Want to know what is important to the big brokerage firms, insurance companies, and banks that you deal with? Here are some of the secrets that I learned from behind the curtain and that your advisor will never tell you…

1. The company I work for only has sales meetings, not investment management meetings.
2. My real job is just to gather money, not actually manage it
3. I am not a fiduciary and am not required by law to act in your best interest (ouch)
4. My title is financial advisor but I have never read a personal finance book and I can’t help you create a budget.
5. The income I receive from the investment often dictates the types of investments I recommend to you. If it puts more money in pocket than it fits your investment style the best! (skim through this 42 page document to see how the advisors at Edward Jones get paid)
6. Some investment products have hidden fees… actually most of them do.
7. I call you at the end of the month with a great new idea in order to meet my sales quota (aka production) so that I can keep my job/get a bonus.
8. My company provides daily advisor rankings to show who brought in the most new assets/accounts or to show who made the most commissions off of investments. A ranking list to show which advisor has performed the best for their clients does not exist.
9. I sold you a structured product, closed-end fund, mutual fund, an annuity…because the commissions are HUGE and HIDDEN so you don’t know how much you paid.
10. When I ask a question to my superiors about an investment, I am told not to worry about it, just go find more accounts and New York will handle the money.
11. In some cases, I get paid a yearly management fee on top of the actual investment managers getting paid their fee. In addition, I get paid commissions and trailers on the sales of annuities, mutual funds, structured investments, UITs, bonds, closed-end funds, etc. Guess how much that affects YOUR return???
12. My firm sometimes offers enhanced commissions/bonuses to me if I will quickly sell the investment they own that they expect to lose value. They win, I win, you lose.
13. Often, I get paid mutual fund 12B-1 fees which are hidden. (seriously, take a minute and go read this article about them)
14. I only got this job because my dad/uncle/cousin is the boss, I come from a family that has money, or I was a good used car salesman. Unfortunately this just continues to destroy the reputation of our industry.
15. The annuity I sold you can cost anywhere from 3-5% per year and you certainly won’t see this on your monthly statement. O yea and I made a commission of over 10% in some cases to sell it to you. (Want to see an example of how crazy this stuff is? Click here or here)
16. The “comprehensive” financial plan I put together for you took my secretary about 15 minutes to complete and all they had to do was plug numbers into some software to get a desired return rate. How I am going to achieve that growth rate is a totally different story since I spend most of my time looking for new clients.
17. I manage several hundred accounts and you are #? on my list…
18. You have to be fully invested at all times and cannot be in cash since I only get paid on the fully invested portion of the portfolio.
19. Looking at my firm’s research and following what they tell to me sell is my investment strategy.
20. The majority of your investments underperform the market, but your statement makes that impossible to figure out.
21. My research is outdated and limited strictly to my company’s analysts.
22. I will never recommend that you invest in gold/art/real estate/etc because I won’t get paid for it. Plus, my company would fire me immediately.
23. Even though I “manage” several hundred accounts, my company wants me to find more.
24. I might switch my current brokerage firm or bank. The new one will most likely not be any better for my clients, but it will give me a substantial upfront bonus. I will most likely repeat that in a few years.
25. 99.9% of the trainings my firm provides (and requires me to attend) are designed to make me a better salesman.

As a boutique wealth management firm, Kovar Capital doesn’t have sales meetings or quotas to make, our only focus is providing your family with the best financial planning experience possible. To schedule an introductory consultation please contact our office at (844) 568-2747 or click here to be taken to our online schedule.

With so many people asking why I don’t recommend or buy mutual funds, I figured it was time to actually put pen to paper and answer this question once and for all so here goes!

1. You don’t know what you own. Mutual funds are made up of dozens or hundreds or even thousands of different securities so how can you really know what your money is actually funding? There are tools that will show you what is in these things but the vast majority of people never look at them. I don’t know about you but when I go to the store, I like to spend my hard earned money on clothes I know I like and that will fit, not something from the mystery grab bag.
2. They are crazy expensive. According to The Motley Fool the average expense ratio for mutual funds is 1.5%. That means that just for the “privilege” of owning that fund, they are going to charge your 1.5% for their services. But Taylor, 1.5% is a small price to pay for expert money managers who are going to outperform the general market for me… WRONG. Over 85% of mutual funds fail to beat the market. Oh and guess what? On top of that 1.5% fee you have the fee you are paying your “advisor” to provide you with good advice. At the end of the day, most people are paying around 3% a year to own a bunch of stuff that isn’t in their best interest.
3. Rich people don’t buy them. For the majority of people, the whole point to invest money is to make more money. Logic would tell us that if we want to make more money, we need to follow the examples of people who have made a lot of money and you know what, those people don’t buy mutual funds. Warren Buffett (one of the greatest investors of all time) is a huge proponent of buying individual stocks and one of my favorite quotes of his is “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” It’s hard to be happy with something when you don’t know what it is.

If you have a 401k/403b plan at work then you don’t have many options to invest in besides mutual funds but if your advisor is recommending you buy them, then you need to find a new advisor. You know why so many advisors recommend mutual funds?

1. They get paid! Anywhere from 1 to 6% every time they sell you one! and that’s on top of their annual fee to you of 1-2%! Talk about a nice pay day!
2. They are lazy. Why should they spend their precious time researching stocks and bonds that actually suit you when they can talk you into buying a huge wide variety of some that may or may not be in your best interest?
3. They just don’t know any better. I know what it is like coming into the financial planning industry through one of the big guys. They train their advisors to provide advice that is going to be in the best interest of their shareholders, not the actual investor. It’s unfortunate that many of these advisors don’t take the time to study how financial planning should be done instead of just learning how to be a salesman.

