Trust :: Directions For Women

Trust

are you a client or a muppet?

March 16th, 2012

Walter the Muppet is known for his identity crisis. But there should be no question about yours. Photo from www.Muppet.Wikia.com

Many of you have undoubtedly heard about the news story of last week: The Op Ed (resignation letter) that the Goldman Sachs employee, Greg Smith, wrote in the New York Times. Mr. Smith had a few choice words for his employer of 12 years, and he revealed a few things that Goldman has been trying to counter ever since. It makes for a great news story, but it also provides a revelation to the majority of American investors who work with large Wall Street firms.

In professional circles, we often talk about a “client-first” attitude. Advisors place priority on the well-being of the client, while the advisor’s own well-being – or the compensation earned by their recommendation – takes a back seat. The client is served first.

Firms like mine, and the others listed on the Directions website, are Registered Investment Advisors. We are held to a fiduciary standard which requires us to put our clients’ interests ahead of our own. Yes, this is a legal requirement!

Imagine going to a family doctor who prescribes medicines according to whichever pharmaceutical company offers the largest kickback or “commission” for that prescription. We would much rather the doctor writes a prescription for the medicine that was going to be most effective, right? It seems ridiculous to imagine the medical industry operating that way, but large firms like Goldman Sachs have gotten away with it for decades.

Wall Street firms have been offering advice based upon what is in it for them, and much of America has fallen for it. This was the point of Smith’s letter, and it accounts for the media firestorm that ensued. Smith reveals that Goldman Sachs puts its clients last. Here are the “highlights” from Smith’s letter:

1. “To put the problem in the simplest terms,” he writes, “the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.” This form of business should be called “client-last.

2. Promotions are not garnered by merit, but profit: “If you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.”

3. In order to make money for the firm, a Goldman employee has a few options: “Persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit.” Nice doing business with you, right? Or, “Get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned,” said Smith, “but I don’t like selling my clients a product that is wrong for them.”

4. Perhaps the most disturbing Smith comment addresses Wall Street’s unsympathetic approach. He reports, “It makes me ill how callously people talk about ripping their clients off. Over the last 12 months, I have seen five different managing directors refer to their own clients as ‘Muppets,’ sometimes over internal e-mail… Will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.”

You can read Mr. Smith’s comments in their entirety here, where you will also see a nice illustration of vultures at feast. He predicts that companies — and people — who care only about making money will not be able to retain the trust of their customers.

And I agree. In an age where trust is eroding, and the financial world is getting increasingly more difficult to navigate, consumers need to know where they can go to get honest answers and recommendations. You need an adviser who sees you as a person, not a Muppet, and treats your family affairs with respect and compassion. But as the world sees Super Bowl ads and magazine pages touting enormous caches of financial resources, it’s understandable that the public’s perception of these Wall Street firms is more respectful than their behind-the-scenes behavior deserves. It behooves us to make sure the longstanding allegiance to this system comes to an end. I may work in a firm that would profit from that kind of systemic transformation, but I firmly believe the consumer will be best served when she is served first, not last.

My only parting comment, which I cannot help but make, is if you have any question about the honesty or integrity of your current advisor, give me (or another advisor on the Directions site) a call. We may not have the vast resources that they do at Goldman Sachs (or many brokerage firms for that matter), but we can compete with their culture and attitude any day of the week.

Click here to read Margie Carpenter’s story.

Categories Finding a financial planner
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Every Generation Has Trust Issues

by Eleanor Blayney

November 11th, 2010

The following blog is a response to our previous posting in our Issues and Answers series, Mistrust and Responsibility, One Generation’s Perfect Storm.

I think every generation has its own trust, or rather distrust, issues. Speaking as a baby boomer, our version was “Never trust anyone over 30 or anyone wearing a suit!” Needless to say, it never occurred to us to talk to a financial planner, which was probably a good thing, since in those days there were only a handful of such professionals.

Women in their 30s and 40s today do indeed face a different dilemma. Not only were they raised to be suspicious of anything that isn’t sealed and date-stamped, but they now face an exceedingly more complicated world than existed for those of us who remember Woodstock. (It’s hard to believe now, but there were half a million people there, but not one cell phone. Our mothers had no way to reach us, which is how Woodstock happened in the first place…)

But then along come Madoff and other financial scoundrels, and the differences between Gen X-ers and Baby boomers become trivial compared with our shared conviction that the financial advisory world is a dangerous place, heavy on testosterone, and light on ethics and empathy.

The answer, however, is not Do-It-Yourself financial management. Women may have the information needed, but not the time, experience, or judgment to make smart financial decisions for themselves and their families. We do indeed need financial experts, just as we need doctors and attorneys.

The solution wears two hats. As women, we need to understand how to find advisors whom we can trust. As advisors, we need to make ourselves more accountable and responsive to women.

Let’s start with what women can do. First, we can realize that there is middle ground between D-I-Y personal finance and handing complete control over to an expert. Call it management by delegation – a concept that any Gen X-er can understand and approve of. It involves doing your homework – checking references, background history, credentials – of a prospective financial planner. Yes, this takes time, but so does choosing a child-care provider or a car with an acceptable safety history.

