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Investment Insights

Avoid These Common Mistakes When Choosing a Financial Planner

By Trilogy Financial
February 20, 2024
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Introduction:

 

Selecting a qualified financial planner is crucial for securing a robust financial future. A proficient planner, like those at Trilogy Financial, can create a financial plan tailored to your unique needs to help you reach your goals.  Yet, a staggering 74% of Americans engage in financial planning without professional guidance, revealing a potential gap in making informed choices​2​.

 

Advisor meeting clients.

 

Mistake 1: Overlooking Qualifications

 

 

Chart quantifying the benefit of a financial planner.

 

  • Stat: Smart financial planning can yield 1.5% more in annual average returns, underlining the importance of qualified guidance​3​.
  • Tip: When choosing an advisor ensure  your planner holds pertinent certifications and showcases a robust track record of expertise.
  1. What are pertinent certifications for a financial planner?Pertinent certifications include the Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), and Certified Public Accountant (CPA) designations. These certifications indicate a high level of expertise and adherence to industry standards.
  2. How can I verify a financial planner's certifications?You can verify a planner's certifications by checking the databases of certifying bodies like the CFP Board or the CFA Institute. Additionally, you can ask the planner for proof of certification.
  3. What constitutes a robust track record of expertise?A strong track record includes many years of experience, successful financial planning, happy clients, and industry recognition or awards.
  4. How can I assess a financial planner’s track record?You can assess a planner’s track record by reviewing client testimonials, checking for any industry awards or recognitions, and asking for references. Additionally, verifying their work history and experience in the field can provide insights into their expertise.

 

 

 

Mistake 2: Neglecting Fee Structures

 

  • Stat: According to a 2019 Financial Trust Survey, “Nearly half of Americans (48%) incorrectly believe all financial advisers have a legal obligation to act in clients’ best interests.”4.
  • Tip: Understand the fee structures and ensure transparency in your financial engagements if you chose to work with a financial advisor.
  1. What are common fee structures in financial planning?Common fee structures include fee-only (fixed, hourly, or percentage of assets managed), commission-based, and fee-based (a combination of fees and commissions).
  2. How can I ensure transparency in fee structures?Ask your financial planner for a clear, written explanation of all fees and charges, including any potential third-party fees, before engaging their services.
  3. What is the difference between fee-only and fee-based financial planners?Fee-only planners charge a flat fee, hourly rate, or percentage of assets managed, and do not receive commissions from selling financial products. Fee-based planners, on the other hand, may charge fees and also receive commissions, which could potentially lead to conflicts of interest.
  4. How do commissions affect the advice I receive?Commissions could potentially create a conflict of interest if a financial planner is incentivized to recommend certain products that earn them commissions, rather than what's in your best interest.

 

 

 

Mistake 3: Disregarding a Personalized Approach

 

 

Advisor providing a personalized approach to financial planning

 

  • Stat:  A Bankrate 2019 survey shows that 44% of individuals with a personal finance plan save more for retirement and 43% save 50% more per month.​5​
  • Tip: When hiring a financial advisor opt for financial planners like those at Trilogy Financial, who prioritize a personalized approach to meet your unique financial objectives​​.
  1. What does a personalized approach in financial planning entail?A personalized approach means that the financial planner takes the time to understand your individual financial circumstances, goals, risk tolerance, and future aspirations to craft a strategy tailored to meet your unique needs.
  2. Why is a personalized approach important in financial planning?A personalized approach ensures that your financial plan is aligned with your goals and circumstances, which can lead to better financial outcomes and satisfaction over time.
  3. What are some examples of unique financial objectives that would benefit from a personalized approach?Unique financial objectives could include planning for early retirement, saving for a child's education, managing a large inheritance, or preparing for a significant life change like marriage or starting a business.
  4. How does a personalized approach compare to a one-size-fits-all approach in financial planning?A personalized approach provides tailored advice and strategies based on your individual circumstances, which can lead to more effective financial planning and better outcomes compared to a one-size-fits-all approach that may not align with your personal goals and risk tolerance.

 

 

Mistake 4: Ignoring a Comprehensive Service Offering

 

 

Chart showing 90% of people say financial planning helped them achieve their saving goals.

