Gimmicks. Big words, expensive cars, and fancy suits. Promises, pages, and pages of glossy reports, pie charts, and stories about how their perspective is special because of their history. We call them asset-gatherers, and they are many. They are hunting for money, and you are their target.
Have you ever wondered why it seems like you must turn over your life savings to someone you barely know, just to get some financial advice? Have you been working with someone for years and, at some point, felt like you or your spouse are being forgotten or ignored? Are the answers to your questions always the same? Do you even get answers to your questions?
What happens more often, your financial advisor asks:
- For referrals? -or-
- If he/she could be doing something (or anything) better to help you?
Chances are, you are dealing with an asset-gatherer, not a financial planner. This is an important thing to know because they both have very different perspectives on what their job description is and who they work for. An asset-gatherer represents a firm, and their primary job function is to bring in investments for the firm to manage, and they are contractually limited to have very little fiduciary obligations to you. A financial planner is different in that they generally have a contractual, fiduciary responsibility regarding all the advice they give you, and therefore your results matter – IN A VERY BIG WAY.
When you are considering whether to hire a financial advisor for the first time or if you should change advisors, here are some pointers that might help you:
If it is free, is it really free? If you can get a financial plan for free, there is an issue. If you are required to turn over the management of your investments to get a financial plan, there may be an issue. Some financial planners charge an annual percentage of the assets for which they are designing a financial plan for and therefore offer investment management services as a part of the fee. If the planning is free or requires investment management, you must:
- Access their planning expertise. Is financial planning their primary focus, or do they offer it just to get your investments?
- Assess their investment expertise. Financial planning and investment management are entirely different specialties. What is the value of their investment management program in relation to your situation, and why do you need their investment expertise?
Best practice: Hire a financial planner who can provide a financial planning service without requiring investment management. Hiring an advisor means that you are charged a reasonable fee for the financial planner’s time and expertise. Comparable to paying an attorney or CPA, if the services are too inexpensive, then the advisor may not have the expertise you expect and need. If the services are free, you have not actually hired anyone.
True friendship comes free. A financial advisor provides a professional service, so try to avoid looking at your financial advisor as a friend. This sounds harsh, but you need someone to tell you what you need to know, not what you “want” to hear just to keep you satisfied. You also need someone whom you can speak frankly with if you are not getting the service or advice that you need. I am not saying that you cannot be friends with your financial advisor. I am saying that you are paying for a service, so you need to get results commensurate to what you are paying. If you feel trapped between losing a friend or not getting good advice, then you need to make a change.
Fee-only (reference form CRS). Do you really want to work with a financial advisor who has no way to charge you for providing financial advice, outside of selling you some sort of investment product or investment management service? If you only need or want advice and not investment help, then why pay extra? Find a fee-only financial advisor and pay special attention to the word that follows fee-____. A fee-only advisor is very different than a fee-based advisor. Although they sound alike, fee-only advisors generally carry an ongoing fiduciary responsibility to their clients and are restricted from making any sort of commissions, kickbacks, or any other type of unlevel compensation based on which investments they recommend to you. Fee-based advisors can move back and forth between services that require a fiduciary standard, so you may not clearly understand who benefits more from the new investment or insurance they want you to purchase (you or them). Recently, the SEC started requiring firms to provide a Client Relationship Summary (form CRS) to all clients and prospects prior to engaging in new business. The form is written in plain English and standardized. You can use the form to easily identify if your financial advisor is fee-only or fee-based. Fee-only advisors will have a 2-page form and it will be very clear about how they charge fees and that they do not receive commissions. Fee-based advisors will have a 4-page form; 2-pages for fees and 2-pages for commissions.
Your money, your life. Get the most out of both. Good financial planning drives good investment decision making. The combination of good planning and good investment decisions leads to financial success. When you have financial success, you have less stress, more time for things like family, entertainment, fun experiences, and great conversations with friends. Get your money to work for you by getting a financial advisor who works for you, not for your money.
We have released a series of articles describing the types of relationships you could have with financial advisors and professionals and the ways you can engage in business with them. Here are three other resources that could help you on your financial journey:
- Fee-based or fee-only financial planner – what’s the difference? Read here.
- Does the age of your financial advisor matter? Read here.
- The effects of fees over time. Read here.
- What are you paying for? Read here.
Would you like to speak to our team? We offer a no-cost, no-obligation first discovery meeting to learn if planning is appropriate for you. We have video-conferencing technology and are not limited geographically. Wherever you are, if you need help, we can help you! Connect with us by filling out our form at www.seedpg.com/contact.
S.E.E.D. Planning Group LLC (S.E.E.D.)is a Registered Investment Advisor (RIA) with the Securities Exchange Commission. S.E.E.D.’s team provides investment fiduciary and fee-only financial planning services to clients. Our fees are disclosed, easy to understand, and not predicated on product sales.
Travis Maus is the managing partner and a wealth manager at S.E.E.D. Planning Group, LLC. He earned the Accredited Investment Fiduciary Analyst® (AIFA®) designation from the Center for Fiduciary Studies®, the standards-setting body for Fi360. The AIFA designation signifies the ability to perform fiduciary assessments measuring how well investment fiduciaries are fulfilling their duties to a defined standard of Care. As a wealth manager, he is also a member of the firm’s Financial Planning team where he provides coordinated and strategic financial planning and investment services to families and small businesses.