Money

Avoid Making Emotional Money Errors

Clients Must Depend On and Trust Their Financial Planners

If you climb into a Porsche or Corvette, you feel you could drive fast, and you just might do so. You will feel you have more control than you actually do. Mark F. Swingle, the Principal of New Jersey-based Westfield Financial Planning, says the same is true of financial services. Much like getting behind the wheel of a fast car, people think they have more control, but things can also go badly a lot quicker than they thought.

Mark is a Certified Financial Planner™, but this is his second career. Previously, he was in the restaurant industry, although he’d been investing since childhood. In college, he majored in economics, and later served as president of an investment club started by his wife and her sister. It was cited by ValueLine as the best investment club in New Jersey for two years. Eventually, he got into the life insurance business with Mass Mutual but called himself a “round peg in a square hole.” He wanted to do financial planning, while the company wanted him to sell insurance. Mark left Mass Mutual and joined the independent broker-dealer NFP in 2003, and he left the conflict ridden broker-dealer world in 2017 to become the Registered Investment Advisor Westfield Financial Planning. He went into financial planning because he enjoys helping people and is turned on by the idea of helping clients make and keep money – and preventing them from doing the wrong thing at the wrong time.

Understanding the Need for Professional Help

Westfield Financial Planning stated investment minimum is $250,000, but that is designed for someone mid-career, say in their 40s and who is still saving and amassing wealth. It is not enough assets for a potential client who is close to retirement. “We won’t make enough money to make sense for them or us,” he says. “We’re looking for [clients] who want and need help and also understand the importance of professional help,” Swingle said. He admits that before he was in the business, he didn’t necessarily value professional help and would do his own taxes and other tasks he now knows are best left to the pros.

“There’s no point in paying me and only doing 10 percent of what I tell them. That’s a recipe for failure for me and the client. Most clients are not interested or good at managing stuff, or they made emotional errors in the past and recognize they’re not cut out for it,” he says.

Initially, Mark spends time with new clients going over retirement planning, estate planning, income tax planning, protection such as life and liability insurance, and pinpointing areas that need work over the next 6 to 36 months. There’s a client review every six months. He recommends long-term care insurance to shift the risk of nursing home expenses from the client to the insurance company. Since there are fewer carriers and the insurance is expensive, the subject needs addressing earlier than in the past.

The Properly Diversified Portfolio

“At 60, someone may ask how we will change their assets when they retire,” says Swingle. He points out, statistically, one half of a couple that age will live another 30 years. “Inflation will eat away your purchasing power if you don’t take some risk to grow faster than inflation,” he says. If one lives to 85, they need 50 to 60 percent of their portfolio in stocks. If their stock portfolio is currently at 90 percent, they don’t need all that risk and they can pare it down.

He tells clients that a properly diversified portfolio of 60 percent stocks and 40 percent bonds took 18 months to come back after the 2008 crash, while it took three years for a portfolio consisting completely of stocks to come back to its 2007 number. “You don’t give up much return over 20 years, a difference of less than 1 percent. It’s a reasonable financial tradeoff,” he says.

Financial Planner vs. 401(k) Advisor

Mark points out that as a financial planner, he likes to know his clients extremely well. “We know their kids’ names and what their goals are,” he says.

Westfield Financial Planning manages $110 million and has a team of six people. In the 401(k) world, customers just get basic information and education. While they may get an occasional meeting or a teleconference, there’s no ongoing help.

“It’s a very different relationship and level of service. Participants are brought to the table of the 401(k) by their employer and have no control of the menu,” he says, adding they don’t really want control over the menu, but want to know they can trust the selections and the costs are reasonable, and they won’t get in much trouble.

The Need for Financial Literacy

“Financial literacy for kids is more important than in the past, mainly because it is easier to borrow money, and easier to get yourself in trouble,” Swingle says. He recalls being taught how to balance a checkbook when he was young, but his own kids don’t have a checkbook. “The online apps do all the balancing for you,” he says. While it’s a bit of a challenge to educate young people in financial literacy, he thinks teaching financial literacy starting at a young age in schools is crucial.

Choosing a Financial Planner
Mark advises those looking for a financial planner to ask how many clients they have, and how many they have lost over the past year.

“That determines effectiveness on how you keep clients, and it’s as good a track record as you’re going to get,” he says. “A planner can show the performance they want to show, but if clients panicked out at bottom, such as in 2008, you failed them. At the end of the day, it’s all about trust.”

For more information on Westfield Financial Planning, visit: westfieldfinancialplanning.com

Westfield Financial Planning (WFP) is an independent Registered Investment Advisor (RIA) with the US Securities and Exchange Commission (SEC). Westfield Financial Planning and its representative are in compliance with the current filing requirements imposed upon SEC registered investment advisers.

 

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