With turmoil in the financial world – inflation, bank bankruptcies, recession concerns, etc. – you may have reached the point that you want to check in with a professional advisor. If nothing else, it may calm any anxiety about your future. Common questions I hear as I speak to audiences across the nation are: Am I on track? Will my savings last through retirement? Do I need to adjust my investment mix? How do I address unknown risks? Am I spending too much?
No matter your age or your accumulated assets, getting help and insight from a professional is a good idea, especially if your concerns are taking a toll on your quality of life.
Who to Choose
If you choose to use an advisor, it is important to find someone you trust who will take the time to know you and answer all of your questions in terms you understand… and someone who is a fiduciary. A fiduciary is bound legally and ethically to put your interests first. That is not a universal requirement in the industry. Being a fiduciary is the highest legal duty of one party to another. It is a higher standard of care.
How do you find an advisor who is a fiduciary? Look for a Registered Investment Advisor (RIA) or a CERTIFIED FINANCIAL PLANNER ™ professional. You can search for an advisor in your area who is a CFP® professional at the following website: www.letsmakeaplan.org. One of my recent blogs described the difference that a CERTIFIED FINANCIAL PLANNER™ professional brings to the table. See Extra Retirement Plan Catch-Ups.
Let’s imagine you have decided to hire a professional and have narrowed your search to several CFP® candidates you found in your area using www.letsmakeaplan.org. What should you do next?
Interview Questions
I suggest you schedule an appointment with two or three possible financial planners in your area. The following questions may help you decide which advisor is the best fit:
- What are your qualifications and credentials?
- What services do you offer?
- Will you have a fiduciary duty to me?
- What is your approach to financial planning/investing?
- What types of clients do you serve?
- Will you be the only advisor working with me?
- How will I pay?
- How much do you charge?
- Do others stand to gain from the financial advice you give me?
- Have you ever been publicly disciplined for unlawful or unethical actions in your career?
If you choose an independent advisor, a RIA, it is also important to ask: “Where will my assets be held?” A Registered Investment Advisor should not mix your assets with other clients’ assets. They should create separate accounts for each client and use a third-party custodian, such as Pershing, Schwab, or Fidelity, to hold the assets. When there is a third-party custodian, you can expect to receive two statements: one from your advisor and a separate one from the custodian. The two should reflect the same information. The statements from the custodian should clearly show that you are the owner of the account.
Why is a separate custodian important? Unfortunately, there have been instances of advisors mixing client funds with their own and then using the funds for themselves. An unethical advisor may create their own client statements with false information, and if there is no custodian statement for comparison, the situation could go undetected.
Background Check
Before you select a particular advisor, it is also a good idea to check their background, work history, and any client complaints. There are two sources for that information. If the advisor is associated with a broker-dealer, use FINRA’s BrokerCheck, brokercheck.finra.org. If the advisor is associated with a Registered Investment Advisor (RIA), then use the SEC website, sec.gov/check-your-investment-professional.
Potential Cost
What you will pay for financial advice depends on both the financial advisor and what you want the advisor to do. First, most advisors will not charge for an initial conversation to determine your needs and the scope of services that you desire.
A typical cost for a comprehensive financial plan is $1,000 to $3,000 but may be higher for more complicated financial situations. What you get for that fee is a comprehensive financial plan and guidance for how to follow it, but no ongoing services or investment management. If you desire ongoing investment management, most but not all advisors base their fee on the market value of the assets they manage. The fee may be stated as an annual percentage rate, for example 1% of assets under management (AUM). Management fees are often on a graded scale so the more assets under management, the lower the fee. You can find advisory fees that range from 0.30% to 3%, but 1% is typical. If you want ongoing management, the advisor may include a comprehensive financial plan for no charge. Although it is less common, some advisors charge a flat fee or charge on an hourly basis.
Finally, advisors are required to give you a Form ADV or CRS which contain detailed information about their fee structure along with other important information. If not offered at your initial appointment, ask for those documents.
Your Decision is Important!
Any important decision requires research and, especially when it comes to your money, take your time to make a wise advisory choice. Compare your options and make sure you and your spouse or partner are on the same page. Do not be pressured into a decision. Ask questions to ensure you will be comfortable with the advisor you choose. Not only do you want someone who is knowledgeable and ethical, but also someone who you trust to deliver both good and, if necessary, bad news.
Beverly J Bowers, CFP®
Part of this blog first appeared on Sixty and Me.
