5 Questions to Ask Your Financial Advisor

By
Steve Hartel, MBA, AIF®
April 24, 2018
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Congratulations. You’ve decided to work with a financial professional to help improve your financial situation. How do you find a good one? Unfortunately, that’s harder than it sounds. There is a huge barrier between people seeking good financial advice and professionals offering it. Advisors can be found in the yellow pages (Millennials, you might have to Google that), on various online sites, by answering incoming phone calls, by asking your friends and neighbors, or any number of other ways. Personally, I believe a referral or introduction from an existing client is the best way, but that could be another entire article. Here are some suggested questions you should ask a prospective advisor.

  1. Start by asking yourself what kind of help you think you want and/or need

Are you just seeking help with your investments? How about someone who will be the “quarterback” of your entire team of professionals (tax preparer, estate attorney, bookkeeper, banker, investment manager, etc.)? Are you looking for someone who simply suggests things for you to go do by yourself (what I call the “travel agent” model), or someone who will give you advice and then help you carry it out (what I call the “Sherpa” model)?

The answers to these questions will determine what kind of professional to seek out. I know some of you are thinking, “Wait—aren’t they all the same?” Trust me; the answer is an emphatic “NO”! One of the best ways to determine what type of professional someone is, is by asking about their credentials.

  1. What are your credentials and what do they mean?

Anyone can call themselves a financial advisor. A stockbroker, a life insurance agent, a mutual fund sales rep, an annuity salesperson, a banker, a mortgage broker. Seriously, there are no rules for the title Financial Advisor. The title Financial Planner, on the other hand, has very definitive rules. There are only two kinds of people who can legally call themselves a planner. One group took classes, passed some exams given by an industry group, and received the Certified Financial Planner (CFP®) designation. The other group took classes, passed some exams by a governmental group, and received their Series 65 or Series 66 registration. These folks are called Registered Financial Planners, although that moniker hasn’t caught on yet the same way the CFP® has. Both of these groups can legally charge you a fee for giving you advice.

You might also encounter professionals who received a Series 6 registration (this allows them to sell you a mutual fund) and/or their Series 7 registration (commonly called the stockbroker license). You will also encounter people who have some combination of these.

Someone who only has a CFP® can give you advice but can’t help you execute it. These are the “travel agents” I referred to. This might be a good choice if you want to pay for advice but then go do everything yourself. Another example might be people who hire a personal trainer at the gym one time to teach them the right exercises to do; then they go do them by themselves.

Someone who only has a Series 6 or 7 registration can sell you products for a commission, but they can’t give you any advice. Let’s call them “luggage salespeople.” This might be good for people who don’t want professional advice, make their own decisions, and simply need to buy financial products in a transactional relationship with a salesperson.

Someone who has their Series 65/66, or has their Series 6/7 and 65/66, or who has their CFP® and Series 6/7 and/or 65/66 can perform the “Sherpa” function of going on the journey with you and helping you implement the advice. These are good choices for someone who recognizes the value of professional advice and knows they need a little extra help with actually getting things done (or want that extra accountability). Think people who hire a personal trainer at the gym and see them week after week. In my experience, clients of these professionals make the most consistent progress toward their long-term goals.

  1. How will I be charged? How do you get compensated?

Sometimes those are the same question and sometimes not. Does the professional make a commission when you buy a product? If so, how much is it? Do they charge an hourly fee, a monthly fee, or a one-time flat fee? Is the professional paid a fee based on the size of your invested assets? What is that fee?

If you are buying products, are there any fees built into the products themselves? How much? Are the fees for the product clearly spelled out or are they buried internally?

Will ALL of your fees be clearly itemized on your statements? Ask to see an example.

  1. What services do you provide?

This should line up with your answers to Question #1. Don’t make any assumptions here. Make sure the service you are seeking is actually provided by the professional you are interviewing. The professional might want to sound like they can do everything for you. For example, a stockbroker can open an IRA for you, but that’s not the same thing as doing retirement planning for you. Be clear.

  1. Are you a Fiduciary?

Due to a recent regulatory change, this is the new industry buzzword. There are multiple standards of care in the financial services industry. One is the “suitability” standard. Professionals who do not give advice are held to this standard. They need to show that the product is appropriate for someone in your situation, but they don’t have to disclose their compensation or prove that the product they recommended is actually in your best interest. If there were two products that both accomplished the same thing, but one resulted in the professional receiving higher compensation, the professional doesn’t have to tell you that.

The other standard is the “best interest” standard. People held to this standard are fiduciaries. They must always act in the client’s best interest. If they sell you a product, they must demonstrate that it is in your best interest rather than their own.

