The channel through which you hear of a financial planner may provide clues to the planner’s integrity and way of doing business. Beware of planners you find (or who find you) through these avenues:
-
Cold calling: You’ve just come home after a hard day. No sooner have you sat down to dinner when the phone rings. It’s Joe the financial planner, and he wants to help you achieve all your financial dreams. Cold calling (whereby the salesperson calls you, without an appointment) is the most inefficient way for a planner to get new clients. Cold calling is intrusive, and it’s typically used by aggressive salespeople who work on commission.
Keep a log beside your telephone. Record the date, time, name of the organization, and name of the caller every time you receive a cold call. Politely but firmly tell cold callers to never call you again. Then, if they do call you again, you can collect $500 in small claims court!
-
Adult education classes: Here’s what often happens at the adult education classes that are offered at local universities: You pay a reasonable fee for the course. You go to class giddy at the prospect of learning how to manage your finances. And then the instructor ends up being a broker or financial planner hungry for clients. He confuses more than he conveys. He’s short on specifics. But he’s more than happy to show you the way if you contact (and hire) him outside of class.
The instructors for these courses are paid to teach. They don’t need to solicit clients in class, and, in fact, it’s unethical for them to do so. Part of the problem is that some universities take advantage of the fact that such “teachers” want to solicit business, setting the pay at a low level. So never assume that someone who is teaching a financial-planning course at a local college is ethical, competent, or looking out for your best interests.
Ethical instructors who are there to teach do not solicit clients. In fact, they may actively discourage students from hiring them. Smart universities pay their instructors well and weed out those who are more interested in building their client base than they are in teaching.
-
“Free” seminars: This is a case of “you get what you pay for.” Because you don’t pay a fee to attend “free seminars” and the “teachers” don’t get paid either, these events tend to be clear-cut sales pitches. The “instructor” may share some information, but smart seminar leaders know that the goal of a successful seminar is to establish themselves as experts and to whet the prospects’ appetites.
Be wary of seminars targeted at select groups, such as special seminars for people who have received retirement-plan distributions or seminars touting “Financial Planning for Women.” Financial planning is not specific to gender, ethnicity, or marital status.
Don’t assume that the financial planner giving a presentation at your employer’s office is the right planner for you, either. You may be surprised at how little some corporate benefits departments investigate the people they let in. In most cases, planners are accepted simply because they don’t charge.