Szifra Birke, Author at B i r k e C o n s u l t i n g

Important Questions to Ask Your Financial Advisor

March 14, 2017 By Szifra Birke

All above-reproach financial advisors want you to know how they operate. They welcome detailed questions about the ins and outs of the investments they suggest and the expenses you will incur. Despite the awkward feelings, you aren’t being disrespectful by asking.

What are the tricks to get started? The way you ask the question can make a big difference. No need to be confrontational, just be transparent. Ask straightforward, curious questions. Work to create safety for the other person.

“I’d like to be clear about how you’re compensated for the work you do for me.

How much of your compensation comes from my direct payments to you, how much from fees on my investment, and how much is paid to you by the investment product?”

Again, your goal is to create a conversation that allows them to just tell you about their arrangements—no accusations from you, no defensiveness from them. Another neutral question might be:

“I’ve heard that it would be helpful for me to know if my advisor is a fiduciary or not? Can you explain the difference, and are you?” (Fiduciary means your advisor agrees to put your interests ahead of their own.)

They may make it hard for you, “Don’t worry about it. The fee isn’t coming out of your pocket.” This is the wrong answer. You may not write a check or hand over your credit card, but you are indeed paying. A Wall Street Broker laid it out this way. “An investor who paid 2% in fees each year would give up more than $178,000 over 30 years, almost as much money as the $180,000 deposited in the account during that time.” That amount of money is probably worth being a bit uncomfortable over!

If their answer is vague, they change the subject or don’t give you exact amounts, you’ll need to be even more straightforward. Again, keep in mind that a straightforward approach is the one that highest quality professionals prefer you always use, and they will also use it back. Try these questions:

“I always want to know how my finances work, so please explain in detail the way you get compensated.”
“I’m uncomfortable with not knowing the details. Please make them clear for me.”
“How much money will you personally make in cash commission now, if I select this product? And how much will you make later, in any sort of ongoing or trailing commission?”
“Are you earning more from selling me this product than you might if you put me in a similar product from a different company?”
“Is there a bonus you are eligible for that comes as a result of this sale? Is your bonus less likely if you don’t make this sale?”

It may be uncomfortable to ask questions but it’s your right to know. For some people a light tone might be more comfortable, “Where are you going to go if you win the incentive for selling this product?”

Try asking your questions in writing.

Writing your question may be more comfortable. As a bonus, a written answer creates accountability for the advisor and lets them know you’re on top of things. If you don’t get a straightforward answer the first time, ask again until you do. Keep politely asking until you clearly understand.

If you feel uncomfortable and stuck, think about any question you might use to open up the conversation:

How often do you monitor my investments?
Why does this product benefit me?
I don’t understand this portfolio. Please explain it to me.
Please explain why you have me in this alternative allocation?

Still stuck? You can ask your other advisors for help. Request that your attorney and other advisers talk with one another. They should all be willing to keep each other in the loop. If someone isn’t, you can ask the others to help correct that situation immediately. (Many of the best advisors suggest having your team work together all the time—so efforts are coordinated in your behalf.)

It’s easy to let things slide and stay with a professional who may not be working in your best interests.

If you’re working too hard, it may be a clue that your advisor is not the best fit for you. If after a couple of tries you can’t get the information you need, it may make sense to interview another advisor to find someone who is easier to talk to.

Money conversations can be uncomfortable—so we tend to avoid them, approach them with trepidation, or use language that’s pushier than necessary. We can help you help you get more comfortable talking about money and craft conversations that work in your best interest.

We coach key personnel, train teams and work with people of wealth on dealing effectively with the emotions raised by money-related issues. You can get more comfortable so formerly awkward conversations no longer feel awkward.

For more information on fiduciary responsibility:

Watch an interview I did with a fee only advisor, Gavin Morrisey.

You can also check out John Oliver’s Fiduciary and The Retirement Challenge on You Tube. Language is crude at moments so don’t watch with young kids. I wonder if John Oliver can have clear, open conversations with his financial advisors?!

Is Your Financial Advisor Working in Your Best Interest?

January 30, 2017 By Szifra Birke

Not all financial advisors are created equal. Nor are their fees. The issue that you may need to discuss with your advisor is how they receive their fees and how that may affect whether they lean toward serving your best needs or theirs.

Are you aware that many advisors are not required to make the choice that is most financially beneficial to you? Want to know if yours is? Ask whether they are following the fiduciary standard or the suitability standard. Find that tough to ask? There’s that sticky stuff we feel around money.

