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How Would You Respond … if Asked?

By Rick Kahler MS CFP® http://www.KahlerFinancial.com

Financial professionals like me think nothing of asking clients this question.

But, if the tables were turned, though, and clients or prospective clients asked the same question of us, how would we respond?

The “Talk”

Every now and then this issue comes up in conversations among financial planners. Some advisors think their net worth is none of their clients’ business, any more than doctors’ cholesterol levels are any business of their patients.

Others are concerned that a single number like net worth is incomplete information and can even be misleading. Knowing a financial professional has a net worth of, say, five million dollars doesn’t necessarily mean the person is trustworthy or a capable financial planner. Net worth tells prospective clients nothing about where the money came from. The planner may have inherited it, won the lottery, earned it through a business other than financial planning, earned it from commissions on poor investments, or even obtained it illegally.

Wither the “Number”

Nor does net worth reveal anything useful about the understanding of money or knowledge of financial planning. I’ve worked with plenty of multi-millionaires who were skilled at making money but were horrible money managers and inept at investing. Even more, there are many brilliant young planners who haven’t had the time to accumulate a large net worth.

I suspect that most clients who want to know about their planners’ net worth actually have several deeper questions in mind. Some may be asking if the professional actually follows his or her own advice. Imagine how troubling it might be to find out your financial planner doesn’t have a retirement plan, is a habitual over-spender, or hasn’t gotten around to making a will.

Other Reasons Why

Another reason for the question may be a concern whether the planner is financially stable and will be around in the future. During the Great Recession, many financial professionals saw their revenues fall by 30% to 40%. Some who did not have a business emergency reserve had to resort to laying off staff, cutting services, or in some cases closing their doors.

Still another concern may be whether the planner is familiar with a potential client’s particular financial issues. This is especially true of high net worth clients. They need to know a planner can relate to the complexities, responsibilities, and emotional challenges of managing wealth.

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The Questions

All of these are legitimate concerns. Knowing a financial planner’s net worth, however, doesn’t address those concerns. To discover whether a planner is a good fit for you, it would be more useful to ask questions like the following:

• Do you follow the same advice you give clients? Give me some examples.
• Do you have six months’ living expenses in an emergency account?
• Do you invest your money in the same manner you will invest mine?
• If I were to run a credit report on you, what would it tell me?
• What are some of the things you have learned from your financial mistakes?
• Tell me what your company has in place for emergency planning and succession planning.
• Tell me why you can relate to someone with my net worth and the issues I am facing.

Assessment

If a planner is offended by these questions or dances around answering them, that may be a red flag. If a planner offers answers freely and transparently, you may have found someone who provides exceptional service. Planners who share some of their own financial information are clearly committed to building the trust that is so essential between planner and client.

As a prospective client, you may hesitate to ask these questions even though you want to know the answers. Don’t be shy; ask.

More:

• More on Doctors and Personal Net Worth
• Physician Assets, Liabilities and Personal Net Worth
• MD Salary versus Net-Worth Conundrum [.ppt slide-show presentation]

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants

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