It sometimes seems like once you’ve figured out part of the investing world your needs change. Maybe you understand how to maximize your retirement savings but now need help on college savings for your children. Or perhaps you’re closing in on retirement and don’t understand how to best start withdrawing assets that you’ve built up over the last 40 years. These are specific situations where you might benefit from talking to a financial professional.
However, unlike doctors or lawyers, anyone can hang out a shingle and call themselves a financial pro or retirement specialist. Given you’re dealing with money – sometimes extremely large amounts – this is not an area where you want to make a mistake.
Types of financial advisors
Financial advisors can run the gamut from people who are simply selling what their company wants them to sell (your needs be damned) to those who hold themselves to a fiduciary standard of only suggesting products or advice that are in your best interest. There are really two keys: who they are looking out for and how they are paid.
Fee-only financial advisors. As the name states, these professionals make money from the fees you pay, whether a percentage of assets, an hourly rate, or a flat fee. They may be fiduciary financial advisors where they provide advice that’s only in your best interest, or financial advisors who provide advice/products that are simply “suitable” for their client.
Commission-based financial advisors. For the longest time, this was the norm in the industry. Some offer free advice but you end up paying through higher expenses on the securities in which they invest your money. Others charge fees and still earn a commission from your investments. Most often, commission-based financial advisors provide the suitability standard for their clients.
Determine where you need help
Before you begin researching financial planners, map out specifically what you’re looking for. If you’re going to ask about saving for your child’s college education, gather as much information as you can beforehand. Are you saving for only one child or are more on the way? Do you think your parents will kick in some money for their grandkids? Are you going to push an in-state public college or be open to any school across the country? Understanding what you want will help focus your priorities to find the best planner who can meet your needs.
Average fees
Hourly fees for a fee-only planner start at around $150 and go up from there. If you choose this route, find out the approximate number of hours the planner thinks it will take to meet your needs.
Some will charge a flat fee for a comprehensive plan (a retirement withdrawal scheme along with best ages for you and your spouse to claim Social Security, for example). Costs for this can run into the thousands.
You may also find a planner that provides a set amount of work for a monthly retainer of $100-$200 per month.
Research fee-only planners in your area
As more people turn to robo-advisors to save and invest for their specific goals, financial planners are realizing they need to shift more of their business to the advice side of the spectrum. That’s good for you if you’re looking for a one-off meeting with a planner.
To start, look at several organizations that provide a network of financial planners, including the Alliance of Comprehensive Planners, the Garrett Planning Network, and the National Association of Personal Financial Advisors. Additionally, NerdWallet notes that you may be able to take advantage of less expensive financial help (if your needs aren’t too complex) through the Association for Financial Counseling & Planning Education.
Using these organizations can help you create a list of potential candidates, but don’t forget to ask people you trust for their recommendations. When you have narrowed your list down to three or four, call them (or visit their website) to ask about their credentials and compensation, along with how to set up the initial meeting. Definitely find out their fiduciary standard – are they looking out only for your best interests – before scheduling an in-person meeting.
Questions to ask
Your first meeting with a planner should be a time for both of you to learn about the other person and your comfort with each other. As part of that, you should be given plenty of time to ask any questions you may have. Several you should ask include:
- Are you a fiduciary, in that you will provide advice and suggest products that are only in my best interest? (Yes, ask this in person and get it in writing.)
- Are there any times you will not be acting as a fiduciary?
- How do you make your money?
- What kinds of clients do you normally work with (age range, building up assets, starting to withdraw assets, etc.)?
- Can you provide names of clients who would recommend you?
- What information do you need from me to move forward?
- (Since this is a one-time meeting) – What is your estimate for the cost for this advice and how often will we meet before the plan is completed?
- (If it’s a wide-ranging plan) – What is your estimate for this type of plan? Also, how much to revise the plan if the markets tank or my situation changes?
Usually the first meeting is at no charge. If the planner provides answers you’re not comfortable with, challenge them on why they do it that way. If you leave the meeting and still don’t feel comfortable with the planner, don’t ignore the feeling. Contact the advisor to discuss your concerns or simply consider another person on your list. This decision is too important to not feel confident about your choice.
Also, once you have your specific one-off needs met, your advisor may pitch managing all of your financial planning. Perhaps you would benefit from this, perhaps not. But most financial planners will probably make an attempt to keep your business. If you don’t like being put on the spot, prepare a response such as I’ll give it some thought but I’m happy doing the majority of this on my own.
Financial professional services can run the gamut from a comprehensive plan to a sanity check for something you’ve researched and planned out on your own. Whether you need their advice is up to you. But if you do, by following these steps you can identify a financial advisor who can assist you.
Photo by Scott Graham