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Am I Ready to Hire a Financial Planner?

Are you ready to hire a financial planner? Now I bet if you're going to this boot camp right now you're thinking, uh no, definitely not. And that's totally okay. But I do want to get into who they are, what they do, and how to make sure that you're hiring someone that's good for you and your money. What does a financial planner do? Well it depends and it depends on their certifications and what you're looking for, but a great one is someone that's helping you get your financial house in order. They're helping you protect your money, grow your money, build your money. Probably putting systems in place to protect you from yourself, so that if things are happening, like for example if you're investing and the stock market is going down you might start to panic and you naturally would have sold a bunch of your investments and perhaps locked in your losses and that wasn't a good time to sell. They're probably gonna get on the phone with you and say hey, we've got a plan, there's a strategy ...

in place, we put this investment plan in place knowing that these kind of things would happen. This is not a good time to sell. They can kinda talk you back down. They're also people that can help make sure that you have everything that you need for your overall financial life, not necessarily just linked to getting the most bang for your buck, but also things like estate planning, how to be thinking about the future in that regard, getting the best investment products, perhaps making sure you have the proper insurances in place, and that's also going to get into how to make sure you're finding the right person. Because all those different types of opportunities definitely means that you can be working with somebody who's getting a kickback and they're not getting you the best possible product. So we're certainly gonna dig into that today. But the baseline thing to know is a financial planner is an objective third-party person who is well educated, if you're picking the right one, in finances so they're able to help you keep your financial house in order and protect you from yourself in some cases. Now a lot of people think you either need to look like that or that your financial planner is going to look like that and that is not necessarily true. You actually might be more ready than you think to hire a financial planner because it's not longer true that you need to be in quote the double comma club, meaning you have a net worth of at least a million dollars, to get access to one of these guys, a financial planner. And they don't all look like that either. That's an important thing to know, but I think we often when we conjure in our minds think that that's either someone who uses them, or that's what they all look like. And I'm also going to blame movies like Wall Street for that reputation as well. So times that it might be right for you to reach out to a financial planner and have one in your life include big life steps like getting married, buying a home, starting a family. Inheriting wealth is definitely a big one where it might be helpful to have somebody in your corner, as well as getting divorced. So pretty much any major life step. It could be incredibly helpful to bring in an objective third party to check in and make sure that you are making the right moves for yourself and your money and your family. This is an incredibly key concept to understand when it comes to financial planning and moving forward. And that's the difference between fiduciary and suitability. These are two big terms you're gonna hear thrown around. What you need to always remember is you want to partner with someone who is a fiduciary. That is the word you want to remember. And what does that mean? A fiduciary who is somebody who is legally obligated to recommend to you the best possible financial products for you and your situation. That should be any financial planner's job, but legally they don't have to do that. They have to legally only adhere to the suitability rule which basically recommends that they are doing something that is suitable for you, that's it's not going to harm you that they do this, but it might not be the best possible thing for you. Now there's a lot of shades of gray in there because that means they could be recommending or even selling you financial products that they get a kickback on. And they're also obviously encouraged by perhaps employers or institutions to sell those to you and they get a commission on it, but it's not actually the thing that's best for you, but it's not gonna hurt you, so legally they can get away with it. Which is why I want you to always remember fiduciary and you only ever want to work with a fiduciary. And how do financial planners get paid? They are a few different ways. One, it could be based on commission. Probably someone you don't want to work with. If the only way they make money is commission that should definitely be a big red flag for you because if that's the biggest way they get paid they they're going to be incentivized to be putting things into your overall plan and portfolio that get them the most commission. Going back to the suitability idea, it's probably not the best thing for you, it's just okay. Another one is fee only. So this keeps it a nice, clean relationship. You just pay them a fee every single, perhaps, month, quarter, year, whatever the structure is, and they help advise and guide you. But they don't get any commission off of anything they put into your portfolio. And then there's fee and commission. Sometimes this is called fee-based. It's a hybrid of the two. They probably will take a fee from you and in addition they legally can also sell you or put financial products into your overall portfolio that they get a commission on. I'm not going to actually lambast that because there are some really great credible financial planners who use this, but they're above board about it. They tell you if they're gonna get a commission on it, they tell you how much it is, and they should be able to justify why that is still the product that they think is right for you and if you disagree you should be able to put another financial product into your overall financial plan. So this is three different ways that planners usually get paid. Another one you're gonna hear about a lot, just generally if you're ever researching financial planners is this idea of AUM, or Assets Under Management, which means they get a percentage of your portfolio as payment. That's really where you have this idea that if that cliche stereotype of needing at least a million dollar net worth in order to talk to a financial planner and get access to one, because of course if you are getting paid in assets under management, then you want the most amount of assets possible that you're managing, so you get more money and it's more worth your time. That's really where