High net worth individuals and business owners know a lot about investments, making money, and growing their finances. But I’ll guarantee you something. I’ll guarantee you that no matter how much you know before you set foot in an advisor’s office, you will probably encounter unfamiliar financial jargon and advice. Things will be said that you have no way of validating or judging.
If that happens to you and the advisor can’t or won’t clarify, strongly consider finding another advisor. Business owners and high net worth individuals should run from coaches or advisors who use wording or techniques similar to what I’ve listed here.
- “I know where the stock market’s going.”
No one knows the future. Even the most successful investment advisors and financial coaches make moves that don’t work out. There is “proven low predictive power” for success in picking stocks or mutual funds. If your advisor hints that he or she knows what a market or investment will do you’re dealing with someone who is either not telling the truth or is delusional.
- “You can assume an X% return on your investment.”
Statements like this are unprofessional. Every trained and educated financial or investment advisor learns to never issue such a decree. It’s a statement that makes an assumption no one can guarantee. Past performance does not guarantee future results. Whether you’re a high net worth individual or a business owner, make it your mission to avoid assumptions when investing or managing your money.
- “Don’t worry about the cost of this product. You pay nothing.”
Many high net worth individuals and business owners work with a planner or advisor who is commission-based — there’s nothing wrong with that. But you still need to understand how your advisor gets paid. When advisors say you pay nothing it may be that they want to conceal how and how much they get paid.
- “This financial plan will fit your needs perfectly.”
Business owners, high net worth individuals—all of us live complicated lives. Your financial issues and priorities change over time, often unexpectedly. No financial plan can anticipate every health issue, job loss, divorce, inheritance, college expense increase, or other major financial variables. Go with a financial advisor who stresses frequently reviewing your financial plan and who encourages you to keep in touch with even seemingly minor questions.
- “You really need to act now.”
An advisor who says this to you is probably pushing the sale on you. Smart business owners and high net worth individuals work with advisors who encourage them to take the time to think through any major financial moves. Don’t be pushed into any investment.
- “You can substantially grow your funds without risk.”
Financial advisors for high net worth individuals guide or coach them on how to save money, reduce taxes, and accumulate wealth. But if your funds are to grow significantly you must take some calculated risks. No advisor can eliminate all risk. Your advisor should keep risks to a minimum and at a level that keeps you comfortable.
- “Your future looks bright, according to our software.”
Some high net worth individuals will get a financial plan print-out from their advisor that contains some rosy-looking numbers: You have a 92% chance of reaching your retirement goal, a 95% chance of paying your kids’ college expenses—even a 87% chance of affording that cottage on the lake you’ve been eyeing.
Don’t put too much stock into such calculations. Many are based on mathematical models known as “Monte Carlo” simulations—that’s Monte Carlo, as in the European gambling haven. The models are designed to calculate probabilities based on thousands of possible market scenarios. But equations are only as good as their inputs.
Yes, software generated plans can be useful. But no software can anticipate events like a job loss, a career change, or other factors that can dramatically alter your financial future. Consider the computer-generated results but always rely more heavily on your own judgment and wisdom.