Ep. 104 – 4 Costly Misconceptions About Retirement Planning

What misconceptions do you hold about retirement planning? To have an active retirement plan, you need to have the right financial advisor to manage your investment. 

It is important to settle down with an advisor you’re comfortable with, and that aligns with your philosophy. To debunk these misconceptions, you have to do your research and ask the right questions, so they don’t cost you in the future.

In this episode of the Secure Your Retirement podcast, we debunk four costly misconceptions about retirement planning. Listen in to understand these misconceptions at a more detailed level and how to avoid them when looking to invest in your retirement plan.  

In this episode, find out: 

• Not everyone using the title “financial advisor/planner” is qualified.
• The lowest fees are not always the best solution for your goal to engage with a financial advisor.
• Understand what you’re getting from the fees you’re paying and ask questions. 
• All credentials and certifications are not the same. 
• The time and work required to acquire the standard certification. 
• Just because an advisor works for a larger company doesn’t mean they’re qualified.
• Why the independent advisor side of the financial world is the fastest growing today. 
• Do your research when choosing an advisor and ensure they align with your philosophy. 

Tweetable Quotes:

• “If you’re getting what you’re looking for, the fee doesn’t matter as much anymore.”– Murs Tariq
• “When you find out somebody’s got a certification, go find out what it took that person to get certified to be able to use that credential.” – Radon Stancil
• “Every single one of these misconceptions comes down to doing your research and asking the right questions.”– Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

To receive our free book, Get Off the Retirement Rollercoaster, leave a 5-star rating review on Apple Podcasts and send a screenshot to morgan@pomwealth.net.

Here’s the Full Transcript:

Radon Stancil:

Welcome everyone to our Retirement In Action this week. Today, we’re going to be talking about this idea of misconceptions. Misconceptions really about retirement planning, but in particularly, about investment planning around retirement, maybe what you should look for in an advisor. There are some misconceptions you might say or misunderstandings and we just thought that it would be good to take you through those. We’re going to really deal with four. So this is not going to be an overly extensive conversation, but it’s just going to give you an idea of maybe expanding how you might think a little bit. So we’re just going to jump right in and kind of go through each of these. And we hope this will be beneficial to you as you’re thinking about who to use, or maybe why you are using. So maybe it builds your confidence. Maybe you’re working with an advisor and you say, “Wow, I’m in the right spot. And that’s a good thing too.

            So misconception number one, just because somebody is using the title and we’ll put it in quotes, financial advisor or financial planner. If they’ve got that title, they must be qualified. We’re going to say that’s a misconception. Why? Well, because anybody can say that they are a financial advisor or a financial planner, by the way, technically they’re not supposed to, unless they actually have the criteria to do so, but you could be an insurance agent. Let me just say this. There are insurance agents who call themselves financial advisors, retirement planners, financial planners, and all they have in their repertoire. All they have in the places that they can go to and access are insurance products. Now, by the way, mercy and I, we talk about it all the time on the show. This is episode 104. And after over a hundred episodes, if you’ve listened to our episode, you know that mercy and I believe in and do use insurance products.

            We use fixed annuities. We use life insurance. We talk about Medicare supplements. That’s insurance long-term care, that’s insurance. So we have no problem whatsoever using insurance products, but just because I call myself a financial planner or a financial advisor, but all I have is I’m an insurance agent. That’s really not giving you the well-rounded advisor that you would need if you’re like close to or in retirement, or really trying to plan your financial world. Because if a person only could use insurance products and we could say it the opposite way to what if they only could sell you mutual funds and stocks that doesn’t give you the well-rounded approach either. We believe that there is certain criteria that we’re going to talk about on one of these misconceptions, or at least be able to go into a little bit more about what we think a person needs to have, to be able to call themselves a financial planner or a financial advisor. So here is the misconception. I’ll repeat it. And then we’ll move on to number two, just because somebody has financial advisor, financial planner in their title and their business card on the website, that alone does not qualify them to be an advisor that can give you a well-rounded retirement financial plan. All right. You got anything else on that Murs? And we want to move on to next number two.

Murs Tariq:

No, I think that’s good. And I know we’re going to hit it a little bit more in number three, as far as the term financial advisor and different types of credit accreditations and stuff behind people’s names. So I think we’re good where we’re at there. I’m going to hit number two, misconception. Number two is that the lowest fees are the best solution. And we will tell you upfront that is not always the case, the world that we’re in right now, every everything is a constant struggle or battle of how can I get the lowest fees? All of the investment firms are constantly lowering their fees. There’s a lot of competition going on in the world. There’s been the creation of these things. And we did a podcast on this, not too long ago about robo-advisors and, and they are low cost options as well.