Let’s start from the beginning.

Many advisors at brokerage firms are paid commissions to sell you products that the firm makes money from.
Some of these advisors are good. Unfortunately, many are just good sales people whose advice is influenced the commissions they get paid.
What makes an advisor money may not be the best choice for you. It may cost you more to buy a product that is no better for you than one that would leave more money in your account (for college, retirement or whatever you are saving for).

You need to ask your advisor which standard they are operating under—fiduciary or suitability. The question might feel to them or you like an accusation because money seems to do that to questions. This is a very important question to get comfortable asking.

The fiduciary standard for Registered Investment Advisors (RIA), or an ERISA appointed Fiduciary, requires that the advisor put your needs ahead of theirs. The fiduciary standard requires that you hear about lower-fee options, if the lower-fee product is of equal quality. Advisors who are fiduciaries must:

Put the client’s best interest first.
Act with prudence; that is, with the skill, diligence and good judgment of a professional.
Not mislead clients; provide full and fair disclosure of all important facts.
Avoid conflicts of interest. And if conflicts are unavoidable, they must fully disclose and fairly manage in the client’s favor.

Broker dealers, insurance salespersons or any other financial company advisors are required to apply a suitability standard.

They must know you and your financial situation.
They must recommend products that are suitable for your situation.
They can sell you products that result in them receiving a higher commission than for a comparable product.

If you’re not comfortable asking about fees and professional standards, you could lose a lot of money. The higher fees you pay may be invisible today, but result in dramatically less compounding over the time you own the stock, bonds, or other investment vehicles. Your discomfort may cause your portfolio to be worth thousands, or tens or hundreds of thousands less than it could be.

The other question you need to be able to ask is whether your advisors is fee only or fee based.

Fee-only advisors (look for RIA or ERISA) don’t sell products, don’t accept commissions and operate as fiduciaries.*

Fee-based advisors can sell you investment products for commission.

Again, discomfort in asking questions can cost you way too much!

More information:

Watch an interview at the end of this article that I did with Gavin Morrisey about fees you may be paying your advisor that benefit him/her more than you—and what you can do.

Gavin is former Senior Vice President, Wealth Management at Commonwealth Financial Network and now managing partner at Financial Strategy Associates, a financial services firm in Needham, MA. He and his firm are independent, fee only advisors who will answer any and all your questions.

Check out John Oliver Fiduciary and The Retirement Challenge on You Tube!
Search the Web: There’s a lot of information how financial advisors get paid. In fact, that search led me to many interesting videos and articles.

Don’t avoid money or fee related conversations. If you want to talk with your advisor but feel uncomfortable, we can help you craft a conversation or email that is respectful and helps protect you.

Whether you’re an attorney, or other service professional thinking about raising fees, a dental office aware of the benefits for patients and your business if your team could talk more comfortably about costs, a parent who wishes he/she could talk with adult children about inheritance plans or family business, an adult child who fears approaching the conversation with parents for fear of seeming greedy, we can help you craft conversations that matter. Let us help you get more comfortable talking about money.

Kind of a P.S.

I know this article was long—and yet here’s more. More reasons to be wary. For those of you who have the bandwidth to keep going:

When I was doing research for this article, I came across these powerful and disturbing information-articles that highlighted kickbacks, contests, incentives for advisors. Here is just one of them. The bold is my emphasis.

From CNBC confessions from financial advisors Friday, 20 Jun 2014

Most investors know their financial advisors take a percentage for managing their portfolios, but they probably didn’t know the mutual fund industry is also giving these advisors commission for pushing specific equity mutual funds, unbeknownst to investors.

I’m not talking about front-end load fees. I’m referring to commissions and bonuses that financial planners get after they put their clients into these funds.

The industry and SEC call these payments “commission” but in reality, they are a “kickback” or “incentive” for financial planners to push specific equity funds, even if they are not in their client’s best interest. This payment structure raises ethical and legality concerns on whose interest is being served: the financial planner or the client.

Even more disconcerting, most investors don’t know this is happening.

I’ve seen how this works following two decades of working on Wall Street for well-known brokerage firms. This payment structure to financial planners is hidden behind a smokescreen that is covered by layers of payments through different sources. First to the brokerage houses, then to the brokers.

