Financial Second Opinions Can Uncover Hidden Issues

By: Michael J. Searcy

When a law firm was told they needed to pay $40,000 into their cash balance plan to cover a non-highly compensated individual, they decided a financial second opinion might be beneficial. After meeting with an advisor that helped interpret the language they didn’t understand from their actuary, they knew their second opinion request had paid off. They discovered they could classify the employee in a more appropriate way and need only fund about $2,000 to the plan!

Getting a financial second opinion could be one of the most important financial decisions you make this year. Sometimes the findings can solidify the fact that your current advisor is doing a great job, giving you peace of mind about the advisor you have chosen.

Sometimes it can offer alternative options or uncover significant errors in practice or judgment that can leave you thankful you decided to seek a review. Either way, you’re typically going to be better off for having received a second opinion.

A second opinion review could discover hidden fees you didn’t think you were paying. After being told their advisor was only paid a flat fee, one couple felt they might be being misled and reached out to another advisor for a second opinion. Not only did they find their current advisor had breached his fiduciary responsibility by lying about the fees they were paying, they discovered they were paying almost three times more than they originally thought. There were hidden fees in their investment transactions and the advisor was receiving commission for the investment purchases. The review gave them the knowledge to both correct the situation with their advisor, and know the right questions to ask when moving to a new advisor.

Another couple nearing retirement, after seeing several months where the performance of their portfolio dropped drastically, decided to seek an outside opinion. While they didn’t want to offend their current advisor by questioning his judgment, they believed their conservative portfolio should never have reached the amount of loss they were seeing on their performance reports. The outside analysis uncovered their risk level was completely inappropriate for not only their stated feelings on risk, but also their age and goals. Even though they had expressed a desire for their portfolio to be conservatively allocated to spare extreme volatility during a time where their income would be slowing, the actual portfolio makeup was invested aggressively, setting them up for potential volatility and significant loss. They learned that their friendship with their advisor was keeping them from making smart decisions about their financial future and now have a portfolio suited to their needs and lifestyle.

Advisors have different styles, philosophies, and methods they apply to their work. Having different practices does not make one advisor more correct than another. A financial second opinion is not a finger-pointing exercise; it is taking an active approach to making sure your advisor and your money are working for YOU. Have you questioned something related to your finances on which you’d like a second opinion? Would you just like to make sure your advisor is doing the outstanding job you believe he or she is doing? Consider seeking a financial second opinion this year – the benefits could be monumental!

Originally published in Mission Hills Magazine

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on December 12, 2014 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.