The Financial Planner Who Missed the Tax Benefits of Donating Appreciated Stock

Ugh, I'm so frustrated. I thought we were doing a good thing for ourselves, but now I think we are trapped. Full backstory: A friend recommended their "financial advisor" to us. We thought, "Great! We've been meaning to meet with someone... we have a kid on the way, and my husband isn't putting away anything toward retirement since starting his new job in August."

So, we set up a phone meeting with this friend from Northwestern Mutual. She gives us a call, and we end up speaking with her for over an hour. She asks us lots of questions—what we are looking for (we tell her we want to set up retirement stuff for my husband and explore maybe putting some of our $17k in savings into CDs or mutual funds). She asks us questions about when we see ourselves retiring, how "aggressive" we are, etc. All good stuff. We hang up and agree to talk again in a week when she will give us a plan.

Cut to a week later, we're having another phone meeting, and she emails me THE PLAN. It's many, many pages, basically explaining what we have vs. what we will need if we want to retire. But she mostly just talks about how we need more life insurance. "Sure," we think. Maybe we do need more life insurance. She explains that my husband needs at least $1 million in life insurance and I need $500k (we both already have $150k policies through work). This is news to us, but we hear her out. She also spends a ton of time explaining how we need to have disability insurance. Again, we think, "Maybe we do." So we spend the greater part of an hour and a half talking about life insurance and long-term disability insurance. She briefly mentions we should be maxing out my Roth IRA and could perhaps start one for my husband.

We hang up with plans to talk again in a week and sign some paperwork. Over the next week, my husband and I really realize that we don't want disability insurance (she quoted us paying like $170/month), and we didn't feel we needed more life insurance at this time (she had us paying $340/month in permanent and $125/month in term). But we were okay maxing out my Roth at $450/month. We also wanted to explore stocks/bonds/CDs/mutual funds more (like we initially told her). So, I sent this all to her in an email before our next meeting. She responded with, "OK, great! Sounds good... talk soon."

Cut to another phone meeting, where she would talk with us about our updated PLAN. She emails us the NEW PLAN while we're on the phone. LITERALLY NOTHING IS CHANGED. She proceeds to spend the next hour convincing us why we need life insurance and disability insurance. My husband and I are both pushovers and listen to the whole spiel again. Every time we bring up a reason why we don't feel like we need it, she tells us how wrong we are. I mean, she's the professional, we thought. I still expressed my disinterest in disability insurance but wasn't completely closing the door on life insurance. She kept guilt-tripping me about "what will your kids have if one of you dies!"

By the end of the conversation, I hadn't agreed to anything except to roll over my Roth to Northwestern. She had me give her my bank routing info to get "the paperwork started." She also said she was going to be sending me a bunch of stuff to sign in the next few weeks, but it was just to apply for things... nothing was set in stone. We could just see what the insurance company was going to quote us, and we still weren't committed to anything. "Ugh, fine," I thought. She said a small amount might be taken out of my checking, but it was just to make sure "the charges are able to go through when we start moving more money to my Roth."

So a week or two goes by, and I see a ~$30 charge go through for "disability insurance"—WHICH I TOLD HER I DIDN'T WANT! And I just realized... this doesn't feel good. It doesn't seem right. She's not listening to what we want. She still hasn't addressed our interest in CDs/mutual funds/stocks, which we initially came to her for. I spent the weekend doing my due diligence—spending a few hours on r/personalfinance, NerdWallet, just googling in general about what my husband and I should really be doing. I decided to call the whole thing off with Northwestern.

It's been a nightmare trying to cut off ties with her. I was kind and courteous through the first couple of emails and subsequent texts: "We really appreciate your time but have decided to pull out. Again, thank you." She is being evasive and manipulative, telling us we are completely wrong and still need to work with her. At this point, I have just ignored any further communication. It has just been a really bad experience.

But THE REAL REASON I still feel like I can't completely ignore her is that I asked her several times when I should expect to see a refund for the disability insurance THAT I DID NOT WANT AND DID NOT AGREE TO. She just dances around the question. I'm also worried because I've gotten a "bill" (no charges yet) in the mail for the $340/month in permanent, $125/month in term, and $170 in short-term disability.

Is there anything I can do to make sure I don't get charged for this? If I communicate with her any further, she just tries to talk to us about why we need to invest with her, etc.

WHAT DO WE DO? She is being shady AF.

I was approached by a "financial advisor" who offered free financial advice. This planner was a friend of a friend, so I agreed but told them straight off the bat that I was not looking to hire a financial planner. They said that was fine, and that the advice would certainly be free because I’m a friend of a friend.

This is where I made my first mistake. After a few meetings, this advisor gave me a "financial plan" that included paying for term life insurance AND whole life insurance AND disability insurance (all policies under the company they work for). These would come out to $4,700/year when my salary is only in the $80-90k range. Not to even mention that I am 22 years old with no dependents and have no need for life insurance. This "financial plan" also didn’t include rent, mortgage payments, car payments, or anything else I might need to pay in the future.

I can understand being advised to get disability insurance, but this financial advisor knew that I had not even signed up for my company’s disability insurance and so would not be able to make an informed decision on it. I told this person "no," but they tried to convince me I was making a bad choice. They told me that whole life insurance was a good investment, even better than investing in some index fund, and generally made it sound like this would be the worst financial decision of my life.

I asked my friend about this, and it turns out his mother also sells life insurance. The difference is that she’s ethical and only sells whole life insurance to people who actually need it (i.e., not people in their early 20s who have no health issues and no dependents). I found out that whole life insurance is not an investment, and if it is, then it’s a pretty lousy one. I found out that I probably don’t need two different life insurance policies at the age of 22 with no dependents.

My point is, there are certain people passing themselves off as "financial planners," "financial advisors," or "financial whatever" who tell you that they want to make sure you’re financially secure and would only want to advise you to do things that are in your best interests. These people are snakes, but somehow, they are able to legitimize themselves behind a big company. I’ve heard that a lot of them target younger people and use fear to convince them to buy a bunch of insurance they don’t need.

Just be careful, fellas, and do your own research.

I'm a tax attorney, so I see a lot of other people's finances.

The ones I see that work with a financial advisor are, without exception, paying at least 1% of AUM in fees to be in higher-costs funds that underperform the index funds in the long run. To make matters worse, the financial advisors choose tax-inefficient funds and take their fees in the most tax-inefficient way possible. I have also found that many do not understand the nuances of self employed retirement plans or the backdoor Roth.

In my view, there are a few problems with the industry. First, most financial firms hire salespeople and then teach them finance, instead of hiring people who already know finance. I know a LOT of morons working in Edward Jones shops and the like, who are charming but ultimately don't understand the back end of the products they sell. My ex worked for two of the large regional banks in my area, and she had a degree in communications.

She knew (and knows) nothing about finance, but instead was hired because her family is wealthy and gets referral business from old neighbors and classmates. She couldn't even pass the Series 7, but the banks thought she could work in trust management. I talk to clients and financial advisors all the time who don't understand the difference in tax efficiency between mutual funds and ETFs, or the mechanics and reasons of a 1031 exchange, or what the tax incentives actually look like in various types of accounts, or the merits of a solo 401k vs a SEP IRA.

When you only have a hammer, everything starts to look like a nail. Second, the incentives are rarely aligned in the middle of the market or below. Helping a 24 year old set up and fund their Roth IRA is probably not worth your time on the front end unless you're getting an outsized commissions, which ultimately cost the client more money than needed for someone with a small account.