4 Warning Signs That You Might Be Receiving Bad Financial Advice
Folks reach out to Keen Wealth for all sorts of reasons, at all different points in their lives. We talk to young couples just starting out who want to put themselves on a path towards financial security. New retirees want to feel secure about transitioning away from work. Older seniors come to us looking to secure their legacies and make life a little easier for the next generation.
And, sometimes, a person realizes they've been receiving bad financial advice, and they're hoping my team can help them clean up the mess.
On today's show, we discuss some warning signs that the person managing your money might not be putting your best interests first, as well as how Keen Wealth's comprehensive process can restore your confidence in your financial planning.
1. Unnecessary complexity.
My team liked many things they saw on paper when they first sat down with our new client. He had worked hard throughout his career. He had a healthy savings account and seven figures of liquid assets. His home was paid off. He was receiving a nice Social Security benefit. And, perhaps most importantly, he was living within his means.
But when we started digging into his portfolio, we found a confusing hodgepodge of investment products and illogical market trades. This financial "advisor" had even wrapped up a tax-deferred equity index annuity inside of a tax-free Roth IRA.
Longtime listeners probably recall that annuities and other investment vehicles you see advertised on social media and TV raise red flags with my team. These financial products aren't always bad. But in many cases, the people selling them aren't required by law to provide thorough explanations about how they work, or to put their client’s best interests ahead of their own. As long as they mail off complex disclosures every year, they're covered. And the insurance companies that issue such products, while also operating lawfully, are usually more interested in making money for themselves than they are in helping folks build wealth for retirement.
In our new client's case, he invested around $200,000 in an annuity in 2007. This annuity’s cash value was based on two equity indexes and had caps on monthly earnings but no caps on monthly losses. Today, the cash out value is around $190,000. Ouch. It does have an income stream that can be drawn over the owner's life expectancy but after running the numbers we determined that our client would have been substantially better off having their money in a well-diversified stock and bond portfolio that is easier to access, liquid, and that can be passed on to heirs.
2. Shared credentials.
The individual who had been managing this client's money had asked for his personal login information to his accounts. When we looked at his financial statements, we saw holdings that covered everything from bankrupt penny stocks to speculative ETFs. Luckily, it didn't look like this person had stolen any money outright, but there was no coherent strategy in place. Certainly, none of these moves seemed to be in the client’s best interest.
Unfortunately, had anything illegal occurred, it would have been very difficult to determine responsibility because of the shared logins. At Keen Wealth, we have limited power of attorney for our clients and separate logins that we use when managing money and investments. If the person you're working with doesn't have similar protections in place, your money could be at risk.
3. Going solo.
A financial advisory firm managing under $100 million in assets has to register with their home state's regulators. Firms managing more than that -- such as Keen Wealth -- have to register with the Securities and Exchange Commission. At Keen Wealth we manage over $1 billion in client assets and take our fiduciary responsibility very seriously.
Additionally, firms like Keen Wealth have multiple teams of experienced specialized professionals working on financial planning, compliance, portfolio management, educational outreach, cybersecurity, and client service and administration. It would be impossible for one person to provide all of these essential services adequately and with no system of checks and balances.
4. A pitch that sounds too good to be true.
"My best friend works in Silicon Valley and this is what the billionaires do!"
"This is the plan Wall Street doesn't want you to know about!"
"You'll get all of the upside from investing and none of the downside!"
“I know when to get into the markets and when to get out!”
“This is the next big thing!”
Run, don't walk, away from these kinds of promises.
If someone truly had a secret formula for getting rich fast, they wouldn't be trying to manage your money. They'd be living on a private island.
What we offer folks at Keen Wealth is a comprehensive planning process that’s 100% focused on your financial goals and needs. It’s a process that requires a lot of hard work and patience. And, when the markets are experiencing volatility, it requires a long-term perspective. But every step of the way, you will feel confident that you’re working with a team that’s always ready to support you and give you advice that you can trust.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.
The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.
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