Finding a financial planner that has the knowledge and ability to optimize your financial situation and look out for your best interest, on all accounts, and at all times, can be really challenging.
Especially when you've already narrowed down the field and are left comparing two seemingly equally qualified professionals, it may be difficult to tell the difference. Sometimes it's helpful to look at an extreme example to highlight red flags.
For anyone that hasn't been living under a rock for the last 30 years, you've probably seen at least one of the three Back to the Future movies. Let's use Dr. Emmett Brown from the trilogy to illustrate some red flags and why he would have made a terrible financial planner.
He Overcomplicates Concepts And Uses Complex Jargon
In all three movies, Doc Brown seems to overcomplicate concepts, use complex jargon, and at times, talk in a condescending manner to his companion, Marty McFly. As an example, in Back to the Future 1, after the DeLorean initially travels through time, we can hear Doc Brown yelling, "1.21 gigawatts! 1.21 gigawatts!" Marty stands confused, wondering, "what the hell is a gigawatt?"
Later in the first movie, Doc Brown characterizes a high school dance as a "rhythmic ceremonial ritual."
And in Back to the Future 3, Doc scolds Marty for "not thinking fourth dimensionally."
Clients should seek financial planners that simplify, rather than complicate concepts. Most people can probably regurgitate academic concepts from a textbook. However, it takes a financial planner that really understands a concept to be able to simplify it for a client. Seek out a professional that will not only simplify, but educate you along the way.
He Catastrophizes Everything
In Back to the Future 2, there is a scene where Marty's girlfriend, Jennifer, from 1985, is put in a position to potentially bump into her 2015 self. Doc explains to Marty that this could be disastrous. Specifically, he says, "I foresee two possibilities. One, coming face to face with herself 30 years older would put her into shock and she'd simply pass out. Or two, the encounter could create a time paradox, the results of which could cause a chain reaction that would unravel the very fabric of the space time continuum, and destroy the entire universe!"
Can you imagine if your financial planner talked to you like this during the 2008 recession? It probably would have led all of us to panic, make irrational financial decisions, and lose a lot of money. Seek instead to find a financial planner that has the ability to bring calm when there is volatility and can help you plan for good times and bad times so you can stay even keeled.
He Has Questionable Integrity
In Back to the Future 1, we learn that the time machine runs on plutonium. Doc Brown stole the plutonium from a group of Libyan nationalists. "They wanted me to build them a bomb, so I took their plutonium and, in turn, gave them a shoddy bomb casing full of used pinball machine parts," he recounts.
In the real world, you can use BrokerCheck to review the background, experience, and violations of potential financial planners. Those planners or firms that are registered with their states, the SEC, or through their brokerage should appear in this database. Be careful though, as many financial coaches are not registered, so it may be tougher to verify whether they have any past violations.
He Lacks Attention To Detail
In Back to the Future 1, when Doc Brown and Marty are taking the time machine out for the first time, Doc says, "if my calculations are correct, when this baby hits 88 miles per hour, you're gonna see some serious sh*t."
Your hard-earned money deserves proper attention. Look for a planner that will leave no stone unturned, take a comprehensive view of your finances, and knows that one financial decision may affect every other part of your financial life. When getting recommendations or a plan from a planner with a strong attention to detail, you can feel confident that the recommendations you're given are based on thorough research.
His Own Finances Aren't In Order
According to Wikipedia, Doc Brown was initially wealthy because of his inheritance, but ended up spending his entire family fortune on his time travel project.
As I wrote in a previous article, just as you may prefer to work with a personal trainer that is physically fit, you would probably rather entrust your life savings with someone that has proven they can successfully manage their own finances. When searching for a financial planner, don't be afraid to ask them about their own finances. Rather than asking about net worth or salary, focus on their thought process and strategies they would use for someone in your situation.
Bottom Line
While Doc Brown isn't a real financial planner or even a living creature, his character from Back to the Future can help us look out for red flags when shopping for a financial planner.
Look for a financial planner that will simplify concepts and educate you along the way. Seek to find a planner that can help you plan for good times and bad times and keep you calm in volatile markets. Finally, find a planner that you can trust and will use the right processes to help you reach your financial goals.
And remember, "your future is whatever you make it, so make it a good one."