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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

4 Mistakes People Make When They Find a Financial Planner

Updated: Dec 18, 2021

Finding a financial planner can be difficult. They all sound the same when they say they care about their clients. How can a normal person make a smart choice when hiring a financial advisor? Bridget Sullivan Mermel CFP(R) CPA and John Scherer CFP(R) share four key mistake to avoid that will help you make a smart decision:

1 Hiring someone who does not have any legitimate credentials

o The CFP™ is the gold standard when it comes to getting comprehensive financial advice. Period. All the rest of the alphabet-soup behind an advisors’ name is a watered-down ‘education’ to make them sound smart. (One exception - CPA’s can get the ’PFS’ designation; if you find someone who is both a CPA & PFS you know they have the basic credentials to be a real financial planner.)

o Note that just because someone is a CFP™ doesn’t mean that they are any good. But would you hire a doctor who didn’t have an MD? Or a dentist who didn’t have a DDS diploma on their wall? Then why would you trust your financial future to someone who doesn’t have the basic educational credentials to be a financial planner?

2 Believing that there are no costs / any investment is free

o So often financial advisor fees are hidden inside of investment or insurance products, and it can seem like they are free. I’ve even heard advisors say ‘This doesn’t cost you anything – the insurance company pays me so this is free to you.’

o Of course, nothing could be further from the truth. Even if an advisor sells things and gets paid a commission by an investment or insurance company, it ultimately comes out of the clients’ pocket.

3 Relying too much on guarantees

o It sounds really good to have investments which guarantee that you don’t lose money, but every investment carries some risk. Every one. If someone tells you there’s no risk at all to an investment, either they don’t really understand that product or they’re not telling you the whole truth.

4 Focusing on investment return

o Investment return is important, to be sure. But it’s only one of many things that are important for future financial success, and it’s not near the top of the list. How much you save (both from wages and in making wise purchases), how much you earn, the stability of your family relationships, how much you pay in taxes – all of these things are at least as important as investment return


John: Finding a financial advisor you can trust can be really difficult. On today's episode of Friends Talk Financial Planning, we'll share four mistakes to avoid to make sure that you can find good financial advice when you're looking. Hi, I'm John Scherer and I run a fee-only financial planning practice in Middleton, Wisconsin.

Bridget: I’m Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois. John, before we get to our four mistakes to avoid, I want to remind people to subscribe if you haven't subscribed to our channel already--Friends Financial Planning. We'll then be able to let you know when new episodes come out, and it will also help because it gets us more respect with Google and helps us reach more people. Okay, so, John, the four mistakes that people make. Let's talk about the first biggest mistake people make. Go for it!

John: The biggest mistake I see people making is working with an advisor who doesn't have a legitimate professional designation. And when we're talking about financial planning, what I really mean by that is the CFP or Certified Financial Planner designation. That's the gold standard for me. That's the one that, and I've got several other alphabet soup know things behind my name, and you won't find it on our website or business card because the CFP, that's the one when I talk with friends, other people who are looking to find somebody.

It's sort of like, it would be like, Bridget, going to a doctor that doesn't have an MD, right? Or you would never go to a dentist that doesn't have a diploma on the wall that says DDS, right? That doesn't mean they're a good dentist, but that's like the base level of competence. And it really gives you a step up if you hire somebody or find somebody that has that CFP.

Bridget: And it's a credential that shows that people are serious about the field of study.

John: That’s right.

Bridget: So it's not like financial planning is something that everybody knows and that there's no academic research or there's no field of study. It's like if you become a doctor, there's a lot of field of study that you have to master before you can become a doctor. Same with CPA; I’m a CPA as well. There's a field of knowledge that I get tested on.

Well, in personal finance, there's a lot of information to know. And the CFP shows that the person, at least at one point in their life, was serious about learning about financial planning. And so, again, I 100% agree with you. And a lot of people are selling products and putting themselves out there, and they're not CFPs, they're not Certified Financial Planners.

John: Yeah. And for my money, like I said, there's a lot of other designations that are out there, but none has the rigor, and I've got some of them, none has the rigor of the CFP. And you mentioned being a CPA, and that maybe is the one exception to the CFP rule for me is that as a CPA, a person can choose to get their (what is it?) Personal Financial Specialist, I think, PFS. Is that right?

