Gaining Financial Control in Difficult Times

The death of a husband, especially suddenly, brings many unexpected changes. In families in which the husband has taken almost the sole responsibility for finances, women are often faced with taking a crash-course in finance at the most difficult time of their lives.

A few years ago, when one of my clients lost her husband to cancer, and was faced with the decision of how to invest a major life insurance policy, many of her friends advised her that she shouldn't make any major financial decisions for at least one year. As a matter of fact, she was surprised how many people offered this same guidance, as though this were a rule of thumb. There is no doubt that they were trying to help, but this advice is not very practical, and it might even be harmful. Financial decisions do need to be made, and as St. Thomas counseled: "caution is a prelude to action, not a substitute for it."

Especially in the event that you have inherited a major life insurance policy, it is imperative that you find a good financial advisor to assist you.

Do yourself a favor and ignore those comments of "I've heard Uncle Gary dabbles in stocks", or "What was that no-load fund I saw in the paper the other day?"

The truth is that Uncle Larry probably doesn't know too much about estate planning, even if he is a master stock analyzer. As for buying a mutual fund you saw advertised in the paper, that is often a recipe for disaster as well. Why? A mutual fund is a product--the ongoing counsel of a financial professional is a service. That is not a put-down to mutual funds--financial products are needed, and many mutual funds are good products. However, a particular product may or may not be appropriate for you. To use an analogy, if you needed a special diet to resolve a health issue, you wouldn't simply buy food randomly, you would hire a dietician to assist you. Food is a product--the work of a dietician is a service. What you need is the service of a professional who has access to the products that are suitable for your needs.

Of course, this discussion begs the question: "How do I find a good financial planner to help me?" If you are not working with anyone currently, a recommended course of action is to start interviewing planners.

When you start talking to prospective financial planners, remember that you're looking for someone to manage your money for the rest of your life. That's a pretty important job, so bearing that in mind, it's not rude to ask questions. Here are some questions you should ask:

1. "How long have you been doing financial planning?"

   In terms of experience, there's no set rule, but I'd look for someone with ten years minimum experience. You want someone who has seen the ups and downs of the financial markets and has had to deal with both. Someone who has only been in the business for six months might have the best of intentions, but might be lacking the knowledge to service you properly. Also, you might want to avoid someone who has forty years of experience. He or she will certainly have the know-how, but they also may be very close to retirement.

2. "What advanced licenses or certification do you have?"

   After you ask this question, you will immediately discover that Wall Street speaks in acronyms, almost to the exclusion of real words. What you should be looking for is someone who is designated as a Certified Financial Planner (CFP) or a Registered Investment Advisor (RIA). For a person to acquire either these designations, an extensive knowledge of financial markets is required.

3. "Have you managed money for anyone else in my position? Who are they?"

   It's surprising more people don't ask this question. If the financial planner has never worked with someone in your particular situation, he or she may not be aware of the difficulties that you face. However, if he has worked with a number of people who have been in your position, he will be able to guide you in your decisions much better. Also, ask for three referrals from these clients, and call them. Ask the clients' how the advisor is doing.

4. What would you say are your strengths and weaknesses as a financial advisor?

   This question might catch the financial planner off guard, but that's OK. It's a fair question that gives the planner a chance to show honesty. If the planner starts answering "This is the greatest firm on Wall Street, and neither the firm nor I really have any weaknesses", get up and leave.

5. Could you tell me a little about your family?

   If you were an employer interviewing a person for a job, asking this question would probably be a violation of federal law. However, you are not an employer, and you are not subject to any such law. Good thing, because it's a great question. Remember that you are seeking someone who will financially care for your family forever. Wouldn't you want to know how they are caring for their own family? The words "devoted father" might never appear on a resume, but the reality is that a devoted father who is engaged in the lives of his children is likely to be engaged in the financial success of yours.

Ultimately, the decision you make regarding which financial planner to employ will almost certainly have a long term effect on your family. Taking time to get to know a few planners before you make a final decision is a wise course of action. Finally, ask St. Anthony for help in finding someone that will truly take your family's well-being to heart.

John Clark is a Registered Investment Advisor and a nationally-recognized expert in the field of ethically responsible investing. You may email him at jclark@lasallest.com or call him directly at 1-888-764-2423.