Comprehensive Financial Planning = Crazy?

February 9, 2009 • Evan Simonoff

For several decades, the profession's leading practitioners have described their work as comprehensive financial planning. According to Stark & Stark attorney Tom Giachetti, they are asking for it, meaning lawsuits.

"Why would you do that?" Giachetti asked attendees at a session at TD Ameritrade's annual conference in Las Vegas last week. He should know. He's one of the leading legal defenders of advisors in the nation, and one could see his mind conjuring up cases of clients getting ripped off by used car dealers and air conditioner repairmen and blaming it on their financial advisors. Is it a stretch? Maybe.

One other tip from Giachetti: Many of the questions that SEC examiners ask advisors during their compliance inspections are way out of bounds. If examiners are told that, or asked what relevance the question has to the inspection at hand, they will often back down.

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15 years ago

I could not agree more, I have been warning advsiors that I work with for some time about thier target value. Here's what I told them last year:The media is still in "gloom and doom" mode, another 250,000 people recently became jobless and lawsuit and attorney advertising is at an all time high. These attorneys are smart enough to know when the cycle produces a boom in their business and boy are they in for a fat Christmas and a Happy New Year with people lining up to be part of the process. I think the current environment is exceptionally dangerous, with a national distrust and hatred of financial institutions and the industry in general, God help the advisor who faces a jury fed on tales of overspending and irresponsibility by the nation's largest institutions. WHAT CAN WE DO ABOUT IT? Take the same steps you advise your clients to take: 1. Examine your E&O coverage - and see if there is room to increase your limits and add umbrella coverage in the multiple million dollar range. The coverage is cheap and you can always drop or reduce the umbrella later after the crisis has passed;2. Be a hard target - Don't be collectible above the limits of your E&O, be proactive and make sure you have adequately addressed your own Asset Protection planning. Make sure your personal investments and real estate are properly held - this DOES NOT MEAN IN YOUR REVOCABLE living trust. We represent a number of the brightest guys in the business personally, as well as working with their clients for a reason. 3. Make sure your record keeping and practices conform with the highest standards. I'm sure your compliance officers have a checklist they can provide on this issue. Also, be exceptionally careful of the interaction and dialogues between your non-advisor employees and your clients are appropriate and limited in nature. I see many advisors offices operating with "old pro" admin people who are exceptionally knowledgeable and take on a great deal of responsibility and client interface. Make sure you know what they are doing and saying - you are responsible for every word out of their mouths;4.Be NICE and COMMUNICATE - those with the best bedside manner and relationships in any profession have an edge over those that do not in client retention, referrals and avoiding conflicts that lead to lawsuits. I deal with multi-millionaires every day. You would not believe how many of them complain about the lack of personal attention and care they feel they receive from their financial advisors. Many say they have, "... no communication other than their statements and an occasional call when the guy wants to sell me something, he does not even send me a Christmas card". Wow - I was speechless the first time I heard this, then I heard it again and again. If you have not thought about little touches like ordering cards and thanking people for their business - you better get in line at Staples - the clock is ticking;5. Up your game - are you sure that you are apprised and ahead of what the best and brightest new tools are? Are you attending product seminars and CE on new strategies? Your competition is and even if you don't get sued you could have many clients poached if you are not talking about the new math. Taking clients from other advisors whose clients are down 2-40% and are unhappy is like shooting fish in a barrel for the best advisors we work with. They are using this crisis as the best business development opportunity of the last 10 years - which side of that opportunity are you and your firm positioned to be on?6.Take Action. This is the single most important thing I teach those we protect. Now is ALWAYS the time - later is almost always "too late". Already in harm's way? No problem-exclude the current action and make sure it cannot be repeated. Just because you got caught with your "pants" down once does not mean it has to happen again;

Comprehensive Financial Planning = Crazy?

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