Bridget: Right.

John: So if somebody is a CPA and a PFS, that's the one where you go, “Okay. That makes sense,” but the rest of that alphabet soup other than CFP, just doesn't hold much water for me.

Bridget: Great. So we know that everybody's going to look for the credential and the person's… when they're checking somebody out. What's your, what’s our next mistake to avoid?

John: Yeah, the other thing that I avoid, or one of the other things--and I think of it sort of like a checklist. Okay, jeez, avoid that one by hiring a CFP. Another one is that we find people…believing or thinking that the cost of investing or the cost of hiring the advisor is free.

Bridget: Right.

John: And most often, like I see it in, there's an insurance agent, a lot of insurance products where it comes out and they pay a commission, but I've seen folks where the insurance adviser is saying, “Listen, none of your money goes to me. I get paid by the insurance company, so all your money goes…there's no fees to you--I've heard that--no cost to you. And it simply isn't true.

One experience that I have. I used to sell insurance a long, long time ago, not quite in a galaxy far, far away, but it was a long time ago. And…I remember this was a fixed annuity, so it works kind of like a CD. You buy a three-year CD, a three-year fixed annuity and one back in those days, the three-year CDs where three-year annuities were paying 4% for one of them, which is a pretty good deal. And the exact same product in a different structure paid five and a half percent.

What was the difference? The one where the customer made 4% I, as the agent got paid five. Where the customer made five and a half, I, as the agent made three. The money literally came out of the client's pocket, even though the client never paid me anything, right? I never got paid by the client; the insurance company did that.

And as the customer, if you're hiring somebody like, I don't know, how do you know that if you never say, “Well, you could choose five and a half or you could choose four.” What would you choose? Well, Duh, right? But it comes out of…when the advisor is making more money on one versus the other…I actually did the math on that one, Bridget, it was exactly, it was literally dollars out of the client's pocket or dollars in my pocket. And that was one of the last straws for me before becoming fee-only. So, nothing's free.

Bridget: Yeah. I had an insurance agent who recommended somebody buy whole life insurance who was not contributing to their 401K. And I took issue with that. And I said, “How much are you making on this whole life insurance policy?” And they said, “I don't know.” And I said, “Well, go find out.” And I'm highly skeptical that they did not know how much they were going to make on that policy.

John: That's right.

Bridget: And they, of course, were touting the tax benefits of this whole life policy. And not that there's no tax benefits, but there's many more tax benefits to putting money into a 401K.

John: That’s right.

Bridget: So that's the type of thing that you will see from somebody who is doing things for free.

John: It's one of these, Bridget, where in cases where you're investing your money or putting your money to work in some place, right, there's the advisor, there's the company that's handling the investments, and then there's the client. There's only those three elements, whether it's mutual funds, insurance. And if you know, if you know the companies are making money, what's the adviser making, there's only the three parties in there.

Bridget: Right.

John: And that really is useful to know. And there's nothing wrong, right? Like people need to get paid for their advice. And it's not like it's a problem, but don't hide it, right?. And thinking it's free is one of those concerns.

The other thing…Make sure they've got a CFP. It's not free. Know what you're paying for them. And sort of a corollary with that know what you're paying for is putting too much value in guarantees can be a real mistake. And even though it feels really good, especially when the markets are bouncing all over and things.

Insurance is a big one where it's guaranteed, we've got these guarantees in here. And there are risks in every investment. Thinking that it's risk free, that guarantee side, like, no, you can have guarantees, but there are other risks that you take. And if you're talking to an adviser and they say, “Listen, this is guaranteed. It's risk free.”

And they don't talk about the other risks, either they just don't really understand what they're telling you to put your money into, or they're not telling you the whole truth. So that's a big red flag to me is if it's risk free and guaranteed--that just doesn't exist.

Bridget: Can you tell me about the type of guarantee that you've seen before with some of these products that people should avoid? You already mentioned the guarantee of 5.5% versus 3% and who's getting the difference. What other types of guarantees have you seen that you know, okay, that just is wrong?

