​As LBW looks inward at our industry, we find a wide push to provide people with convenience; similar to what one would find today in other industries such as retail, healthcare, and even education. At what point does the prioritization of convenience cause harm to other important characteristics? This continued movement towards ultimate convenience coupled with our ever-growing do-it-yourself mentality, can create a dangerous combination.

The intention of this blog is to examine a few of the more common plays on convenience in the financial industry, despite other important considerations, as we want to address where some of our concerns lay.

1) Using the same or affiliated accounting practice for personal financial management:

In college studying finance, a professor told me (Dan) the primary difference between accounting and finance was an accountant is trained to think from the past to the present, and finance professionals are trained to think from the present to the future. Clearly, both an accountant and financial advisor are going to have crossover in their fields of practice. However, we at LBW do not feel that these two financial services should be done by the same person. Yes, it may be easier to consolidate your efforts and only deal with one person or company, but is that the best option? The mindset of these two professionals are different. These mindsets are often conflicting when considering measures a person should take from a monetary and/or investment perspective. If a person is handling your accounting efforts and providing financial advice, which one takes priority? We feel, even if that professional attempts to not have one preside over the other, subconsciously their area of expertise will win. As a result, the client will suffer. They will not be gaining a complete and objective approach to their personal financial management. For example, should you be contributing to a Roth or Traditional IRA? Many accountants will advise you to contribute to the traditional IRA if that IRA provides a tax deduction today while a financial professional might advise a Roth due to the advantage of future absolute returns. Why is the idea of combining these two services so commonly found today? Think Wal-Mart; it is a one-stop shop for the client – it’s more convenient. However, like Wal-Mart, a consumer may not want to buy EVERYTHING from them, as they may want a certain quality that Wal-Mart may not provide. This is similar for accountants and financial professionals –we have different expertise’s. On the face of it, it looks great, but not so much when you examine the situation in-depth. It’s also more profitable for a firm to combine these services. These efforts create a stickier situation and thus it’s harder for a client to leave if unsatisfied. The combination will also diversify and bring in more revenues for the firm. Our recommendation is that of what we believe – to act in the client’s best interests by separating these functions. Hire two separate entities that are skilled and able to focus on your accounting and financial advising needs respectively. And the kicker – encourage these different personalities to collaborate together on your behalf.

2) Utilizing an insurance policy as an insurance policy and an investment vehicle, all-in-one:

Permanent, or cash value, life insurance policies are constantly sold by agents claiming you can kill two birds with one stone. Their pitch: “you can have an insurance policy that is also an investment portfolio.” Again, the same question asked in section one exists here: which will take priority – the insurance component being sold by an insurance company, or the investment piece being proffered by the insurance company? We prefer to view insurance for what we believe was its original intent: to provide risk management and not to be used as an investment vehicle. The investment component of these policies is typically costly to the buyer and offers relatively few investment options. These investment options are typically passive in nature, and surprisingly, even though found in an insurance policy, likely do not focus on risk management on the investment side to the degree we feel it should. If you want an insurance policy, get an insurance policy to protect the risk that you’re trying to mitigate. If you want to invest, hire a professional that will operate within an investment framework that is designed to focus on sound investing on your behalf. Beware not to confuse the two.

3) Selecting a target-based fund allocation for your employer-sponsored retirement plan:

This craze has become popular in recent years. You probably have seen these options in your 401(k) or 403(b) plans, and your plan most likely has it as your default option. Why? Why is this question often missed and not asked? Why and when did we decide to shy away from asking “why?” It’s easier for a client to select this option. Yep, it’s easier for the 401(k) providers too. These allocations are structured to have your account balanced automatically over time to adjust to your ever-increasing age and your ever-closer retirement date. In theory that may sound like a good option; however, what about the consideration of other factors such as household spending, saving habits, income, family assets, or goals? That is a lot of important data impacting your current and future quality of life not even thought of for the sake of convenience. Now, yes, if you don’t plan to have your advisor assist you or you re-balance the account yourself, this could be attractive. We would urge you to try to rebalance instead of becoming reliant on a static computerized model, which leads us to our next subject.

4) Selecting your financial professional because you only have to provide “a few simple answers”:

This one drives us crazy at LBW. More and more we keep hearing firms offering to invest your assets by simply answering, for example, “seven questions.” If someone wants to say they know you and your family after seven broad answers, and feel they are now qualified to manage your life savings – run, and run fast. If it’s a computer taking on this impossible endeavor, run farther and faster. We see this approach more and more in the employer-sponsored plan and financial advisor space. Do you want to be conservative, balanced, or aggressive? I’m sure most of you have heard that before. What does it mean to be aggressive or conservative? If you are not sure, don’t feel bad, we are not sure either. To take it a step further, our viewpoint on being aggressive is perhaps different than yours. Who is correct in their definition of aggressive? It would be logical to think that being “conservative” means being safe, or safer than “aggressive”, relatively speaking. Most “conservative” allocations will likely be heavily positioned in long-term government and corporate bonds. We at LBW, can, will, and have made a strong argument that those type of holdings are possibly less safe than finding yourself completely in equities (like you will find in most “aggressive” allocations). Of course, depending on the equities and bonds selected, how can we accurately place people into generic boxes and classify them according to their comfortability, desires, personal attributes, and goals? By providing only a few answers to a few questions, you can’t. We can understand why a person would want it to be this easy. Simply put, it is just not the case. We are all unique, and need a custom approach applied by a qualified person who is able and willing to actually know their client.

In conclusion, convenience is a factor to be addressed. We all live busy lives. Keep sight of what we are talking about with all these scenarios. We are talking about planning the means to a quality of life for you and your family that you want. These topics should warrant time and much attention. Financial success or independence, however you want to define it, is intended to be a marathon. Please don’t rush it or cut corners – anything worthwhile always takes time and effort.



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