Interview Questions for Choosing a Financial Planner (GoodFinancialCents.com)

Interview Questions for Choosing a Financial Planner (GoodFinancialCents.com)


This is Jeff Rose, goodfinancialcents.com.
Welcome everybody. I have a little neat, exciting thing to share here. I was interviewed by
Laura Adams a.k.a. The Money Girl. She is actually a contributor to the blog, goodfinancialcents.com
so be sure to check for her articles. I had the pleasure of being interviewed by her for
a little Skype interview that we did. This was our first attempt. We had a little static
near the end but we are learning. I’m getting all my technical glitches out of the way.
She interviewed me about interviewing a financial planner for your own services. At the end
I shared some tips of the five mistakes to avoid when saving for retirement or financial
planning. Be sure to check out the interview. Hope you enjoy. See you later. LAURA: Hi everybody. This is Laura Adams from
The Money Girl podcast and author of Money Girl: Smart Moves to Grow Rich. Today I am
here with Jeff Rose. I am so excited to be interviewing him. He is a financial planner.
He has a business that is called Alliance Wealth Management. I thought it might be a
good idea to find out from Jeff what some of the typical questions are that he gets
about financial planning. Jeff, why don’t you start out and just tell us what you do
and what type of customers you have? JEFF: Sure. I have been a financial planner
for just over eight years or so and along the way I’ve helped many different types of
clients. Being younger, I got started in the business when I was 24 so I had a lot of younger
clients that just wanted to start saving for retirement, start saving for their kid’s college
education. Also, I had a lot of the baby boomer generation that were approaching retirement
and had a large nest egg like their 401K or their pensions that they’d been saving into
their entire lives and now they had the biggest decision moneywise to make in their lives
what to do with it. They entrusted me to basically devise an income plan for them with that money
so that they wouldn’t out live it. That is really where, I wouldn’t say my focus has
turned, but just my clientele has turned that way through referrals and through all the
different events that I do. Right now I service probably about 80% of the baby boomer plus
generation. Most of these individuals I would say are people that know they need to be invested.
They know they need to be in the market in some way just to keep up with the cost of
living and to keep up with their desires in the golden years. They just don’t have the
time and they really don’t trust themselves with that amount of money so they want to
rely on an expert like myself. I say expert. I’m not trying to toot my own horn, but they
want to rely on a professional to take care of them. LAURA: Absolutely, yeah. I’m curious what
your opinion might be about whether everyone needs a financial planner. Does everyone need
one or are some people able to do it themselves? JEFF: That is a great question. I actually
just took a poll of my email newsletter because I was really curious. I just had a hunch.
I talk to people all the time that don’t have a financial advisor. They’ve been doing it
on their own or they are not doing anything at all. I really was just curious so I emailed
my subscribers just curious to know the feedback. The questions I asked were: Do you have a
financial advisor. Yes or no. Why or why not. Of all the people that responded there was
only about 30% or so that had a financial advisor. That was kind of my hunch thinking
that most people don’t. The most common reason was trust. They didn’t trust them. They maybe
had some bad stories from friends or family members or they had a personal experience
where they had a financial advisor that sold them something that shouldn’t have been sold
to them, and they just didn’t trust that direction. Other people just didn’t know if they needed
one yet. They didn’t feel like they had enough money to get started. I think in all those
situations, maybe you don’t need a full-time financial planner to manage the investments
on an ongoing basis, but I think it’s like a doctor relationship. You don’t need to go
to the doctor every single day, but it’s always advisable to go in at least once a year to
have your annual checkup. Why wouldn’t you do that with your financial life just to make
sure that what you have in your 401K is where it needs to be. Make sure that whatever investments
you’ve been doing in your own brokerage account are in the right funds, stocks, or ETFs. Make
sure you have enough life insurance. I think everybody needs to have some type of advisor,
maybe not an ongoing basis, but at least someone to checkup on and give them that annual checkup. LAURA: Yeah, that’s a good way to put it.
What are the different types of advisors that people might find out there if they go online
and do a search for somebody? Tell us a little bit about the different types of advisors
that people maybe would or wouldn’t want to use depending on their situation. JEFF: It gets so confusing now because right
now everybody is a financial advisor. Everybody has that title. They used to be a stock broker,
