How to Pick a Financial Advisor That’s Right for You

Mary Beth [00:00:00]:

Hey there.

Neela [00:00:01]:

Welcome to the if Money Were Easy podcast, the show where we teach you how to expand what’s possible with your money. We’re your hosts, Neela Hummel and Mary Beth Storjahan, certified financial planners &Co CEOs of Abacus Wealth Partners. Today on the show, we’re going to talk about how to pick a financial.

Mary Beth [00:00:20]:

Advisor that’s right for you.

Neela [00:00:22]:

Well, this is a fun one.

Mary Beth [00:00:24]:

This is a fun one. Is it because we’re financial advisors?

Neela [00:00:27]:

Oh, because we’re like, oh, you lucky, you get a meet a financial planner. We’re such fun people.

Mary Beth [00:00:32]:

But also we, like, have bones to pick with half of them. So I don’t know. I mean, we are fun people.

Neela [00:00:37]:

We can be.

Mary Beth [00:00:38]:

We can be.

Neela [00:00:39]:

Yeah.

Mary Beth [00:00:39]:

We’re also judgy sometimes, but we’re also very nerdy.

Neela [00:00:42]:

So we are, yeah, in good hands. It’s great.

Mary Beth [00:00:45]:

It’s a full package. So let’s just hit, I think, from the top, the great thing. Like, we’re financial advisors. There’s financial advisors, there are financial planners, There is a wealth manager, a wealth planner, a wealth advisor, a certified financial planner, an investment broker, Investment agent.

Neela [00:01:03]:

Right. Investment professional.

Mary Beth [00:01:06]:

Investment professional, yes.

Neela [00:01:08]:

What’s the difference? Which one do you want?

Mary Beth [00:01:11]:

Well, which one do you want? I know which one I want.

Neela [00:01:14]:

Right. Well, obviously as certified financial planners, we skew towards certified financial planners.

Mary Beth [00:01:20]:

But why?

Neela [00:01:21]:

Why? So financial advisor, financial planner, investment advisor, yada, yada, yada. Pretty much everything else that you named that wasn’t. A certified financial planner is a completely unregulated term. We could literally. I could call my dog a financial planner and not get in trouble with anyone. Anybody can call themselves, as long as.

Mary Beth [00:01:40]:

Your dog doesn’t give investment advice, because then that’s probably some regulation there. But you could definitely, like, advise on budgets all day long.

Neela [00:01:47]:

I can chat with him about the Series 65 registration requirements and I’ll get back to you. But I think the thing to know, particularly with a certified financial planner, is that you know that this person is skilled in a broad section of financial planning topics. So retirement planning, investments, taxes, insurance, all the exciting stuff. It’s basically like a master’s degree for financial planners, and then you have a major exam. It’s almost like the bar equivalent of financial planning.

Mary Beth [00:02:16]:

Yeah, I mean, that’s exactly right. So just for context, way back when, when I worked at a broker dealer, I had gone to school financial services, so I actually majored in financial services. And I happened to get my coursework done for the certified financial planner designation while I was in school so I was one of a few. You can go get it while you’re in college or you can get it after college to get your classes done for the certification. But I was sitting next to somebody who was in the same program as me who had sold sodas. I don’t want to pick up Brianna. Compliance wise. Can I say Pepsi or Coke? Basically it was like a soda distributor like went around.

Mary Beth [00:02:49]:

So like because he could do sales, he didn’t have the background in terms of like the financial planning education but because he could do sales he was able to be in that program as well. And we were both there looking to build books, a business. And so when with a cfp there is an underlying just foundation of education that is required that you want to know that your advisor has gone through. You want to know that your advisor is hitting beyond investments. They’re hitting. That’s like the comprehensive financial planning that people say they do. They’re hitting this other topics. That is the requirement you need to pass the classes.

Mary Beth [00:03:19]:

Then you pass the grueling two day test which was like oh, I don’t think it’s two days anymore.

Neela [00:03:23]:

One day now.

Mary Beth [00:03:23]:

One day now. Sorry, I’m kids these days. So old. You never know what a Scantron is anyways. I used to have to wait when I got my cfp I had to wait to get a letter in the mail. I don’t understand that too. Yeah, yes kids these days, you just know automatically.

