How to Hire a Financial Advisor

Financial Life Planning for Busy Parents

If you’ve been a listener to this podcast for some time, you are likely well aware of the things to look for when hiring a financial planner. However, your friends may not be. If the topic of finances comes up, do the right thing: educate your friends and family on how to find a good advisor.

What happens when you don't help your friends and family

I recently had a client who came to me with a concern for a family member. Her cousin inherited a sizable sum of money and hired a financial advisor to assist with the logistics. My client expressed concern about a few aspects of the plan her cousin received, in particular, the number of life insurance policies she was encouraged to obtain, and did not understand some of the recommended investments.

When it comes to Financial Advisors: Ask the Right Questions

We talked about how my client could help her cousin with regard to asking the right questions of her new financial planner. This advice applies to anyone interested in obtaining financial services so I decided to share her story and a list of nine questions anyone should ask when hiring a financial advisor. I’ve also taken the liberty of including my answers as a reference point for any interview conducted with potential financial planners.

9 Questions to Ask When Interviewing a Potential Financial Advisor

1. Are you a fiduciary?
   1. YES! I started my own Registered Investment Advisor (RIA) company, licensed in the states of MA, CA, and PA. These states require that I act as a fiduciary for my RIA and all my clients.
   
   
2. What are your professional qualifications and credentials
   1. I am a Certified Financial Planner (CFP®), a Registered Life Planner (RLP®) and a Chartered Financial Counselor (ChFC®).
   2. When I started my RIA in 2018, I immediately enrolled in the CFP® curriculum. It took a few years to complete the required college-level courses, pass the comprehensive exam, and fulfill the work requirement (2-3 years of full-time work in the industry).
   3. I have also taken the required coursework for the Registered Life Planner in 2021 - a year of classes and work provided by the Kinder Institute.
   
   
3. How are you paid? What are your fees and how are they structured (hourly, flat fee, percentage of assets under management)? Are there any additional costs I should be aware of?
   1. I typically work with new clients in a flat fee arrangement to provide comprehensive planning. You can always find the latest fees and services listed right on my website. This is a one-time fee to cover all the initial planning together.
   2. Often, clients will engage me to provide ongoing services. This service is also a flat-fee, yearly arrangement, based somewhat on net worth and paid monthly. Again, those transparent fees are listed on my website.
   3. There are no other fees paid to me. Sometimes I will recommend services that have associated costs (estate planning, tax preparation, life insurance, etc) - but I always let you know the potential costs of these services, paid directly to other professionals, with no commissions or incentives for me.
   
   
4. How long have you been working as a financial advisor? What is your experience with clients in situations similar to mine?
   1. I started my own RIA in 2018 and have been working with clients in the years since. I primarily work with busy parents who want to get organized with their finances to ensure a successful future for themselves and their children.
   
   
5. What is your investment philosophy? How do you select investments for your clients? Can you explain your approach to risk management?
   1. I believe in using low-cost index funds, in a mostly buy+hold approach, which involves monitoring and rebalancing throughout the year. I use academic research (rather than hot stock tips!) to drive my investment recommendations. Money is a tool to be used to live your best life and your investments should support that goal.
   
   
6. What services do you provide? How often do you communicate with your clients? Do you offer comprehensive financial planning?
   1. I typically start new clients with comprehensive financial planning. We cover topics such as budgeting, education planning, insurance review, estate planning, investments, and taxes over a few meetings spanning a couple of months together. I also provide ongoing financial planning, accountability partner, and investment advice for those clients who want a working partnership throughout the year.
   2. I only work with a small number of clients, so I am readily accessible. Every piece of advice or recommendation you receive comes from me directly, not from staff or assistants.
   
   
7. What is your financial planning process? How do you determine and prioritize financial goals for your clients?
   1. I have a standard process that I take all new clients through, which includes a set of meetings, questionnaires, information gathering, analysis, and recommendations. While the process is standardized for all clients, the information, analysis, and recommendations are all unique to your situation.
   
   
8. How do you communicate with clients, and how often? How can I reach you if I have questions or concerns?
   1. During our initial planning process, I will communicate with clients before, during, and after each of our meetings. I send out an agenda, keep us organized during our meetings, and write summaries. I use email, text, and a customer portal to organize our communications and information.
   
   
9. Can you provide references from current or past clients? Have you had any disciplinary actions or complaints?
   1. I typically do not provide references because all my communication with clients is confidential. That said, I do have some clients who have volunteered to be a reference for me, so I can usually match you with someone in a similar position who is willing to chat about my services and approach.
   2. I have never had any complaints or disciplinary actions against me.
   
   

It's important to find the right advisor for you. You hope to be in a long-term relationship, so don't skimp on the upfront work to find the right match!