Finding a Real Cowboy: How to Protect Your Money from Wall Street and Financial Planner Wannabes

By James Pasztor

In the Wild West atmosphere of financial services, it can seem impossible to separate the good guys from the bad. Not many laws protect average citizens, and the rules that do exist are not always followed or enforced. Still, some classic cowboys who work hard and refuse to quit until the job is done remain. It is possible to work with financial planners who can help you achieve goals that will make life better for you and your family.

First, it is important to understand some ground rules. Setting measurable goals, re-evaluating your plan on a regular basis and taking charge of your life are prerequisites to beginning your search for the right financial planner. Youll also need to ask key questions to weed out the salespeople from the true advisers who can help you achieve measurable objectives.

In Finding a Real Cowboy, youll be equipped with everything you need to plot a path to protect your money from Wall Street and keep it growing and working for you.

• Language: English
• Publisher: iUniverse
• Release date: Sep 17, 2010
• ISBN: 9781450246460

James Pasztor

James Pasztor, a certified financial planner, is an associate professor of financial planning and investments with the College for Financial Planning, and a fee-only financial adviser. He lives in Aurora, Colorado, with his family and three rescue dogs—Zoe, Jake, and Ace.

Book preview

Contents

Foreword

Acknowledgments

INTRODUCTION

CHAPTER ONE

CHAPTER TWO

CHAPTER THREE

CHAPTER FOUR

CHAPTER FIVE

CHAPTER SIX

CHAPTER SEVEN

CHAPTER EIGHT

CHAPTER NINE

Resources

Appendix A:

Financial Planner Search Matrix

Appendix B:

Certifications and Charters

Appendix C: Designations

Appendix D: Verification

Foreword

If queen, I would require my people to read a few specific books with the intent to enhance the country’s financial security and prosperity. I will not give you my entire list—heck, I’m not really the queen—but two do bear mentioning: Enough by John C. Bogle, founder of the Vanguard Group, and the one in your hand.

Too many in the financial services industry have lost touch with reality and forgotten that it’s not their money to do with as they desire. Their gunslinger ethics have destroyed many financial lives and ultimately devastated the economy. That’s why author, associate professor, and certified financial planning professional Jim Pasztor, in How to Find a Real Cowboy, likens the industry to the Wild West: it’s hard to determine the good guys from the bad, there are few laws to protect the average citizen, and the rules that exist are not always followed or enforced.

Pasztor understands, as do I, that with all the greed and deception, it is no wonder many feel reluctant to work with a financial adviser or planner. However, we all face extremely important financial decisions and opportunities throughout our lifetimes, much of which can be complex or daunting even for the well-educated lay person.

So, how do we resolve this conundrum? We become educated about how to go about finding one of the good guys—a financial advisor who is willing to work for our benefit rather than for theirs.

I’ve assisted journalists from the Wall Street Journal, USA Today, the New York Times, Money magazine, and many other publications regarding articles about finding, selecting, and hiring financial advisers and planners, and I can honestly say that Pasztor has assembled an excellent guide explaining, in plain yet entertaining language, what you need to know about these important issues. He helps you to think about both the financial questions you have and those you don’t know how to ask. And he brings to light what’s really going on in the financial services industry in a no-holds-barred overview of all of the most critical considerations involved in selecting and hiring financial planners and advisers.

Armed with the knowledge gained by reading this short book you will earn your place as a savvy prospective consumer of financial advisory services, and that’s exactly how it should be! After all, financial planning is all about channeling your resources to accomplish what you want most out of life—so your financial planner must be someone who is willing and able to help you do this.

If you are under the impression that the financial services industry needs to revisit the true Golden Rule (and not the He who has the Gold … adage, but the original one: Treat others as you wish to be treated), then I encourage you to read this book cover to cover. Your financial well-being may depend upon it.

Sheryl Garrett CFP®

Founder, Garrett Planning Network

Acknowledgments

The journey of writing this book started well over a year ago, and would not have become what it is without the help of two individuals: my wife Patrice and my brother David. Patrice patiently read through draft after draft, providing much-needed and appreciated guidance. She was an invaluable sounding board throughout the entire process and helped to keep me on track. I would not have completed this project without her.

My brother David, a longtime newspaper reporter and editor, is the real writer in the family. The finished book took shape because of him, and is a credit to his much-appreciated feedback and editing skills. Little did I know how much help I needed!

iUniverse provided help and guidance regarding the publishing process, for which I am also grateful, and would like to extend a special thank-you to Kristin DeMint and Lynn Everett.

In addition, I have learned so much over the years from financial planners and advisers who have done an excellent job of serving their clients. Organizations such as the National Association of Personal Financial Advisers (NAPFA) and the Garrett Planning Network are setting the standard for how clients should be treated, and the level of expertise they should receive. The Financial Planning Association (FPA) has been a unifying and important voice for such financial planners and their clients.

I would like to thank my colleagues at the College for Financial Planning, for all that they have taught me, and for their enthusiastic accessibility whenever I had questions. Among them, I would especially like to thank Professor Don Johnson and Jan Payne, MBA, for their feedback and suggestions.

I have been honored to teach many fine students in the financial field over the years, and I appreciate all that they have taught and shared with me as well.

Finally, I would like to thank my clients, whom it has been a privilege to serve and work for. I look forward to many more years of collaboration.

INTRODUCTION

Why Are We Doing Business This Way?

We can be naïve sometimes. We can believe, for example, that because a certain way of doing things has been around for awhile, it must be the best way. In fact, however, sometimes our way of life has dire consequences, and yet we continue down the same path. We behave as if there is nothing we can do, even though the answer is right under our noses.

Let’s look at an extreme example of this phenomenon: Ignaz Semmelweis was a Hungarian physician who lived from 1818 to 1865. While working in a Vienna hospital, he became alarmed by how many mothers died shortly after childbirth. The mortality rate was as high as 25 to 30 percent. The problem was believed to be puerperal fever—then a catchall diagnosis for fatal infections that arose immediately after childbirth—and there were various theories about its cause. The medical establishment accepted these deaths as unpreventable—just an unfortunate cost of doing business.

Semmelweis, however, was not content with this explanation and set out to learn more. In so doing, he noticed the death rates varied dramatically even within his own hospital. The rate was 13 percent in a clinic that was part of the teaching hospital for medical students, for example, but only 2 percent in another clinic used to train midwives.

Then, the death of a friend and colleague set Semmelweis on the path to a solution. The friend, a professor of forensic medicine, did not die from puerperal fever, however. Rather, he died from an infection after accidentally puncturing his finger with a knife while conducting an autopsy. The autopsy of the friend, in turn, revealed pathology similar to that in women who had died from puerperal fever. Noting this connection, in 1847, Semmelweis concluded that medical students were carrying infectious particles from the autopsy room to the patients they were examining in labor.

Thereafter, he required medical staff to wash their hands with a solution of chlorinated lime before examining patients. Many resisted, but Semmelweis persevered. Within just one month, the mortality rate in the teaching clinic dropped from 13 percent to about 2 percent. The next