Neela [00:03:38]:

We also had to walk to take the exam uphill in the snow.

Mary Beth [00:03:41]:

Both ways.

Neela [00:03:42]:

Both ways. Kids just don’t get it these days. I honestly once I got my pass letter I jumped up and down so much and I’m not like a very small person that our downstairs corporate neighbors were like oh my God, it’s an earthquake.

Mary Beth [00:03:56]:

I was in my office too when I got. My mom called me, my letter went to my parents house and my mom called me. I was at work and I remember like staring like just in my office, like jumping up and down like staring. Staring out the window in Pasadena. Great.

Neela [00:04:10]:

I love that story that you put out because basically you know if you’re just going for kind of a random term, you could be getting a soda salesman or you could be getting somebody who spent the last several years learning how to do this.

Mary Beth [00:04:21]:

Yeah. So it’s important to understand the baseline foundation of education. Like where was somebody educated? What letters do they have after their name and what were their requirements? So they’re also the issue is that we pick CFP because there is a variety of letters after names for advisors these days. And so there’s a lot of continuing education you can do in areas that you can specialize in. But the CFP is one of the core competencies of just like a foundational knowledge that you want to look for. So do not be distracted by the other shiny letters after somebody’s name. The CFP is always what you want to look for. CFA is also great.

Mary Beth [00:04:55]:

Chartered Financial Analyst. That’s a good one in terms of investment management. There’s a great focus there. That’s also really just like top tier designation that is investment specific, though that’s not the comprehensive financial planning. So just know that difference from a CFA Chartered Financial Analyst to a CFP Certified Financial Planner. Those are the two you’re looking for. The CFP is going to be the one that’s going to get you the comprehensive able to get the advice in all your financial.

Neela [00:05:17]:

So how would you find an advisor that you knew was looking out for your best interests?

Mary Beth [00:05:23]:

There are a couple of ways. I mean, there’s. I mean there’s actually a handful of ways, right? There’s organizations that you can use that you can search through.

Neela [00:05:31]:

There’s Napa, national association of Personal Financial Advisors.

Mary Beth [00:05:36]:

Napa is a great one. You can go directly to the CFP board to do a search. I mean, there’s a reason, like a lot of people just go to trusty old Google and you look for a CFP in your area. If you’re looking to go local or you know, like you’re specifically looking for. So. But Google is your friend. You can go cfp. And I was like, I could do female CFP in San Diego, works with type A women.

Mary Beth [00:05:57]:

I don’t know, I could put something like that, you know, in my Google search and see what pops up. And so I think there’s some great ways you can do if you’re starting out on your own, getting referrals from friends and asking around to see who they like and what they’re interested in. I think is a great way too. But I think looking to those. You always want to go to an organization where they are presenting you with options, that your advisor is a fiduciary, which we should probably talk more about.

Neela [00:06:19]:

Yeah, the fiduciary term, that’s the F word, but like the cool F word. And it’s kind of. Honestly, it blows my mind by the way. The other, it’s still cool, different cool. But this one you can say in front of your kids. The fact that like we needed A word to describe what a fiduciary is, is kind of upsetting in the financial services industry because it’s basically all it means is that the advisor will put your needs ahead of theirs. That’s pretty much it. Can you imagine, like any other profession? Like, imagine going into your doctor and be like, do you have like a health standard where you need to like put my health before your, you know, pockets?

Mary Beth [00:06:56]:

I mean, we can digress a bit, but I’m like, then we have like the pharmaceuticals and the recommendations that are being prescribed.

Neela [00:07:00]:

That is true.

Mary Beth [00:07:01]:

So I’m just gonna go.

Neela [00:07:01]:

That is true.

Mary Beth [00:07:02]:

There is.

Neela [00:07:03]:

Touche.

Mary Beth [00:07:03]:

But tell me how that could play out in my life. So if you’re my advisor and you’re not a fiduciary and I’ve got, I don’t know, let’s say I’ve got a couple hundred thousand dollars that I just inherited, I’m coming to you. D like, what could that look like? I’m like, I have a couple hundred thousand dollars. I don’t need it right now. I’m ready to invest for the long term.