that idea comes from. Certainly a ton of financial planners and advisors who still work with that method, but you also are seeing a lot more now that are fee only and that does cater more towards younger Gen X, Millennials, and of course future Gen Z folks who maybe aren't in that sort of double comma net worth land, at least not yet. And again this fee only does really simplify your relationship with your financial advisor. I think it promotes this inherent amount of trust that you can have in them because you know they're really never trying to sell you anything that is nefarious or just getting them the absolute most bang for their buck with very little regard to you. There is actually a gold standard when it comes to financial planning. Now unfortunately the government actually has never really quite stepped in and regulated this industry in the same way they have with perhaps medicine or law. You understand what a doctor and a lawyer is, the kind of education they have to go through, the certification they have to go through. Well with financial planning, there is an institution that's sort of arose from this, a lot like absolute gray area that it was and that is the CFP Board, Certified Financial Planners. So CFPs are people who have to go through a very rigorous training program in order to, and then pass a test and have a certain amount of experience in order to maintain the CFP license. They also are required to be a fiduciary so that really does help simplify your situation. And when you're looking for one I encourage you to check for a CFP designation. You don't have to. There are some great planners who are not CFPs, but if you want the best of the best, I would go there. You can the check the validity of their title by going to the CFP Board website. There's information about making sure that they are actually properly accredited, that they're all up to date, there's nothing outstanding. If there's any sort of black marks on their record it's gonna be recorded there. You can have your advisor sign a fiduciary oath. You can actually just look up that term and you can Google and download this fiduciary oath you can take into them. Again, if they are a CFP they should already be a fiduciary, but you can have them sign a fresh oath just for you at the beginning of your relationship if you want. If they just say yes, I am a fiduciary, but I refuse to sign your oath, that could be a little red flag for you. (laughs) I also want you to make sure that the advisor has worked with clients in your specific type of financial situation. People obviously will niche and specify into different areas. So there could be someone that is just so air tight with estate planning, they are going to be able to get you anything you need to know about a will, end of life planning, insurance, planning for your retirement, passing down wealth to people in the future, inheriting wealth yourself, those are your guys. If that's not your phase of life, you might want somebody that knows the ins and outs of everything related to student loans as well as investing. And those are the people you want to focus on. If your advisor doesn't have any experience with clients who have been struggling with student loan debt and that's something that's part of your financial health picture, maybe that person's not the perfect fit for you, but they might be able to refer you to somebody who is. So always, you know, never be afraid to ask. And like I just said, they need to be an expert in your particular area of need. Now one thing to know as because of client privilege type things in this industry they usually can't refer you to somebody else to be an endorsement because they are kind of protecting their clients in that regard. So you're just gonna need to straight-up ask them have you had experience with anybody who has student loans. Is this something that you know a lot about? Generally they are gonna be forthright with you because if they're not, and they don't do a good job, you're going to fire them and move on to someone else, and they usually are very connected to each other so they hopefully can refer you to somebody else who can help, if that's part of the situation. And I'd love for you being with somebody that's fee only. Again, if they are fee-based, I'm not saying immediately write them off but have a conversation about what that means. Now if you're not ready for a full time planner there are certainly other options for you. Usually you want to think about a financial planner as being somebody with whom you're in an ongoing relationship. You are probably checking in once a quarter, if not at least once a year, checking to make sure how your financial health is growing, what you're doing, investment planning, retirement planning, all of that. They are helping with all of these different parts of your life. But if you're not ready for that, you might be able to find someone who does offer one-off meetings, a just generally consultation. Usually it's going to be a fee. Some of them do it via Skype so you don't even have to physically be in their office, you don't even have to physically be in their state, although I will say it's very helpful if it's somebody who knows the ins and outs of options in your specific state. I do highly encourage you do that. And they generally just do charge a one time off fee. Not all financial planner do that. In fact I would say that most of them don't, but there are some out here who do. Some also have created courses or resources that they sell on their sites for situations such as these where you think I need some help, I can't afford, or I'm not currently interested, in an ongoing relationship so what can I do. So as you start to research them, especially those catering to Millennials, have started to get very on their tech game, especially if they are Millennials themselves. And many do have courses that are really uniquely catered to people in a position of maybe I'm getting married, I have student loans, can't afford an advisor yet, but what should I do, and they have resources for you there. Here are some red flags to look out for when you are vetting a financial planner. Again, commission only, for sure a big red flag. If they're just fee-based it needs to be a conversation, why, when are you putting commission-based products in, can you tell me what they are, and how can I make sure that is the best possible product for me. If they won't sign a fiduciary oath, especially if they claim to be, eh, we don't like 'em, we're moving on. If they offer primarily free services, this is a huge red flag, 'cause they're getting paid somewhere. So the question is if all of their services that they're offering to you are free, how are they making their money? It's probably because they're selling you a product at some point or they're only giving you things that are commission-based and they're getting a big kickback and they're not actually letting you