Do I need to find a new financial advisor?

Submitted by massalk t3_yhm7c5 in personalfinance

Ok so my financial advisor has a plan for me. Moderate risk investing, Roth IRA, investing in my company's 401k, and then she wants me to do whole life insurance through Allianz. Now after reading the million posts on here about how awful whole life insurance is, I'm wondering, should I trust her? She came recommended and had good reviews. But I've seen a lot of comments like "find a new financial advisor if they want you to get whole life". Should I find a new advisor?

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tbone-85 t1_iueh9qy wrote

Most likely you don't need to be paying anyone for financial advice

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micha8st t1_iueotu2 wrote

Who is this FA, how do you pay her, and can you give a little more detail as to the plan?

Oh, and why does she recommend Whole Life?

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demosthenesss t1_iueh6cs wrote

It depends on why they want you to do it.

There are however few reasons the average person would benefit from it, so likely the answer is "yes" you should find a new advisor.

It also depends on whether she pushes back if you say "no."

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massalk OP t1_iueiqix wrote

She hasn't been pushy about anything at all thankfully. I told her I want to hold off on whole life for the time being and she said that was fine. What would be a reason that whole life would make sense for the average person? I haven't really invested much in anything (401ks included) and I'm 33. I make really good money travel nursing right now. To my understanding, whole life, along with everything else, was to kind of "catch me up" to have a good retirement.

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fuddykrueger t1_iugyici wrote

One example where whole life would make sense is if you’re relying heavily on your spouse’s pension for retirement and your income would decrease dramatically if your spouse passed away prematurely. If you have enough extra retirement monies saved though by the time you retire, then that would likely negate the need for whole life insurance.

Another example of the average person wanting whole life insurance would be if you have a dependent who is permanently disabled and who would always need to rely on you for caretaking and financial support.

Then there are very rich people who buy it to help their heirs pay estate taxes after they pass away.

Other than that, probably not necessary to buy whole life.

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Zestyclose-Handle-73 t1_iueip8j wrote

You should not trust her. If you know anyone personally who has given her a great review, it's time to stop considering their opinion on financial matters.

Why do you think you need a financial advisor?

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massalk OP t1_iuejlzr wrote

Because I am not financially literate. I make a good amount of money currently as a travel nurse, but have not invested in anything hardly until now and I'm almost 34. I want to retire early and I would really like to be able to have some passive income or a turn key business eventually so I dont have to work full time as a nurse.

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Zestyclose-Handle-73 t1_iuek7le wrote

You are financially literate enough to have found this place.

You are financially literate enough to be doubting the benefits of whole life insurance.

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massalk OP t1_iuekppo wrote

Well to be fair, it's only because I asked my dad about it and he said it wasn't a good idea lol. I would've had no clue otherwise.

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Zestyclose-Handle-73 t1_iuel608 wrote

Sounds like a smart guy.

I know you're worried about starting late, but you're in a great position because you're ready to start. Or, almost ready to start.

Have you read the prime directive?

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Parking_Goal_3301 t1_iuekmok wrote

It sounds like you ARE financially literate. Trust yourself and read things from reputable sources.

The max out IRA + 401K is good advice. I’m a little older than you you and doing a bit more high risk than moderate since I have time and it’s a god time to invest. If you don’t have dependents, I wouldn’t get life insurance or I’d just use whatever is offered through work. 1-2 years salary type of thing

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massalk OP t1_iuelchs wrote

I really think I am though. Whenever I read anything about finances, it doesn't make any sense to me. If it's not something medical, it's like my brain does not compute. I don't even know how I am a fully functioning adult with a good income.

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Appropriate-Safety66 t1_iuemjee wrote

To be fair, many medical professionals, including doctors, are not particularly good at financial matters.

Years ago, I read that doctors are very adept at falling for financial scams plus they are too embarrassed to admit when they have been scammed so they don't report it.

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massalk OP t1_iuen6g3 wrote

Yeah very understanndable. For nursing school, I didn't have to take anything besides basic econ. Everything else was science or social sciences related. I imagine it's similar for doctors. I really wish financial literacy was more of a focus for high school and college.

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Parking_Goal_3301 t1_iuemxsg wrote

Read “The Index Card” by Helaine Olen. She says everything you need to know about personal finances can fit on one 3 x5 index card. It shouldn’t be too complicated for most of us.

Too much complexity trips many people up and doesn’t make them smarter.

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massalk OP t1_iuenvgh wrote

Thanks for the recommendation! I just want financial freedom and I really want to be able to not have to work as a nurse full time. It's a hard job in multiple ways.

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bloodyrude t1_iueleeb wrote

I would find out if she makes any commission off of the whole life insurance

Ask her to explain how whole life is better for you than term life plus investing the difference in a low cost index fund.