It also involves staying engaged with the advisor. It’s not a matter of staying on top of everything the advisor knows or does, but conducting periodic gut-checks as to whether the advisor seems to be working for you (and not the other way around). It involves having the confidence to fire an advisor because you are not being heard, or not being educated to the degree you would like.

From the advisory side, change is also necessary. Manisha Thakor – a well-known and well-respected personal finance author and advisor to women –suggested three prerequisites on our blog for advisors seeking to help women with their finances:

Be completely transparent about fees. Women are price-conscious, and have to know upfront and center what it will cost them for the advice. Delaying or omitting this information is a big mistake, no matter how beneficial are the services.
Jettison the jargon. Women need simple, relevant-to-my-life explanations of financial strategies and decisions.
Listen to the feelings, and not just the facts, of a woman’s financial circumstances.

Another advisor suggested to me, at a recent retreat, that financial planners can gain consumers’ trust by doing trustworthy things. To Gen X women I would say: make your prospective advisor earn your trust. It’s not a blank check you have to write up front, but something that can be pledged in small increments.

Unfortunately – at least to Gen X-ers – planners don’t come in tamper-proof plastic packaging, nor are they subject to money-back, safety recalls when their advice proves defective. It’s always going entail some risk when you share confidential information with an advisor or take his or her advice. One of the many goals of Directions is to identify ways that women consumers and their advisors can pare that risk down to an acceptable level, making not seeking advice far more risky and time-consuming than finding the right advisor.

Click here to read the stories of some of the advisors we work with at Directions.

Categories Finding a financial planner, Personal Finance for Women, Trust
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Women and Money: Mine, Yours, or Ours?

by Eleanor Blayney

May 24th, 2010

Being in a relationship does funny things to our hearts, as well as our heads – particularly when it comes to personal finance management. It is not uncommon for older married women to behave in a very contradictory fashion: they cede all financial control to their husbands, but at the same time, they are far more likely than their partners to keep a secret stash of money just in case.

Women often confuse money with love. Being taken care of financially can be, in their minds, equivalent to being cared for. The fear of becoming a bag lady – held by an absurdly high number of women, even affluent ones – is probably more about running out of love than it is running out of money.

I am often asked by married women if they should keep their finances separate from their husbands. Rarely do I answer yes. Marriage is, after all, an economic partnership which involves working together and pooling resources for shared goals: a new home, college educations for children, retirement abroad. If, however, the goals are different, as is often the case with second marriages and a separate menu of kids, then some segregation of resources is probably in order.

On one point, however, I am far more absolute: all women, married and single alike, need to be thinking and planning their financial futures separately from their partners. This does not replace joint financial planning, but must be done in addition to it.

The reality is this: Whether in stable relationships or not, women will likely be alone at some point in their lives, often for a significant period of time. The Census Bureau reports the average age of widowhood at 56. Even for couples celebrating their golden anniversaries, the wife is likely to survive her husband by several years. Divorce, too, is a stubborn modern-day fact. In a 2002 study, the National Center for Health Statistics found that 30 percent of couples are divorced or separated within the first ten years.

The transition from coupledom to singlehood is rarely gentle and never simple. A time of difficult, even violent emotions, it’s hard to think, even breathe, let alone make decisions about finances. But money issues loom large when you become single again: What’s mine? What’s not? Where will my money come from? Whom can I trust? What needs to be done/changed/closed/opened/paid?

The best time for planning to be single is when you are not. Think of it as a form of insurance, contingency planning, or emergency preparedness.

• Set aside money now that you might need in the first few months of being single, just as you might stock up for a natural disaster on bottled water, duct tape, and canned goods. This isn’t your secret money: it’s a survivor fund and as such, should be completely acceptable to your partner. He should probably have one, too.

• Create a phone list of the people – a CFP® professional, banker, accountant, attorney – who can help to orient you in your new financial situation.

• If you have a planner now, ask him or her to prepare some what-if scenarios addressing your financial situation in the event of divorce or the death of your partner.

You might also ask your planner to meet with you separately, even if you are doing planning as a couple. Take this time to express your financial goals, preferences and issues from your own perspective. Again, this is not about going behind your partner’s back. (Indeed, if a planner perceives that you and your partner have a true conflict of interests, he or she should identify it as such to both of you, and find a resolution before continuing with your planning.)

You want to establish your own financial identity – how you think about finances, and the way you wish to be addressed and involved by both your planner and your partner. Some planners might want to think of you and your partner as one client, but in fact you are a team of two individuals. The distinction is subtle, but important to your financial future.

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Categories Financial Planning, Personal Finance for Women
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Look who's talking…

by Eleanor Blayney

May 12th, 2010

There is a memorable Bob Newhart skit where he plays a psychiatrist meeting for the first time with a woman who nervously confesses her problems with claustrophobia, bulimia, and relationships. Newhart is not your classic Freudian shrink who stares into space, saying nothing. In fact, he actually has some advice for his client, which he summarizes in just two words:

“STOP IT!”

When the flabbergasted woman just stares at him, he drives his recommendation home by spelling it: “S-T-O-P new word I-T!!!”

