| When choosing a financial advisor, it is very important | | | | thought into it. |
| to understand that financial advisors represent | | | | Understanding this puts you more in control of the |
| financial institutions. These institutions are the | | | | situation when choosing a financial advisor and when |
| insurance companies, banks, mutual fund companies, | | | | working with financial institutions. You do not have to |
| stock brokerages, mortgage companies, etc. They | | | | blindly do what they tell you. You can use this |
| are simply the companies that provide the product | | | | convenience to your advantage when you |
| your financial advisor will be using in building your | | | | understand its underlying philosophy and purpose. |
| financial plan. Since financial advisors are heavily | | | | 3. Keep Your Money As Long As Possible |
| influenced by these institutions it is important to | | | | Think like the bank president again for a moment. |
| know the 4 basic rules by which they all operate. | | | | Once clients have put their money in your bank, |
| This information will help dramatically when you are | | | | when do you want them to take it out? Never, if |
| choosing a financial advisor. | | | | possible, correct? The longer you, the bank, keep |
| The 4 rules are: | | | | their money the more opportunity you have to make |
| 1. Get Your Money | | | | a profit with it. |
| 2. Get It Often | | | | This is the reason all of your qualified plans (like the |
| 3. Keep It As Long As Possible | | | | 401k and IRAs, as well as many Annuities, and |
| 4. Give Back As Little As Possible | | | | Variable Life Insurance policies) have long withdrawal |
| At first glance this list may seem offensive, like you | | | | penalty periods. The qualified plans, with very few |
| are under attack by these institutions. In reality, they | | | | exceptions, cannot be touched without penalty until |
| are simply running a business and trying to make a | | | | age 59 and a half. It is not uncommon to have 15 |
| profit, and if you were in their shoes, you would | | | | year withdrawal penalty periods in the Variable Life |
| follow the exact same list. So let's look at each of | | | | Insurance and Annuity contracts. |
| these a little more closely and discuss how you can | | | | These long withdrawal penalty periods are in place |
| use this knowledge when choosing a financial advisor. | | | | simply so the financial institution can use your money |
| 1. Get Your Money | | | | longer. |
| Imagine you opened a bank today. What is the first | | | | Be aware of this rule when choosing a financial |
| thing you would need to do to get your bank up and | | | | advisor. Make sure you know the exit provisions of |
| running? You would need deposits, right? And how | | | | any financial product you are discussing. |
| do you get those deposits? By offering your | | | | 4. Give Back As Little As Possible |
| prospective clients something they want in return for | | | | Think like the bank president again for a moment. |
| their money. | | | | When it comes time to actually return the money to |
| All financial institutions rely on getting clients to place | | | | your depositors, how much do you want to give |
| their money with the institution. All of their advertising | | | | back to them? As little as possible, right? What would |
| and sales are based on attracting people's money. | | | | you do to discourage them from withdrawing that |
| The financial advisor is part of the sales arm of the | | | | money in one lump sum, or better yet, to leave the |
| institution and his primary role is to get money for | | | | money in your bank even longer? Create rules for |
| the institution. | | | | withdrawal? Tax it? Penalize it? |
| This is not a bad thing. Done properly, every party in | | | | The way many of these plans are taxed is designed |
| the transaction wins. The institution gets your money | | | | to keep the money inside the plan for as long as |
| to work and profit with, you get a higher interest | | | | possible, thus allowing the financial institution to keep |
| rate or higher possibility of gain than you had | | | | using that money indefinitely. |
| previously, and the financial advisor makes a | | | | Financial Institutions want to keep your money as |
| commission for finding a new client. | | | | long as possible. Recently there has been a surge of |
| Just be aware of that dynamic when choosing a | | | | new ideas and products about passing the money |
| financial advisor. The advisor represents the financial | | | | inside qualified plans on to succeeding generations to |
| institution and will get paid by them for bringing you in | | | | avoid paying the taxes on the money. Essentially, you |
| as a client, but he also must be truly acting in your | | | | leave the money locked inside the plan forever. |
| best interests and do what is right for you. A good | | | | Great idea, but for whom? |
| financial advisor understands that by doing what is | | | | There you have it, the 4 Rules of Financial |
| truly right for you, he also is doing what is in his own | | | | Institutions. All financial institutions, and thus the |
| and the financial institutions best interest. | | | | financial advisors who represent them, operate on |
| 2. Get It Often | | | | these rules. They are not necessarily bad rules. When |
| Imagine again that you are the bank president. How | | | | you were thinking as the bank president in each of |
| often do you want people to deposit their money | | | | the examples, you too would have acted in the same |
| into your bank? As often as possible, and on a very | | | | manner and followed the same rules. |
| regular basis, right? How do you accomplish this? | | | | Choosing a financial advisor is no small matter. |
| What if you could create a way where people | | | | Interacting with the financial institutions behind the |
| automatically deposited their money with you every | | | | financial advisor is no small matter either. |
| single month on a regularly scheduled basis? | | | | If you understand the rules of financial institutions |
| That is why direct deposit and automatic billing were | | | | you can use them to your advantage because you |
| created. It is also why the IRS has automatic | | | | know the game they play. You will also choose a |
| withholding for your income taxes. And you thought | | | | financial advisor and products that are in line you're |
| it was simply created as a convenience for you. | | | | your goals and ambitions for life. |
| Yes, these things are convenient, but their true | | | | You must understand and use the 4 Rules of Financial |
| intention is to get your money on a regular basis | | | | Institutions to create a financial model that truly |
| every month without you having to put a lot of | | | | benefits you. |