Choosing The Right Financial Planner Fit For You
By PETER GAERTNER
What are some of the main considerations when comparing financial advisors? How do I know whether he/she truly has my best interests at heart should I trust them with my hard-earned savings? How will this relationship benefit me as the client now and years into the future?
The above are just a few common questions and considerations you may have gone through when you first started working with your advisor, or, you are possibly going through the same or similar head scratchers now. It is all too easy to simply feel overwhelmed when financial jargon or abbreviations are being mentioned to you during introductory phone calls or meetings, resulting in a possibly change of priorities and the thought of “I will get to it another time or when life slows down”.
Please allow me to provide a little bit of clarity in this important decision-making process to help keep you on track. If there is one thing I learned over the years, usually the hard way, it is that there is no time like today and that we cannot get time back. A simple concept but so ever-important when it comes to your family, future and the opportunity cost of investments.
First, what is it that you are looking to accomplish?
Are you a do-it-yourselfer when it comes to investments that is simply looking for an objective confirmation or a one-time engagement to provide a financial roadmap to your situation? If so, a financial planning engagement may make sense for a qualified financial professional to review, assess and recommend steps for you to take action alone. There is a usually a fee associated with this service, either on a per work scope or per hour and it would be over the moment you leave the advisor’s office.
Are you looking for ongoing financial guidance that includes financial planning and investment management while teaming up with a financial professional? Then a full financial planning/investment management engagement may make sense for you to build a relationship and rapport with your advisory team and support staff. Uncovering and solving your family’s priorities, getting to know your spouse and loved ones all while helping you navigate financial decisions so that you can truly live a full life, would be the priority of your dedicated advisor. This service can be available for an AUM (assets under management) percentage of the total assets that you let your advisor manage for you or it could be a flat fee.
Should you decide to go with the latter or simply would like to learn more, below are additional questions and considerations to assist you in making the best decision for you.
What are the advisor’s credentials and education? CFP®, CFA®, CLU®, and ChFC® are some of the most common ones and they all required the advisor to go through a series of courses and/or exams along with continuing education courses every few years. A Bachelor’s degree or Master’s degree from an accredited University should also be a minimum requirement. Arguably most important, is the advisor a fiduciary to his or her clients, meaning that they will always do what is in your best interest?
What’s their experience working as a financial planner and, more importantly, with similar clients? Where would I fit in with this advisor? Meaning, would I be his or her “average” client or would I be on either end of his client spectrum and am I okay with that? How long has the advisor been in the business to provide financial advice?
What does the advisor do to stay current on industry changes? Are they a member of an association such as the Financial Planning Association, Society for Financial Service Professionals, Tax Counsel, Estate Planning Group, etc.?
What can the advisor share about his or her business when it comes to current clients?
How long has the company been around and what are the services offered to their clients?
Will you have access to a primary advisor, team and what is their succession strategy?
What is the company’s investment philosophy?
How is the advisor compensated?
What are all the fees that a typical client may incur? Usually, there are three separate layers when working with an RIA: 1. AUM Management fees that the advisory company charges at a reoccurring interval such as, quarterly, for their services (investments, planning, etc.); 2. Internal fees or fund expenses for any mutual fund or ETF that is being held in your account. While this is not a direct expense to you, the expenses are coming out of your returns. They can vary from very low for index ETFs to over 1% for many mutual funds. 3. Oftentimes, trade or transaction fees are separate as well. While many investments are no transaction free (NTF), there are still many out there for a small nominal fee.
Also, make sure that you vet a potential advisor. While references are a great way to start, the internet offers instant access to SEC and FINRA site checks, LinkedIn profiles, and simply googling their name or firm could result in learning more about the candidate as well.
Once all the above questions are answered to your satisfaction and you are comfortable to meet with the advisor(s) of your choice, I truly believe that the first meeting has the potential to set the stage for a long-lasting relationship. Trust must be earned, it is not given, so a discovery meeting where the advisor is able to share more about all the above items, is invaluable to a potential client. More importantly, the advisor should be eager to learn as much as possible about you during this first meeting and every meeting thereafter, what’s important to you, where you see yourself in the future and so much more. Only then can true value be created for you, a successful relationship started for years and possibly generations to come, and you can be on your way to live a full life.