How To Find A Financial Planner That’s On Your Side
June 22, 2017A friend of mine recently asked me what I thought of the new Department of Labor’s rule last week that requires financial advisors for IRAs and qualified retirement accounts to act as fiduciaries in their clients’ best interest. I personally felt a little conflicted.
The issue
On one hand, it can reduce a lot of the conflicts of interest that plague the financial advisory world. Before the requirement, advisors essentially had a choice over whether to be regulated as investment advisors subject to the fiduciary rule or as brokers subject to the much looser “suitability standard.” Many of the latter recommend high-fee funds that pay them large commissions, despite the fact that low fees have been found to be most consistent predictor of superior performance.
On the other hand, it will likely have some unintended and harmful consequences. Since advisors subject to a fiduciary standard tend to charge asset management fees, they often require you to have a minimum account balance to work with them. These fees can also cost more than the commissions in the long run.
At Financial Finesse, none of this has ever been an issue. We don’t charge fees or sell anything at all and make absolutely no money based on what we tell people. Because our services are paid for by employers, they are free to the people we work with and open to anyone, regardless of income or net worth. This opportunity to help people who really need it rather than sell things they may not need is why many of us chose to work here. Many even took a significant pay cut.
How to find a planner outside of the workplace
What if you don’t have access to an unbiased workplace financial wellness provider like Financial Finesse through your employer? Looking for a financial planner who will act in your best interest goes beyond just what’s required by the new rule. Here’s a process to follow that’s similar to the one we use to hire our planners:
First, find out how they’re compensated. Do they accept commissions based on their recommendations? If they charge an asset-based fee, do you meet their minimum account size? Consider advisors that charge an annual, monthly, or hourly fee as this presents the least conflicts and typically costs less when you do the math.
Second, good intentions aren’t everything. Make sure they have the skills to act in your best interest too. Look for planners with at least 10 years of experience and who have widely respected professional designations like the CFP®, ChFC, and CPA/PFS. Many other “credentials” are really just marketing gimmicks that can be purchased online.
Once you’ve narrowed your search a bit, do your homework. Review their disciplinary history here. Interview at least three to see who you personally feel comfortable with. Otherwise, you may find yourself not consulting them or taking their advice. Finally, ask for references of clients similar to you.
Of course, this process doesn’t guarantee that your planner will always act in your best interest. Stay vigilant and don’t be afraid to fire your planner if necessary. Remember that the person who cares most about your financial well-being and is ultimately responsible for it, is you.
Here at Financial Finesse, we believe strongly in the importance of workplace culture and the power of doing well by doing good. This article is the fourth in our week-long series of posts where we highlight a specific part of our company culture that helps to make Financial Finesse one of America’s best places to work. This is just one part of our celebration of recent recognition by Inc., who listed us as one of the Best Workplaces in 2017 and Entrepreneur, who named us to the Small-Sized Companies: The Best Company Cultures in 2017 list.