Is Your Financial Planner a Millionaire? Should You Care?

questionmarkLately, I’ve been asking financial professionals this question: “Should your clients care whether you’re a millionaire?”

I’ve asked financial planners, financial therapists, and clients. The responses were varied, given with considerable energy, and made some good points. Some professionals said, rather than answering the question, they would turn it around and ask why it mattered to the client. Others said their net worth was none of the client’s business. Others thought there were deeper reasons for asking the question that should be explored. One said she would answer, “Good for you; that’s a question I’d want to know, too, if I were in your position.”

There is nothing magical about having a net worth of one million dollars, millionaireexcept that according to a Gallup poll, it is the number most Americans associate with “being rich.” Just because a financial professional is a millionaire doesn’t necessarily mean this is someone you may want to engage as your planner. It tells you nothing about where the money came from. The planner may have inherited it, won the lottery, earned it from commissions on poor investments, or even obtained it illegally.

Nor does net worth tell you anything of someone’s understanding of money or knowledge of financial planning. I’ve worked with plenty of millionaires who were horrible money managers and inept at investing. In fact, of the original Forbes 400 richest people in the world, 200 of them lost their fortunes or died penniless. 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 if their planner is worth more than one million dollars 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 professional doesn’t have a retirement plan, is a habitual over-spender, and hasn’t gotten around to making a will.

Another reason for the question may be a concern that the planner is financially stable and will be around in the future. This may be more important to clients given the crisis we’ve just come through, where many 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.

All of these are legitimate concerns. There may be more direct ways of finding out this information than asking whether your planner is a millionaire. Here are some questions you might ask a financial professional:

• 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?
• Tell me what your company did to weather the loss of income you must have suffered during the 2008 economic crisis.
• Tell me why you can relate to someone with my net worth and the issues I am facing.

funJust for fun, you could also ask the million-dollar question. You might learn a lot from observing the way the professional answers it.

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One Response to Is Your Financial Planner a Millionaire? Should You Care?

  1. richard trachtman October 6, 2009 at 4:17 pm #

    This is a relly good article. I would expect some traditonal therapists to turn the question back on the client. But, except in classical psychoanalysis, the professional does not need to remain a blank screen. Delaying an answer can be useful to allow time for the client to explore the meaning of his or her question and the concerns behind it. But, never sharing any personal information, when it might help the client trust the professionnal is misguided. Some of the answers given by professionals suggest they are victims of the same Money Taboo as everyone else. Why should a client trust a professional with personal revelations if the the professional isn’t willing to share something of his own experience? This discussion reminds me of questions such as “How can I know you will understand me when you are (older, younger, not the same sex, a different race, religion or class etc.) as I am?” The answer should be that he or she can not know until he or she has experienced the way that the professional listens, asks questions, empathizes and advises the client. A bit of self revalation combined with these skills can help create a good working relationship.