Oops: Advisers reveal their biggest mistakes

August 17, 2016 3:31 PM

Everyone makes mistakes — even the most experienced advisers.
When there are so many factors involved in offering clients sound advice, occasionally something may go awry. Here, we asked planners to tell us about some of the big mistakes they’ve made and how they remedied them, along with any lessons they’ve learned along the way. Click through to read their stories.

Oops. Advisers admit their biggest blunders

Robin Jerstad

Ben Gurwitz

Financial Life Advisors
San Antonio, Texas

Gurwitz says one of the biggest mistakes his firm has made involved a client with Parkinson’s disease and his wife.

“It was obvious he was not going to live to our typical, plan-projected age of 100, but we never really simulated what his early passing would do to their tax situation. The widow’s effective tax rate went up after her husband died,” says Gurwitz.

“We could have accelerated income while they were still in the 15% tax bracket, before she moved into the 25% bracket.”

Since then, “we have incorporated simulating taxes for a single surviving spouse in all of our plans with couples,” Gurwitz says.

Wes Shannon, rws@sjkfinancialplanning.com

Jason Nuttle

Robert Wesley Shannon

SJK Financial Planning
Hurst, Texas

Don’t assume that clients realize they’re spending too much, Shannon says.

“I had a retired executive from a Fortune 500 company who had agreed to withdraw a regular amount from his retirement account. During the first three years, he regularly called me and withdrew additional amounts over and above what we had planned,” he says. “I assumed he knew that he was taking too much out. After three years, he said that he was unhappy with my performance. When I showed him how much he had withdrawn, he was surprised. I kept the client, but learned that I cannot assume that clients are paying attention to their accounts.”

James Guarino

Tax Partner
MFA
Tewksbury, Mass.

Guarino learned the hard way that some clients just don’t listen.

“I had a very successful, do-it-yourself couple who pretended that they wanted outside input on their financial situation, and it took me a couple of years to realize that they weren’t a good fit,” says Guarino. “They just didn’t hear anything I said that was contrary to their way of thinking. Eventually, we suggested that they really needed to consider the advice we were giving them — maybe they weren’t spending their money well in working with us.”

David Demming

President
Demming Financial
Aurora, Ohio

Demming learned early that, when it comes to picking client investments, return isn’t the only thing that counts.

“Thirty-eight years ago, we did what our mentors did and picked the best of the worst illiquid products, such as annuities, non-traded REITS and limited partnerships, and got clients into them,” he says.

Unfortunately, Demming continues, “the typical client doesn’t have enough liquidity for those. I’ve never had people yell at me because they had too much money that was liquid, but I’ve had a lot of people yell at me because they didn’t have enough liquidity.”

The experience “taught us to put a premium on liquidity, fees, and skepticism,” he says.

Matthew Cosgriff

Bergan KDV Wealth Management
Minneapolis, Minn.

It was a mistake to assume his services were one-size-fits-all, says Cosgriff, who specializes in millennial professionals.

“Focusing in a niche allows us to streamline the service line to best suit that clientele, in addition becoming more of an expert on the issues relevant to that niche. It also helps to narrow marketing so that we can market more precisely to fewer people.”

Amy Jo Lauber

President
Lauber Financial Planning
West Seneca, N.Y.

Outside investments can tie knots in a financial plan, Lauber says.

“I had a client make an investment change without me knowing about it for several months. I quarterback her financial life, but I don’t directly manage her money. This investment isn’t the end of the world. It just makes her a little too heavy in U.S. large caps,” says Lauber. “Brexit and the election mean a volatile market, and she will feel that more than she would have. From now on, my written recommendations will say that all investment decisions should be run by me first to determine if they're suitable in light of clients’ overall financial plans.”

Tammy Wener

Principal
RW Financial Planning
Lincolnshire, Ill.

Wener made errors in her own real estate investment in rental property. “We didn’t realize what the eviction process involves, that it can last five to six months and you still have to pay the mortgage while you don’t have any rent coming in,” she says.

Fortunately, Wener and her husband had savings, and they still have the property.

“I advocate separate emergency fund for rentals,” she says. “I don’t think I’ve changed any clients’ minds about buying investment real estate, but I know I’ve persuaded clients to think about it differently.”

Austin Lewis

Founder
ROOTED Financial Planning
Fort Worth, Texas

At a former job, Lewis learned “what not to do in the stock market,” he says. “A popular industry video [featured] a trader who started her own investment fund trading options. The firm traded out-of-the-money calls and puts using probability analysis, which generated income for the fund.”

Lewis thought the strategy made sense, though he didn’t use it to trade. (what does ‘bought into’ strategy mean? He applied some elements to his planning, but didn’t use it to trade? Or he thought it made sense, though he didn’t use it to trade?)

“It was so logical. Now the SEC has a large lawsuit against that trader,” he says. “She was creating false returns for her funds and may have to pay settlements, as well as paying fines and maybe doing jail time.”

The lesson?

“Do your own due diligence on new strategies,” Lewis says.