know. So please make sure you understand how somebody makes their money when it comes to things like this. And then if they claim to be a CFP, but they're not registered on the website or they appear to not be in good standing, obviously a big red flag. And if they've never worked with someone in your particular situation, this by no means means that they're a bad financial planner, but it just means that they're probably not the perfect fit for you. So where can you actually find one of these guys? There are a bunch of different advisor networks that exist. I did mention XYPN a little bit earlier when we were talking about places to look. That's also a great, it's kind of a search engine if you will, of ways to search out different planners. They all are CFPs, they are fee only I do believe. And a lot of them are Millennials and they're catering specifically to the Millennial demographic, so that's incredibly helpful. Garrett Planning is another option for you to look into. And then the National Association of Personal Financial Advisors, it's just a huge list of a bunch of different people. I do not believe that they are all fee based. I think some of them actually are asset under management, just something for you to know, but different resources, places that you can look people up. All right, any other questions as we wrap up this segment? Yes? What is the general price point that you can expect to pay, like if you're like I want to know if I can afford a financial planner. I'm sure there's a range, but what's kind of the minimum rage for someone who's just kinda chuggin' along, still tryin' to pay off debt? Great question, and I don't have a good answer for you because it is so variable depending on where you live, what your needs are, what you're looking for. But if you're looking for someone to mock up a one time financial plan, and just a one time meeting, I would expect to pay at least $350. That might be a little bit of sticker-shock for some people, but consider the fact they're usually taking an hour of time to sit with you and meet with you, they're gonna mock up a full financial plan for you, and then they're probably gonna meet back with you. And the amount of time that that takes, 350 is actually a pretty solid value and I would think it could even go up from there. But that's the kind of investment at minimum you might be coming to pay. Some are gonna be more, some are gonna be less. You're just gonna have to do the research. And that's another reason I mentioned the courses and resources because that way it might be a little bit cheaper, there might be another way that you can do it, but it could be somebody that you respect and trust and they've just put something out that's more general for folks who are just trying to get it together. So just to clarify, this is from Agi. Can you again, what is the difference between financial planner, financial advisor, financial counselor? Are they the same, are they different? Financial counselors aren't at all in this conversation. There's a lot of odd accreditations that I don't even really know what they mean for the most part. There's just different quote unquote accreditations people can get. That has nothing to do with financial planning and advising. It's a great question because there's no good answer. Advisor and planner gets used almost interchangeably. CFPs are Certified Financial Planners. I tend to then lean towards saying financial planner. If you hear investment advisor, that generally is gonna be somebody who is selling you a product or somebody who maybe works for an insurance company, you're gonna hear that. Sometimes with insurance companies you hear them being called financial advisors, where really they're just selling you commission-based products. So that is one reason I just like the CFP designation to begin with because it really makes things nice and clean and easy to understand, because there's not a ton of regulation in this industry and planner and advisor does gets used generally interchangeably. Counselor, generally that just refers to somebody who might be talking kinda like I am here today about how to get it together, strategies, techniques, but their not necessarily having that same caliber of background financial history education, or financial education and experience to help make you a full holistic financial plan for your specific situation. And knowing all the ins and outs of the industry and the legalese and the jargon and all of that as well, and tax planning being part of that too. All right, perhaps one more. This is from Sandra who says our bank offered free financial planning. Called them up and said we have free financial planning. Are they they same types of financial planners that we're talking about, the CFPs? I'm gonna guess no. But I cannot tell you that 100%, with 100% certainty. But if it's free now, it depends. Maybe if you are a very high net worth individual for your bank and therefore it's lucrative for the bank to keep your business, maybe they are offering you a CFP. But you also want to have financial planning with somebody who's not tied to a financial institution in that way. So again how is that person getting paid? Are they trying to promote products that's either getting them commission or kicks back to the bank itself that you bank with. So I would definitely recommend, maybe go in. If it's free, go in and see what that person has to say, but take it with a huge grain of salt and perhaps fact check it against someone else. Yes? I can speak to that a little bit. Great! 'Cause WSCCU, when I was a member there, they worked with Balance I think it was in California, and Verity, who I bank with now, they have a financial person. And I would say it was a great, it's a great place to start because really she didn't pressure us with products. Like she'll let you know what they have, like if they have a credit card or something available, but it wasn't really much of the conversation if any. It was really more so that they gave us handouts and worksheets in advance to just go through and budget. And a lot of the questions similar to what we're asking in this workshop in this class and to be a though partner really in the conversation and provide some introspection and be curious. So it actually was a really great opportunity to just sort of check in 'cause it's free and to do a little bit of the homework and if you're like taking this class but you're like not sure, or you're not following through on all the homework, or you have it in your cashflow, it could be a great opportunity for an accountability buddy almost in some ways. Perfect, and I do like this idea of if it's free and they're not pressuring you into something, it's a good jumping off point, but I will also say if it's through a financial institution, just any recommended products, double check it against a couple of other options. Not saying it's not a good fit, just always double check.