December 29, 2011

A Good Financial Advisor Will Tell You…
Everything You Need to Know about Retirement, Generating Lifetime Income, and Planning Your Legacy
Robert Luna, CIMA® and Jeremy Kisner, CFP®
Aviva Publishing (2012)
ISBN: 9781935586494

New Personal Finance Book Asks the Right Questions and Answers Them

I’ve read several books about investing, and while I’ve gleaned some small wisdom from them, certain of my questions were never answered. But in “A Good Financial Advisor Will Tell You…” authors Robert Luna and Jeremy Kisner ask many of the same questions and then provide clear and insightful answers. One thing I didn’t expect to find in this book was that some of the answers I already thought I knew were not necessarily true, or not as simple as I had thought, such as the Rule of 100. The authors explain why these simple answers do not work in convincing detail.

Both Kisner and Luna have years of experience between them, from working on Wall Street to operating their own investment firms before they merged their businesses to form a partnership and co-author this book. They have worked with numerous clients and focus especially on helping “middle-class millionaires” who find themselves with portfolios ranging from half a million to ten million dollars. Many of these people, who were very successful at accumulating assets in the first half of their lives, are not prepared to manage those assets in retirement. They frequently make the same mistakes, which are predictable and avoidable. Beyond “what not to do,” Kisner and Luna offer practical advice about the problems with investing only for safety, trying to live off the interest and not touch principal, and where investors go wrong when trying to play and beat the market.

In this book’s pages is everything the person preparing for retirement needs to know to make the most of retirement, including at what age to claim Social Security benefits, how to estimate your life expectancy, how much money you’ll need to retire, how to plan your investments to keep pace with inflation, the seven steps to a lower-risk portfolio, why insurance can be a valuable part of your retirement portfolio, and perhaps most importantly, how to interview and find a good financial advisor, as well as when to fire him.

While I found all of “What a Good Financial Advisor Will Tell You…” to be interesting, insightful, and even entertaining because of the many stories told to illustrate the main points, what fascinated me most was the section on “The Psychology of Investing.” Learning about the psychology behind financial decisions made me realize that despite being an educated person who has always been careful about his money, I am still prone to making irrational and emotional decisions. I feel I have a better idea now of what questions to ask my financial advisor and also to ask myself when making investment decisions. Here is one short passage about the psychology of investing that I especially found illuminating:

Perhaps the most common mental shortcut we see is called Recency Bias. In short, you may feel that recent past performance (good or bad) will continue. The human mind is wired to see the world linearly. We seek out patterns even when none exist. We convince ourselves that whatever is the most recent pattern will continue indefinitely—even in the face of overwhelming evidence that it won’t. The result is an ongoing cycle of booms and busts.

The media tends to feed our recency bias by focusing on recent performance and spotlighting the biggest winners and losers of the day, week, month, or year. You always have to keep in mind that the media is in the business of selling advertising, not making you a better investor.

What I also appreciate about the book is that the authors use simple language—I never felt they talked over my head, and whenever they used technical terms, they adequately explained them. That said, this book is far more than a simple starter for investors. Certainly, people beginning to invest will benefit from it, but so will people who have been investing for years. A Good Financial Advisor Will Tell You contains that extra dose of advice and knowledge that separate it from other personal finance books.

For more information about A Good Financial Advisor Will Tell You… and authors Robert Luna and Jeremy Kisner, visit them at www.agoodfinancialadvisor.com.

— Tyler R. Tichelaar, Ph.D., and author of the award-winning “Narrow Lives”