Have you ever fired a financial advisor?

Hopefully you’ve never been fired from a job, but if you’ve ever had 80 or so bosses at once, chances are high you’ve been fired!

That’s the case with this business. I work for my clients, not some big brokerage firm. As such, any one of my 80 or so clients can fire me pretty easily. All it takes is a phone call and KAPOW!


Why did I get fired?

Usually you need to do something wrong to get fired. Maybe treating customers poorly, or lying to them. That would be just cause.

In this case, I was fired for telling the truth! Bear with me here, there is a moral to this story.

I tell every client I don’t get paid to sugar coat things. If you’re in bad financial shape, you’re going to know it. We’ll work hard at getting you “right-sided”, but you’re going to know it! For some clients (as Jack Nicholson said) “They just can’t handle the truth!”.

You see, we do a GREAT deal of planning for our clients. NO ONE works harder to get – and keep – them on financial track. Dying broke isn’t an option, but neither is sacrificing quality of life after all, that’s what we live by for our clients.


This client retired too early and spent too much money

Recently I had a client who I’d been working with for nearly 4 years. They retired young – too young actually (before 60) – but it was their desire. They retired before they hired me actually.

I created a great retirement plan for them based off an annual budget of (let’s say) $60,000. If they’d stuck with their budget, they should have been just fine.

Unfortunately, the last three years they withdrew closer to $75,000. That’s a whopping 20% more than they were supposed too withdraw!

I can’t stop them from withdrawing funds. It’s their money after all! But I can tell them how it will affect them financially.

At our most recent financial planning review meeting the numbers (which were just OK to begin with) looked quite poor. Excessive withdrawals early in retirement (and definitely for an early retiree) can really destroy the big picture plan.


Don’t shoot the messenger

Their excessive withdrawals caused problems with their financial goals down the line. Granted, they wouldn’t run into problems until they were in their 80’s, but it’s my job to make sure they never risk dying broke. If they were to live into their 90’s they’d definitely be broke.

I gently brought this to their attention at our review meeting, and explained we had issues to resolve. One of the largest issues was their private health insurance premiums prior to Medicare.

Insurance costs prior to Medicare are probably the #1 problem early retirees face! Their premiums were going to be roughly $15,000 per year for the couple – an outrageous amount! And with 5 years to go to be eligible for Medicare, this concerned me greatly.


What should they do?

Their house was owned free and clear, and they had a collectible worth a fair amount of money. Should they go back to work? They didn’t like that answer, but the healthcare benefits alone made it a worthwhile choice.

Should they sell the collectible? Should they pull money from their home, sell it or even downsize?

All options were on the table as far as I was concerned. Unfortunately NO options were on the table as far as they were concerned.

Plenty of investors mistakenly assume that Alpha is real. Alpha is the value added an investment manager brings to the table. While an advisor can add “Alpha” through tax planning, risk management, and general financial planning, they cannot add Alpha through investment management.

When one financial advisor says he can earn more than another, in reality this is just speculation and conjecture. Of course, he can recommend more risk, but that can cause a retirement plan on the brink of disaster to completely implode when the next bear market comes!


Were they getting pitched by another financial advisor?

Any financial advisor can claim their mutual funds are better, or their management style is better, or they have the secret sauce to higher returns. They don’t. It’s not possible.

We focus on the bigger planning picture for our clients, and add value through maximizing social security strategies, making sure they’re in the best Medicare plan for their needs, and tweaking every little ROTH IRA conversion possible.

We add value through more tangible things with REAL financial benefits (and we do an amazing job of low cost tax efficient evidence based investing as well!).

I recommended to start by liquidating the collectible. It was the obvious low hanging fruit that would buy them some time to look into going back to work and/or downsizing the house. Apparently that was my death knell with this client.


I’ll NEVER sell that collectible car!

Some people would rather believe in a great story than in reality. I have nothing to gain by recommending they make tough financial decisions like selling a collectible to bolster their retirement plan. Rather than make the tough decision, they went for the great story.

I’m unclear as to which financial advisor they ended up with. I don’t really care.

All I know is that the reality of the situation is they’re going to die broke without some serious changes. This was caused by retiring too early and spending too much – two things I had no control over.


So I was fired by a client

The client quickly fired me. They thanked me for all of my hard work, and they never had an issue with their investment results. But I’m quite certain that the “next financial advisor” that fell into their path promised them 1% more or something to that effect, maybe a guaranteed signing bonus with a fancy annuity. Who knows…

The moral of the story is consider your financial advisors motives before making a rash decision. The new financial advisor had a commission to earn, whereas I had a retirement to save… they’re retirement!

Sometimes it’s not the best story you should fall for, it’s the best plan – even if you don’t like the results!