Neela [00:07:19]:

So I’m not a fiduciary. I work at a firm where I can put you in one of two portfolios. Both of these portfolios, you know, they meet your investment objectives, they meet your needs. They, you know, are good long term portfolios for you. One of them is super low cost and I don’t really get much of a commission off of those. But this other one over here has a lot higher fees. And you know what, if I sell this fund, I also have a better chance of winning that trip to Hawaii. So that’s called the difference between a fiduciary standard and a suitability standard is that a fiduciary should put you in portfolio A all day long.

Neela [00:07:57]:

A suitability standard, well, you know, we can kind of move you into A or B depending on my incentives. You’ll be fine.

Mary Beth [00:08:05]:

Don’t worry about it.

Mary Beth [00:08:07]:

That’s it.

Neela [00:08:08]:

Plus, I’m going to Hawaii.

Mary Beth [00:08:09]:

Hey. Hey. So that’s why fiduciary is incredibly important. So cfp, you want the fiduciary as well. That’s an incredible aspect. You can search, you know, depending on the platform you’re using to search for an advisor. But we’ll talk more about questions you need to ask. You want to make sure that that is either on the advisor’s website or that you are point blank asking them if they are a fiduciary when you are interviewing to make sure that you have that Option.

Neela [00:08:33]:

What about compensation?

Mary Beth [00:08:35]:

So there are a variety of ways that advisors can get paid. So Neela just mentioned one of them. So we have the commission. So depending on what product or investment that I therefore convince my client or you tell my client it’s best for them, recommend they decide to buy it, then I’m making a commission, get some percentage of that sale comes back to me. The percentage of the revenue goes in my pocket, whether it’s a one time or ongoing, that’s a commission. I get a payment for the product I’m selling. You fee based means I can earn a commission. So that means I can charge you a fee, an ongoing fee and I can also earn commissions.

Mary Beth [00:09:09]:

So some advisors are fee based, which means they might charge you the 1% on your portfolio to manage the investments and then they also may sell you an annuity which will then give them a commission. That’s going to be what a fee based advisor does. Like some, a lot of advisors do that. And then fee only advisors are the ones that receive payments from clients they work with. Basically that’s going to be your. There’s no kickbacks, there’s no commissions. They’re only getting compensated on what’s in your best interest at all times.

Neela [00:09:37]:

Right. Your fees are right where you can see them.

Mary Beth [00:09:39]:

Yep. So which one do we prefer and do we recommend?

Neela [00:09:43]:

We are obviously partial here. Yes. But in terms of incentives, I think it matters and it’s like you want, I think a fee only model is the best insurance you have of alignment of interests. Which means that like honestly, your clients should be the only ones paying you. I don’t want to get paid partially by some of these funds or by these other organizations or wrap fees, et cetera. Fee only is, is our recommendation.

Mary Beth [00:10:08]:

Yeah. And it’s what I will say. I’ve worked, I’ve been in the industry for 20 years and I’ve worked in a variety of firms. I’d say I’ve been at fee based and, and then also I moved to fee only like over a decade, a decade and a half ago. Fee only is what feels best for me. And like working with my clients, fee only makes me feel good of like I’m doing what’s in their best interest. I’m not incentivized, I’m not looking at one product over another. And I’m not influenced either.

Mary Beth [00:10:32]:

I’m not being influenced by even if you think like I’m totally neutral. Just the psychology of knowing that one could pay you more than the other is going to create something there Even though you could claim to be neutral all day long, V only, I think keeps it cleaner slate.

Neela [00:10:46]:

Right. Which is honestly one of the top questions that you can ask as you’re interviewing your financial advisors is how are you compensated? And are you a fiduciary? You get really good information just to those two questions, like, what are your credentials? What is your background in financial advising, and how do you get paid? Yep.

Mary Beth [00:11:04]:

What else do we have here? So we have talked about compensation, we talked about fiduciary, we talked about lack of regulation in certain areas.

Neela [00:11:11]:

Right.