investment advisor, insurance agent. Right now I talk to everybody and they say I’m a
financial advisor. I’m like what does that really mean? The different types would be
if you go to a financial advisor at an insurance company or insurance agency. It has just been
my experience that they are just going to lead in with some type of insurance product.
That could be an annuity. It could be some type of whole life or cash value life insurance.
Personally I’m not a big fan. I don’t want to start harping down on that, but those are
the ones that I would stay away initially. I’m not saying life insurance is bad. Just
be conscious of what their pitching to you and what they are trying to put you into.
If you go to any type of big brokerage firm it could be anywhere from a commissioned advisor
where they are going to sell you a mutual fund or an ETF, and they are going to earn
a commission off that product. They also could have a fee-based relationship or advisory
relationship where you are paying an ongoing fee, a percentage of your total investments
with them. Just make sure you are clear on that. Where the waters get muddy there is
you might pay an ongoing fee for your account with the firm, but there also might be transaction
charges within the account. There could be internal expenses within the investments that
you own. The next thing you know you think you’re paying 1% and you’re really paying
2½% and that really starts eating away at your money and it’s hard for you to grow it.
That’s why my heart goes out to the consumer because there is so many different ways. If
you don’t ask the right questions, if you don’t know what to ask, you’re just basically
at the mercy of this advisor. Just be abreast of that. The last one -we talked about doing
the annual checkup- there are a lot of fee only advisors that basically just charge you
by the hour. These are the folks that will just meet with you and analyze your situation
and give you a game plan. I think maybe even a financial coach maybe would fall in that
category of someone just giving them guidance on where they need to be. LAURA: Great! So what type of advisor are
you? Tell me a little bit about how you or your firm charges people. What’s a typical
customer’s fee structure, or what compensation do you get for a typical customer? JEFF: Sure. That’s a great question. Just
to give you an insight, I worked for the big brokerage firm so I’ve been that direction.
I know that structure. Then we left and we started an independent firm. When I became
independent I had the ability to do commission, and I had the ability to do fee. I was doing
that for about three years, and the conversations got so confusing because it depended on the
client and their situation. I liked it because in some cases maybe a commission relationship
was better for the client if they weren’t doing a lot of active trading. They just bought
one thing every once in a while. The majority of my clients I did on the advisory relationship,
the fee based where I was managing their portfolio helping derive income stream. Whenever I was
having that conversation with people I was like here I’m doing this and here I’m doing
this. I just got frustrated with it and really wanted to have a more stream lined presentation
or approach when talking to people. Recently, I just created my own registered investment
advisory firm where now it’s completely a fee-based relationship. The fee ranges anywhere
from 1-1½% as my ongoing fee. That is all encompassing. There’s no more transactions
charges. There’s no IRA fees. At this time that covers doing a financial plan for the
client and updating that on an annual basis. Basically the client can call me, not preferably
on the weekends, but they can call me whenever they need to if they have a question about
anything. I help clients figure out how much they need to save for their kid’s college.
I’ll take a look at their 401K. That’s not even part of what I’m managing, but I’m going
to take a look at it for them just to make sure it’s where it needs to be. LAURA: Excellent! That actually sounds like
a pretty good deal compared to some of the fees that I’ve heard. As a registered investment
advisor what type of responsibility do you have to the client? There’s a lot of confusion
in the market place about what is a financial advisor’s responsibility versus a broker’s
responsibility in terms of recommending a stock or an exchange-traded fund. I think
it’s important that people get to know an advisor who can give them some level of responsibility
versus just throwing out a stock here and there as a good pick that they think is hot
right now. JEFF: The big thing, the consumer may never
understand this, I know the profession or our industry is trying to do a better job
of making them understand, but basically the two key words here are suitability and fiduciary.
With the previous relationship it was more of a suitability issue where I would take
a look at a client’s situation and then I would recommend an investment that I felt
was suitable for their needs. It may or may not have been the right thing, but that is
what I felt based on the situation. Now as a registered advisor, as a fiduciary I am
