When I meet with a Financial Planner for the first time, what is the typical process?

When visiting with a financial planner that you are considering working with, treat the initial meeting as a mutual interview. The financial planner should ask you about your current financial situation, financial goals and your personality as it relates to investing. By getting to know your financial situation, the financial planner can begin to formulate an investment strategy that is specific to your needs.  At the same time, you should be prepared to ask questions that will allow you to determine if you would feel comfortable working with this financial planner.

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Do not feel that you need to work with the first person you meet with, you should interview at minimum 3 financial professionals.  Remember you can’t control what will happen in the stock market, but you can control your quality of service.  With this in mind, make sure to interview each advisor thoroughly so that you feel comfortable with your decision.  Depending on where you live, there are probably dozens, if not hundreds of advisors within a 30 minute drive from you, so if you are not 100% comfortable, keep interviewing. Just as you would visit several car dealerships and test several car models before making a purchase, you should make sure to check each advisor to make sure that the advisor’s qualifications, personality and overall business model match with your goals.

The goal of this article is to prepare you for the interview by letting you know what to expect, what to ask, and what you should know about your financial advisor.  By investing a small amount of time now, by setting forth personal financial goals, as well as some objective qualifications that you would expect of an advisor, you can save yourself from worrying about whether you made the right decision later on.

Determing Your Financial Goals

Your goals can be broad, such as wanting to be able to travel in retirement, or they can be specific, such as wanting to buy a new home within the next couple of years. Below are some areas for consideration before you meet with a financial professional.  Write down your goals and bring them with you to the interview.

  A. What are your goals? What are you saving for?
      Examples: A down payment on a home, vacation, sending your kids to college, planning for retirement.

 B. How much progress have I made toward obtaining each of your goals?
      Include how much you currently have and where it is currently invested.

  C. What is your time frame? How soon do I wish to accomplish these goals?
      Break each goal into short-term (3 year or less), medium-term (3 - 10 years) or long-term (10+ years)

Preparing for the Interview

By having your goals written, you are already ahead of most people when it comes to their financial planning.  It is important that you give consideration to each advisor so that you can be comfortable with making the most informed decision possible. This section is aimed at giving you some basic guidelines on what to expect, what to ask, and what you should know about your financial advisor. Make sure to write these questions down and bring them to your interview. Have the advisor answer as much information as possible, and write down the responses so that you are able to compare several advisors objectively later on.

Attached are some questions to get the information you would need to properly evaluate the advisors. Tip: Print these questions and take them with you to the interview.

 1. What Services Do You Provide?
      Tax planning?
      Estate planning?
      Insurance Reviews?
      Retirement planning?
      Recommendations for investments or investment products?
      Anything else?

 2. What licenses or qualifications do you hold?
      Do you hold professional certifications or designations?
      How long have you held each of these?
      What states are you licensed in?
      What types of investments are you licensed to offer?
      Do you belong to any financial organizations or societies? Which ones?

 3. How would you prepare my financial plan? Qualified advisors might use the following methodologies:
       Gathering current financial data
       Setting goals and understanding risk tolerance
       Analyzing and evaluating financial status
       Developing and presenting a full range of alternatives and their particular recommendations
       Preparing a written plan
       Counseling on how to implement the plan

 4. What continued services will I receive after the initial plan?
       Do you sell financial products?
       How often do you send out portfolio reports?
       What are your market research methods?
       Will I continue to receive written analysis of my financial situation and your recommendations?
       Will you provide continued advice on non-investment financial issues?
       Do you take possession of, or have access to my assets?

Look for a financial advisor who provides ongoing services to advise and assist in your plan's implementation as well as future plan revisions.

The next important area of questioning has to do with how the advisor is paid. At this point, your examination of what services the advisor provides should have given you a basic idea of how much value you would derive from them. Now, by finding out about the advisor’s fees, you can see whether you expect to get your money’s worth by hiring him/her. You should ask:

 5. How is your compensation calculated?
 6. Do you provide an initial meeting at no cost? (Financial professionals generally provide a free initial meeting)
 7. How does the advisor charge for the services?
         Hourly rate
         Flat fee
         Percentage of assets
         Commission (fee per financial product sold)
         Is the fee schedule flexible?
     
Although there is no best answer for everyone, it is important for you to understand how your advisor will be compensated. Hopefully, by having these questions answered, you will have a good idea of whether an advisor provides the services you desire. Look for a very strong fit here, but keep in mind that the more extensive the services are the more expensive they will be.

What About Your Credentials and Record of Integrity?

The advisors that you visited probably told you of their numerous qualifications. Be sure to do your homework on those designations, because not all designation are built on are equal.  Certain designations require significant study and examination, while others are simply marketing gimmicks that require minimal effort. Designations such as the Certified Financial Planner (CFP) designation is considered to be the highest for Financial Advisors and the Chartered Financial Analyst (CFA) is considered to be the highest among Asset/Portfolio Managers.

There are two main sources of information that will help you to answer this question: government agencies and fellow clients. Any financial advisor who provides advice about securities must be registered with the Securities and Exchange Commission (SEC) and/or the state securities agency, depending on the total value of assets under management. Most advisors will provide a roster of clients who can share their experiences with you.

Obtain a copy of the advisor’s registration form, Form ADV. Part 1 discloses information about the advisor’s education, business, and whether the advisor has had problems with regulators or clients. Part 2 outlines the advisor’s services, fees, and strategies. You can get Form ADV from the advisor, the SEC, or the state securities regulator, depending on the size of the advisor’s business.

Call your state securities regulator to see if the advisor has a record of complaints. You can also verify the advisor’s educational and professional background by going to the Broker Check section of the websites below:
  The Financial Industry Regulatory Authority (FINRA) at 800-289-9999 also provides information about the advisor’s licensing and any consumer or regulatory complaints.
  Call the Securities and Exchange Commission (SEC) at 1-800-732-0330 to verify that the advisor is registered with the SEC.
  The Certified Financial Planner (CFP) Board of Standards at 888-CFP-MARK(237-6275) will verify whether an advisor has earned the CFP designation. You can call the CFP Board of Standards (303) 830-7543, ext. 219 to check on license and disciplinary record of Financial Planners.

After the Interview

Now that you have met several financial advisors it’s time to start reviewing the information that you’ve received in order to make a final decision. Remember: make sure to select advisors based upon their qualifications rather than their personalities. While selecting an advisor that you get along with is important, it is even more important that they have the skills and knowledge to effectively handle your investments.

Review the qualifications that each advisor listed. Did anything stand out for each advisor that made you uneasy? Reassured? Make notes of such sentiments while you draw comparisons. Did the advisor listen to what your goals, risk tolerances and questions were?

An advisor’s track record is the best indicator of what the advisor will do for you. Explore further if there are any differences between what the advisor told you and what your research told you.

Making A Decision

If you have gotten this far, then you have just about all the information you will need to make a decision regarding which advisor seems the best for you. Don’t settle for someone you are unsure of because there are many advisors to choose from. You should be able to find one with a strong track record of providing the services you need at a reasonable cost. Most importantly, you should feel comfortable with the professional that you choose. You want someone that you have confidence in; after all, this is your money that we're talking about. No matter what his or her title is, your professional should seem like the right choice to you. 

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