Financial Planning

I have a 20-year old memory of asking Bob Bova, the founder of Moneywatch Advisors, if he thought I could retire if we could accumulate $1 Million. At the time the company I worked for was being acquired – there’s no such thing as a merger – and I was particularly frustrated with the new management team. Bob and I were playing golf at Andover Country Club where it was abundantly clear that the PGA Tour was not a viable fallback career and I was at a professional low point and looking for some hope. In typical fashion, Bob didn’t say, “sure” and give me false hope. Or, “no way” and dash my hopes. He said, “Let’s sharpen our pencils and make a plan.”

Lisa and I had been clients of Moneywatch for 2-3 years at this point, signing on after observing my parents’ outstanding experience as clients for about a decade. Until then, they had primarily focused on managing the investments within our 401(k)s. But, what Bob developed for us now changed the course of our financial lives.

I have a faint memory of a family in our church when I was in middle school, probably, selling their house and all their possessions to buy a boat and sail around the world. I occasionally wonder what happened to them. Did they find happiness? Fulfillment? Adventure? Terror? Were the kids able to finish school? Are they, ahem, normal after such an experience?

I recently bought a new car and the process was downright enjoyable compared to yesteryear – because I was prepared. In contrast, I have a distinct memory of Lisa and me buying a Honda Civic about a quarter century ago and negotiating – and walking out of the dealership twice – for about 5 hours until we finally struck a deal. When we were signing our young lives away the dealership manager brought me an umbrella as a nice gesture. I told him, “If I’d known there was an umbrella in the deal, I would’ve signed a long time ago.” Well, if looks could kill this blog would have to be ghost-written.

Simply put, fee-only financial planners – like Moneywatch Advisors – are compensated by the clients they serve, no one else. As a result, their loyalty is to their clients and only their clients. Fee-based financial planners charge you and then are often paid a commission from a 3rd party company to sell you their products, too. So, where is their loyalty?

I get asked all the time by both clients and prospective clients – how am I doing? Personally, I like Chris Rock’s line on relative wealth: “If Bill Gates woke up with Oprah’s money, he’d jump out the window.” Perspective is an amazing thing.

I have a fond memory of my maternal Grandfather sitting me down soon before I graduated from college and telling me, “Steve, whatever you do, don’t borrow money.” While Grandpa John lived far from an easy life as a dairy farmer in Nebraska, he and his mother did inherit the farm when his father died so he didn’t have to incur debt to get started. Circumstances are just different now. Buying a home or even a car is almost impossible without a mortgage or car loan. According to AARP, larger mortgages, higher student loans and a greater overall comfort with debt than displayed by earlier generations has increased the average debt for households approaching retirement by nearly 160% from 1989 to 2010.

Although I prepared by studying evenings and weekends for two years to meet the coursework and exam requirements of the Certified Financial Planner process, leaving my friends both at the University of Kentucky and in Frankfort wasn’t easy. After doing the same thing professionally for over 20 years, though, I was ready for a new challenge that would engage my brain in a new and different way. So, after 25 years’ experience as a client of Moneywatch Advisors, I joined the firm. After my first year in the financial planning profession, here is what I have learned – about our clients, about the financial services industry and, most important, about myself:

I recently read about a 28-year old New Jersey man who typed the wrong address into his rental car’s GPS in Iceland and drove six hours in the wrong direction – SIX! – from the airport to a fishing village in the north of the country….when he was just trying to get to his hotel. Now, his first mistake is quite understandable. I’ve been to Iceland and they are apparently too cheap to buy a vowel because every word is virtually unpronounceable. But, despite the long drive and “poor road conditions” he plowed on because that’s, ahem, what the GPS told him. And he never questioned that Reykjavik’s airport would be 6 hours from, well, Reykjavik. That’s like assuming Lexington’s airport is in Detroit.

Don’t read this blog post now – save it for the week between Christmas and New Year’s and read it then. Let’s face it, you’re running around like your hair is on fire trying to finish work projects, attend parties and finish your gift buying. But that week after Christmas is usually pretty slow. If you’re working, there aren’t a lot of phone calls. If you aren’t working, outside of a movie or maybe ice skating, there’s plenty of free time. Take one hour during that week and 1) Read this blog post; and 2) Review the following items:

Enjoy this month’s edition that features a client’s thoughts on the complications of dying, important year-end deadlines, update on TD Ameritrade’s Advisorclient portal and reminder about potential email fraud.