How to interview a financial planner

Your retirement accounts might be the biggest pot of money you’ll ever get your hands on. So why do we spend more time picking out a pizza restaurant than a financial advisor? It can be pretty intimidating to interview people to handle our money – how do you know the right answers if you’re not sure of the questions?

This list will help give you confidence when you meet with a prospective financial planner. Take a notebook to jot down responses and observations. Be sure to get answers in writing. Take a friend or spouse along to get their point of view. And if your prospective “hire” seems reluctant, too busy, or too “important” to have this talk, then move on to someone who will appreciate your business.

Doing business

  1. Explain your investing strategies and beliefs. Some examples are: what do you invest in (stocks, mutual funds, ETF’s, bonds, combination)? How do you choose what you buy with my money?
  2. Do you give financial planning advice and do I pay separately for it?
  3. How much can I expect to pay each year?
  4. What safeguards do you have in place to ensure my money will not be stolen? What custodian will you use to hold my money?
  5. Will you recommend any proprietary products? If so, why? (A proprietary product is one that is manufactured by the firm you are dealing with, or affiliated firms, such as American Funds, Vanguard, etc.)
  6. How do you define risk tolerance and how do you determine what amount of risk is appropriate for me?
  7. How do you get paid? Do you make anything from recommending or selling specific products to me such as annuities, stocks, bonds, etc.? Could you receive any payments or benefits from third parties as a result of working with me?

The relationship

  1. Describe your typical client. (Such as: age, amount invested, individual v. business, etc.)
  2. Will I work with you or someone else?
  3. How often will I see you? Will all meetings be face-to-face? How long does it usually take to get back to your clients? How do you prefer to communicate (phone or email)?

The advisor

  1. What are your credentials?
  2. How long have you been doing this?
  3. What continuing education have you had in the last two years? Were there any sponsors? Who paid for it?
  4. What professional organizations do you belong to?
  5. Can I have a copy of your resume?

Of course, as I pointed out in last month’s article, finding an advisor who works as a fiduciary is where you should begin, and many of these questions are designed to find out whether you will have that relationship. But there is another way: ask if the advisor will sign a fiduciary oath. The Committee for the Fiduciary Standard is a volunteer group of individuals who advocate for the fiduciary standard of conduct before Congress, the SEC, and other agencies. You can print out their template for your advisor’s review and signature. If your prospective hire has a problem with this oath, don’t waste your time there.

After the interview, you should request a copy of the firm’s Form ADV Part 2, often called the firm’s “brochure”, if they haven’t already given you one. This is a disclosure document with information such as services provided and associated fees, information about the firm, and so on. It also lists potential conflicts of interest and tells you if the firm or advisor has ever been disciplined for any reason and. (You can also look up this information at BrokerCheck®.)

One last thought: you may believe your hands are tied if your retirement money is “stuck” in a 401k at work. But you control the important decisions: how much you contribute and your portfolio choices. In our business, a 401k held at a client’s employer is called an account “held away”. Often, financial planners will advise on held away accounts for an hourly fee. For a few hundred dollars a year, your advisor will design a portfolio from the options available at work and give you advice on annual rebalancing. You can also get advice about how much to contribute to your 401k, tax strategies, and when to redirect money to a different account, such as a Roth IRA. The cost of this advice should pay for itself many times over as you invest strategically for your future.

Don’t settle for someone who’s more interested in what they can do to you than what they can do for you. And go into that meeting with the confidence that it is your money and you have the power.

Does your advisor save or cost you taxes?

How to find a GREAT tax pro

The 3 advisor licenses to look for

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