In this episode, an experienced financial planner shares common financial mistakes his clients have made over the years. If you are doing any of these things with your money, you need to stop now!
Martin Bamford achieved Chartered Financial Planner/Certified Financial Planner (CFP) professional status in 2007 and was named a Fellow of the Personal Finance Society in 2014. He is a Chartered Wealth Manager, Accredited Later Life Adviser and Full Member of the Society of Later Life Advisers (SOLLA). Martin is also responsible for investment management research at Informed Choice Financial Planners and he is host of the popular personal finance podcast Informed Choice Radio.
Martin is also the author of several bestselling personal finance books and produced his first feature-length documentary in 2014, about the post-war Baby Boomer generation in retirement.
Time Stamped Show Notes:
[4:24] After studying business and working for insurance companies, Martin joined his parents at their business in 2002, with whom he makes decisions jointly and unlike many, he get to see them everyday.
[6: 21] About 5 years ago, after being a financial planner for a decade, Martin received the case of a couple that were in a difficult position who were looking for help to know what to do with their money.
[6:59] A previous financial planner presented a wonderful plan to the retired couple with no experience in money. It was a plan that had many risks involved for a modest income couple.
[8:50] As a financial planner Martin has to be sure that to engage with a new client, he will be able to add value by listening and trying to understand the situation.
[9:45] The previous advisor encouraged the couple to borrow money using an equity release mortgage to invest it, and on top of he suggested to take the borrowed money and leverage it on a two to one basis. Which added to $750,000 pounds against a 400,000 pound house.
[12:00] Martin tells us about the complicated plan the previous planner had which involved investing the money in a life settlement fund, which is a pool of money that buys an interest in life insurance policies in the US.
[13:21] The investment money generated enough income to pay interest and keep investors happy, for a while. Until around 2010 a regulator issued this warning branded life settlement funds as toxic, so the income stops and the funds are closed and investors couldn’t get their money back.
[16:02] When they realized all their money was gone, denial was their state of mind for two years, because as well as losing their investment they had a big tax bill and no money to pay.
[17:13] The only way Martin could help was to introduce them to a professional attorney solicitor who had experience with that type of schemes.
[20:45] Due to lack of financial education, when a professional comes forward, general people don’t understand fully the risks. Martin tells us a bit about that and that being one of the reasons to start the podcast Informed Choice Radio.
[24:00] Failing Forward Segment
- What is the bottom line reason of this failure to Alan and Doris? – “They trusted someone, they wanted more money and they didn’t have good financial education to understand the risks involved”
- What is the single most important lesson they and you learned from this? – “Educate yourself, understand the risk, understand how you’re likely to lose money and then you’re more likely to hold on to it.”
- What are the major ways you protect yourself from future failures? – “We keep things simple, everybody can achieve their financial goals with simple solutions”
- Who do you turn to when you need help? – “My parents, they are both financial planners and have been doing this for longer than I have.”
- What advice would you give to someone in a similar position? “ – Get a second opinion early, don’t wait until it’s too late. As soon as it starts looking too good to be true, look for a second opinion. None of us are infallible.”
[31:15] You connect with Martin through his Twitter @martinbamford. The podcast Informed Choice Radio started back in 2004.
[33:09] Guest’s final thought: “Be careful out there, the majority of financial planners are good people but it only takes one try to complicate it, make high risks and make money for himself, just take care.”