The 4 C’s

I was reminded last night about what I believe every relationship needs. I call it the 4 C's: Communication, Compromise, Compassion, and Commitment. While I believe undeniably that these are needed very strongly in a romantic relationship, I also believe it is needed in a professional relationship as well. That is what I want to discuss; a professional relationship that I like to have.

Communication

Communication is the key to all understanding. Communication is also a fantastic way to educate and to build trust. If a person has an understanding of why I am recommending something, then I believe I have done what is right by educating them enough to make a solid decision. If for example, someone does not communicate to me their current needs, and I come back to them with a recommendation that did not address any of their current needs -then there was a problem with our communication. That leads to a lack of trust, and potentially leads to questioning someone's honesty.

Compromise

Compromise in business usually means that in order to get good service you need to compromise on price or vice versa. In my business compromise means something entirely different. Compromise in my business is taking a little from this pocket and moving it over to another pocket. Compromise is putting that $4 that is usually spent on that morning coffee to work for you and not towards that coffee. Compromise is letting 1% to 3% protect the other 97%.

Compassion

Compassion - a feeling of deep sympathy and sorrow for another who is stricken by misfortune, accompanied by a strong desire to alleviate the suffering. My career depends on this. In my profession is it said that you never know how good of a career choice you've made until you deliver your first benefit check. This is the very foundation of my belief in my business. I have the 'strong desire to alleviate the suffering', which is entirely why I do what I do. I want to help other people achieve things that they didn't know how to achieve before.

Commitment

Commitment in business is gaining understanding and then moving forward with a plan. In my business it is no different. The types of products that I have available to my clients are ones that take commitment; they are not short sighted. Please understand that just as a client is committed to their plan, I am committed to the client. My whole purpose is to understand where the client is and where they want to go. Then, it is my duty to submit a plan that they could follow. That is my commitment to the client that I will find a good plan/product mix to achieve their goals.

Why bother investing?

Why is it that people are so willing to invest their money in stocks, bonds, mutual funds, their own 401(k)'s, IRA's, Real Estate, Commodities, but are so unwilling to use another financial instrument? The instrument I am talking about is insurance. Life, disability, long term care insurance, just to name a few that have tremendous consequences on someone's financial outcome.

Believe me, before I got into the financial services business I didn't believe in, or understand insurance, more so the latter. I didn't understand insurance and believed like my parents and so many others that it was throwing money away. To be honest, even when I was getting my license I still really didn't understand or want to understand what the benefits of insurance were. People who are in the insurance side of the financial services industry say that you will never appreciate this business until you deliver your first check. Although I am sure that would solidify my beliefs, and even compound my appreciation for the business, I am here to say that I already appreciate it more than I ever thought I would.

Insurance is just another financial tool that should be used to achieve your financial goals. In fact, life insurance in particular is probably the most versatile financial tool, yet people do not use it. Why? People don't understand how to use it, and secondly they don't want to consider thinking about death. I am going to let you all in on a little secret--one day, we all are going to die. I'm just dealing with facts here--death and taxes, are the two certainties right? Why not find a way to pay as little in taxes while you are still here and still have access to your own money. Little known fact: Life insurance enables you to do that! Get over the fact you will one day die, and get over the fact that this financial instrument will pay your beneficiaries, if you happen to die sooner than you have planned. Life insurance is a financial tool that could make you wealthy over time, but too few of us use it!

Most people I know seem to have the "Superman complex". They seem to think that they are either invincible, or are lucky. If you are a 30 year old you are 4 times more likely to become disabled than you are going to die. What does that mean to you? That means you are likely going to lose a significant portion of your income if you don't have a plan in place to protect that. How many of you have a plan in place that will protect your income? Did you know that a good disability insurance covers you if you are unable to perform your own occupation until you are 65? An example: if you are unable to perform your own job responsibilities but are able to go out and get another job, not only will you receive your new job income, but you will also receive the disability payment as well, which is usually up to 60% of your income tax free!

Someone recently told me this year that they are going to "invest all they can into their retirement" rather than pay for a long term care policy. I find that to be an interesting strategy and here is why: it is estimated that 70% of people who reach 65 will need some form of long term care before they die. (Council of Economic Advisors. Economic Report of the President. 94. Washington, DC: U.S. Government Printing Office. 02/17/07) Are you going to be part of the 30% who will not need any form of care? Odds are, most of us are not. Based on national averages the cost of Home Care is $58,400/year as of 2008 and increasing year after year. The cost of Facility Care is $77,380/year and is also increasing.