            At the end of the day, we believe that you kind of have to evaluate what you’re looking for and also understand what you’re getting. And so when it comes to fees, there can be different ways that you’re working with an advisor. One advisor could say, come to me because I have the lowest fees, but maybe that’s not exactly what you’re looking for. Maybe they’re not specialized at all in what you’re looking for. Like maybe it’s, you’re looking for someone that’s going to help you grow the money and that’s not aligned. Or maybe you’re looking for someone that is going to that’s specialize more in retirement planning or business planning or whatever it may be. And it just doesn’t match up. So that, that conversation, even though it may be the lowest fee, it just may not be right for what you are looking for, what your goal is for even engaging with the financial advisor in other worlds like Radon was just talking about in the insurance world.

            Oftentimes, you’ll be told that, “Hey, there’s no fees if you buy this product,” whatever the product is because you don’t really see the fee. Some of that, it’s not hidden. It’s just sometimes it’s built into the product in the sense that you’re going to get a rate, say if you’re buying a CD at a bank, or if you’re going to buy an annuity or you’re going to buy an insurance product, a lot of times the fees are just built in. And so the advisor can say, or the insurance agent can say, there’s no fees to be in this product, but ultimately they are receiving a commission. So I’d be very quick to ask them, well, what type of commission is the insurance company paying you, even though it’s not a fee that I’m paying you? Well, it’s essentially there is a fee there.

            So understand it, ask the questions as far as what the fee is. And I think the biggest one here, when it comes to the person that says, I think the lowest cost, the lowest fee is the way to go. You know, Ryan and I, if you’ve been listening to our podcast at all over the past hundred some episodes that we have that we believe in active management, active management in the stock market, we’ve been able to reduce significant downside risk in, in previous years, like a very recent year of 2020, where the market fell 34% in a matter of two weeks, I mean, sorry, two months. And we just, we did not see that. We didn’t see nearly as much as what the market fell because of our active management there in 2008, when the markets fell 38% in the calendar year, once again, we did not see that because we have a risk, risk managed portfolio, and that’s why people come to us and that’s why they pay us a fee.

            And so they understand what that fee is and they understand what they’re getting out of that. So a lot of times we’ve had conversations with people that are at say, Vanguard. Vanguard is well known to be the low cost investment provider, because they’ve got some very inexpensive next to zero cost funds that you could buy into. But the conversation becomes, Hey, I went into Vanguard and I bought that fund. And in 2008, that fund, even though I paid them zero essentially lost me 38% of my money or in 2020, even though I paid zero, I still lost a chunk of money for a period of time there. So at the end of the day, when it comes to fees, I think it’s important to put things into perspective, know what you are getting from that fee that you may be paying or that, that fee that might be built into the product, understand what you’re getting and ask the questions as far as is this going to line up with the goals that I have?

            And then the fee conversation kind of becomes irrelevant. If the fee is going to be you’re getting what you’re looking for. Well, then the fee doesn’t matter as much anymore. if you’ve got it, even if you’re say let’s blow it out of the water and let’s say you’re paying a 10% fee, but the returns are well above while all of a sudden the 10% fee doesn’t make anything. I know 10 is a very, very high number. I just wanted to make it an overly illustrated example. So it’s just something to think about. Definitely the lowest fee is not always the solution. Understand what you’re looking for, understand what your goal is.

Radon Stancil:

All Right, so we’ll move on to number three, misconception number three, all credentials or certifications are the same, or they kind of have the same criteria, and I’m not going to go through the many different credentials that you can have or initials behind your name. But I here’s what I want to make sure that you understand is we believe for you to understand what it took and what it takes to qualify for that credential or certification. There are certifications that pretty much just require you to pay a fee and maybe take almost like an open book quiz. And they’ll say you’re a certified something and you, you, you put it there and it sounds very good. It sounds like, wow, you’re a certified whatever. And that, that means a lot, but go look it up. I mean, when you find somebody who’s got a certification, go find out what did it take that person to get certified, to be able to use that credential.

            Now, I’m going to tell you about a credential that I think is extremely powerful. And it might at first sound like I’m saying it because both Murs and I are certified financial planners, but I want to tell you why we became certified financial planners and why we think that credential is so strong. So certified financial planning is, to be called a planner, to use that certification, there’s a lot of criteria. Number one, education. There are now college courses, college degrees actually that you can get in financial planning. Years ago, you couldn’t, they didn’t offer it. But even still, let’s say you didn’t have the degree in financial planning. There are many colleges that offer certified financial planning courses that is about a two year college program that you have to go through just to get the education part of being a certified financial planner. So think about that two years of education.

