Financial Planning Professionals

June 9, 2018

I have had the pleasure to work closely with and get to know some very capable and talented financial consultants. Most have developed specialized practices in things like social security, buy-sell agreements, medicare, portfolio management, real estate, disability insurance, life insurance, IRA alternatives, trust funding, etc. I am always happy to give a referral if you are looking for someone in a particular area or if you are just not sure who you might want to talk to.

Keep in mind a few things as you engage an advisor. Learn up front how the advisor is compensated. Over the last several years, the trend in compensation structure has been going to a fee-based model and away from commission-based. This reduces the incentive to buy or sell for the commission. You don't pay for each transaction but you pay a percentage of the value of your assets under management. Your advisor's incentive is for your portfolio's value to increase, not for its composition to change, so your interests are more aligned.  You have a right to know every fee or potential fee that your advisor might earn. An honest advisor will gladly explain how, when, and why he or she is compensated.

 

Many advisors will create a financial plan for you. I highly recommend this! The plan is usually developed by plugging in your personal information, objectives, risk tolerance, etc, to a sophisticated program. Some advisors offer a plan for free while others charge. "Free" can be nice and expected, perhaps, if you are already paying your advisor a commission or s/he has assets under management for you that are generating a fee already. But I tend to favor the plans that you pay for. Often the paid for plans are a higher quality and more useful. Don't judge a plan by thickness - they are not winter socks! A thick but generic plan is nothing more than a lot of scratch paper. You want a plan that is understandable, customized to your needs and circumstances, and can be implemented. 

 

Big brand or boutique firm? I'm speaking in broad terms here and there are many exceptions but not any wrong answers. Big companies, such as Merrill Lynch, Morgan Stanley, Ameriprise, Fidelity, TransAmerica, and UBS, offer the kinds of services you would expect from a big brand. They frequently have more resources and more specialization but they may only have certain families or brands of investments available for you. They may offer personal or commercial banking, their own investment funds, and more cost-savings as a "one-stop" shop. Smaller operations tend to be more independent, offering a wider selection of investment options and more personalized attention. Which way you go depends on what you need and value the most.

 

Hire a fiduciary! A couple of years ago the Department of Labor issued a rule requiring financial advisors to act in their client's best interests, i.e., to uphold a fiduciary standard. This is a pretty high standard intended to force the advisor to avoid a conflict of interest in doing work for you. But a recent 5th Circuit Court of Appeals decision struck down the rule.  So now your advisor is not necessarily required to uphold that fiduciary standard (at least in the 5th Circuit but possibly in others as well). Nevertheless, look for an advisor who voluntarily upholds that standard; who agrees in writing to act as a fiduciary. Have a written agreement with him or her to do so.

 

Last bit of advice- whoever your advisor and whatever company she or he works for, you want someone who is proactive, easy to contact, and holds an annual review with you. Our firm makes it a point to return a client's call or email within 24 hours at the latest. A financial advisor should do that or better! Ask the prospective advisor if you could talk to one of their clients. Check the advisor's ratings online. Ask a trusted friend, family member, or professional for recommendations. Find someone who cares about your family and your money almost as much as you do!

 

 

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