Conclusion

I’m a Sherpa, so I naturally believe that’s a better choice for most people seeking professional help with their finances. My fees are very clear and, they appear right on the statement or contract signed by the client. I think hidden fees should be avoided at almost any cost. My clients hire me on an annual basis to be their DecisionCoach. I give them advice, I help them make better financial decisions over time, and I help them implement the advice. Depending on the client, I might be helping with organization, cash flow, investment management, budgeting, retirement planning, college planning, income planning, tax mitigation, asset protection, insurance, advanced medical expense planning, estate planning, and much more. Are you looking for a professional like me?

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By
Mike Loo, MBA
April 16, 2018

Have you ever noticed when you turn on the news, the media is either panicked because the markets are down or celebratory because the markets are up? This may make for fun entertainment, but it can also impact people’s emotions, which are dangerous when they affect investment choices and financial decisions.

While you shouldn’t hide your head in the sand when it comes to the news, there’s a fine balance between staying up-to-date and obsessively following every market change.

The Problem with the News

Many people think watching the news will help them decide what financial or investment decisions to make. The problem with this is that the news is late, especially in terms of investing.

Capital markets efficiently price in all widely known information. As soon as news is available to the public, it becomes reflected in share prices. Therefore, looking at the same things as everyone else doesn’t give you a leg-up on other investors.

Additionally, we know that most news stations have a bias or slant. Many major networks tend to lean either right or left, and this can actually impact the type of actions they suggest in terms of financial decisions. Furthermore, when their guest is the head of a bank or works for a credit card company, you’ll want to be aware that their advice may be biased.

The Information to Turn to Instead

One of the best solutions is to ignore the pundits and spend more time sticking to your personal financial strategies and investment plan. It may sound crazy for me to suggest this, but I’ve found that it helps my clients feel less stressed and less likely to make emotionally driven decisions.

It takes training to tune out the media noise levels and focus on your long term plan. It is tough to do, but with a little coaching, you can feel less stress from media influence and more focused on your plan.

Let Your Advisor Do the Heavy Lifting

While working with a financial advisor is a collaborative approach, requiring work on both ends, it can be helpful to rely on your advisor for staying up-to-date on financial news and investment trends. Part of an advisor’s job is to stay current with financial news and changes in the markets. Your advisor will then suggest changes, if needed, based on your personal goals and needs.

Stick to Financial Wellness Tips

While listening to the news and recommendations of pundits can lead to emotional decision-making, reading general articles and blogs about financial health and wellness can be beneficial, and even motivating. There are hundreds, if not thousands, of blogs out there that share tips on sticking to a budget, savvy ways to save money at the grocery store, and how to find the best credit card rates. These sources of information can help you maintain a healthy outlook regarding money and keep you motivated to stick to your financial goals.

How I Can Help

As an independent advisor, my personal goal is to provide my clients with guidance that can help them understand and better define their financial goals. I stay up-to-date with the latest financial news, trends, and market shifts so my clients don’t have to. I hope to allow them the time to focus on their passions in life knowing I am here proactively monitoring their investments and financial strategies.

To learn more about how I can help you focus less on media noise and more on your passions in life, contact me for a no-strings-attached meeting. We can discuss your goals what strategies can help you pursue them. Call my office at (949) 221-8105 x 2128, or email me at michael.loo@lpl.com.

By Trilogy Financial
June 7, 2024

AI is revolutionizing the way scams are conducted, drastically reducing operational costs while simultaneously enhancing the believability of fraudulent calls. In the 12 months since the launch of ChatGPT, AI-aided identity fraud surged nearly 1,800%, and phishing emails surged by nearly 1,300%, with their quality being the best we've ever seen. Additionally, AI-operated news sites, often used to push out misinformation, disinformation, and propaganda, grew from 40 sites to nearly 600.

Things to Know:

  • Content Farms: These platforms pump out low-quality, clickbait articles to earn ad revenue. Initially, humans edited AI-drafted articles for quality, but now, AI can produce vast amounts of content with little to no oversight.
  • Advertising Concerns: Reputable brands might unknowingly advertise on these spammy sites, which can mistakenly lend these articles credibility.
  • Disinformation Risk: Without human checks, AI can spread false information. This ranges from accidental “AI hallucinations” (fabricated facts) to deliberate disinformation, like fake celebrity obituaries designed to increase site traffic.

Tips for Navigating Content Safely:

  • Critical Thinking: Always question the authenticity of online articles.
  • Recognize AI Signs: Be cautious of sites with generic names or an overload of ads. Look out for errors and placeholders (e.g., “[date]”) that suggest AI-generated content.
  • Take Breaks: Regularly step away from the digital avalanche to avoid content fatigue and maintain cybersecurity awareness.

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