Ladies, it’s time to take charge of your money. You know you need to; you know you want to. So what’s holding you back?
According to a 2015 Money Fit Women Study conducted by Fidelity Investments, 92% of women want to learn more about financial planning, and yet only 47% feel comfortable discussing money with a planner on their own. What is the cause for this insecurity? Trust. They don’t trust their own knowledge and they are not sure what professional they can trust.
Here’s the “F” word that can change all that: fiduciary. Here’s another “F” word – fee-only. Put them together and you have someone who is looking out for your best interests (fiduciary), who will only receive compensation from you, their client, and not from mutual fund companies, insurance companies, and other financial institutions for selling products. This keeps their advice conflict-free, since the only criteria for investment selection is what is in your best interest (as opposed to which investment they can sell you that will pay out commissions).
When you work with someone who makes recommendations based on putting your needs first and is paid only for their advice, questioning intentions or motivations becomes unnecessary. A good advisor will put together a plan that doesn’t revolve around getting in and out of positions, as those actions generate transaction fees and can have tax consequences. In fact, a good advisor will take the time to educate you about your investment strategy so that you are better able to stay focused on your goals and tune out the panic when there is market volatility and uncertainty.
The traditional brokerage model that dominates the financial industry is often the only model people are aware of. Perhaps women shy away from seeking advice because, instinctually, they may be worried about being manipulated. After all, meetings with salesmen can often sound remarkably similar to “You have the most beautiful eyes.” It’s hard to know if a broker’s recommendations are truly beneficial to you once you know they earn commissions on what they sell and some investments will pay more in commissions than others.
But the answer isn’t to adopt an ostrich “strategy.” Reaching financial goals takes time and planning. Ignoring the task at hand is akin to squandering time and opportunities.
Financial planning for women has its own challenges. For starters, many women have taken some time off from their careers to raise children or to tend to aging parents. These absences reduce contributions to employer-sponsored retirement plans, such as 401K plans or 403B plans, as well as lower social security benefits. With higher life expectancies than their male counterparts, women are more likely to live longer in retirement, and to be single for at least a portion of their retirement.
Where to start? The Certified Financial Planner (CFP®) Board has a zip code search to find local Certified Financial Planners. To earn a CFP® designation, one must go through a stringent process that includes education, exams, professional experience, and ethics screening. Continuing education is required to maintain their status.
A word of caution, some planners are commission-based or a hybrid of fee-only and commission-based. This means they can get compensated by other financial companies for selling products to their clients. Strictly fee-only advisors are never salespeople fronting for product; they are paid solely for their time and advice. Advisors listed on the CFP® Board site must indicate how they are compensated. Look for “fee-only” advisors as they are not tempted to give advice that might benefit them even just slightly more than you.
Being frozen into inaction is not going to get your financial plan off the ground. Finding an advisor you can trust is an important first step. Now that you know about fee-only fiduciaries there’s only one question left: What are you waiting for?