If she is not a fee only advisor and a fiduciary, then beware

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massalk OP t1_iuemlvo wrote

I will ask her about the comission. What do you mean if she is not a fee only and a fiduciary?

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manwnomelanin t1_iuflp9a wrote

I wouldnt bother asking tbh. If shes trying to sell it to you, it’s because she gets commission. Ive never met anyone who believes whole life insurance is a good thing besides the people who sell it

(I used to sell it)

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Parking_Goal_3301 t1_iuensw6 wrote

You need to know how she’s getting paid.

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massalk OP t1_iueodma wrote

She is percentage based, not flat fee. And she had me sign a bunch of papers stating that legally, she had to work in my best interest etc. So I am assuming that means she is a fiduciary?

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Parking_Goal_3301 t1_iuepgix wrote

There is absolutely no way I’d be paying someone a percentage for advice like this.

Only flat fee (for example, $600 to create a plan) and a guarantee that they are a fiduciary, meaning they only are working to my benefit not anyone else’s.

A lot of these people get paid twice. By you and then via commission if you buy the product they recommend

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massalk OP t1_iueq0mj wrote

Gotcha. Well, she already invested a good chunk of my money with TD Ameritrade doing like ETFs and stuff. Soooo I wonder if it would be worth it right now stopping my agreement with her and going with someone else. I've already told her not right now for the whole life insurance and she was fine with that.

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Parking_Goal_3301 t1_iueqsw1 wrote

I wouldn’t continue with her. You can buy ETFs very easily on your own.

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massalk OP t1_iueq1tk wrote

Gotcha. Well, she already invested a good chunk of my money with TD Ameritrade doing like ETFs and stuff. Soooo I wonder if it would be worth it right now stopping my agreement with her and going with someone else. I've already told her not right now for the whole life insurance and she was fine with that.

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bloodyrude t1_iuf7384 wrote

If you're not paying her a fee, then how is she getting compensated? If it is commission on insurance or fund purchases, then she may have a conflict of interest.

A fiduciary is someone who must act in your best interest. Not all advisors are.

I have an advisor. I pay him a quarterly fee. He makes no money from my investments and in fact, he just tells me what to do and has no trading access to my accounts. I just provide him account statements each month.

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massalk OP t1_iuf8ei8 wrote

Well, she had me sign papers saying she is legally supposed to act in my best interest. So I guess I could sue her if she didn't. And she gets paid by a percentage. So for one account, it's 2 percent, the other is 1.5 percent.

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tobi437u t1_iuehdiq wrote

If you're not comfortable with your financial advisor's recommendations, it may be worth looking for someone new. Whole life insurance can be a controversial topic, so it's understandable that you would want to get a second opinion. Ultimately, it's up to you to decide whether you want to keep working with your current advisor or switch to someone else.

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trilliumsummer t1_iuewaz4 wrote

Should you trust her?

How does she make her money? That’ll tell you just about everything you need to know.

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Mid_AM t1_iuf0fzi wrote

Depending on your investing/risk style and situation - a policy might make sense. It is an option in the retirement wheelhouse. Have you worked on an actual financial plan that considers your goals, invest/risk style, for lifetime?

Retirement goals can fall apart when we do things that we are not truly on board with. You need to get an understanding of what this does for you and see if that is comfortable.

As for more discussion on this topic Look up info from wade pfau . I have his books but skip any whole life/life ins passages as I am at the end and cannot get them (maybe I can but would be high due to health dings). Here is something in forbes that makes me want to read the beginning of the series. https://www.forbes.com/sites/wadepfau/2021/03/04/adding-whole-life-insurance-cash-value-as-a-volatility-buffer-in-retirement/?sh=1a31a634bc1b Another blog I follow talks about it here - https://www.whitecoatinvestor.com/appropriate-uses-of-permanent-life-insurance/

I would not fire the advisor due to this , I would encourage you to look at what they have provided in service and if they are addressing your invest/risk style. Maybe some more education on this suggestion is needed or perhaps if that product does not sit well with you maybe an alternative that feels better and accomplishes the same goal should be explored.

Good luck!

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Linny911 t1_iuf0uuo wrote

Avoid whole life from anyone but new york life, mass mutual, and maybe northwestern. Even then, avoid unless it's a 10 year pay policy. It acts as a high yield saving account that should provide return of around 5/6% tax free, but probably not if you got it from Allianz or any other stock companies that do not have historical performance of profit sharing.

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Howwouldiknow1492 t1_iug14fb wrote

Yes. Find a new advisor. If you need life insurance because you have children or other dependents, term life is a much better deal. This "advisor" doesn't have your best interests at heart. The list of reasons is long.

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financepro208 t1_iuh1pv6 wrote

Check out Chris Naugle on Youtube... particularly on how to BYOB. Life insurance can be a very positive buffer asset.

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