Mary Beth [00:11:11]:

Tell me a little bit more about when it comes to interviewing financial advisors. What am I looking for from a relationship? If I’m first sitting down across the table from somebody, what questions are you asking? Beyond there’s the facts of, like, just the facts of, like, how much are you paid? Are you fiduciary? Like, those are yes or no. But there’s still a large swath of people out there who could say yes and, you know, check the boxes on those things. So then. Then from there, what am I looking for?

Neela [00:11:36]:

I want to know if you have experience working with people like me. I have these concerns. Do you work with people like me? Would you know how to advise me? That’s a big one. I think the other piece is, am I truly getting financial planning or am I just getting investment management?

Mary Beth [00:11:51]:

Yeah.

Neela [00:11:52]:

I mean, because financial planning touches a lot of aspects of your life, and we think the best option really has a marriage of investment planning and financial planning so that they’re really working in tandem. So it’s like, you provide financial planning. Like, tell me what you mean by that. As an advisor who does comprehensive financial planning and really goes in depth. That’s a really fun question to answer because then you’re like, oh, like, you have this question, you’ve talked about, how do you save for college? Like, what about, you know, are we looking at 529 plans? Are we starting to have these conversations with our kids? Am I coaching you on having that conversation with your kids? As you’re getting closer to the college years, you can kind of tell honestly, based on how somebody lights up. Like, a great detailed financial planner gets asked that question, and they’re like, oh, my gosh, well, how much time do you have? Let’s talk about all the things we can do together.

Mary Beth [00:12:40]:

Yeah, I completely agree. I think it’s really important to identify first before you’re going in to interview somebody. You need to know, are you looking for investment management? Are you looking for financial planning? Are you looking for both.

Neela [00:12:50]:

Right.

Mary Beth [00:12:51]:

Or do you not know you could just be starting and just not really know what you’re looking for or what you need? And so being clear and being kind of inquisitive about that as well, like, what’s the investments look like? Do you do financial planning as well? Like, what does that look like? And understanding. But I completely agree. Like, I know when I’m asked that question, when I have a prospect in front of me that Neela just talked about, like, vibing, and she has, like, this great shoulder move that we did. Um, do you vibe? Hers is great. Yeah. Do you vibe? And so. Yeah. And so if you vibe, like, you know that your advisor lights up.

Mary Beth [00:13:19]:

And so I know when I sit across from, like, a woman who’s like, type A, like, aggressive in her career, also, like, trying to manage the family, I just know, like, those are the ones where I’m like, yes, and here’s what I’ve seen in the past and here’s what I’ve done. And, you know, I’m talking to them of, like, I see you, I get you. I want you to know that. And I want to share that. Like, I have worked with, like, similar types of clients before. And so you should have that feeling from your advisor. You know, the person you’re potentially working with, you should have that feeling of, like, they have experience here. Yes.

Mary Beth [00:13:46]:

They are confident and, like, they have a plan, like, a process for how they’re going to help you. You want to make sure. I think that’s the other thing is, like, making sure not only that they have their experience working with you, that the process they’re going to bring you through feels like it would be beneficial.

Neela [00:14:00]:

Right. And I think also knowing what is important to you, you talk about, like, type A communication is very important to me. I want to know how are we going to be communicating? Are we going to be able to do zoom meetings, or is it only in person? Can we do phone calls? Will you be available? How long before I get a response to an email? Like, how collaborative is this? Just kind of, what can I expect? Helps check off the type A in my mind of like, okay, I just need to know what I’m looking at. What does this engagement really mean?

Mary Beth [00:14:27]:

Yeah. And I think you also understanding what can you lean on your advisor for? Like, what kind of questions? Like, can we call you with or should we call you with? Beyond, like, we’re scared of what’s happening in the market. Right. Always call your advisor for that and hopefully they tell you that. But beyond that like open enrollments coming up, like can I lean on you? Or like taxes. A lot of people like, do you do taxes? Like, no, we don’t do taxes. But like, maybe we can help you to like have some considerations in your financial plan, know what to look out for, what to consider, 401k investment allocation. You want to have your advisor sharing and instructing you of when it’s appropriate for you to lean on them as well because you don’t know what you don’t know.