John: Yeah. There's one big one that we see, and it's usually in an annuity wrapper, so oftentimes it's from an insurance agent or from an adviser that's selling products with things. And it says, “Listen, your money goes up with when the market goes up, and then when the market goes down, you've got a guarantee that it never goes down.” There are some really complicated products, and they're not all wrong, but it's not as simple as that. And really, there's a lot of other risks that go into things that we find that the clients certainly don't understand.

A lot of times the advisors don't understand where they are. And this idea of, jeez, it never goes down and it goes up. Here I'll give you one example, Bridget; I just thought of this. I had somebody who would come in because they were being pitched one of these products and said, “Listen, I want an objective opinion on this.” And it was that the client would get the first 4% per month when the market went up and then it was guaranteed to never go down, right, and they'd pay him a bonus when they put the money, they'd give him 5% extra when they put the money in.

And I said, “Well, jeez,” I know these products…I said, “What's the Commission on that because...?" He said, “Well, I asked the person, the person makes 5% commission.” So listen, they're making 5% of the money that's going. And you're getting the first 4% every month, right? So the first 36%, and then you're giving do you assume the company's making money on this? Well, yes, they must be making money. What doesn't add up here, right?

And then we dug into it and it was, yeah, you get the first, but every time the market went down, you didn't get zero. You actually lost money, but then they threw it up end. It was a really complicated thing. And we had put together some numbers. You go, "Oh, you're going to get nothing like market returns. It's going to be something less than CDs probably." Right? One of those sort of things, but the guarantees sounded so good.

And, like, the words that they said weren't factually wrong, but the implication was 100% wrong. And so it's those things where…and again so how does a normal person understand that? Golly, here's a complicated thing. Well, hire a CFP and somebody that…hire somebody that's obligated to act in your best interests.

And then the other thing is just if it sounds too good to be true, don't put so much money, or so much credence to those guarantees, right? Because they just aren't as good as it sounds like. It feels good, but it's just not quite what it's cracked up to be, or what it feels like.

Bridget: What's our last mistake to avoid?

John: The other one, I guess they're sort of three corollary ones, but it's focusing too much on investment return I think is a really big mistake when you're looking to hire a financial advisor. And, you know, Bridget, investment return is important, right? But it is not the most important thing. And that's what sometimes people think.

How much you save, how much money you earn, how stable your relationships are. All those things are more important, or at least as important as investment returns. So if you're looking for a financial advisor that you can trust and you find someone that's talking about what great returns they get and focusing on that, that's a really big red flag for me.

Bridget: Right. And I would add that people misuse…another thing that gets misused is tax advantages. So just like the example that I used with the whole term life policy. So the throw around “You save money on taxes." So that is like music to everybody's ears. I'm surprised that we don't have a greatest hit in Spotify, “Save Money on Taxes.” That would be a hit.

John: Right.

Bridget: Everybody loves to hear that, but the investment people throw that around because they know that it sounds good. But then you want to say, “Okay, how?”

John: Right.

Bridget: How is this better than my 401K?

John: Right.

Bridget: Would be a good baseline question. Yeah.

John: Yeah, that's great. I think that's a great place to wrap things up again. The four big mistakes to avoid: 1) hiring somebody that doesn't have a CFP avoid that one; 2) relying too much on guarantees. Don't put too much stock in there; 3) thinking that it's free, nothing's free. Don't put too much there; 4) And then focusing too much on investment return. Don't put too much focus on those things. And you'll put yourself way ahead as far as finding a financial advisor you can trust.

Bridget: Thanks so much, John, for going over this with us today. And I just want to remind people that if you like how we talk and think about this, we're both members of a group called the Alliance of Comprehensive Planners. It's a non-for-profit group of planners that have a lot of the same values that we have. And so you can find out more about them and find the adviser in your area at And why don't you talk about subscribing one more time.

John: Yeah, that's right. Again, if you like what you hear here. If you please hit the subscribe button that helps other people find this show, so they can learn those things, and it keeps you updated on future episodes. So hit “subscribe” and until next time, Bridget, thanks.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

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