Tim is a financial advisor that was asked to give a 2nd opinion to an investor named Dan. When introduced, Dan mentioned that he was already working with an advisor.
Tim explained his unique approach and what he would do differently. He talked about the value of having a 2nd set of eyes look over his investment situation. At his first meeting with Dan, Tim concluded that Dan’s current advisor was simply an investment broker, and not a true planner.
The Second Opinion
Tim realized rather quickly that Dan was being led down a path of high commissions without a fiduciary responsibility from his current advisor. Tim immediately felt bad for Dan. Tim didn’t want Dan to feel bad about his current situation or the decisions he’d made in the past. But he also wanted to be very honest with Dan, so he made calculations on his own.
He found that Dan had paid over $200,000 worth of commissions that were neither needed or suitable.
On top of that, Dan’s current advisor did not address any risk management needs that Dan had. Although Dan is single and does not have any children, he didn’t understand why life insurance might still be an important part of his overall savings strategy and future insurability. Tim was also concerned that the wealth accumulation plan that Dan had in place by his current advisor could become wiped out quickly if he became unable to work.
Making the Switch
Tim discovered that one of Dan’s goals was to guarantee as much generational wealth as possible for his niece and nephew. He also wanted to give generously to his church and favorite charity.
So Tim created a comprehensive financial plan for Dan. It accounted for the direction Dan was wishing to head personally and financially as well as his risk management needs. Ultimately, Tim was able to move over all of Dan’s investments without any trading costs (under a fiduciary platform). He recommended that Dan apply for long-term disability insurance to protect his income should he become sick or injured and not be able to work, as well as a long-term care insurance policy to protect his assets and have proper care should he become incapacitated later in life.
A Better Plan
Tim realized that Dan was never approached by his advisor to discuss distribution planning and retirement. Dan was concerned about taxes and down markets in retirement. So the type of policy that Tim implemented for Dan was an overfunded cash-heavy life insurance permanent policy. It focused just as much on the cash as the death benefit that can be accessed on a tax-free basis during retirement. It needed to be safe but not go backwards.
Dan was pleased, because this allowed him to be more aggressive with his market-based dollars, knowing that he had something to fall back on that wouldn’t decline with the market.
A Good Relationship
After six months of working together, Dan is thankful for the 2nd opinion that Tim gave and for the switch he made to an advisor who listened to him. He knows that his wealth accumulation plan is more geared towards his specific goals, values, and dreams. He is more diversified than before…now that he’s no longer in the brokerage world. Dan also revealed that he is comfortable working with Tim because Tim, unlike his previous advisor, has a fiduciary responsibility.
Surprisingly, Dan told Tim that the most impact Tim’s had on him is that he sleeps better at night, knowing that his advisor is truly looking out for him.
The Objective Measure Conference is coming to Minneapolis on October 5th. Objective Measure is about active financial leadership. It’s for both advisors and clients, and it’s about preparing for the future. Advisors have a responsibility to make the financial services industry all that it can be. Clients…and potential clients…have a responsibility to be proactive, to change the way they talk about and manage their finances. They need to take ownership of their futures alongside their advisors.