Inflation, wily stock values, and increasing headwinds in the real estate market have a lot of people taking a look at their finances as economists prepare for what the National Association of Realtors Chief Economist Lawrence Yun recently called “a most unique recession.”
If you find that your personal and business finances aren’t recession-ready, now’s the time to look into enlisting a certified financial planner who can help you get your taxes on track, build your retirement, shore up your investment portfolio and find ways for you to streamline your expenses.
Hogan Taylor Wealth Senior Wealth Manager Scott Logan and Northwestern Mutual financial planner Abyan Abdullahi sat down with Inman to explain the ins and outs of finding an adviser, building a robust financial plan, and even moving on to a new planner if you need to.
Here are their four steps for beginning a new financial journey:
Step 1: How do I find a financial adviser?
Financial advice is dime a dozen, with a plethora of experts (and so-called experts) producing articles, videos and catchy social media graphics on the dos and don’ts of safeguarding your personal and business finances. Although you can find some reliable information online or even from a financially-savvy colleague or friend, Logan and Abdullahi said it doesn’t replace having a certified financial adviser.
“Whether that be investments, insurance or annuities, etc., the whole point of a financial adviser’s role in their clients’ lives is to ensure they’re able to worry less and live more,” Abdullahi said. “The analogy I like to use with my clients to describe my role in their life is that I’m the primary care doctor of their financial health.”
And like primary care doctors, Abdullahi and Logan said certified financial planners have a legal obligation to do what’s in their clients’ best interest, which adds a layer of assurance and accountability.
“We are advisers who have committed to operating in a fiduciary capacity, which means a legal obligation to act in the best interest of a client,” Logan said. “So there’s some protection for the consumer.”
Logan suggests agents go to the Certified Financial Planner Board of Standards or the National Association of Professional Financial Advisors to find lists of advisers who have the educational requirements and certifications to provide financial advice.
From there, both advisers said agents can dig into potential advisers’ biographies to see their field of expertise, which can include investments, insurance, retirement, tax planning, business planning, estate planning and a host of other options. While some advisers are a jack of all trades, like Abdullahi, some choose to specialize in one or two areas like Logan, who primarily focuses on investments and retirement and tax planning.
If you can’t find adviser who can handle all of your needs, Abdullahi said there’s nothing wrong with setting up consultations with multiple advisers who can work as a team on your behalf.
“I’m really lucky in that I have a comprehensive financial advisory firm, so there really isn’t much that I’m not able to do for my clients,” she said. “But for other individuals whose advisers might only be experts in insurance, or might only be experts in investments, you can definitely have more than one adviser.”
Step 2: Get nosey and ask questions — but be prepared to give answers, too
Once you find a few potential advisers, the next step is setting up an initial consultation where you’ll learn more about the adviser, their firm, their menu of services, their pay structure, and what’s needed to get started on your journey to better financial health.
Logan and Abdullahi said consultations are free, and agents should take advantage of the opportunity to check out a few advisers before committing to one. Every adviser has their methods, but Abdullahi said her consultations come in two parts: an introductory meeting and then the next meeting is the presentation of a financial plan.
“You have the introductory meeting where we’re learning more about each other and usually, by the end of that first meeting, I’m able to tell whether or not I can provide value to an individual,” she said. “In that entire process, there is no fee associated, so if you ultimately decide ‘This is not really like what I’m looking for,’ you’re more than free to move on and find a different adviser.”
At the first meeting, Logan said you should ask an adviser questions about their education and their certifications, which should include, at the least, Series 7, and Series 66 or Series 65 testing. Some advisers also become a Certified Financial Planner, which includes adherence to a fiduciary standard.
Beyond that, he suggests you get clarification about their fees, services and how they’ve helped other clients with a similar background. Their answers to those questions and their level of transparency he said, will give you insight into whether they’re the adviser for you.
“We’re in a trust business. As a fiduciary and a fee-only adviser, we don’t have anything to sell but trust and competence and peace of mind,” he said. “But a client has to, in essence, give us trust before we can fully earn it. So I think one of the ways a client can get a feel for how transparent an adviser might be, is to ask questions upfront about their fiduciary role and how they get compensated.”
