Follow the Money

Wisdom counts and appearances can be deceiving! For decades the phrase “Follow the money” had been attributed to the character Deep Throat in Bob Woodward and Carl Bernstein’s book All The President’s Men. It had been reported that this phrase was whispered to reporter Bob Woodward by Deep Throat as a path to cut through the lies and deceptions, and to discover the truth about the Watergate scandal.

In 2012, the writers of the screenplay for All The President’s Men, Bob Woodward and William Goldman, admitted this phrase was not in the book and that it was never spoken by Deep Throat. Yet today “Follow the Money “continues to be misattributed to Deep Throat and the book.

The phrase “Financial Planning” also suffers from a deeply rooted cultural misunderstanding. The majority of the consuming public truly believes financial planning is a clearly defined discipline, much the same as law or accountancy.

This is not the case; truly, a financial planner, someone who purports to provide “financial planning services” may be anyone. In recent years the AICPA’s Financial Planning Division, the CFP Board, and NAPFA have made an attempt to inform the consuming public about this universal misconception, and to begin the process of defining who is a financial planner.

I believe that a greater emphasis needs to be placed on how financial planners are compensated. Compensation falls into two broad categories: products and services provided and employment relationship. Both of these categories can have an impact on recommendations provided by the financial planner.

First up, I would like to give homage to my mother who taught me very early in life, “You don’t get something for nothing.” I have a personal distaste for the phrase “free financial planning.” If the planners who offer this service for “free” are truly providing it for free, how are they providing for themselves and their families? Let’s follow the money!

Most financial planners are brokers, agents, registered representatives, and/or asset managers. They render an invaluable service to the consuming public providing access to financial products and services in a regulated environment. This is how they provide for themselves and their families. When a planner sells products or manages assets, they often offer a financial plan for “free” in order to collect assets to manage or sell products. So, a word to the wise: when offered financial planning services for free follow the money by asking your planner how they are paid.

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