12 Questions to Ask Your Financial Advisor (And My Answers)
1. Are you a fiduciary?
Yes, both by law and in word and deed.
2. Why do I need a financial planner?
For the same reason that people need doctors, attorneys, and CPAs.
If you don’t have the time, knowledge, or desire to learn everything you need to develop and implement a financial plan, you need a financial planner.
Only you can truly answer this question, though. I’m not here to convince you that you NEED a financial planner.
3. Which types of people do you not work with?
When we first meet, I’m looking to see if we’re a good fit for a long-term planning relationship. Some examples of relationships that don’t mesh well are:
- DIYers: If you can do the planning yourself, it doesn’t make sense to work with a financial planner.
- Market Timers: If you want a financial planner to predict when financial markets will rise and fall, move along. We don’t do that here. We focus on those things we can control… i.e. our behavior and actions.
- Second Guessers: Having your own knowledge on finances is great! In fact, a big part of my job is education so clients understand the “why” behind our choices. Financial planning is imprecise… our goal is to be generally right in our actions and decisions. If you are the type of person to tell your doctor what sickness you have or medications that should be prescribed, we aren’t going to work well together.
- One-time Questions: If you just need one or two questions answered (taxes, for example), I will answer them to the best of my ability, but it won’t make sense for us to work together. My business is built around serving clients for years and, eventually decades. If you are just looking for a meeting or two, other advisors offer that service but I do not.
4. How do you get paid?
My ongoing fees for comprehensive financial planning and investment management are an annual fee of 1% of managed investments, calculated and billed monthly… with a $1,800 per year ($150 per month) minimum. In practice, I take the account value on the last day of the month, multiply it by 1%, and then divide by twelve. In cases where the resulting total fee is less than $150 for the month, I will bill you for $150 total.
I also charge a one-time fee of $500 to begin the financial planning process.
I charge no other fees. You as the client are the only person who pays me… because I work for you. I receive no other fees or payments from any other person or company.
In some cases, we may work with other people or organizations that charge for services such as insurance, tax preparation, and estate planning. However, it is always your choice to work with them. Your fees paid to these third parties are of no financial gain to me.
5. How will we work together?
My initial financial planning process is generally structured over 4 meetings, depending on complexity. Once we agree to a plan framework, we work to implement the financial plan which can take additional meetings, emails, or phone calls.
I also have an annual schedule of planning work that I follow once we implement your plan. A general expectation is that we will meet 2-4 times per year in a regular rhythm. In between meetings, we can and will exchange regular emails and text messages.
That’s in a perfect world. My clients live in the real world… which means things change in a sometimes predictable and sometimes unpredictable manner. Many of my interactions with clients are driven by changes in their lives and financial challenges and opportunities. As such, we don’t always stick to a strict meeting schedule. We can exchange emails and schedule meetings on an as-needed basis as well.
6.What’s your investment philosophy?
The core investment portfolio in a financial plan should consist of a broadly diversified, low-cost portfolio of stocks in companies from around the world. From there, I will modify the primary client portfolio based on their risk tolerance and add assets like bonds, gold, and commodities as appropriate.
Asset allocation is the primary determinant of investment returns. Client behavior is the primary determinant of investor returns.
As we move through life and grow our wealth, we can add other investment options like trend-following strategies, cryptocurrencies, and other real assets.
7.What if I don’t have a lot of assets to invest?
That is a reality for many people… which is okay. I designed my business to help people build wealth, not just people who have already done so. In fact, several of my clients have started working with me while they had a negative net worth and we’ve successfully taken care of debt and started investing.
My financial planning fee is specifically set so I can work with people just starting their financial journey. The majority of my services are focused on planning for debt payoffs, life insurance, optimizing employee benefits, minimizing taxes, etc.
8. What types of clients do you work with?
First and foremost, my primary business focus is on military veterans who are making the transition to a new career following their military service. I spent 8 years in the Army and have specific and extensive knowledge of military benefits and the challenges faced by Veterans as they leave the military.
By extension, I also work with younger professionals (20s, 30s, and 40s) as many of the challenges and opportunities are the same as Veterans minus the military-specific financial considerations.
9. Do you do taxes?
Yes, tax planning is an important part of the financial planning process… both long-term planning and year-to-year decisions. We tip our servers, not the IRS.
I do not prepare and file tax returns. I partner with a tax preparation company if you need this service and will act as the coordinator of this process for no additional charge, but that company charges separate fees for tax return preparation and filing.
10. How many clients do you have?
As of July 2021, I serve 20 client households. The way I manage my business, the strong friendships that I have with clients, and the high-touch nature of my style of financial planning will limit the total number of clients that I can service… probably in the 40-50 range.
I can promise that there will never be layers of assistants to limit your access to me.
11. “Other Company” charges 0.3%, why should I pay you more?
You are absolutely welcome to use other, less expensive services. In fact, if you are just looking for a generic investment portfolio, I recommend that you try one of the “Robo advisors.” You can get a well-diversified portfolio for even less than 0.30%.
You must ask yourself what services you want. Do you want some generic financial planning? Do you want to spend a few minutes on the phone with someone who services hundreds of clients to get an investment recommendation?
If so, go right ahead! I can’t and won’t compete for that business.
If you want comprehensive financial planning with extreme attention to detail and focused on you as a unique individual or family, you won’t find it for 0.3%.
12. Can you manage just a portion of my investments?
No. As we complete the financial planning process, I will make recommendations including the investment portfolios, savings rates, and investment account types. One of the biggest challenges in financial planning is plan implementation. Accounts managed elsewhere or not managed at all leaves room for significant error.
As an example, before I gained the ability to directly manage 401Ks, I would provide portfolio recommendations for clients to execute. In several instances, the client forgot to execute that recommendation, costing them thousands of dollars in investment returns.