Logan and Abdullahi said asking about a potential adviser’s fiduciary standard is key because they are legally bound to do what’s in your best interest, avoid conflicts of interest and disclose any potential conflicts of interest. If an adviser doesn’t adhere to a fiduciary standard, then you may want to think twice about their services.
From there, both advisers said you must get a clear understanding of how a potential adviser gets compensated: Is it fee-only, which means they charge a flat rate for their services? Or is it percentage-based, which means their fee fluctuates based on the number of assets? Do they receive commissions from mutual funds or other financial products?
Logan said a good adviser can clearly and concisely answer those questions, which creates trust and empowers clients to make the best decision for them.
“At the end of the day, it’s really all about trust and empowerment,” he said. “We have to articulate exactly how we’re getting compensated, and then the prospective client can determine if they feel like the value can exceed their cost of doing business.”
“I think someone having the ability to articulate that sitting across the table from someone, that’s another level of trust,” he added.
In addition to asking questions, Abdullahi said clients must be prepared to answer a few questions too.
“If you’re asking someone for financial advice or for guidance in your in terms of your financial situation, be very prepared to answer questions about your financial situation,” she said.
“I get a lot of people who are surprised when they have a meeting with me, and I start asking them questions about their financial situation. I can’t really make an analysis or make any recommendations if I don’t understand what you have going on.”
Here are a few questions that financial advisers recommend prepping for before a consultation:
- What’s your income?
- Do you file a W-2 or 1099?
- How much do you have in savings?
- Do you contribute to a retirement fund, such as a 401K, an individual retirement account (IRA) or a Roth IRA?
- How much do you spend on your personal and business needs per month? How much do those expenses fluctuate from month to month?
- How much do you spend on your personal and business needs per quarter? How much do those expenses fluctuate from quarter to quarter?
- How much do you spend on your personal and business needs each year?
- Do you find that you’re consistently under budget or over budget?
- What are your short-term, mid-term and long-term goals?
- What are you most concerned about regarding your financial health? What issue would you want to tackle first?
- What kind of financial planning have you already done?
- Do you have life insurance?
- Do you have any liabilities?
- What’s your motivation for hiring a financial planner?
- What do you hope to get from having a financial planner?
Logan and Abdullahi said the more information you can provide at the first meeting, the better. But, if you don’t have the answers to those questions, they said a good financial adviser will meet you where you are.
“I’ve just learned to serve clients where they’re at,” Logan said, while noting he’s served all kinds of clients, some who were expertly prepared and others who were more like a deer in the headlights. “Some people aren’t ready and over time, when they have more capacity or they’re ready to take a bigger look at something, then we’re ready and capable to handle those conversations as well.”
“I guess the point is that we don’t want to overwhelm people with feeling like there’s too much to do,” he added. “Sometimes you just gotta take things in bite-sized chunks and then start making progress that way.”
Step 3: Choose your adviser, and buckle in for the long haul
After getting through your initial meetings, seek out online reviews and, if possible, personal insights from people in your sphere who are familiar with the adviser or advisers you’re considering. Both said potential advisers will likely follow up with you first, which Logan said provides further insight into the level of attention they provide.
“Service is something that we can always control,” he said in reference to the volatility of the financial world, which can be scary for clients. “We can easily control how quickly we get back to somebody if they’ve got a question or they’ve got a need and how we process and respond to that need.”
After agreeing to move forward with an adviser’s services, both of you will schedule additional meetings to dive deeper into your finances, review the plans your adviser has created, and get started on your goals, whether that’s creating a more robust investment portfolio, streamlining cash flow and building savings or finally getting your taxes in order.
If you’ve chosen to work with more than one financial adviser, Abdullahi said it’s important to let each financial adviser know they’ll be working with someone else on your financial plan. It’s easier, Abdullahi said, if you choose financial advisers within the same firm, but a good adviser can adjust to whatever your needs are.
