How to Choose the Right Financial Advisor – Interview is a must!
There are a lot of financial advisors out there and all of those are just a little bit different. So now that you've made the decision that it's time to hire a financial advisor, how do you make sure you're choosing the right one for you? My name's Brandy Branstetter and I'm the co-founder of Beyond Wealth and today I am going to walk through 10 questions that would be really helpful for you to ask a financial advisor as you're starting the process of finding that perfect match for you.
Do they have the experience and knowledge required to help you with YOUR specific needs
What are their certifications? – Credentials do matter.
How long have they been a financial advisor?
Are they a fiduciary? (and why is this important?)
Do they specialize in working with people like you?
What services do they offer?
Are they a generalist or a specialist?
What does the process look like?
How will you communicate? In-person meetings, email, video conferencing
How often will you communicate?
Will you be working with one lead advisor or will there be many team members you’ll be working with?
What is the overall philosophy for financial planning and investing?
Ex: Education, collaboration, communication, transparency, low cost
How much does it cost?
How are they paid? Flat Fee, Hourly, a % of assets managed, commission
Let’s dive a little bit deeper into each of these sets of questions.
Do they have the experience and knowledge required to help you with YOUR specific needs
What are their certifications? – Credentials do matter.
How long have they been a financial advisor?
Are they a fiduciary? (and why is this important?)
What are their certifications? – Credentials do matter.
The first thing you probably want to know from anybody you're hiring to help you with your money is do they have the experience and the knowledge required to help you with your financial goals or help you with your specific financial needs. So the first question you might ask somebody is What are their certifications? And I will tell you, in my opinion, credentials really do matter when it comes to financial planning and investment management solutions.
Certified Financial Planner Professional ®
When you're talking to an advisor who has the CFP® marks behind their name, that stands for Certified Financial Planner Professional®, and basically what this is telling you is that this person has spent a lot of time going through education requirements in order to gain some base level knowledge in all the different areas of financial planning. It also proves that this person had to pass some pretty rigorous testing in order to claim these CFP® marks as their designation.
It's also helpful for you to understand that because this person is a Certified Financial Planner Professional®, they're also required to complete a lot of hours of continuing education every year. So you can feel confident that your CFP® Pro is up to date on rules, regulations, and new strategies that might be coming out in the world of financial planning.
Chartered Financial Analyst
Another designation that's really important is a CFA designation. This is a Chartered Financial Analyst, and this is pretty much the “gold standard” in working with anybody in your investment management portfolio. So once again, they have lots of education, passed significantly rigorous tests in order to prove that they have the knowledge, background and the expertise to help you with your financial needs.
How Long have they been a Financial Advisor
Another question that you might want to ask your financial advisor that you're interviewing is how long have they been a financial advisor? I don't know about you, but when I'm hiring a professional services company, I want to know they've been around for a while and I'm not necessarily their first client and I'm not going to be their last customer. So I want to know that somebody has been in the business long enough to have that experience beyond just the education requirements in order to really help me with what it is that I need.
Are they fiduciary? (Do they have your best interest in mind or their own?)
The last question and understanding if they can really help you with the knowledge and expertise is understanding are the fiduciary. And I think it's really important that as a consumer, you understand what a fiduciary can do for you for financial planning and investment advice. So if your financial advisor is a fiduciary, then they are obligated to act in your best interest and put your own interests above their own interest. It's interesting when I bring this point up with certain people, because a lot of people aren't aware that not all financial advisors have to be fiduciaries.
Once again, if you're paying somebody for honest, straightforward and objective advice, don't you want to make sure that you can be confident that they're doing it because it is the best thing for you and not necessarily the best thing for them?
So those are those questions that you should ask in making sure that they have the right knowledge and expertise to help you.
Do they specialize in working with people like you?
What services do they offer?
Are they a generalist or a specialist?
The next thing that you probably want to know, and it's super important to you is do they work with other people like you? The first question you might ask them is what services do they provide? And you'll want to make sure that they can list out all the different areas of financial planning and investment help that they are really good at, and they can help you with, you know, for instance, do they help you in evaluating your employee benefit option?
Do they help you with retirement planning? Do they help you with financial goal planning or cash flow management and making sure that you have the right savings plan for today, tomorrow and 20 years into the future? So making sure you understand exactly what those services are, is really important. A lot of financial advisors will say they do comprehensive planning or holistic planning, but to the regular person, that doesn't really mean a lot, especially with a lot of financial advisors, having different definitions of what they feel is comprehensive or what they feel is holistic in there, planning set up.
