Are you wondering if you will be able to retire? Are you thinking about reaching out to a financial planner? Do you find yourself worried that you will pick the wrong person and end up with the next Bernie Madoff? Are you worried you will end up with somebody who is learning their way and makes mistakes at your expense?
It’s very normal to have these concerns. The process of moving from “saving for your future needs” into “living off your savings” is challenging and complex. You have a lot at stake and you will only make this journey once. It’s wise to be careful, but what does that look like?
There are plenty of online resources you can use to find a financial “advisor” or financial planner. One concern is that often those resources are marketing businesses that charge financial professionals a fee to connect them with families looking for financial advice. Many of these services do not “screen” advisors so much as they sell advisors on their ability to find more prospective clients.
Here are a couple resources I would recommend. These groups provide databases of financial planners who are members of their organization, so you know they met the membership standards of the group. The Certified Financial Planner Board of Standards can help you find CFP® professionals who have received training and passed a rigorous exam. The National Association of Personal Financial Advisors can connect you to members who work only for advisory fees.
Yes, I am a CERTIFIED FINANCIAL PLANNER™ professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
Once you have a few names of financial planners how should you proceed?
Test Drive a Couple. I suggest you meet with two or three planners to gain some perspective on how the process might work. You should get a free meeting from any reputable planner as a chance for everybody to get to know each other.
Trust Your Gut. After 22 years in this business, I can tell you that personal chemistry is essential to a successful advisory relationship. You need to enjoy your interactions with your planner. You need to be able to easily understand their recommendations. And you need to feel comfortable asking questions about the advice.
Be Clear on How They are Paid. Many “financial advisors” are actually product sales representatives in the eyes of regulators. This means they have a duty of loyalty to their employer BEFORE any duty to a customer.
- If they work for ONE company, they get paid by an investment product manufacturer and have a vested interest in you choosing that company’s products.
- If they work on commission, they are paid to generate transactions. They do NOT get paid to create great financial outcomes for you. Their incentives will be to have you use MORE stuff, DIFFERENT stuff, and to CHANGE often.
- You want a clear explanation of what you will pay and the value you can expect to receive. If it’s confusing to you, ask again.
Are They a Fiduciary? You should ask them directly and listen carefully to the answer. To be a fiduciary is to place the client’s interests first, at all times. Some financial professionals act as a fiduciary in some situations and as a sales representative in other situations. An experienced fiduciary planner will be skilled at helping you consider all manner of solutions without any conflict of interest based on which product pays the highest commissions.
Understand their training and credentials. Many advisors, especially those new to the business, get only basic sales and product training at the beginning. I have been in this business for more than 22 years and am a big fan for the CFP® and BFA® designations. That’s why I have both the CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor credentials. I am a financial planner who is an advocate for my clients ALL THE TIME – a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.
Ask Them About Their Last New Client. They should be comfortable telling about the last client that joined their practice. You should listen to see if your situation is similar to this client's. Ask Them About Their Organization. The more you understand about the way the planner works, the fewer surprises you can expect as you move forward.
- Do they have a large staff, or are they a solo professional?
- Who should you expect to interact with most on the team?
- How many other clients does the planner have now?
- How many new clients does the planner expect to add this year?
- What expertise and resources can the planner access to help you if needed?
Ask About All the Services Available. Some “advisors” offer only a limited menu of investments. Others offer a comprehensive menu of financial planning advice. For my clients, as a CFP® professional, we always talk about several aspects of the client’s financial life:
- Cash Flow and budgets.
- Risk management strategies. (Insurance)
- Current savings rates and strategies.
- Investment management.
- Retirement Income Planning.
- Tax-Smart Investing.
- Estate Planning.
Ask About Your Role in the Process. A successful financial planning process is a dialog. Over time you will meet for updates. Things will change in your life. Maybe even your goals will shift. You can expect a professional financial planner to want regular contact and at least an annual review meeting to discuss goals, progress, priorities and clarify next milestones.
Think About the Why of Your Financial Goals. A great financial plan will help you prepare to achieve the most important goals in your life. Things like: saving for a vacation home; retiring early; sending family to a great college; taking a historic vacation trip; start a mission-driven business. But to reach these big, important goals, you want to understand why you are pursuing them. Being clear on your big-picture values provides a guide for many of the choices you will face. Does it help you move toward your big goal? Or not?
If you would like to talk about your situation, I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.