Mary Beth [00:15:02]:

And so like leveraging their experience there, like, when should we reach out?

Neela [00:15:05]:

Totally. Yeah. And you also made me think of the idea of depending on what you’re looking for and also where you are in your financial journey can also influence the kind of relationship that might make sense to you. Right. If you are really just getting started and you need some pointers in the right direction, you know, a long term ongoing relationship might not be the right fit. And you want to start with like an hourly session or if you aren’t able to pay for a session or you just need a one shot go, you can look into pro bono opportunities or find an hourly planner to just help kind of put you in the right direction. I’d say as things get a little bit more complicated, that’s probably when you want to start looking for somebody that is available on a more ongoing basis so that you can start to develop that relationship, learn and start to grow together.

Mary Beth [00:15:54]:

Yeah, absolutely. So figuring out, and figuring out what feels comfortable for you, personality wise, you know, I think that’s again, you don’t know what you don’t know. But I think based on our, probably our experiences, like we’re financial advisors, we’ve been in this industry for decades and so we have clients who leave other advisors to come work with us. Like that’s just natural. Right? Clients move around. And so there’s reasons that clients leave their previous advisor. It could be communication, could be a mistake. For example, they could be feeling like they’re not heard.

Mary Beth [00:16:21]:

I think being mindful of the active listening from the advisor, like do you feel like they actually truly see you? Do they recognize what your true kind of core concerns are or are they mostly pushing an agenda and kind of trying to put it into a box? So I think being on the lookout of like a little bit of trust your gut on some of those things, like if you’re feeling closed off or you’re feeling like, hey, maybe the advisor is talking to your spouse but not addressing you, like those are flags, those are things to consider. Like Just right off the bat. I mean, if you’re not included, don’t move forward.

Neela [00:16:54]:

Right. I love that you said that because there’s like a quick little test where it’s like if you are in a meeting with a financial advisor and they’re talking more than you, probably not a good fit. Like are they interested in telling you more about them than they want to actually learn about you? That’s a red flag.

Mary Beth [00:17:09]:

Red flag.

Neela [00:17:10]:

This is one. You know, we were going to link to a couple of blogs that we have on this subject, but you know, something to just be aware of. I know we talk about CFPs and there’s actually only just over a hundred thousand CFPs out there. It’s not a huge number, it’s a pretty narrow segment of the population. But something that’s happening in the financial advisory business overall is that it’s aging essentially. We have a lot of people who got started as financial advisors in the 70s and 80s coming out of the insurance industry. Half of all advisors are over 50. So I think an important question, especially if you’re working with somebody who’s a solo advisor, is what’s your succession plan? What happens if you get hit by a bus? Is there a team there that will be able to support you? Is there a multi generational team that is set up so that you might not have to make this decision ever again? So I think that’s, it’s an important question even to just ask, just so you have some peace of mind that you’re not hiring somebody who’s going to retire in two years and then you have to do this whole search all over again.

Mary Beth [00:18:11]:

Yes, exactly. I think it’s a great point. It’s okay to work with, work with a large firm, work with a small firm, with a solo advisor, but I think the succession planning for your own comfort is very important. They might not be retiring in two years, but you do want to make sure, even if they’re in their 30s, 40s, that they do have a succession plan. Like what happens if they have a medical emergency? How do you find out about it? When do you find out about it? And so you want to make sure that there is some thought and a plan around that and they typically should have that as part of their documents as well. But you never know. You want to ask.

Neela [00:18:41]:

And I think to add to, there are basic questions that we want to make sure you’re asking. But at the end of the day, financial planning is like a highly personal field and it touches so many aspects of your life. So you made this point of like, what are you looking for? Like if the thing that is most important to you is like hey, I want to make sure that my kids become responsible stewards of wealth and I really want to have like more family conversations around this. Do you all do that? Make sure that you’re getting what would actually add the most value for you. And you would be surprised what financial planners are able to do.