So another thing that is really important to know is not only do they work with people like you by offering the services that are really important to you, but are they a generalist or are they a specialist? So meaning do they specifically work with people who are in the same lifestyle stage as you, so are you in your thirties and starting to have a family?
You probably want to work with a financial advisor who has a lot of clients that are in that same life category as you, or are you 60 years old and getting ready to retire? Well, you may want to find a financial advisor that works with a lot of other 60 year olds and helps them transition into retirement because the more specialized an advisor can get in the specific types of clients they work with is just reassurance to you that they have that knowledge and expertise and many repetitions and helping their clients solve the same issues that you may have as well. Those are the questions that you would ask to figure out, do they work with people like you?
What does the process look like?
How will you communicate? In-person meetings, email, video conferencing
How often will you communicate?
Will you be working with one lead advisor or will there be many team members you’ll be working with?
What is the overall philosophy for financial planning and investing?
Ex: Education, collaboration, communication, transparency, low cost
How will they communicate with you? How often?
Another thing you probably want to know before you hire a financial advisor is what does their process look like? One of the questions that you could ask to find this information is how will they communicate with you? Are you expected to have in-person face-to-face meetings? Are they going to be video conferences? Is it strictly phone calls, emails, does their communication style match up to the way that you want to be communicated with?
For me personally, I think communication is the key to any successful relationship. So it's really important to make sure that those professionals that I'm hiring are giving me very clear expectations of how we'll communicate and how we'll continue to work together into the future. Another thing that you would want to ask them is how often will you guys be communicating? So will you be meeting one time a year? Will you be meeting twice a year? Will you have access to them on the phone or email at any time, or is it only specific times of the year where you're going to be able to lean on them for assistance?
Who will you be working with?
You'll also want to know, in the process, who will you be working with? Is it going to be the one financial advisor that you're talking to? That's going to be your main point of contact, or is there an entire team of people behind that advisor that you may meet with, or have contact with when talking about different things that are important to you? For instance, is there somebody on their team that specializes in tax work? If you have a tax question, you'll be directed to that person versus somebody who's really versed in retirement planning strategies, will you be working with a different member of the team on all of these aspects and areas? It's important to know that information so then that way you can feel comfortable with what your expectations are for the relationship moving forward.
What is the overall philosophy for financial planning and investing?
Another question that I love to get asked, so I think it's really important that you ask this to any financial advisor that you're interviewing is, what is that advisor's philosophies or values around financial planning and investment management solutions?
You're going to be looking for keywords like education, collaboration, communication, transparency, or low cost, maybe when we're talking about investment strategy or socially responsible. These are the things that will align with your personal values or the things that you think are really important when hiring a professional to be able to help you. For instance, at Beyond Wealth we are very much focused on collaboration and education because we want to make sure that all of our clients understand the why behind every single recommendation and through education, we can give them that power through knowledge, to feel very confident that the decisions that we're making together are the ones that are best for them, and they understand why we're doing it.
How much does it cost to work with a Financial Planner?
The last thing you probably want to know when evaluating a financial advisor is how much is this going to cost? One of the questions you could ask, well, straight up, you could just ask them, how much does this cost, or how much are your services? But you want to know how they are going to get paid for their services?
There's a lot of very different models when it comes to different financial advisory firms, some firms will charge a flat fee for financial advice. Other firms might charge an hourly fee, a percentage of the investment assets they manage for you. Or other advisors might be paid through commissions. They earn on certain products that they offer you. And there's no one way that is the most superior way or the worst way to operate your business. It's just super important as a consumer, that you understand exactly how your advisor's going to get paid and that you see the value in all the service they're going to be providing you in the fee that you're paying them for that service provided.
So at the end of the day, it really boils down to once you get all these questions answered, do you feel comfortable with that advisor? Because if you don't feel comfortable with your financial advisor, you're probably going to be really reluctant to follow any of the advice that they give you.
It's very important that you can feel like you can open up to this person and you can talk about things in greater depth and detail than just performance numbers and how much you should be saving to your 401k, because there's so much more in a financial planning and managing your investment strategy than just getting to retirement one day. There's a lot of life to live in between.
Brandy Branstetter, CFP®