Take-Aways From a “Free Dinner” Seminar

 

Once again, I decided to go “undercover” and attend a free dinner investment seminar with a friend. The beginning was a bit rough. Both of us are pescatarians (vegetarians who eat fish) and there were three meat entrees to choose from. We brought this to the sponsor’s attention, however, and were offered salmon. The best part of the meal, however, was a decadent chocolate cake.

Here are three “Barbservations” about the program materials and the audience:

 

¨   Fee-Based Planning: According to the materials that were distributed, the program sponsor was a fee-based firm. Fee-based financial planners earn income from both client fees and commissions on financial products they sell (e.g., annuities, insurance, and mutual funds). This compensation model may create potential conflicts of interest, as planners may be incentivized to recommend products that generate commissions in addition to providing advice for a fee.

 

¨   Confusing Terminology: Some of the participants seemed to confuse fee-based with fee-only. A fee-only financial planner is compensated solely by client fees: an hourly rate, a flat-rate, or a percentage of assets under management (AUM). Fee-only advisors do not receive commissions or incentives from product sales, reducing potential conflicts of interest and ensuring advice is aligned with clients’ best financial interests.

 

¨   No Visible Financial Certifications: Neither presenter had any designations listed on either sales literature or business cards or slides. No CFP® (certified financial planner). No ChFC® (chartered financial consultant). No CRPC® (chartered retirement planning counselor). Nothing. This raised a red flag for me because financial certifications have associated ethics standards and continuing education requirements which those who do not hold them are not subject to. If I were hiring a financial advisor, I would want one who has shown a commitment to professional development.

 

That said, there were some useful “nuggets” of information shared at the seminar:

 

¨   Retirement Risks: These were explained in detail and include longevity (outliving assets), inflation, health care costs, cognitive ability decline, physical health decline, death of a spouse, increased taxes following the start of RMDs, unfavorable government policies, unplanned spending shocks (e.g., dental bills and home repairs), and limited earning capacity in later life.

 

¨   Long-Term Care (LTC)- This causes the biggest “crack” in older adults’ nest eggs. LTC insurance typically kicks in when people can’t perform two of six activities of daily living or ADLs (e.g., dressing, eating, toileting) for 90 consecutive days. People age 65+ have about a 70% chance of needing some type of LTC at some point in their life.

 

¨   Two Phases of Financial Planning- In the accumulation (saving) phase, the goal is to have enough money to retire and the time horizon to retirement is often known. In the income (decumulation) phase, the goal is to not outlive assets and your life expectancy is unknown.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.