 

 

  • Stat: A whopping 90% of individuals achieved their savings goals owing to comprehensive personal finance plans, emphasizing the necessity of a holistic service offering​ 6​.
  • Tip: Choose a planner offering a spectrum of services including retirement planning, estate planning, and risk management.
  1. Why is it important for a financial planner to offer a variety of services?A variety of services allows for a holistic approach to financial management, ensuring that all aspects of your financial life are considered and managed in a coordinated manner. This might include mutual funds, tax planning, and more.
  2. What is retirement planning, and why is it crucial?Retirement planning involves preparing for life after you stop working, which includes saving, investing, and making other financial arrangements to ensure a comfortable living post-retirement.
  3. What does estate planning entail?Estate planning involves the management and disposal of an individual's estate during their life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax.
  4. What is risk management in the context of financial planning?Risk management in financial planning refers to the identification, assessment, and strategizing to mitigate or manage financial risks that could negatively impact your financial situation.

 

 

Mistake 5: Underestimating Continuous Communication

 

 

  • Stat: Clients report higher satisfaction levels with higher frequencies of investment-related educational communications and scheduled meetings, underscoring the importance of continuous communication​ 7​.
  • Tip: Ensure your financial planner maintains open channels of communication, keeping you informed and engaged throughout your financial journey.
  1. How can I ensure that my financial planner maintains open channels of communication?
    You can set expectations for communication upfront, such as preferred methods of communication and frequency of updates. It's also helpful to choose a planner who is responsive and willing to engage in regular discussions about your financial plan.
  2. Why is communication important in financial planning?
    Communication is crucial to ensure that you and your financial planner are on the same page regarding your financial goals, risk tolerance, and any changes in your financial circumstances. It also helps in building trust and understanding throughout the financial planning process.
  3. What are some red flags regarding communication with a financial planner?
    Red flags could include lack of responsiveness, unwillingness to answer your questions, failure to provide clear explanations, or not initiating regular reviews and updates as agreed upon.
  4. How can effective communication with a financial planner impact my financial journey?
    Effective communication can lead to better understanding, trust, and alignment between you and your planner, which in turn can result in a more effective financial plan and a more satisfying financial journey.

 

 

 

Conclusion:

 

Avoiding these common pitfalls when choosing a financial planner can significantly steer your financial voyage towards success. Engaging with a reputable firm like Trilogy Financial not only helps sidestep these mistakes but also ensures a tailored, client-centric approach delivered by qualified professionals, fostering transparent communication throughout your financial journey​1​.

 

 

 

 

 

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Family & Relationships Advice

How to Teach Your Kids About Money

By Trilogy Financial
November 2, 2017

The day you become a parent is a day of overwhelming emotions. You may experience joy at the sight of your precious child, relief that he or she made it out of the womb, and for many of you, fear and anxiety because you somehow have to turn that seven-pound baby into an independent, responsible, and successful adult.

As parents, there are so many things we have to teach our children, beginning with the basics of how to eat and share toys to more complicated lessons such as making decisions and getting along with others. As a society, we are excelling in some areas of parenting, but falling behind in others. In a recent National Financial Capabilities Study, only 24 percent of Millennials (age 23-35) were able to answer the first three financial literacy questions correctly, and a mere 8 percent answered them all correctly.[1]

Most parents agree that we need to do a better job teaching our kids about money. Last year, T Rowe Price reported that 80 percent of parents didn’t think schools were doing enough to teach kids about financial matters.[2]However, parents cannot abdicate all responsibility to the schools. Raising children and teaching them to navigate the world is first and foremost a parent’s responsibility.

Set A Good Financial Example

The first step in teaching your kids about finances is modeling what you want them to learn. Few parents would disagree with this concept. The same T Rowe Price study mentioned above found that 69 percent of parents are very/extremely concerned about setting a good financial example for their kids. The vast majority, eight out of ten, feel that they are setting a good financial example, but two-thirds also admit to doing things that wouldn’t qualify as setting a good example.

An enormous 40 percent admitted that when it comes to talking to their kids about finances, it’s “Do as I say, not as I do.” Anyone who has raised kids knows that isn’t enough. My clients tell me they are very concerned about setting a good example for their children. The first step in teaching your kids about money is simple: Show them.

Talk About Finances

Sometimes a silent model isn’t quite enough, and some areas of personal finance aren’t very visible. That is why it is imperative to talk to your kids about finances. But talking about money may be a long-standing cultural taboo. Often this reluctance to discuss financial matters spills over into the home as well.