            Then the next thing you have to do is actually pass the exam. Now, the exam is the equivalent type of exam you would get. If you were becoming a CPA or an attorney, it’s a six hour exam. And it is quite the, the, the exam only about 50% of people pass that exam. Whenever it is taken, that’s still not the end of the story you on top of that have to have a certain amount of experience. And two, I’m sorry, three years of experience full-time in working in financial planning in some way, working under a mentor, working with clients in some way, and then you can use their credentials as a certified financial planner. So think about what you’ve put in. You’ve got time in, in, in knowledge education, you’ve had to pass a very extensive exam, and you’ve got to have at least three years of experience, just to be able to use her credentials.

            Then you have to live by the code of ethics of the certified financial planning organization. Then you have to do a continuing education every single year in order to be able to continue to keep that certification now Murcia. And I, we used it because we believe it is the gold standard. We believe it is the standard that should be out there. And it was a such a standard. We believe that we wanted to put the work in, in order to, to achieve that. Now, some people want to have a certification. They just don’t want to put all the work in. So they go get one of these very quick, almost like a, you know, again, pay a fee, get it types a certification, just because they didn’t want to go through that work. And so just whatever the certification go, find out, whatever it is that is required so that, you know what that really means. All right, you want to move on to number four, Murs.

Murs Tariq:

Yeah. Number four, the advisor works for a large financial institution, so that must make them qualified. So Radon just kind of talked about the CFP and what the CFP is and how we hold that as a gold standard. So just because someone works at a, a named, let’s say a brand name company, like a Morgan Stanley or a Merrill Lynch, or a bank of America, Edward Jones, whatever they are, you know, in the past Morgan Stanley Merrill Lynch has kind of been held up on the higher side of the investment banking world. You know, there, I’ve got a couple of thoughts on this one is just because they’re an advisor in that larger company doesn’t mean that they are qualified. It really comes down to, I like Radon just said, we, we prefer the CFP marks.

            There’s a lot of education that goes behind that. Also a lot of these larger companies have have, and we know this because we’re in the business and we see kind of the inner twinings of how they work, but larger, the larger companies have these training programs where they’ll bring in a very young person right out of college, and they’ll get, make them get some types of certifications, but also they just have very strong training programs.

            And then that person you may be working with has very little experience for quite some time. And then they actually grow in the years and get some more experience. But what we actually end up seeing is that that person ends up leaving that company. They got the experience they needed. They left the company and actually started their own independent firm. Well, how can they do that? They, they can do that because they actually feel confident in their ability to work outside of using a brand name, like a Merrill Lynch or Morgan Stanley. And then the big added bonus that comes with that is that now they’re completely independent. And even though they don’t have a name behind them like that, they have themselves, and they have their ability to serve their clients. And, and that, that says quite a bit also that independent advisor is also now in a world where they can essentially do the best that they can do for their clients.

            We fully believe that the independent advisor side of the world is the fastest growing right now because you’re not forced to push any type of product. So if I work, if I have worked at a, let’s say an insurance company like Prudential for the longest time, do we think that Prudential is going to let me sell mass mutual products? No, I’m going to have to sell whatever Prudential has to offer, or if I’m at a Vanguard or any of these other big companies, they have their own quotas that they have to hit. So while it can be just fine for the client, we like to even take that out of the picture. And so that’s why, you know, it just because they’re at a brand name company. Yes, absolutely. Can you get great service from that situation? Absolutely. You can, but you kind of have to do your research once again, every single one of these misconceptions comes down to doing your research and asking the right questions.

            And at the end of the day, when it comes to choosing an advisor, someone that you feel comfortable with, do you interact with them well? Do they give you the confidence that you need in your overall plan and your thinking? And then do they just make you feel comfortable? And do they align with your own philosophy of risk or your own philosophy of financial management? So a lot of things that you got to think about and does it doesn’t come down to, well, you know, my dad was at Merrill Lynch with this one advisor. So I feel like I should be at that, at that same Merrill Lynch, because that advisor did good for him. You know, it’s just one of those things where you got to do the research and I wouldn’t say put a bias towards a certain brand brand name company, go with what you feel good about. So that is the four misconceptions. Obviously there’s going to be a lot more to talk about here, but we wanted to bring just four to light today. And we’ve got a few more topics to hit in this series that we’re covering here.

Radon Stancil:

All right, everyone, if you listen to that and you’re thinking, “Man, I missed some of the details there, visit our website, pomwealth.net, go to the blog page forward slash blog, or you’ll see that the menu at the top of the website. Go to the blog page and we have an article on this very topic. Every single week, we have a new blog page article, blog article that comes out so that you can have all this detail right in front of you. So please go visit that. We appreciate so much you listening. We hope you have a great week. We’ll talk to you next week.