The services rendered by a financial advisor are paramount to a successful plan and will either substantiate, or cause an investor to second guess, fees and expenses that are charged. In large part and from our perspective, many advisors claim to provide financial planning services, but their process, in many cases, are “cookie cutter” programs that may not address or may leave out specific client needs. At Capstone, our approach to financial planning is structured and holistic. It compels our financial planners to ask the right questions to determine specific objectives. Different investors have different needs and not all financial plans are created equal. Some investors need more than just asset management – aspects of a financial plan may also include things like estate planning, life insurance needs analysis, education funding, tax planning, budgeting, and sometimes, complex planning is required. For example, let’s say you’re a high level executive and own large amounts of company stock or have complex stock options, these types of investments may have very special tax rules that apply to them and consulting with an outside tax expert would prudent and necessary. At Capstone, we will work with independent tax experts and legal advisors when we believe it to be necessary to implement a proper and complete plan. So, you see, “Cookie Cutter” planning is rarely an optimal route to take.
All clients and investors should also know what to expect from their advisor before the planning process gets implemented. If an advisor is making specific recommendations without asking all of the right questions first, it’s probably a sales pitch and you should be probably pause and seek a second opinion. When deciding what types of advisors to speak to, you might want to seek an independent Registered Investment Advisor or RIA. RIAs, based on how they register their business within their state and/or with the Securities & Exchange Commission, are under a legal obligation to put an investor’s best interest first. RIAs are subject to a “fiduciary” standard and have that legal obligation under a “best interest” policy. Other types of investment advisors are subject to a “suitability” standard. Brokers and agents at “name brand” banks, brokerage and insurance companies don’t have a legal obligation to put the best interests of their clients first. Also, advisors who have the CERTIFIED FINANCAL PLANNER™(CFP) designation may be better equipped to provide proper planning and are held to a higher ethical standard than others in the industry. CFPs can also be a good place to start. Go to www.cfp.net to learn more.
Here are some questions you should consider when understanding services that an advisor can provide:
- Generally speaking, what types of services, outside of investment and asset management, do you regularly provide to clients?
- Are you only licensed to sell certain types of investments or can I expect that you will be able to cover all aspects of my plan?
- Do you consider yourself to be the “jack of all trades” or do you work with other experts either within your firm or outside?
- Will you work with my tax and legal advisors, or do you require that I work with yours? And if you require that I work with yours, do you have financial incentive to establish that? Is that a conflict of interest?
- Are you legally obligated to put my best interest ahead of your own and your company’s? Are you an investment Fiduciary?
Lastly, and most importantly, it is always a good idea to check the background of your advisor. Go to www.FINRA.org and enter the name of the advisor in the “BrokerCheck” section of the website. When you get to an advisor’s profile, click on “Detailed Report” and you will retrieve full history and background information of an advisor. FINRA rules require that licensed individuals report all derogatory disclosures to their record. Disclosures include things like criminal history, negative financial issues like bankruptcy filings, customer complaints, etc…If your advisor has disclosures, you may want to ask him or her to explain what happened and if you’re not completely satisfied with the explanation, it may be best to move on.
Are you getting enough from your financial advisor?