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No, Really: You Need Your Own Financial Planner

Ten years ago, planner Richard Kagawa couldn't get his wife to discuss their own retirement.

"She would say, 'It's too far away. I don't want to talk about it,'" recalls Kagawa, now 62, of Capital Resources & Insurance in Huntington Beach, Calif. "My response was: I'm in the planning business. How can I not talk to my wife about retirement?"

So Kagawa did what few planners do: He hired his own planner. In fact, he used two: Michael J. Smith, of RTD Financial Advisors in Philadelphia, and Elizabeth Jetton of Directors for Women in McLean, Va. Jetton, in particular, connected with his wife and gently confronted her on her unwillingness to discuss retirement, he says.

At one level, Kagawa's decision makes perfect sense: After all, he constantly tells others about the benefits of working with a planner. Yet Kagawa's acknowledgment of his own money struggles and his decision to hire a peer to advise him make him a rarity among planners.

"Most [planners] don't take the advice they give their clients," Kagawa says.


And failing to do so can carry a heavy cost.

At the most basic level, when planners can't manage their own finances, it undermines their own credibility -- and their clients' confidence.

It also undermines the credibility of the planning profession, some experts believe. Indeed, the CFP Board in 2012 began routinely publishing the names of planners who have declared bankruptcy.

Advocates of the "planner's planner" approach point out that doctors and lawyers routinely hire peers to attend to their medical and legal needs, while mental health counselors are required to undergo extensive counseling before they are licensed to counsel others.

"If you think financial planning is so valuable, why don't you have a planner yourself?" asks Carl Richards, director of investor education at BAM Alliance and a New York Times columnist.


Richards became famous in part by confessing his own financial missteps -- including the loss of his home during the recent financial downturn -- in the pages of the Times.

Now, he says, he uses a planner in part "to be the thing between me and stupid."

Richards' book, Behavior Gap, argues that human beings aren't good at making their own decisions about subjects -- like finances -- in which they are too emotionally involved.

Planners are no exception, he argues.

"To a large degree, I don't think that financial planning is a function of skill," Richards says. "I think it's a function of having an objective third party tell you when you are doing something stupid. I am really good with other people's money because I'm an objective third party. But I don't have an ability to be my own objective third party."


Failing to plan properly can also rob advisors of the kinds of secure futures they help design for others -- and on this front, studies suggest that the majority of planners are falling short.

Take business planning: Some two-thirds of advisors did not have a multi-year business plan in place for their practices, according to Fidelity's recent Advisors Insight Study, and nearly half have no formal business plans at all for their practices.

And then there’s saving for retirement: In a recent survey of 117 mid-career advisors, just 11% said they thought they would be able to retire comfortably. And 48% said they had saved less than half of what they needed to retire, according to CLS Investments, the Omaha-based third-party money manager that conducted the study.

Some may be banking on selling the equity in their firm -- but most small practitioners won't be able to sell for anything close to the $1 million that many believe their firms are worth, says CLS Chief Executive Todd Clarke.

"They are going for a half million or less," Clarke says. Advisors "aren't able to retire based on those numbers."


A small, but vocal minority of planners like Kagawa and Richards are speaking up to say that planners -- if they are serious about their profession and their own futures -- need to get serious about their own planning.

Rick Kahler, of Kahler Financial Group in Rapid City, S.D., won a Financial Frontiers Award from the FPA in 2008 for a research project in which he asked dozens of peers if any had hired planners -- and, if not, why.

Their answers, Kahler found, were similar to those offered by many other do-it-yourself investors: high costs or fear of losing credibility with a spouse or others (particularly clients, in the planners' case). Some hadn't even considered the idea, he notes.

But the No. 1 reason was that planners -- like many other potential clients -- think they can do the job better themselves.

Kahler offers a personal example of what can go wrong with that attitude.


Five years ago, after he set up an irrevocable life insurance trust for his wife, Kahler says he failed to notice that his insurance agent mistakenly listed his wife (and not the trust) as the beneficiary of his $1 million personal life insurance policy. That meant that, upon his death, estate taxes would have eaten up $400,000 of that $1 million benefit.

"It would have totally negated all the expense of setting up the trust," says Kahler, "and negated the entire strategy," which also was intended to shield that sum inside the trust against the threat of creditors and legal judgments.

Luckily, Kahler's planner -- Cicily Maton of Aequus Wealth Management Resources in Chicago -- spotted the error.

"I catch this stuff for people all the time," Kahler says. "I felt embarrassed that I had let something so significant slip on my own plan."
Some planners also say that retaining an advisor can improve their own planning skills.

"I wanted to see what it would be like to be a client," says Amy Jo Lauber, a planner in West Seneca, N.Y., of her decision to hire Jeffrey Goldfarb, a Raymond James planner in Buffalo, N.Y. "It was good to be a client, good to sit on that side of the table."


Mutual admiration prompted two Ohio planners to begin bartering planning services three years ago.

But when Kevin Kroskey, of True Wealth Design in Akron, told his wife that he wanted to work with Don Tharp, of Hudson Financial Advisors in Streetsboro, "My wife took a very long look at me and said, 'I thought that's what you do,'" Kroskey recalls.

"Then she said, 'How long is this meeting going to be?'" But by the time the meeting was over, Kroskey says, his wife was converted.

Indeed, both advisors say they were able to do planning with the other's spouse that they couldn’t do with their own. "My wife has a completely different appreciation for and understanding of our financial situation and our plan because of Kevin's work with us," Tharp says. "Both Kevin and I spent 80% to 90% of our time talking to [each other's] spouse."

The relationship may have a side benefit as well: Tharp is now eyeing a succession arrangement with Kroskey.

Kahler, however, urges planners to actually pay each other full rates for each other's services. "When you swap, there's a tendency not to follow the full process," Kahler says. "There's a tendency to do more financial coaching rather than financial planning."


Advisors who have signed on with their own planners list several concrete decisions they say have affected their lives for the better.

Kroskey, for instance, says Tharp talked him out of a career move that would have taken time away from his first child and young baby.

And Tharp says he planned to put $100,000 in a non-traded REIT until he discussed the move with Kroskey -- and realized that doing so would violate one of his own core investment philosophies.
Lauber, meanwhile, credits Goldfarb with helping her take the scary step of raising the fees she charges clients. Asked what the impact would be if she'd gone it alone, Lauber says, "I don't want to think about that."

And Kagawa says that, after a decade of planning, he and wife now enjoy a shared confidence about their retirement. They are considering buying a mountain home in Mammoth Lakes, Calif., and plan to go fly-fishing together. He also wants to volunteer as a game warden -- a dream he hatched in college, when he was studying to be a field zoologist.

“I could be a ski instructor at Mammoth,” he adds. “I could do so many fun things.”

But only, he says, because he figured out that he couldn’t be his own planner.

“I don’t think we’ve become a profession yet ... people haven’t looked in the mirror,” he says.“You can’t get there by trying to do everything yourself.”

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