This hidden-fee structure was addressed in the Dodd-Frank reforms, which went into effect on January 1, 2014. Under Dodd-Frank, disclosures for “commission” or “kick-back fees” are now required for pension and 401k retirement accounts, but accounts that aren’t regulated by the Employee Retirement Income Security Act were excluded from the new law.

Questions Can Help You Listen Better

October 13, 2016 By Szifra Birke

There are solid strategic reasons to ask questions.
A few examples:

Questions help you shift conversational gears. They confirm that you, and whomever you’re speaking with, share enough information or understanding to move on.
Questions encourage the speaker to stop wandering and focus on what’s important.
Questions can help you get reengaged in a conversation that feels boring. They can help you resist an impulse to start lecturing or acting on an untested assumption.

When you’re ready to shift gears it’s important to be sure all parties feel they’re understood.

One of the reasons so many conversations loop back to feelings or data already covered—a prime reason for boredom and frustration—is a feeling that the other person doesn’t really understand your position. Ask questions to keep the conversation moving forward:

Is there something you’re saying that you’d like to be sure I understand? I’ll tell you what I heard and you can let me know if I’ve got what you’re saying.
Would it be helpful for me to summarize the points I think are important? I don’t want to keep going if we don’t understand each other.
Any part of what I said that you’d like to ask a question about? Or conversely: Can I ask you a couple of specific questions to be certain I understand what you think is important?

Questions can focus the conversation on what’s important.

Conversations have a tendency to wander unless at least one person keeps bringing attention to (talking or asking about) focusing on the important aspects. Questions are a way to help the other person focus:

Is there a specific part of what you said that you’d like to underline for me?
I have a couple of specific questions, is this a good time to ask them?
Is this a good time to summarize what I’ve heard to be sure I’ve got it?

Questions can help you refocus when you’re bored or even when you’re tired of taking the high road and are tempted to just join the other person in pushing your opinion without listening.

Formulating a question encourages you to strategize about how to influence the conversation to get focused, get shorter, or to lean in a direction that is more interesting to you. Questions engage your thinking brain and can help quiet your emotional brain—boredom is an emotional state and impulsive interruptions reflect low emotional regulation.

I’d be interested in how what you’re saying might affect how we relate to current clients?
Is there a way we can make practical use of this data?
What do you think would be the potential timing, if we were to introduce this idea to our teams? I find I’m worried about diminishing our focus on …

The impact of all these questions is based you being truly curious. Questions that are disguised statements—I.e., I think… don’t you agree?—are typically nowhere near as effective in influencing a conversation. Looking for an aspect of the conversation that truly sparks your curiosity may take effort, but can pay big rewards in increased loyalty and creativity of team members, clients who stick with you, and a wider network of people who trust you are someone who listens well.

Questions also let you discover small, important tweaks that can improve you services, products, and client satisfaction. More on this in a future article.

Asking questions can be efficient and respectful. You can move conversations along, while helping your conversation partner feel good about you. Being conversationally efficient, while being respectful isn’t easy, but it is something you can learn. Having difficult conversations can be easier when you know how to ask good questions.

If you’d like to learn how to craft questions and how to ask curious questions more often, why not call or email us? Increasing your positive connection with your team may be just a few question marks away.

How and Why to Bite Your Tongue

September 6, 2016 By Szifra Birke

Don’t interrupt. It’s obvious; we know. Still it’s very difficult. I speak from personal experience—after decades of paying attention to how important it is to wait until the other person is finished, I often cut them off anyway. I find it especially difficult to remember around friends and family.

According to Deborah Tannen, the linguist and author, some of us—me included—have a “high involvement” communication style. We “overlap” the other person’s speech. This can work—if the person you’re talking with has a similar style. And if what they’re talking about is more informational than deeply emotional.

Others have a “high considerateness” style. These people generally seek more clear pauses and want more order to the conversation.

Talking when you should be listening. Teaching when learning would serve you better.

In most cases it would be more respectful and helpful if I listened, instead of talked and learned, instead of tried to teach.

Why do we interrupt?

It can be helpful to identify what causes your interruptions:

•Are you trying to be supportive? To show you understand what the speaker is saying?
•Are you feeling crunched for time? Trying to move the conversation along?
•Are you more interested in sharing what you know rather than learning?
•Are you trying to show your expertise? Prove something?
•Are you worried that you’ll forget what you were going to say, if you wait until the other person is finished speaking?

