b&b74 Alan Moore, CEO of XY Planning: How to tell a financial “expert” from a financial expert
We round out our October #entrepreneurmonth on with Alan Moore, founder of XY Planning Network. As an entrepreneur, having a good financial advice on your side can make or break your business and there are a lot of financial advisors and experts who may or may not be able to properly advise you on your particular situation.
Enter XY Planning Network, which I joined this year! They are a network of fee-only financial planners (this means they only get paid when you pay them – no commissions or referral fees!) who all have Certified Financial Planner(tm) designations.
Find out how to tell the financial “experts” from the experts from someone who also knows what it’s like to found and run a successful company.
Recorded in #charlotteNC at the XYPN conference on the top floor of the Hyatt, woot. #deaddayjobarmy
Alan Moore: I fell in love with helping people with their money…It’s the last taboo in our culture..and yet it’s so important because if your money’s not right, the rest of your life isn’t gonna be right.
Alan Moore: Fee only and fiduciary are what we call the F-words in financial planning that everyone wants to say but no one really wants to say what they mean…We get paid to advise a client on what life-insurance policy to buy. I’m not incentivized, that is I don’t get paid, whenever they purchase product A over product B. Instead, when you’re fee only, you get paid to say “buy product A or product B” and that’s it. And so being fee-only basically means no commissions…Fiduciary means that someone works in your best interest. What’s interesting is that most consumers think all financial planners are fiduciaries….That they have to put your needs in front of their own.
Alan Moore: An adviser can be a fiduciary and a non-fiduciary in the same conversation. We joke that you need fiduciary hats, because if you put on your adviser hat, your fiduciary hat, you can be giving advice and you have to do what’s in your client’s best interest. And you can say “I think you should buy a life insurance product.” That’s advice. You’re doing what’s in your client’s best interest. But you can take that hat off and put on your salesman hat, your non-fiduciary hat, and then sell them a particular product to do what’s in your own best interest and not what’s in the client’s best interest.
Alan Moore: Keeping in mind that all of financial planning and investment advising, everything we have today, came from the investors act of 1940. So I want you to catch that. We are literally governed by laws that are written 75 years ago that have not been updated.
Alan Moore: When I’m under the IRA regulations, and I’m giving advice, I have to do what’s in your best interests, but I can literally change hats, put on my salesman hat, suddenly I’m selling you something. Now I don’t have to be a fiduciary…so let’s talk. I think you need a million dollars of term life insurance. That was advice–that’s my fiduciary hat. And here’s the product I think you should buy. I just put on my salesman hat. That wasn’t in your best interest. Literally the same sentence we went from advice to sales.
Alan Moore: NAPFA, napfa.org,they are the association of fee-only advisers. In order to join you have to be a fiduciary, you have to be a certified financial planner so you have to have credentials, you have to have experience. You literally have to submit a financial plan to show you know how to do financial planning…So if you go on their website and you search for an adviser, you’re going to find one that meets all of this criteria…If you got and you search XY Planning network, you’re gonna find a bunch of advisers that specialize in working with younger clients, that are fee-only based, that are fiduciary, that are CFPs, again all the things that we were talking about so you don’t have to worry about vetting all these different pieces and trying to figure it out. You just know, if they’re part of the organizations, they meet all of these criteria.
Alan Moore: If you’re getting a financial plan for free, I guarantee you he’s getting paid somehow.
Alan Moore: Education: this is where we start to have some issues, in that you gotta be sure that the folks that are giving the education know what they’re talking about. And the easiest way to do this is to look for credentials…Now, you can buy credentials, you don’t actually have to have any education to have credentials, so you gotta be very careful. The main one, the sort-of gold standard in our sort of profession, our industry, is the CFP, the Certified Financial Planner. It takes months and months, maybe even years, of education in order to meet the educational requirements. You have to pass an exam that is gigantic: it has a 55% pass rate, so it’s an incredibly challenging exam. You then have to have three years of work experience in order to use the CFP.
Pam: I got my CFP designation specifically so that I knew that I had the experience, and, I mean, the material that you have to learn for the CFP means that it’s not just my story about me paying off my debt or my story about me buying a house, but I can advise you on situations that I haven’t personally been involved in.
Alan Moore: Financial planners help people live great lives. That’s my definition of financial planning. And we can do that, not necessarily through more investment returns or just getting a good insurance product, it’s really about having that person to go through life with you and say “What are your goals?”
Alan Moore: I can make the argument that everyone needs a financial planner, but what we find is most people hire a financial planner during a transition: they’re getting married, they’re having a baby, they’re getting divorced, a death of a spouse, they get an inheritance. Something happens in their life that drives them to get a financial planner…Very very rarely do we hear from clients that financial planning wasn’t worth it. Clients tend to stay with us a very long time, and I think it’s because it’s so hard to explain financial planning…but once you experience a good financial planner you’ll see why and say everyone could use one.
Pam: Financial planning isn’t about investment returns, it’s about figuring out how to live your great life.