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Yes, vetting a financial planner is still entirely on you. Sorry. Here are some questions that can help.

Flow FP's Block Woman examines potential advisers with a magnifying glass.

I’m guessing you don’t follow the financial-services media, so you probably missed the recent Giant Kerfuffle: the CFP® Board decided to remove compensation method from its Find a Planner tool.

It had some (not particularly convincing sounding) patter rationalizing the choice, but regardless of the merit of the change, what it means in practice is that you the consumer, you the investor are now responsible for figuring out Yet One More Thing about the financial planners you’re researching.

Every now and again I feel compelled to write Yet Another Article about how to vet a financial planner (and here’s yet another one) to see if they’re the right one for you. The longer I am in this profession, the longer I run my firm, the more important it seems to me to broadcast this information. This is one of those times.

What do you need to ask a financial planner to best understand how they work, and if that’s right for you?

“Are you a fiduciary? All of the time?” Being a fiduciary means, in layman’s terms, that I have to put your interests ahead of my own. It’s certainly not a perfect standard, and some pretty crap advice has been known to come from the mouths of fiduciaries.

But it’s also certainly better than any other standard out there in the financial-service industry, notably, suitability (imposed on professionals who are, in practice, salespeople, not advisors) and Best Interest Standard (a standard imposed within the last year, that is a confusing mashup of suitability and fiduciary).

The second part of the question “All of the time?” refers to the fact that some advisors out there are “hybrid” or “dual-registered” advisors, or wear “two hats.” They are subject to the fiduciary standard in some interactions with you, but not in others.

I’m gonna take a bold stance and say, if you’re looking for advice, you want someone who is a fiduciary 100% of the time.

“How are you compensated?” At a high level, we’re talking “fee-based” (now called in some circles “commission + fee”), “commission,” and “fee-only.” But I’d dig a little further. Advisors can charge:

  • commissions on financial products they sell to you
  • a % of the assets they manage for you (the most common “fee-only” arrangement)
  • By the hour
  • By the project
  • A fixed fee per month/quarter/year

Or, exciting! Some combination of these. “Fee-based” is the (intentionally confusing) marketing term that means “commission + other kinds of fees.”

Understanding how your planner is compensated tells you two things: How much you might pay, and where their incentives lie.

My firm charges a fixed annual fee. We are fee-only. I will note, however, that I have not arrived at the point where I think good advice is only available from fee-only planners.

“What are the costs to me?” This is very similar, but not the same, as the above question. What else is there? This mostly has to do with costs involved in investing your money.

  • “What are the typical annual costs of the investments or insurance products you use in client portfolios?”
  • “What kind of trading fees are typically incurred during a year?”
  • “And, just generally, are there any costs I might pay that are above and beyond the fee you receive?”

For example, in my firm, we invest your money in extremely low cost index funds and exchange-traded funds (under 0.20% annual expense ratio). Trades for ETFs and stocks are free, while trades for index funds are $24 (and we pay attention to that cost when trading). We do not put your money in insurance products or any, more-complicated investment products.

“What kind of people or situations do you have particular expertise in?” Ideally, you want to work with someone who works with people like you on issues like the ones you have. This can include both official training and designations and degrees, and also experience and the way the person has designed their practice.

I have the CFP® certification (which I think is important) and a Masters in Financial Planning, but I provide a lot of value—especially around life planning, company stock compensation, and tech-industry specific knowledge about employee benefits and 401(k)s and career trajectories and what it’s like to be a woman in tech—that the CFP training doesn’t even touch.

“What does your process look like? Both when I’m a new client, and after the initial work together? What does Year 1 look like? What about Years 2 and beyond?” For example, the first 2 of my meetings with new clients don’t talk about money at all. We’ll likely get into month 2 before we start working on the numbers and the spreadsheets and the Official Financial Planning Strategy. (Unless there’s something urgent in your life; we also deal with urgent matters, well, urgently.)

If you want to get to the investment or stock-option strategy like now, and don’t want to have all those woo-woo conversations about a fulfilling life, then I am probably a bad financial planner for you.

Not so much a question, but a feeling you get: Do you like this planner? Are you comfortable with them? Can you imagine talking with them about important things? ‘Cause you’re gonna have to.

As I often lament, choosing a good financial planner is still pretty much entirely on your shoulders. Neither the government nor the financial-services industry does much to help you reliably filter down (or out!) the hundreds of thousands of financial planners, many of them “so-called,” to be sure.

I’m so sorry. If it makes you feel any better, even I am still confused by many parts of the broader industry, how people work, how they get paid, the business organization they operate within.

If my answers to the above questions fit you and your needs, reach out to me and schedule a free consultation.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.

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