Let's use this person as an example: Age 56, so they are actually able to contribute up to $21,500 into their 401(k). Let's say they plan on retiring at age 62 (because 2008 happened). So from now until 62 they will contribute the maximum into their retirement account and let's assume that they will also get an 8% return each year until then, and once retired a more conservative 4%. Let's also assume at age 72, they will need some form of long term care (probably home care). So at retirement just based off of the 6 years of 401(k) contributions they have an additional $147120.29. By 72 they will have amassed $217,773.97. By the time this individual will need long term care it will cost roughly $135,000/year for Home Care. So putting all their money into their retirement will afford them roughly a year and a half of care. However, if they would have purchased Long Term Care Insurance the insurance would cost roughly $2,800/year and cover $104,000 of expenses. Leaving a little more than $30,000 needed to come out of pocket. Using this illustration seems to me that their retirement would benefit longer by passing some risk onto the insurance company.

Financial Advisor Misconceptions

The other day a friend of mine posted on her Facebook Wall, "Loves Dave Ramsey. We are on the road to Financial Peace." While I am happy that she is so enthused about her financial situation, I am more concerned about what followed during our discussion afterward. I responded to her comment with the following response:

I've watched the entire course and he has some really good ideas on reducing debt and spending. I would love to question him on where he comes up with guaranteed 12% returns in mutual funds and I would press him on paying down your mortgage as fast as possible. Lastly, I totally do not see eye to eye with him regarding life insurance.
I personally think it's sort of sad that people don't seem to realize that there are local professionals that are willing to help individuals and families and are willing to have that personal relationship with people, but instead they listen to someone who they will never truly know like Dave Ramsey or Suze Orman and think that those individuals have the "right" plan for you without even knowing who you are or your circumstances.

She in kind responded with this: "I agree that having a personal touch is way better!!! BUT, isn't a financial advisor for people with money? What about us poor folks that don't even know how to balance a check book? That is what this class is to me. Just getting out of debt and actually have a budget and plan. It actually is a lot of fun relating to other people that are in the same boat."

Finally, I had to respond with:

I believe that is the big misconception with financial advisors. Yes there are those of us, who really focus on people with money, however, there are many of us advisors who want to build a lifelong relationship with our clients. What does that mean to you? To me, it's starting from where you currently are and building a plan that you are able to implement and grow with.
The biggest misconception of all is that you need money to have an advisor. Just like how do you eat an elephant? One bite at a time. That is where a good advisor will help you most is helping you realize that you can and will achieve your goals, and they will help show you what is important to start doing today.
You may say you don't have money; a good advisor sits down with you and finds the money for you to be able to achieve your goals, and possibly your dreams too.

The point I am trying to make is that I believe everyone should have a financial advisor. You go to a doctor's office if you are feeling sick, don't you? You go see a lawyer if you have questions concerning the law. You go see a dentist if you have problems with your teeth, don't you? You go see a realtor when you want to buy a home, or a mortgage broker to find a loan. Why wouldn't you consider sitting down with a financial advisor if you have questions about your finances?

While it is entirely true that wealthy people have estate issues to plan and deal with, I would venture to say that more modest income based families could actually benefit more from what a financial advisor has to offer than many people realize. I believe a good financial advisor could help those families achieve their goals faster, and possibly reach for things they originally only dreamed about. At the very least, a financial advisor would help establish a financial plan that would stay in place throughout, no matter what stumbling blocks may appear in your lifetime.

Wouldn't it just make sense to talk with someone who is genuinely interested and concerned in your well being? Rather than some marketing guru who isn't going to answer the phone when you call them? Or better yet, someone who doesn't know you personally and doesn't know what your particular circumstances are? Unfortunately, I am finding more and more people are interested in listening to these guru's who offer up cookie cutter answers. Sometimes, your problems cannot be answered by those answers, sometimes a personal relationship could assist you in finding solutions to those problems where you could not get a solution otherwise. I want to build a relationship with my clients that will last a lifetime. I want to help individuals, families, and businesses in whatever stage they are in currently get to wherever they want to go. Why doesn't that seem to make sense to people?