Asking Advisors the Right Questions- WSJ 12/6/2018
On December 6, 2018, the WSJ featured a special section of the paper dedicated to helping consumers find the right financial advisor. One article in particular caught my attention and formed the basis of our blog in this issue of OUR PROCESS.
The WSJ asked three “of the top minds in the financial advisory business” what is the MOST IMPORTANT question for a client to ask of their financial advisor. I was intrigued by the questions and thought they were actually quite good. So good in fact that I thought it would be valuable to comment on them as it relates to our Goals-Based Wealth Management (GBWM) process.
Ric Edelman, co-founder & executive chairman, Edelman Financial Services says, “It’s a two-part question: Has your investment philosophy/strategy changed in the past 20 years, and if so, how? And do you personally own the investment you recommend to your clients?
The thought process behind these questions are smart. You do not want to the next financial crisis to be your advisor's first. In this profession, there is no substitute for experience. I began in this profession before I ever graduated college. It is all I’ve ever done day in and day out, 50-60 hours a week for over three decades. Now, 35 years later, I have seen and experienced many challenges and outright crises and boast in having clients today who were with me in the early 1980’s. Dave is coming up on a decade of chronological years in financial planning. But, as my protégé’ with no outside influence corrupting his development, I would certainly leverage those years to nearly double in experience value.
Second, because there are so many product salesmen posing as financial advisors, it is wise to know how similar/different what the advisor is doing now compared to 5,10,15 years ago. At VFA, we have been practicing the financial planning process as outlined by CFP Board since our inception in 1997. And while our philosophy and values have not changed, we are not afraid of exploiting the latest innovations in our profession to help us perform with excellence for our clients.
The last part of this question can go either way with me. I have a client who is a wholesaler for a mutual fund company. So that he can tell his reps that he owns what he is selling, this client buys a little bit of everything in his employer’s arsenal. Needless to say, his personal investment portfolio is a wreck and has absolutely zero direction or purpose. In principle however, I agree with the merits of this question. Why would you ever dine at a restaurant where the chef refuses to eat? So, just for the record and for what it’s worth, my personal investment portfolio is comprised of the same holdings we use with our clients. And in keeping with the same principle, far and away my largest investment is VFA,Inc. itself. My future depends on the continued growth and success of the firm and the firm only does well when we have happy clients. It is by design and not by accident that our success is directly correlated to your success. To repeat our corporate motto – “You can have anything in life you want if you help enough other people get what they want.”
Joe Duran, founder and CEO, United Capital Financial Partners says, “How will I know if you’ve really earned your fee?”
I like this question – a lot!!!! Mr. Duran tells the WSJ, “If your advisor says he will outperform the market, then you can probably find a better advisor”. This is something a salesman says, not a financial planner. Everyone can beat the market! No one can do it consistently! Any response about investment performance would be the wrong answer to a very good question. By one measure, this question is easy to answer and/or quantify, but by another, it is too subjective. I mean, how will you ever know what your life would have looked like if you made a different choice? That goes for every aspect of life- not just with financial decisions. But still, I really like the idea of a client being able to conclude with a certain measure of confidence that life with VFA is better than life would have been without VFA. Great advisors help you live your BEST life.
Finally, Daial Maria Salomon, CEO and founding partner, Salomon & Ludwin wants you to ask, “Beyond creating an initial plan, how do you make sure that the plan remains relevant to me and my family, and how do you incorporate it into our overall ongoing relationship?”
This is indeed one of the strong points in our GBWM process. Depending on what service level you select, we are re-assessing your funding status based on updated portfolio values every thirty days; sending out an up to date Goals Profile and portfolio performance report every ninety days; and meeting with you face-to-face to audit every input item in the plan no less frequently than every 12 months. The process stays intensely relevant from the first analysis to the end of your life by becoming a primary factor in making decisions every step of the way. When we come to a crossroad in life and need to make a decision, seeing how each possible choice affects our ability to pay for all of our high-valued goals aids in knowing the right course of action.
Conclusion- This issue of OUR PROCESS takes the questions asked in this WSJ article as an opportunity to showcase our own financial planning process and philosophy. This is Financial Planning done right!
Regards,
Rick Van Der Noord, CFP®
Dave Gerdt, CFP®