Mary Beth [00:19:15]:

Like I said before, there’s a spectrum of specializations and sub designations. So make sure like you can probably find an advisor that specializes in what you’re doing. You just have to be able to ask though. And so going in armed with questions is really important. You can do a quick Google search for questions of to ask. I mean, well, this will be searchable as well. So you can walk in with a list. I think the other thing that I know does come up a lot that comes up on those lists that, that we even debate here at Abacus.

Mary Beth [00:19:42]:

I’ve seen a lot on the list is ask for a sample financial plan. I don’t quite think it’s necessary. I think it could give some people a peace of mind. Like people want to see like what’s the output, what’s the deliverable. I bristle at that a little bit. I want to give people context of like here’s what it’s going to look like. But please know this is outdated. The minute that I hand it to you.

Mary Beth [00:20:00]:

Your life is consistently changing, your goals are changing. This is a one time, at this moment in time plan that we’re gonna, you know that we’re using to move forward, but it’s not the end. And so know that if you were asking for a sample plan, that shouldn’t be a deciding factor for you. You wanna know that you’re gonna have a deliverable. If you feel comfortable, like you need to have something to walk away with, great. You might wanna have an idea of what that looks like. But I mean we don’t typically do it here at Abacus because of that. Because again it’s ongoing, it’s changing.

Mary Beth [00:20:26]:

You’re walking away from every meeting probably with some action items anyways. And it’s just fluid thing but it can give some people peace of mind. And so know that that will be one of the things that does show up on those lists of like can I see a sample financial plan? Know that not all advisors do it and the value that you place on it. It’s a software that we can utilize to help us run the numbers, but it is not that software is not going to say, hey, stay in the market with like the volatility that’s happening right now. It’s not going to give you the peace of mind that a human and conversation and connection will give you. So that’s my soapbox on that.

Neela [00:20:57]:

To your point, if the true goal is financial peace of mind, how will you give me that peace of mind? This is a piece of that. This is the financial planning software we use and this is how it’s going to show you how distributions can be taken over the rest of your life and what your taxes are going to look like and all these different projections. But at the end of the day, I want to feel like my money is being cared for and that my plan is being cared for and that I am able to do what I want. How are you going to give me that?

Mary Beth [00:21:25]:

All right, well, this is helpful. There will be a transcript of this, so hopefully that’s easier for you to download and highlight for some questions and takeaways if you’re listening on the go. But we do encourage you to do your research. Check out some of the websites. It’s a big decision to work with a financial advisor. Just do your research.

Neela [00:21:41]:

Thank you for joining us for another episode of if Money Were Easy. We hope you’re walking away with some fresh insights, maybe some inspiration and some ideas to apply to your finances, life, et cetera.

Mary Beth [00:21:53]:

If you’re excited about these conversations, we would love for you to follow or subscribe on your favorite podcast platform and YouTube. It’s one of the best ways for you to support the show and that way you will never miss the latest from us.

Neela [00:22:05]:

We’re also turning if Money Were Easy into a community and we love your help building support. So leave us a review. Share your favorite episode with a friend and we’d be super grateful.

Mary Beth [00:22:14]:

We are also launching a newsletter. There you will get the episode updates, behind the scenes content, all of the bloopers from Neela and I and what we are reading, reading, watching and listening. You will find the sign up link in our profiles.

Neela [00:22:29]:

The bloopers are choice. Just gonna say they are. They’re really, really great. Please connect with us on Instagram. We’re at Mary B Storage and Neela Hummel cfp.

Mary Beth [00:22:39]:

Thanks so much.

Neela [00:22:40]:

Thank you.

Mary Beth [00:22:42]:

Abacus Wealth Partners is an SEC registered Investment Advisor. SEC registration does not constitute an endorsement of Abacus Wealth Partners by the sec, nor does it indicate that Abacus Wealth Partners has attained a particular level of skill or ability. This material prepared by Abacus Wealth Partners is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security strategy or investment product. Opinions expressed by Abacus Wealth Partners are based on economic or market conditions at the time this material was written. Facts presented have been obtained from sources believed to be reliable. Abacus Wealth Partners, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Abacus Wealth Partners does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.

Mary Beth [00:23:37]:

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