“There’s no conflict of interest for the client to have multiple advisers, but it might be helpful for their financial team to understand what they’re working on, so there isn’t any overlap,” she said. “I know a lot of people who have multiple advisers or have a second adviser because their adviser was lacking in a space, and I was able to fulfill that gap for them.”
Both said your relationship with your financial adviser will be a lifelong one (hopefully), and it takes time and dedication from both parties to get the best from the relationship. Abdullahi said she has clients who meet with her only once or twice a year and others who like to meet once a quarter or once a month.
“Financial security is the confidence that comes from being able to take action today to provide for your future,” she said. “It includes setting goals, accumulating resources, addressing risk, implementing strategies for lifetime income and revisiting the plan as life unfolds.”
“That process in itself requires a lot of discipline, and there isn’t going to be one strategy that works best for everyone,” she added. “Be as open and honest with your adviser as possible — they’ll only know what you tell them. So there’s no way for me to find out additional information about your lifestyle and what you want out of your life unless you tell me.”
Logan said maintaining an open line of communication also helps you better ride out periods of intense volatility, such as what we’re experiencing now with inflation and dramatic stock market fluctuations.
If you find out that you’re stressed out over losses, he said that’s the perfect time to meet with your adviser and talk about your risk tolerance, which may be lower than you anticipated.
“During these volatile times, if you find that your investments are a lot more volatile or you’re experiencing a lot more pain, for lack of a better word, than what you thought, that may or may not be a warning sign,” he said.
“It may be that you as a client just thought that you had more appetite for risk than you do, or it might be that there wasn’t sufficient conversation on the front end.”
Either way, Logan said your adviser can adjust your financial plan to something that better meets your needs, which will happen multiple times throughout the life of your relationship as your financial life ebbs and flows.
“Communication is incredibly important,” he said.
Step 4: Know when to switch advisers
Even when you’ve done your best due diligence, Logan and Abdullahi said there’s always the chance that you may need to switch advisers either due to misaligned personalities, a worrying pattern of subpar service, or just a change in financial goals that require a different set of skills.
Logan said the first warning sign comes down to communication. If an adviser is taking more than a day or two to respond or isn’t keeping you abreast of changes they’d like to make to your financial plan, then it’s time to look elsewhere.
“If you’ve got a professional and you reach out, and it takes them a couple of days to hear from them or you just feel like you’re in the dark, that’s a warning sign,” he said.
Beyond responsiveness, Abdullahi said a misalignment in your needs and your adviser’s planning is a sign to move on. However, to pinpoint this, she said, clients can’t take a hands-off approach to their financial planning — they must stay engaged by tracking their investments and accounts and taking the initiative to raise their financial IQ outside of their adviser.
“Don’t ever be afraid to come to your adviser with new information. Do your research,” she said. “If there’s an area and you don’t really understand it, and if you find that there’s more information out there than your advisers are telling you, maybe it is time to start shopping around and looking for other places.”
Before you move on, Logan and Adbullahi said to have an in-depth conversation with your current adviser. The issues may be exactly what you think they are — a basic lack of customer service or knowledge — or it could be a misunderstanding about your current goals.
“At the end of the day, [an adviser] might have felt like [a solution] wasn’t appropriate for you for whatever reason, or you wouldn’t be interested in it, and now that you’re bringing it up, they can go into detail with it for you,” she said.
Logan echoed Abdullahi and said sometimes fears about the market — such as a hit to your 401k or other investments — can push clients to make a brash decision to switch advisers. In moments like this, he said, give your adviser the opportunity to address the issue and craft a new solution.
However, if they’re resistant to your concerns, it’s time to go elsewhere.
“From our childhood on and what we learned about money as children, we’re wired to be more fearful or greedy; we’re wired to chase the next best thing or be more conservative,” he said. “There are so many different things coming at us from great investment ideas like crypto to having struggles or stresses with finances inside of a relationship, marriage or partnership.”
“There are things like that sometimes that a good financial adviser who has good communication skills can help alleviate, too. So it’s not always just about the bottom line,” he added. “You deserve an adviser who’s going to free you up to do more of what you love to do, while making you more money.”
Email Marian McPherson