Session over, mission accomplished, slam bam thank you ma’am.

Like all classic humor, the sketch is funny because it depicts a fundamental truth. When women ask for advice, they are often not asking for solutions but acceptance. And when men give advice, they focus on eliminating the problem, not analyzing its origins. How many times have you come home from a bad day, complaining about a workmate, a traffic snarl, an uncooperative team? Your husband or partner will listen for a minute and then feel compelled to fix it, as soon as possible. “You just gotta work around him/it/them,” he opines, grabbing for the remote. He sees the problem as solved, while you feel that he hasn’t heard a word you’ve said.

Financial planning can be a “fix-it” discipline, and as a CFP® practitioner, I’ve always enjoyed solving problems. And I’ll admit, there are some problems that seem to require a “STOP IT!” response. Spending too much? Not willing to take any investment risk? Putting off completing that questionnaire for the estate planning attorney? Just stop doing what you’re doing, and everything will be fine.

But the logic and simplicity of such advice has, to my knowledge, never changed behavior. It has, in fact, almost lost me two clients, one whom I told to stop spending money on eating out, the other whom I advised to stop buying shoes. Their flabbergasted response told me that I did not get it. I was advocating eliminating the tip of the iceberg, leaving the real and much greater issues submerged, threatening to sink their financial ship.

I certainly learned from those early mistakes, and now know that my job is to listen, deeply and thoughtfully, long before I offer advice. I’ve learned that women need to be heard, and accepted, before they need to be fixed. Often, they feel isolated with their financial issues, and need reassurance that others share their situation, that they are pretty average when it comes to their worries about money. In this way, they differ from men. She wants to know that she is “the same as” whereas he wants to know if he is “better than.”

When choosing a financial planner, you want, of course, experience and expertise. You want commitment to an ethical code of standards. But there is another “E” prerequisite you should be looking for: Empathy. On your first visit to interview a prospective advisor, who does most of the talking? Are you offered answers before you have posed all the questions? Do you leave the advisor’s office relieved because the interview is over, or because you have found a safe place to become more financially competent? When you return for a second visit, is it clear that the planner has reflected upon and digested all that you shared in your first meeting?

Sometimes we want professionals who are all business and completely focused on their skills. I, for instance, don’t want my attorney to be my pal. A bit of bedside manner works well in doctors, but if I get more than 10 minutes worth, I begin to feel uncomfortable. When it comes to money management, however, our emotional assets and liabilities are just as important as our financial inventory, and may have a greater impact on our ability to be financially successful than a six-figure 401(k).

Here’s some advice if you’re meeting with an advisor who does more talking than listening. Just tell him or her to “Stop It!” It’s your turn to speak.

Categories Finding a financial planner, Personal Finance for Women
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Let’s do it better: talking to women about personal finance

by Eleanor Blayney

April 27th, 2010

Welcome to the Directions website!

The year is 2010. Somewhere out there is a woman sitting at home alone, or perhaps just feeling isolated in a group of colleagues or friends or even within a marriage, worrying about her financial security. She is probably, though not certainly, between the ages of 45 to 65, still employed or newly retired. She grew up with one set of attitudes and expectations about money, but now finds herself in a world where what she learned is not helping her to handle the financial issues she now faces. She is uncertain where to turn. Even with her friends, with whom she discusses just about every issue under the sun, she is afraid to talk about money. Worse still, she is reluctant to go to a financial consultant, not knowing whether they can be trusted. Or perhaps she has had a bad experience with an advisor who did not listen to or understand her concerns, but was just trying to sell her something.

Somewhere in Texas, I am standing in a room of almost 50 Certified Financial PlannersTM at a four-day financial planning retreat. I had posted an invitation to an informal lunchtime discussion about the personal finance issues facing women and had expected about 10 or so people to join me. The room was packed, and people kept coming in throughout the session to sit on the floor. These advisors were mostly women, but there was a handful of men, and each shared in turn his or her thoughts and experiences about working with women. The stories were different – some advisors shared that they loved to work with women; others found their women clients challenging and sometimes difficult. But behind all the shares was a passion and energy around the desire to do it better: to engage women in financial planning in a manner and method that is different from the way we’ve done it before.

I kept thinking during that session, if only I could reach that woman I know is out there, feeling alone and overwhelmed by her finances, and invite her into the room to just listen to and observe these professionals, many of them thought leaders in the financial planning world. I think she would be encouraged to know that her issues are being taken seriously, and that there are advisors thinking “outside the male box” about ways to work with her and gain her trust. I think she would have felt safe in that room, and optimistic that she is valued by a group of advisors who are committed to changing the personal finance conversation for women.

Please share with me, so I can share with this emerging advisory group, where you are in your journey towards financial security, whether you are very far away or have taken some positive steps. We need to hear what you want and need from us, so we can indeed do it better.

Eleanor K. H. Blayney, CFP®
President, D<span style=”font-variant: small-caps;”>irections</span>, LLC

Financial advice for women…
…because women ask for directions

Eleanor@directionsforwomen.com

Categories Personal Finance for Women
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