide you in interviewing
planners until you find one you are comfortable with, stop by our
website and navigate to
www.financialplanningforlife.com/chooseaplanner.html. As always,
good luck in all of your endeavors.
Michael Rogan is president of Rogan &
Associates Financial Planners, a locally-owned financial planning
brokerage firm based in Safety Harbor. He brings nearly two decades
of financial expertise to the local airwaves on the radio show,
Financial Planning for Life, heard at 11 a.m. weekdays on AM 1250
WHNZ. For more information, call 727-712-3400 or visit
www.RoganFinancial.com.
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