Welcome to Financial Advisor IQ

Measure Twice, Cut Once

August 3, 2018

This time we hear from Bill Stoddart, founder and president of NorthFork Financial in Bozeman, Mont. He recalls an experience that taught him to confirm the accuracy of automated reports before presenting to a client — especially when using a new software program.

I had a client who was in her sixties and thinking about retiring. She had a few annuities in addition to a pension, and we decided to meet to see where she was in relation to her goals. To create her reports, I used the same program I rely on for most of my client reports. However, since she had annuities, I saw it as an opportunity to try out the program’s specific annuity feature, which was new to me.

Previously, I had tended to input annuities as cash values when I manually ran reports since the standard features of the program did a great job of recognizing lump sums, inflation rates, rates of return and cash flows. I figured that the annuity feature would make the calculations easier and quicker, but after I input her annuity information, the results were different than what I came up with through my initial manual calculations. I reworked the numbers several times and got them to match; however, I was unaware that the changes I had made in the annuity section had impacted other sections of the report. Thinking I had solved the issue — and frankly running a bit behind for the client meeting — I did not check the rest of the report.

As I went through the report with her, I saw some things that gave me pause. I began to wonder if this was the last report, or an earlier version. The report I was presenting showed that the client was far from reaching her retirement income goals — and she was devastated, as she had been a meticulous saver. As soon as I realized the news I was delivering was inaccurate, I pulled the plug on the meeting and said we needed to stop where we were because something wasn’t right.

I tried to explain that the report was inaccurate due to the new program I used, but my words were not helping. She was already tearing up and her husband was furious; I realized in that moment the pain I had created by presenting misinformation that was essential to this person’s well-being.

Part of it was a rookie mistake, as this was a few months after I had started my own firm. I was a sole practitioner wearing a lot of hats and trusting software programs to help me with my workload. Ultimately, I owned the mistake, apologizing profusely and promising I would get them an updated accurate report. I did not charge for any of this time, of course, and by the end we were on speaking terms — but not much better than that.

It turned out her situation was better than the erroneous report had suggested; however, it was not nearly as good as she'd hoped. As a saver, she had been very conservative with her funds and the CDs she had relied upon had earned less income than she needed to meet her goals. The updated news was still not ideal, but at least it was accurate.

Bill Stoddart

Needless to say, I no longer rely on the program’s annuities feature and find that I do best by relying on the standard features I know well. Even more importantly, I’ve found that always double-checking — or triple-checking — results against manual calculations is much more precise.

This experience was also a huge lesson in the importance of slowing down to fully prepare for meetings, as these types of mistakes affect people’s lives in ways that extend way beyond a simple number-crunching error.