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There are no shortage of people calling themselves financial planners or financial advisors, so as a consumer it can be tough to decide which one is right for you. In this article, I will talk about the different kinds of planners that are out there, why I chose to be a fiduciary, and finally what I as a financial planner can do for you.

Who is a Financial Planner?

                Unfortunately, there is no industry standard on who can actually call themselves a financial planner, which can lead to confusion, and in the worst circumstances someone who is not representing themselves in an honest way for clients.  If you are searching for or evaluating financial planners, there are two main questions you should be asking them.

Question 1: Are you a fiduciary?

A fiduciary is someone who is obligated to act in the best interests of their client.  At the very least, if the person calling themselves an advisor is not a fiduciary, you should think long and hard about moving forward with that engagement.  If they say they are a fiduciary, that shouldn’t end the discussion.  There are different “types” of fiduciaries.  In his Nerd’s Eye View Blog, Michael Kitces describes three different types of financial planner fiduciaries; a Registered Investment Advisor (RIA), a Certified Financial Planner ®, and a voluntary fiduciary.  (He also talks about a fourth, the Department of Labor fiduciary, but that was vacated in 2018 and is not currently being enforced by the Department of Labor).

Registered Investment Advisor (RIA) – An investment advisor registered with either the SEC or by the state they reside and or operate in.  These advisers are required to not engage in any acts that would be deemed fraudulent, deceptive, or manipulative when holding out to consumers.  Essentially, they need to be transparent, with their pricing and about disclosing any potential conflicts of interest to their clients.

Certified Financial Planner (CFP®) – These fiduciaries have been certified by the CFP® Board or are candidates for certification.  They are required to be fiduciaries when engaging in the material elements of financial planning.

Voluntary Fiduciary Standards – This category applies to advisors who through joining an organization such as the National Association of Personal Financial Advisors (NAPFA) or XY Planning Network have taken pledges to act as fiduciaries. 

Question 2:  How do you get paid?

And I don’t mean by cash or check!  There are a couple different ways financial advisors get compensated.  Three main compensation methods are commissions, percentage of assets under management, and fee-based billing. 

Sell You Products

Let’s look at the first one, commissions.  Advisors who are paid via commissions earn money based on selling their client a product.  That product could be life insurance, mutual funds, annuities, etc.  Bottom line, they are paid by the issuer of the product, ie the mutual fund company or the life insurance company for selling their particular product, just like most sales professionals are today.  Some, but not all of these advisors do not provide financial planning, they help sell you a product, that’s it. 

Manage Your Investments

The second method is assets under management. Under this method, an advisor manages your investments in accordance with your instructions.  For this he charges you a percentage of the total assets being managed, typically around 1%.  For example, if you have an advisor who charges 1% of Assets Under Management and he is managing $1,000,000 for you, he would charge you $10,000 per year. 

Comprehensive Financial Planning

Lastly, the fee-based advisors.  Under this method, clients are charged a fee, usually on an annual basis to provide on-going or hourly financial planning support to the client.  There can be a number of different ways this fee is determined, it can sometime be a flat-fee or it can be a percentage of net worth, percentage of net-income, etc.  What is important is that this fee is agreed upon and understood by both the planner and the client before any engagement is started.  Of course, advisors can offer all three payment methods, but generally you see either stand alone or a combination of the Assets under Management with either the commission or the fee-based pricing.

If the advisor you are meeting with or already using can not clearly explain to you how he gets paid, it is time to find a new advisor!

With that as the background, I want to take a minute and tell you why I chose to be a fiduciary and why I chose to not sell any products and instead to focus on comprehensive financial planning and investment management.

Why I Chose to Become a Financial Planner

When I decided a couple years ago to leave a great job and a great company, I did it because I had an overwhelming desire to help people live the kind of lives they want and deserve to live.  Oftentimes, what prevents that from happening is financially based. Therefore, if I could help people and families to overcome these obstacles and live the lives they want and deserve, I would be successful and happy as well.  When I looked at that as an end state and then researched the different types of financial planners that were out there, I knew I could not reach my goal by selling clients products.  I could only reach my goals by helping clients reach their goals.  Which led me to becoming a Registered Investment Advisor, opening my own, independent fee-only firm and being a candidate for CFP® certification.

How Do I Help You?

I help clients make smarter financial decisions, develop confidence in their financial situation, and live the financial lives they say they want.   I do this through supporting you in three main areas:

• Clarity – Identifying goals, and working together to create a plan to reach those goals.
• Education - I use my knowledge, experience, and expertise to make sure you understand the financial options that are available to you and recommend which ones are best for your particular situation.
• Accountability – Being there with you in your journey to help keep your spending aligned with your values (goals).

What Does Comprehensive Financial Planning Look Like?

I know clarity, education, and accountability can sound a little ambiguous, but what does comprehensive financial planning look like in detail, what do we actually do?  Quite simply, we look at every aspect of your financial situation, from general cash flow and budgeting all the way to estate planning to make sure you have the best chance possible to live the life you want to live.  While the first year is going to be different for everyone, I have developed a general service calendar so that you can see all the different areas that we work on and how often we can expect to meet.  I am confident that through developing a relationship of trust, we can work together to help answer your questions and guide you through the many different financial decisions you need to make in your life.

So, if you are searching for a financial planner please take a look at our Service Calendar.  Compare it to the service calendar the other financial planners are giving you, or ask if they even have one.  Make sure you know how much they charge; my pricing is transparent and you can find it here.  If you already have a financial planner, ask yourself what they do for you.  I am confident my clients can answer that question, can you?  If you can’t, I’d encourage you to look at the calendar as well, maybe we can help you out.

Let's have a conversation today about what is bothering you and how I can help.

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