In the end remember to keep it super simple. If you don’t know what you’re buying, don’t buy it. If you don’t know what you’re paying, don’t pay it. If everyone else jumps off a bridge, you don’t have to. Be smart out there and if you want some more plain English truth about the finance industry, join our mailing list to the right!

Why Should I Care?

1. The Bible tells us to!
   1. Proverbs 10:4, Luke 14:28, 1 Timothy 5:8, Proverbs 3:9, Proverbs 22:
2. People with incomes over $50k have a lower chance of getting divorced compared to individuals making less than $25k
3. Money is consistently one of the top reasons listed for divorce
4. Research has shown that financial intimacy = hotter bedroom intimacy 😉

How Do We Get on Track?

1. Pray for wisdom
   1. Few couples invite God into their financial lives. I think God has some amazing things he can do with our finances if we allow him to enter into the process.  Marriage is always a joint relationship between husband, wife, and God.
   2. Pray that God would allow you to put the marriage above any individual concerns. Ask God to guide you in how he wants the funds earned, used, and distributed.  Request a double portion of humility so you can be prepared to accept God’s guidance.  Plead with God to give you the necessary strength to release control of your money over to Him.
2. Get on the same team
   1. Genesis 2:24  For this reason the man will leave his father and mother and be united to his wife, they will become one flesh
   2. The husband and the wife lose their individual identity and become one.  “I” is dropped from the vocabulary and replaced with “We.” The married couple no longer uses “my”, but “our”.  This includes finances.
   3. Every dollar brought into the home is a dollar that belongs to the home.  Every dollar that goes out the door is a dollar that the household spent.  Erase all notions of individual finances.  Forget about who bought what.  It doesn’t matter who first signed for the loan. From now on we are in this financial situation together.  We have an equal responsibility and an equal opportunity.
   4. Since there is a union between husband and wife it is essential that couples combine bank accounts and all other financial items.
   5. It is difficult, but possible, to function financially with separate bank accounts.  However, what do you seek for in your marriage?  To ‘function’ or to thrive?  I do not believe a marriage can thrive until there is intimacy on all levels.  This involves combining all financial resources.
   6. It doesn’t matter who earns it.Some couples think that the one who earns the money spends the money or dictates how it ought to be spent.  Instead, you should respect your unique contributions to the home.  Our family has made the decision that my wife will stay home and raise our children.  We made a choice, and we each make a contribution to the decisions we made.
3. Set Mutual Goals
   1. Matthew 12:25 Jesus knew their thoughts and said to them, “Every kingdom divided against itself will be ruined, and every city or household divided against itself will not stand.
   2. Goal setting is a form of practical dreaming – and who doesn’t like to dream about what the future could be?  This goal setting is not just about finances, but it is about all things in life.  Where do you want to be?  What do you want to be doing?  What do you want people to say about your life accomplishments?
   3. Goal setting is where a husband and wife look at each other and say, “Where do we want to be in 5 years? In 10 years? In 15 years?”  Husband and wife then look at the financial implications of those goals they have jointly set. If a husband and a wife have separate goals it will be nearly impossible to have financial intimacy in marriage.
   4. You should only need to make some decisions in your marriage once.  Unfortunately, many couples have not put those boundaries in place so when it comes to making financial decisions they are forced to keep re-addressing the same issues.
      1. Here are some examples of guidelines you might have: We will give a least 10% of our income to our local church or other charities.  We will save 15% of every paycheck towards retirement.  We will buy things with cash and will not borrow.  We will always make a car payment to ourselves.  We always put down at least 25% when buying a house
4. Who Does What
   1. Money management takes time, energy, knowledge, and wisdom.  One of the common complaints about the modern family is the burden of so many responsibilities and commitments.  This makes its way into the home as couples are forced to decide who will take care of the different tasks related to personal finances.
   2. Take out a blank piece of paper and list all of the the jobs related to personal finances (balancing the check book, transferring funds, paying bills, researching retirement options, making investment decisions)
   3. Make a copy of that list and have each spouse write one of the following phrases by each tasks: (a) I enjoy that, (b) I’m willing to do that, (c) Kill me now
   4. Compare your lists.  Assign responsibilities first according to the task you each enjoy.  Next, assign responsibilities by rotating every other task in the “willing to do that” list.  Then finally, if both of you would rather be shot than do the same task, consider (a) outsourcing it if possible, (b) splitting the responsibility 50/50, or (c) assigning the task to one partner and the other will assume another household responsibility that the other hates

Parting Thoughts

1. Enjoy money! Research indicates that spending money on new experiences produces longer-lasting satisfaction than spending money on material possessions. Experiences bring us happiness not only when we’re experiencing them, but also whenever we reflect back on them as memories.
2. Each person should have some financial freedom. Decide on an “allowance” that each person receives in cash and is theirs to do with as they please.

Scriptures of Encouragement

1. Proverbs 10:4 A slack hand causes poverty, but the hand of the diligent makes rich.
2. Luke 14:28 For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?
3. 1 Timothy 5:8 But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.
4. Proverbs 3:9 Honor the Lord with your wealth and with the firstfruits of all your produce;
5. Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender.
6. James 1:5 If any of you lacks wisdom, he should ask God, who gives generously to all without finding fault, and it will be given to him.
7. Proverbs 16:3 Commit to the Lord whatever you do, and your plans will succeed.