Even though I absolutely enjoy what I do for a living, I am more than cognizant of the fact that not everyone needs to work with a financial planner. With that said, you can expect to receive different answers to this question depending on who you ask and how they serve their clients. Moreover, if you ask enough folks in the industry, you may notice that planners who provide their clients with unbiased planning advice – as opposed to selling products – are typically the ones who understand that not every client needs assistance.
In my experience, the initial meetings I have with prospective clients come about for a variety of reasons – some have just purchased their first home, others are expecting their first child, and many are hoping to connect with a planner who can guide them through all aspects of their situation (connecting the dots – as I like to say). The list is endless. But, within this first meeting I always try to connect with client on a level that allows us to understand if the working relationship will be a good fit. Both from a service / fee and personality standpoints.
Not every meeting should turn into a new client – as some situations are just not a good fit.
Some may be surprised to hear this, but I believe that folks who decide to meet with a financial planner should be guided on not only adjustments that can be made to their situation, but more importantly if the help of a planner is actually needed.
Therefore, I always tell people that when you meet with a planner you should be asking them questions similar to the following:
- Are you a Fiduciary? Do you move in and out of this capacity based on the services you are providing?
- Are you a CERTIFIED FINANCIAL PLANNER™?
- Are you an independent advisor?
- What types of services do you provide?
- Do you provide full planning services outside of just investments?
- Are these services one time or ongoing?
- How often do you meet with your clients within the scope of an ongoing engagement?
- How do you charge for your services?
- Planning fees?
- Investment Advisory Fees?
- Product sales (commissions)?
- What types of clients / families do you typically work with?
- Young professionals?
- Pre-retirees?
- Retirees?
- Business owners / self-employed?
- A mix?
- Do you manage your personal situation similar to how you advise your clients? If not, why not?
Asking some version of the above should shed some light on how the advisor operates, what services they provide, how they charge for their services, and what type of clients they usually work with. In my experience, when these specific areas are covered, the decision to move forward (or not move forward) with the engagement becomes that much easier.
In addition, these questions should help uncover if the advisor provides comprehensive financial planning to their clients, or if the services just revolve around investments and do not take tax, protection, or estate planning into account. With that said, the word ‘comprehensive’ is very overused in the financial services industry, but in its simplest form (and in my opinion), it means the advisor works to find the underlying purpose behind client’s financial intentions, then aims to communicate quality, concise, and accurate advice that provides them with the logistical facts needed to make informed financial decisions.
To bring this back to center, working with an advisor comes down to identifying if the services that will be provided, the cost, and the advisor’s style all align with what you need. In addition, if the advisor has the capacity or ability to continue to serve you as your situation changes. When diving into a family’s financial circumstances, it is important to remember that each situation is vastly different, and past decisions have often been affected by how financial management was taught in their household growing up.
Therefore, it is crucial to listen to client’s keenly from the very beginning in order to truly uncover their true intentions. This is also referred to as ‘going beyond the numbers’ – here I do my best to remind them that their financial assets are simply the mechanism to ‘fund their plan’ while their ultimate plan is comprised of how they ultimately would like to spend their time. If conversations like the above are not being discussed with a current advisor, it may be time to address these areas, or begin to explore what other options are out there.
Along these lines, I typically find that the majority of people who do not end up engaging with an advisor are people who are doing an awesome job handling their finances. They seem to be on track for their goals, have a good handle on their life plan, are investing well, have their estate plan in order – they do not need to be taken through a process to be told they are doing a good job!! When I encounter these types of folks, I am the first to proudly tell them that they are doing a great job, and to keep up the good work. At times in these conversations, I may find it appropriate to suggest a few minor tweaks, but in the end, I send them on their way, and tell them to come back to see me with any questions, and when they are faced with a problem they are not comfortable unpacking on their own. These types of people are referred to as ‘do it yourselfers or ‘DIY’ in popular culture.
With that said, I do find that most DIYers who seek the help of a planner do so because they are not acclimated with how protection, tax, and estate planning fit into their situation (or if these areas should). This usually occurs when an individual is faced with taking money out of their investments (for incomes purposes) rather than simply contributing to these accounts – this calls for a slightly different investment strategy. Other common themes, I see are when, a business is sold, stock options are exercised, or tax planning simply becomes too time consuming to figure out.
As humans, we all seem to be great at spending our pay checks and contributing to our retirement accounts, but we find ourselves lost when we retire and actually need to begin to spend the funds we have been saving for years. It is truly a psychological shift, and it is one that can be hard to overcome, especially if one does not enlist help. As you peel back the onion a lot of questions arise – which account do I start taking distributions from first? ROTH, pre-tax, taxable account, cash…. a combination? How / when do I start taking Social Security benefits, begin ROTH conversions (if necessary), purchase a second home (how should I fund this), how do all of these decisions affect my tax bracket? This list can become quite long.
Now, some people can certainly figure the above out on their own and do just fine, some very much enjoy being involved in these financial matters. While other folks do not want to spend the time here, they just want to live comfortably and enjoy their time with family and friends. In my opinion, you cannot put a price on guidance that can lead to experiencing a great level of choice and flexibility from a lifestyle and financial standpoint – a common reason why folks seek out help when big decisions are on the horizon.
In closing, working with a financial planner can deliver great value and comfort to an individual / family’s situation, however, the key in the decision to work with a planner is to find the right one to work alongside. If you truly connect with the planner on a human level, value their services, and believe in their philosophies, you have all the ingredients for a meaningful lasting relationship.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give tax or legal advice.
Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.