As a continuation of the Fee-Only Financial Advisor blog sharing group, this month’s post comes to us from Michael Garry, a Financial Advisor in Newtown, PA.
For many people, it isn’t not having enough money that has been the initial cause of financial related stress, it is the fact that they entrusted that money to the wrong person or company and they lost, in some cases, big time.
According to a 2015 “Stress in America” Survey, money and finances have remained America’s top stressor since the survey began in 2007. Seventy-two percent of Americans reported feeling stress about money at some point within the last month, which suggests that financial worry isn’t just for those at the lowest levels of income and net worth. The survey also explores the effect that financial stress can have on a person’s health and well-being.
People place their trust in financial professionals, because well, they are told by that broker or adviser that:
“This bond is going to make you money.”
“You have to get into this new fund before everyone else hears about it.”
“This annuity is definitely the safest way for you to invest, don’t worry about inflation.”
And they are the experts, right?
Sadly, the world of finance is wrought with people who have made a business out of making money on other people’s losses. When not bound by a fiduciary obligation to act in the best interests of their clients, many financial advisers give into the temptation to use their client’s assets as guinea pigs in the “next big fish”, or for personal gains, through selling products for commission when those products aren’t suitable for those they are supposedly servicing.
And then what happens? The promise of having your hard earned savings managed by a trustworthy, knowledgeable professional, so that you can go and live your life, quickly dissolves into a nightmare of bad investments, depreciation, losses, and fees, fees and more fees. It takes time for people to realize they are being misled, because no one wants to think that a professional, who told them everything was going to be great, would be so careless with their money, especially when they were being paid to do right by it. Sometimes, by the time people realize what has been happening, so much has been lost that they begin to lose their well-being as well as their wealth.
These losses, the feelings of betrayal, and the unexpected financial burdens they caused, have added up to tremendous amounts of stress in a relatively short period of time. The burden of financial uncertainty and the resulting stress can be the cause of a whole slew of health issues.
How Your Body Reacts to Stress
When you’re under stress it can affect your cognitive functioning, it can raise your blood pressure, lower your metabolism, and cause you to breath heavier. These are the short term effects of stress. In the long term, this type of physical reaction to stress for prolonged periods of time is known to increase the risk of heart disease and stroke, cause digestive problems, lead to unhealthy weight loss and/or gain, cause skin problems, sleep issues, increased muscle and joint pain and exacerbation of chronic conditions like diabetes and thyroid problems.
Investment losses, particularly for those who are retired and who have no ability to earn the money back, can eat away at people’s emotions. We are hard-wired to blame ourselves for our losses, even if we can see that a broker has been irresponsible with the investments. The emotional impact of financial losses leads to initial stress and then, as this stress impacts your health it can create even more financial and emotional burden.
Find a Fiduciary
So what can be done to avoid these catastrophes other than hoarding cash and locking the door?
While maintaining healthy habits like exercising, eating right, and practicing mindfulness or meditation have been proven to reduce stress, there is one more thing that can be done to avoid unnecessary financial stressors before they wreak havoc on your life and well-being. That is, understanding the fiduciary obligation that your advisor is willing to take on.
Fee-Only Fiduciary advisors have the highest likelihood of avoiding these conflicts of interests because they only are paid by their clients via a percentage of invested assets of for a flat or hourly fee. They do not take commissions from insurance companies, third parties, or incentives to push or sell any one investment or product. They are legally obligated to act in your best interests.
That doesn’t mean that they know from one day, or year, or month, or decade to the next what will happen with the Markets. What you know is that they will be obligated to provide the highest level of service and expertise, manage your assets as if they were their own, and make choices for your investments that are not only suitable for you but in your very best interests.
And, no, stuffing it in the mattress is not a suggestion they will make.
To see if your financial adviser is truly a fiduciary and therefore, acting in your best interests, ask them. If the answer is anything but an unqualified “yes” you probably aren’t dealing with a fiduciary. If someone is only a fiduciary some of the time, or under certain circumstances, that’s not good enough.
Michael J. Garry, CFP(R), JD/MBA, is the owner of Yardley Wealth Management, LLC, and an independent Financial Advisor who provides Fee-Only financial planning services and investment management in Newtown, PA, and the author of Independent Financial Planning: Your Ultimate Guide to Finding and Choosing the Right Financial Planner