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How Does Your Financial Advisor Define Success?


I am grateful to Jean Chatzky for her selection of this blog as her top pick among investing blogs in a recent piece for AARP Finance Blogs You Should Read.  In her write-up she generously calls me “An entertaining writer prone to football references…”  With that said I could think of no better way to start a piece about your financial advisor’s definition of success than with a mention of the University of Louisville’s rehiring of Bobby Petrino as their head football coach.  To this college football fan, Louisville’s definition of success is clear and unambiguous.  Is your financial advisor’s definition of success just as clear?

Photograph of Coach Bobby Petrino at the 2010 ...Just win baby

The short story is that the University of Louisville rehired Bobby Petrino as their football coach to replace Charlie Strong who had left for Texas.  Petrino was highly successful at Louisville from 2003-2006 before leaving for greener pastures.  Petrino’s alleged lack of character and morals typify everything that critics point to as being wrong with big-time college sports, however I’m pretty confident that none of that was a factor in the decision to hire him.  He is a talented coach and a proven winner and Louisville needs both qualities as they move to the ACC next season to compete with the likes of Florida State, Clemson, Miami, and Virginia Tech.

As the late Al Davis, founder and owner of the Oakland Raiders, said, “Just win baby.”

For those of you who read this blog on a regular basis you know that I am a fan of openness and transparency in the financial services industry so I have no issue with Louisville’s motives for this move, though I did razz my friend, NAPFA study group mate, and UL grad Greg Curry immediately (Greg is an outstanding Louisville-based fee-only advisor).

Just as Petrino was clearly brought in to win, many financial advisors sadly seem to be in this business with the primary motivation of winning, which I am defining here as earning a whole lot of money for themselves.  Why else would sales training be such a big part of the orientation programs at many firms?  Why else would there be sales contests with nice prizes such as trips to luxurious destinations for selling certain financial products?  Don’t get me wrong I’m not against earning a good living, just not at the expense of the people whose interests are supposed to come first and foremost.

For more on Petrino and Louisville check out this piece on the CNN/Sports Illustrated site by Andy Staples and this one by Michael Rosenberg. 

Is your advisor a wolf? 

In keeping with our tradition for fine family entertainment on Christmas day, this year’s family movie outing was The Wolf of Wall Street.  Watching the film made me wonder what I’ve been missing by being a fee-only advisor all these years (just kidding).

Clearly I am not insinuating that if your financial advisor earns all or a substantial portion of their income from commissions and product sales that they also participate in dwarf tossing, consumption of mass quantities of drugs, lewd sex acts, or other forms of debauchery.  I do wonder if their measure of success is the same as that of the characters portrayed in the film, namely money.  Specifically money that inures to them from selling financial products to you.

While many advisors who sell financial products are competent professionals motivated by their client’s best interests, you always have to wonder if a particular investment, annuity, or insurance product is being recommended because it is the best product for you or rather because it is the most lucrative for the advisor.

As long as some financial services firms run sales contests for advisors and incent sales production this conflict will always be there.

My definition of success 

My definition of success is simple.  I am only successful as a financial advisor if my clients achieve success. 

I would venture to say that my closest circle of financial advisor colleagues, my NAPFA study group, would wholeheartedly agree with this definition.  My guess is that the bulk of my fellow fee-only NAPFA colleagues would as well.

If you are looking for a financial advisor to start off the New Year right check out this guide from NAPFA. 

Make sure that you clearly articulate your goals and your definition of financial success to your current financial advisor or to any advisor that you are considering working with.  Clear and open communication is a vital part of a successful client-financial advisor relationship.

Please feel free to contact me with your questions. 

Check out an online service like Personal Capital to manage all of your accounts all in one place.  Please check out our Resources page for more tools and services that you might find useful.

Photo credit: Wikipedia

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  1. I have often wondered what advisers who sell variable annuities or whole life insurance to retired people consider success. Taking their client’s money?

    • Roger Wohlner says

      I’ve been in this business for awhile and I wonder the same thing. How do they sleep at night or look at themselves in the mirror?

  2. “I am only successful as a financial advisor if my clients achieve success.” Not that I didn’t already know this about you Roger, but this is so refreshing to read. Too many out there are looking out solely for their own profit and give quality advisors like yourself a bad name. I’ve worked at firms where money and contests were the driving factor (though I was never directly involved in them) and is much of the reason why I’m doing what I’m doing today.

    As for Petrino, I’m sure he’s more than happy that UofL was in need and willing to take him back. 😉 That said, I believe he’ll help them smooth the transition from the loss of both Strong & Bridgewater.

    • Roger Wohlner says

      John thanks for your comment. A client has the right to expect that any financial advisor will be putting their interests first and acting with their best interests in mind, period.

  3. Man, I can’t BELIEVE that Louisville hired Petrino. Just seems so crazy. Yes, he’s a proven winner. But there are so many other options out there. Anyways, you know what side I come down on. If the planner’s incentives aren’t fully aligned with the client’s then I think there’s a huge problem.

    • Roger Wohlner says

      Thanks Matt, if nothing else it was fun to give my UL grad friend and advisor study group colleague some grief about this. Well said, advisors who are incented in ways not consistent with doing what is right for their client first and foremost often sell products that may not be the best fit for the client.

  4. Ryan Heath says

    Great article (actually I like reading ALL your stuff). However, I just wanted to give an idea in relation to your first comment from Bryce, and your agreement, that life insurance never works for retirees. I am an IAR and all my managed portfolios are fee only. However, I do offer insurance on a commission basis. Let me give a real world example of how we have used permanent life insurance quite a bit over the past few years.

    Jack and Jill Client, age 65, have $1MM in excess wealth (meaning their retirement income strategy is in place) invested in a 50/50 allocation. Every year, we peel off 1% (or $10,000) from their portfolio and gift it to a life insurance trust that purchases a second to die permanent life insurance policy. The death benefit on this policy would be approximately $1.2MM paid after both husband/wife pass away. Assuming the second death occurs in 30 years, we have the ingredients necessary to do an IRR calculation. In this case, a $10K contribution for 30 years, yielding a $1.2MM FV = an IRR around 8% (completely tax free). Obviously if death happened earlier it would be higher IRR, and vice-versa.

    We are using this PURELY from an asset management perspective. Where else could we get an asset with this type of IRR, guarantees, tax advantage, etc…? In addition, we could even add a long term care rider which would give the clients monthly advances equal to 1% of the death benefit if a LTC need was triggered.

    By the way, how can the insurance companies do this (deliver this yield on premium)? It’s the dirty little secret of that industry. They can offer “lapse based pricing”. All the policies that lapse before benefits are paid (which is the majority of them) represent free cash flow to the insurance company. This flow allows them to price policy economics well in excess of the actual yields on the companies portfolio. This is a pricing opportunity that our clients have loved to hear about and take advantage of. Just food for thought…

    By the way, in regards to variable annuities, I do agree that those are seldom, if EVER, useful.

    • Roger Wohlner says

      Ryan thanks for the comment and the compliment. I believe my comment to Bryce was more in reference to annuities and I agree that life insurance can be a useful planning tool for retirees in situations like the one you referenced and a few others.

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