solely responsible for my client’s best interests. I have to make sure I am doing what is absolutely
right for them and I am absorbing that role. Before I did an RA I saw that word thrown
out there a lot and know a lot of other RAs were throwing it out there and I’m like what
does that really mean. Now that I finally get it and grasp it it’s really important
to me. When I talk to other attorneys and other professionals and you talk about the
word fiduciary to them they get it. They understand what that means and that client-advisor relationship.
There’s a tremendous level of respect for it. LAURA: Yeah, I come from the real-estate world
years ago and fiduciary relationships with clients were very important in that industry
as well. So yeah, I want to make sure everybody gets that. If you go to a broker, they may
or may not have a responsibility to look out for your best interest basically, but a registered
advisor (RA or RIA), that’s part of the title. That’s part of the designation, that they
have a higher level of responsibility. I think that is a great designation to look for in
an advisor. Also Jeff, I wanted to ask you maybe a little
bit about the differences you see in men and women that come to you. I get a lot of questions,
different types of questions from men and women about finances and planning, and I am
wondering if you see a big difference working with a couple or just a husband or just a
wife. Is there a big difference in the way that men and women approach money and financial
planning? JEFF: Yeah. Not to say it’s 100%, but it’s
so funny when I look at my baby boomer generation of husbands and wives versus the Gen X generation
of clients husbands and wives. In my baby boomer generation I have husbands that worked
10-12 hour days, and the wife was the homemaker where they basically have relied on the husband
to make all the big money decisions. I always make sure I bring in both clients. She’s still
a part of the equation because that is the root of happiness or unhappiness if we haven’t
had the proper discussion. I want to make sure I want to understand what her thoughts
and concerns are. For the most part they’ve relied completely on the husband. Whereas
my Gen X I’m seeing more of the wives now having more of a say in the money matters.
The experience I’ve had in my own office is where wives are now saying we need to do this,
we need to do this. I think that sound good, that sounds good, but I see more of a leadership
role than I have ever seen before, especially with the baby boomer generation. I think that
is neat to see that. LAURA: Yeah, it is. I do a lot of one on one
coaching with folks and the majority of them are women who tend to be, like you said, taking
more of a leadership role for whatever reason. Maybe they are going through a divorce or
they’re just waking up and realizing hey, I need to be involved. I need to know what’s
going on for my best interests. I think it’s great that younger women and younger couples
are approaching money much differently than older generations, and it’s a really good
thing. JEFF: Another thing I will say I have noticed,
and I think it is pretty well universal is that women generally tend to be more conservative
in their investment tolerance. Even in that leadership role the husband wants to make
12-15% return whereas the wife generally is more on the conservative side, which could
be good or bad. I just want to make sure we’re where we need to be. That’s another thing
I have noticed is that women are generally more conservative. LAURA: Yeah definitely. I think women have
that bag-lady syndrome fear that we always hear. Sometimes women are really afraid of
the consequences of poor planning. That’s a wonderful thing, but you can take that to
an extreme where you don’t invest aggressively enough and therefore, you’re not going to
hit your retirement goal. I think having a balance there between a man and a woman’s
perspective really probably ends up helping overall if you blend both of those perspectives.
That’s great if people work on money together. The opinions voiced in this material are for
general information only and are not intended to provide specific advice or recommendations
for any individual. To determine which investment(s) may be appropriate for you, consult your financial
advisor prior to investing.

5 thoughts on “Interview Questions for Choosing a Financial Planner (GoodFinancialCents.com)

  • folks who bill themselves as financial advisors, i've found, are generally just traders of stocks and bonds, while folks who are titled as financial planners manage all of your investments, including savings, iras, and the like. that's my experience. i was curious as to what you do specifically.

  • Finding a financial planner who you can trust to manage your life savings and rely on their expertise to help you achieve your financial goals is really not an easy task. People should take down notes these interview questions when choosing a financial planner. It is how the planner answers these questions will in large part determine which financial planner deserves to get your business.

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