Money Matters
Donald E. Askey
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A meaningful experience with a financial planner is as much a function of the quality and experience of the planner as it is the clarity of your purpose. That is you, the client.
Why bother with a financial planner if you are not clear about what you are looking for and what you expect from a planner? Are you looking for easy answers or silver bullets? Are you looking for a quick fix? Are you using a planner to help manage your spouse's bad money behaviors? Are you simply looking to validate your own ideas?
Just be honest with yourself and with your partner about why you think a financial planner might be helpful. Then be candid about your expectations with the planner. So, now let's look for the planner.
Let's assume that you are going to do thorough research on a prospective planner and that you are not simply going to accept the rave reviews of your moneyed friends.
Your research should address four distinct areas from the purely rational to the emotional: credentials, process, compensation and conversation.
For credentials, you can easily use online resources available through the Securities and Exchange Commission and the Financial Industry Regulatory Authority. For information about firms and individual advisers and brokers, go to www.sec.gov/investor/brokers.htm. Bear in mind FINRA regulates brokers, individuals or firms selling product for commission. The SEC regulates fee-based or fee-only firms and their registered representatives.
The regulatory sites will not have all of the information you seek, but they will help you determine that an individual or a firm is properly licensed and what, if any, disciplinary actions have been taken.
Well over two dozen different and similar-looking designations appear behind the names of advisers and brokers. Research those carefully. The most widely recognized for financial planners is the CFP. Check www.cfp.net/search for confirmation of active CFP licensure. If a fee-only adviser is important to you, check www.napfa.org for the National Association of Personal Financial Advisors listings.
I would discount so-called experience as a key evaluative criterion. How many years a person has been in the saddle is not a good indicator of an ability to translate your needs into benefit for you. Experience is also all too easily subject to hyperbole. If you stick with credentials and your layperson's interpretation of the planner's process and first meeting, you will have all you need to make the right decision for you.
Let's turn to the planner's process. Does the planner have a clear and focused client profile? It is preferable to you that you be in the planner's sweet spot for service: Are your circumstances similar to the planner's ideal profile? Planners who may accept any breathing client are not likely to be running efficient businesses. You may be today's ideal, but what about tomorrow?
Does the planner behave like a consultant or coach or more like a salesperson? Is the planner telling you how his firm or his process can beat the market or outperform some other adviser? Beware.
Entering into an engagement with a planner, whether for a short assignment or for longer-term asset management, should be the beginning of a well-articulated process. Be clear about what the process is.
Credentials and process are objective measures for evaluating a planner. Compensation is also a quantifiable measure. As a client, you want to be open-minded and clear about the difference between fees and charges you can see and those you can't, such as in so-called no-load funds. The most fully transparent compensation arrangement is fee only. But as a client, you want to be honest with yourself about whether you prefer fees you don't see in contrast with those you do see. And is the planner fully disclosing the fees you don't see?
The most subjective evaluation measure occurs at your first face-to-face conversation with the planner. Since this is a mutually evaluative meeting, you should expect it to be complimentary. I recommend prospective clients come to this meeting with a stop watch and keep track of who talks the most: you or the planner. If the planner has consumed more time than you have overall, then you've just met with a talker and not a listener. Beware.
The ideal planner, again, has a well-defined process for this first meeting. The planner should spend most of the time listening carefully to your answers to his or her questions. You will know at the end of the meeting whether you were sold or listened to. That feeling should inform your choice of a planner.
The value of a financial planner is in helping take you to a place of greater financial comfort and security sometime down the road. The planner cannot take greater care of you than you are willing to take for yourself. The best financial plan is a collaborative effort based on mutually clear expectations.
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Donald E. Askey, a Certified Financial Planner (TM) professional and president of Provident Advisory Group, is a registered fee-only adviser. For questions, visit www.providentadvisory.com.
