Customer Expectations of Financial Planners Are Too High?

Some individuals expect their portfolios to earn at least a 15% return, on a yearly basis, because they have hired a financial planner to manage their investments.   Unfortunately, these expectations are far from reasonable, especially when you consider the S&P 500 has only produced a return of about 10%, over the last 25 years.  Nevertheless, some people are determined that their financial planners must produce not only a positive return on a yearly basis, but also beat the performance of the major stock indexes, such as the S&P 500 and the Dow Jones Industrial Average.

Why Financial Planners Are Not Miracle Performers?

Financial planners are not paid to perform miracles.   No one should expect a financial planner to create a financial plan, in which he or she can retire within five years, with at least one million dollars in a brokerage account, if the person has only saved five thousand dollars and has the ability to save an additional five thousand dollars per year.   If this scenario ever comes true, within a five year investment horizon, you must immediately wake up from your dream!  You might have better odds of hitting the Powerball!

Expectations that individuals must have of their financial planner:

• A person who is knowledgeable in the areas of investing, insurance, and financial analysis
• To be patient and understanding   of client’s needs, regardless of the client’s knowledge of the financial planning process
• To create a financial plan that is based solely on your individual goals, in regards to creating an emergency fund, planning for retirement, funding for college, etc.
• To meet annually, unless there is an urgent matter that requires immediate attention (i.e. you receive an inheritance or company stock options)
• A person you can trust with your personal information

A Word to the Unrealistic Investor

In many cases, individuals will fire their financial planner for poor investment performance, but this usually occurs during a down market.   When the stock market is doing well, most people are happy with their brokerage account’s return, except for those investors with unrealistic expectations. These individuals are more likely to fire a financial planner who underperforms the S& P 500, in any given year.  Truly, these people’s expectations of a financial planner are too high.  Unfortunately, many of these unrealistic investors will eventually find themselves without the help of a financial planner who would rather work with clients who have goals that are attainable, even if they are challenging to accomplish.