Forty-nine percent of the parents in the T Rowe Price study said they rarely or never discuss family finances with their children. Eighteen percent admitted to being very/extremely reluctant to discuss financial matters with their kids and 72 percent of parents experience at least some reluctance to having such a discussion. But how are kids going to learn about money if you avoid talking to them about it?  Some topics require more in-depth discussion and openness and finances are one of them.

Get Your Kids Involved

If you want financial understanding to actually sink in, you need to get your kids involved. Learning theory and research have consistently shown that the more active a learning experience is, the greater the learning gains and retention.[3] Most people have to do something to truly learn it.

How does this work with kids? Here are some ways I’ve put this into practice with my daughter: Even though she is young, I have taught her the difference between a penny, nickel, dime and quarter. Beyond just teaching the values of the coins, I then show her how to earn money by completing basic, age-appropriate chores such as making her bed and folding her clothes. As her coins start adding up, she has the opportunity to buy a toy or to save her money and earn interest (a penny for every dollar). Just as any adult, she loves the idea of making money for no extra work, so she often chooses the savings option!

At this point, I take a step back and let my daughter make her own financial decisions (and sometimes mistakes) so that she can learn from them. She and I have different values and I’ve learned that I need to let her be independent and respect her choices. On one occasion, she decided to impulsively purchase a My Little Pony beanie baby that I thought would be a waste of money. Rather than refusing to buy the toy for her, I took a step back and allowed her to buy it with her own money. Sometimes I am surprised in the process, as she still plays with this toy three months later!

Imparting financial wisdom to your kids is a challenging process that takes years. So, if you don’t feel like you’re doing an adequate job of teaching your kids about money, you’re not alone. Even if you are doing a good job, you probably agree with the 77 percent of the T Rowe Price survey parents who said that they wished there were more resources available to help them teach their kids about financial matters.

I believe that every child can learn critical financial lessons at a young age that will set them up for future success. I want to provide you with the tools to help you on this journey. To set up a meeting, call my office at (949) 221-8105 x 2128, or email me at mike.loo@trilogyfs.com.

[1] http://gflec.org/wp-content/uploads/2015/01/a738b9_b453bb8368e248f1bc546bb257ad0d2e.pdf

[2] https://corporate.troweprice.com/Money-Confident-Kids/images/emk/2015-PKM-Report-2015-FINAL.pdf

[3] http://www.joe.org/joe/1994august/a6.php

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Investments Advice

Investing is for Everyone

By
Jeff Motske, CFP®
March 12, 2019

A generation or so ago, the path to financial freedom was pretty direct for most. You found a job and saved for a home and a rainy day. When it was time to retire, you collected from a pension and enjoyed your remaining twilight years. Over time, things have drifted away from womb-to-tomb employment and gotten a lot more complicated. Today’s Americans have to be much more proactive with their finances. In this day and age, saving isn’t enough. Make sure your money is working as hard as you work for it.

There are a lot of concerns for the future. Buying a home. Sending kids to college. Making sure that your current career will be around to see you to retirement. People are living longer, so their retirement money has to go farther. Many high costs associated with medical care aren’t covered by Medicare, such as many prescriptions and long-term care. Pensions are no longer viable option for most Americans, and Social Security, a program that was never intended to replace income, no longer provides the level of security people need for their future. There’s a lot to prepare for.

Due to these concerns on the path to financial independence, people need to be mindful of their money. Even the most conservative Americans need to do more than contribute to a standard savings account, which can’t keep up with the rate of inflation. Investing your money will grow it exponentially faster than simply saving due to the power of compound interest. Yet, preparing for the future can be very emotional work. Today’s retirement planning relies far more on the decisions made by an individual rather than a company or organization, which can be a lot of pressure. Fears of not having enough money, a very common concern, can cloud decisions and can prompt people to react rather than plan. This is why an objective third party is necessary. Financial advisors can see past the emotions and help you plan your path to your financial freedom.

In this day and age, there are real and unique concerns that can derail you from the path to your financial independence. Trilogy Financial is here to help you establish your goals and invest your money to help get you where you want to go. It is our mission to ensure that every American, from Main Street to Wall Street, has access to great planning and the tools to establish their financial independence.

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