You get what you pay for when you decide to get a $5 haircut, and you get what you pay for when you drink a $100 bottle of wine. Maybe you wouldn’t do either of those. (I won’t blame you.) But from the start, when you see that price, your expectations are set, because you expect to get what you pay for.
That holds true in the financial services industry as well. Unfortunately, most people don’t know always know what to expect when they seek financial advice. And the industry doesn’t help, with financial planners, financial advisors, wealth managers, insurance salesmen, investment advisors and more all falling under the same industry, with little regulation helping to tell you what standards you should expect.
But there is one way to know what you’re going to get: Check to see what you’re paying for.
If your financial advisor is paid by the transaction, or through a percentage of the money invested, chances are good that you’re going to get a lot of advice related to transactions; because that’s what you’re paying for.
Fee-based financial planners, will give you advice on the best way to use your money and to plan for your future. It’s all about having a plan, and knowing how to best adjust that plan as change happens.
And change does happen. Let’s say you’re out driving through Rehoboth this summer and you see it: Your dream beach house. It’s expensive, sure, and you still have a couple of years before you planned to retire … but it’s your dream house. You hatch a plan to sell your home (as well as a smaller vacation house you inherited from your parents) to pay for it.
Sounds like a plan. But is it the right plan? Have you considered the capital gains taxes that would come from selling the vacation home? Of course, there would be no capital gains on the sale of your primary residence – but what if you financed a portion on the new home, instead of paying in cash? Borrowing rates are as low as they’ve ever been – but would a mortgage hurt your plans for retirement?
These are the questions we ask at Blue Rock, and the recommendations that follow are all geared toward finding a way to achieve your goals in the best way possible – getting the dream house, maybe keeping the smaller vacation home in the family, and not getting caught in a tax crunch.
And howmuch money would we make on those recommendations? Zero. Nada. None.
We answer questions all the time with solutions that don’t lead to transactions with us. We work to help our clients manage their plan.
Every year, we ask to see our clients’ tax returns. Every year. And based on what we see in those returns – major capital gains, unexpected windfalls, investment losses – we give our clients our best advice on how to handle their money to achieve their goals and stick to their financial plans, before it’s too late and the year is over. More than 97 percent financial planners do not ask to see tax returns on an annual basis, (according to the U.S. Securities and Exchange Commission.) We’re happy to be among that 3 percent who do. ♦
Todd Roselle is a member of the DBT 40 Class of 2014 and a partner with Blue Rock Financial Group in Wilmington.