The. Critical Questions

Transcription

1 Special Report 10 The Critical Questions to ask BEFORE Hiring A Financial Planner/Advisor (You May Be Surprised By What You Find) Atlanta Office 1200 Keys Ferry Court McDonough, GA Phone (678) Dothan Office 2216 West Main Street Dothan, AL Phone (334)

2 Why This Decision is So Important Hiring the right financial planning advisor is one of the most important decisions you make and one of the toughest. When you make the right decision, you will have a better understanding of where you are now and what it will take to accomplish your goals. In most cases, your reward is multiples of what you invest. More importantly, you will also save time and energy. Time and energy that you can invest back into the people, activities and causes that you care about deeply. Alternatively, if you choose to hire the wrong advisor or simply stay with the one whose expertise has not kept pace with your needs, your outcome could be drastically different. We cannot begin to tell you how many sad stories we have heard from well-meaning, successful people like you who hired a good friend or acquaintance or stayed a little too long with an advisor they ve had for many years, who failed to grow along with them. We can get you back on course, but rarely can you recapture the opportunities you ve missed. The 10 questions in this report outline what to look for in an advisor. Use them as your guide to navigate the potential landmines. Above all, use the questions to help you discern who will give you the specialized advice that you or your family deserves. Your situation is unique and requires a custom plan, not a one-size-fits-all financial plan. Sadly, the exploding number of those claiming to provide comprehensive financial planning or wealth management often leaves successful, savvy folks uncertain about where to go to find trustworthy, competent help. That s why we wrote this Special Report. 2

3 Question # 1: Do they have a legal obligation to act on your behalf? Many brokers and/or financial advisors do not accept the fiduciary standard in the client relationship. A financial advisor held to the Fiduciary Standard occupies a position of special trust and confidence when working with a client. As a Fiduciary, the advisor is required to act with undivided loyalty to the client. This includes disclosure of how the advisor is compensated and any conflicts of interest that arise. Question # 2: Do their core beliefs or values line up with your core beliefs regarding long range financial planning/wealth management and investment management? Request a copy of their core beliefs. It is important that their long term core values or beliefs align with yours. It should be a warning to you if they have never taken the time to clearly state their core values or beliefs. Question # 3: Do they truly plan or are they just a packaged solution firm? There s a big difference between a true planner and someone offering packaged solutions whether those solutions are financial products, banking products or legal documents. In our work, we have encountered all of these. Think about it: if you went to a doctor, and they wrote you a prescription without examining you or conducting tests you would be very uncomfortable. Yet, many financial, banking, or investment advisors offer packaged solutions (prescriptions) without creating a unique, strategic plan for you. And oftentimes, the solution involves products that they sell. Request a copy of a sample plan and review it carefully. Does it appear to provide you with a clear action plan designed to guide you toward your goals? 3

4 Question # 4: Do they provide a process to update and evaluate the progress? First, the planning process begins with you your wants, your dreams and desires? It evaluates your current situation and creates a plan. A well designed plan must be updated and changed as your life unfolds. Circumstances and situations change as life evolves. A critical component to any financial plan is the regularly scheduled updates. These meetings should track your progress to the original plan and consider adjustments. Question # 5: What commitments are they making to you and what commitments do they expect you to make to them? It seems rudimentary, yet you must know clearly what commitments they are making and what commitments they expect of you. Heads up: a firm that doesn t expect anything of you is a desperate, in-need-of-business firm. Stay clear. For anything important to work in your life, it requires commitments both ways. Imagine a coach who said you could reach peak performance without any commitment on your part. Getting in physical or financial shape requires a long term commitment. You can endure the pain of financial discipline over time or the pain of failure. Either option includes pain. Do your security, independence, lifestyle and financial future deserve any less? 4

5 Question # 6: How are they compensated? A financial planner or advisor may be compensated several different ways. These include: A. Project fee or hourly fee: Both methods have their pros and cons but a project fee is normally better since you know the cost in advance. B. Investment management fee based on the assets managed: If the firm will be managing investment assets, they may provide financial planning services as a component of the investment management fee. C. From the sale of products: Some firms advertise free planning with the hope that you will purchase insurance or annuity products and they will receive a commission. D. A combination of the above. None of these methods are inherently wrong. It is just very important that you know how the compensation structure will work BEFORE you agree to become a client. Question # 7: Do they require you to invest your assets with them? Some firms require that you invest your assets in their insurance products, annuities or investment programs. Make sure that you know what their requirements are in advance. Many people prefer to work with one firm to provide the planning services and the investment consulting. However, these functions can be separated if you prefer. Review Question #6 regarding compensation to make sure you know how they will be compensated for the planning process and the investment work. 5

6 Question # 8: What special training does the staff have? Education and special training is very important when considering a financial planning advisory firm. Review the background and training of the primary partners or principals. Beware of the questionable alphabet designations that proliferate the financial industry. Look for the following highly respected and recognized designations: CFP CFA CPA PFS Certified Financial Planner Chartered Financial Analyst Certified Public Accountant Personal Financial Specialist There are other recognized designations. If you re unsure about a designation run a search on Google. Question # 9: Who will you be interacting with at their firm? Some financial planning firms will assign your account to a junior advisor or para-planner without appropriate interaction with the senior advisors. The fact is you want to find a firm that allows you to work with the firm and not just one advisor, either the junior or senior advisor. It is important that you establish a relationship with a firm that provides a business continuation plan for their practice just as they are working with you to develop your long range financial plan. The success of your plan should not depend on the continued involvement of a single advisor. 6

7 Question # 10: In an investment management relationship, what company will be custodian of your assets? Perhaps the most important question to ask is Who will have custody of my assets? The custodial firm (ours is Charles Schwab Institutional) actually holds your investment assets and provides assurance to you either monthly or quarterly that your assets are in fact there. You also should have daily access to your account balance via the internet. Always remember the return OF your assets is more important than the return ON your assets. Many investment scams would have been avoided if the investor had been more concerned about the firm actually holding the money. A principle to remember: Always be very cautious of a firm that provides investment advisory services and serve as the custodian or your assets. 7

8 Summary When considering a financial planning/ investment advisor, be sure that you ask ALL of the questions above. How an advisor answers these questions will tell you a lot about how they will work with you, your family, and your needs. Don t be afraid to ask these 10 questions. You are entitled to receive complete information from a potential planning firm. This includes their compensation, qualifications, experience and processes. These questions will provide you with the confidence to conduct a thorough interview. At CapSouth, we provide a complimentary, no obligation interview to allow you to discuss these questions and your unique situation. Give us a call to schedule an introductory appointment. There s no better time to get started on planning for your future. It s never too late. Copyright Atlanta Office 1200 Keys Ferry Court McDonough, GA Phone (678) Dothan Office 2216 West Main Street Dothan, AL Phone (334)