Behavior more telling than financial Literacy. An educated client is the best client. That’s according to Philip Smelser, a financial advisor and president of Financial Education and Achievement.
Smelser conducts financial education classes along with offering financial advice. He finds that an educated, informed client is generally more satisfied with the advisory process.
“I’m fully aware those that do show up are the most motivated people. Too many people are overwhelmed by life and overwhelmed by the topic,” said Smelser.
The Mass Affluent and Retirement
Smelser started out going to night school while holding a full-time job. A friend in the insurance business got him started selling medical policies, and he quit night school to embark on a long, self- guided apprenticeship. He opened his own practice in 2004.
Smelser calls his typical clients the “mass affluent,” everyday middle-and-upper-middle class people who worked hard all their lives, looking for someone they trust to manage their nest eggs. He meets most clients when they are about five years from retirement, and he relies “100 percent” on a retirement planning course he wrote to provide his clients with a common basis of knowledge.
“The client and I can have a conversation at much higher level after taking the class,” he says. If a client comes in on referral, it’s more work as he must give a mini-workshop.
So what advice does Smelser give the typical client? Besides recommending the basics – reducing tax flow, a diversified investment strategy, and having emergency funds set aside – he knows that cash flow solves all problems.
“When the inevitable downturn occurs, you can show the client they are still getting paid and shares are reinvested. For 98 percent of people, that calms them down and keeps them grounded. You don’t want to just say, ‘don’t worry, it will come back’ to a client who just saw a loss of 20 percent of account value,” he said.
Financial Education and Achievement also dissuades people from taking early Social Security, encouraging them to wait until they get to full retirement age, even if they must dip into an IRA beforehand.
“No advisor can offer a government program that will pay you for life,” Smelser said.
Annuities have vastly improved through the years. Smelser calls them viable and is comfortable using the “g word” – guaranteed. In the past, he personally bailed out many clients who got put into “almost criminal” annuity products.
Financial Literacy vs. Behavior
Although financial literacy programs are beneficial, they don’t really change people’s behavior, in Smelser’s view. However, what does have an impact is personality type. He notes that his wife and daughter “came out of the womb” geared toward savings, but that’s not true of everyone. The increasing availability of online tools will help with financial literacy, but before they were available, the same people seeking this information would head to the library. In short, there’s no substitute for a human being sitting across the desk that really wants to help clients.
Giving Back
Asked about his greatest success, Smelser quickly replies that it’s teaching his classes.
“Part of the fee per class - $39 per household – is that whether you become a client or not, I will help you all I can in that hour. I feel proud I helped a lot of people who did not become clients. It’s part of giving back.”
To learn more about Financial Education and Achievement, visit: financialea.net
