by Richard E. Reyes, CFP
I was recently featured in the Wall Street Journal online Blogs section for financial advisers, wealth managers, and their clients. Thanks to Alex Coppola, staff writer for WSJ for his time in putting this article together. Here is the link to the full article.
Voices: Richard Reyes, On the Purpose of Financial Planning
Richard Reyes is a planner with the Maitland, Fla.-based Wealth and Business Planning Group.
A financial planner’s job involves a combination of selling and providing services. Somewhere along the way planners started to believe that their services included fortune telling – that they could and should be predicting markets. It’s become a question of selling product and pulling people in and out of markets based on our feelings about a particular asset class or particular stock. That’s really not our job.
What we’re supposed to be doing is educating clients and helping them plan prudently to get from point A to point B. If we don’t do that, the client suffers in two ways. They suffer a financial loss; and they suffer a loss of confidence in what it is we’re supposed to be doing. We unwittingly become the client’s enemy.
The most recent, and glaring, example of this was in 2008. Adviser after adviser reacted to the downturn by pulling their clients out of the market. Within a few months the market had rebounded – and has continued to do so over the past two years – and many people didn’t get to participate in that resurgence because of the actions of their advisers.
What’s troubling is that financial planners are still advocating for a strategy based on market timing and a belief that diversification doesn’t work – when in reality, that’s the opposite of the truth. I believe this is a strategy fueled by a sense of competition. Many financial planners want to differentiate themselves from their competition by touting a magic formula. They think that if they act like they know where the markets are headed, people are going to do business with them.
The problem is going to keep getting worse until we, as planners, learn how to say: “I don’t know.” Americans – and this is true across all industries – feel we must always know the answers or we’ll be perceived as weak or incompetent. And it becomes a matter of habit, because clients start expecting an answer from us since we’re willing to give it to them.
But markets are controlled by the behavior of 6 billion people on this planet. There’s no way we can know what they’re thinking.
Advisers need to go back to why we started in this business: Planning for the client’s success. Our job is not to predict or try to control the markets; it’s to help our clients establish and reach their goals in the most cost- and risk-effective way possible.
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Wealth and Business Planning Group, LLC (The Financial Quarterback™) is a Registered Investment Advisor in the State of Florida that provides Fee Planning and Asset Management. Depending on your state of residence, Wealth and Business Planning Group, LLC (The Financial Quarterback™) may not be able to immediately provide services. For more information go to www.thefinancialqb.com. Richard E. Reyes, CFP is an Investment Advisor and President of Wealth & Business Planning Group, LLC (The Financial Quarterback™).