Some things to try:

1. Notice when you interrupt

When you cut someone off, stop (even mid-sentence) and say something like: “sorry; I really want to hear what you have to say.” (This new habit will take time to develop and some courage.)

2. Enlist family or friends to help

Ask people you trust to respectfully remind you when you’ve cut them off. Ask for a do-over.

3. Create a cue to remind yourself

Sometimes sticky notes can help-in your car, on your bathroom mirror, at your desk at work. Find a word or phrase that you’ll be comfortable with others seeing—maybe “listen” or “pause.”

4. Track your progress

Initially just notice and count the number of times each day that you interrupt someone.
After a week or so, set a realistic goal and acknowledge your progress.
Some people find that self-acknowledgment works even better coupled with a reward.

When we click off or tune out before we’re sure we’ve heard and understand the speaker’s entire message, we cut ourselves off from some potentially useful information or insights. And, interrupting is not only disrespectful to the person being interrupted, but hurts you as the leader or manager. Sure, some of your team may be thick-skinned and more Teflon like. Others, though, will be put off and therefore less productive, loyal, or creative. Call or email us if you want to increase your positive connection with your team or just plain want to improve your listening skills.

Listening Strategy Number 2- Reflective Listening

August 2, 2016 By Szifra Birke

Continuing on our recent theme of listening: here’s another strategy that is easy to implement and can make a big difference. You have probably heard the term “Active Listening”—repeating key pieces of a talker’s message to confirm you are listening and understand. Reflective Listening is similar but adds a dose of curiosity and mindfulness. This higher-quality listening can save time, prevent future misunderstandings or mistakes, and create stronger team loyalty.

So what is reflective listening?

When you’re reflectively listening, you’re seeking to understand a speaker’s thought or idea, then offering their idea back in your own words to confirm you’ve understood correctly. You also try to imagine and reflect back what’s beneath their words—to reflect what the speaker is feeling as well as thinking.

How to reflectively listen:

• After listening, use your own words to repeat key points you think the person was attempting to make.
• Check with them to be certain you’ve heard them correctly.
• If they explain that you don’t quite have it, repeat back your corrected understanding.
• Share your impressions of what seems to feel emotionally important to them.

Examples:

• “I hear that you are concerned about my suggestion that we shut our doors to reduce distractions. It’s clear this is very important to you.”
• “It sounds to me like you are frustrated about my response this past week.”
• “Let me reflect what I heard. You think we could generate revenue by adding a service to our estimate process. You have an idea how this could be simple and not take much time. You haven’t nailed down the details yet, but you’d like my initial thoughts to help guide your next steps.”

“I also hear that you are worried your idea will be rejected because you don’t have the details spelled out.”

Caveat: Too busy?

The time you spend listening and reflecting will avoid wasting time sorting out misunderstandings and missteps after the fact.

It’s this easy:
• Take a breath and pay attention to quickly confirm any main points or ideas.
• Deliberately scan and confirm each key concept.
• Keep your review and reflections short and efficient. Avoid long monologues, open-ended questions, and new topics.

Recall Practice
Initially, you can try recall sessions to practice reflecting. (adapted from a book-in-progress that Jay and I are working on)

If you can’t find time to practice in real-time during your work day, sitting at your desk, or on your drive home, take time to think through a conversation you had during the day. Then reflect out loud what you didn’t feel like you had time to say on the spot.

With a bit of practice, you will be able to reflectively listen without appreciably slowing down conversations—you’ll save misstep-time with a minimal investment in reflecting-time.

• “Let me be sure I understand. You are planning to call the client and set up a meeting to talk about the problem, but you are worried that we don’t really have a good path to correct the issue.”
• “Am I hearing concern that you will be blamed?”

If no examples come to mind, you might ask yourself one of these questions to stimulate reflections:

• What did I slide over that might be worth thinking about or revisiting?
• What did she say that I might not be positive I heard fully?
• What was the emotional tone of the conversation?
• Did I really understand what was important to them?

Your awareness will be enhanced by just considering questions—eventually you will tend to notice those things you have asked yourself questions about.

When you are trying to strengthen a relationship, reflecting deeper messages or emotions can communicate that you respect the speaker and value their ideas. Email or call 978-446-9600 if you want to save time avoiding missteps, create a stronger connection with your team, build a more fun and interesting place to work, learn how to enhance your relationships at work (and as a natural byproduct with family and friends).

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