Lots of people call themselves “financial planners” or “investment advisors.” How do I know who is right for me?
Invest some time in making your choice of who to work with. In addition to reviewing a potential candidate’s background, qualifications, and certifications, take the time to assess his/her willingness to accept fiduciary responsibility in working with you. Be sure to ask how they are compensated for their work and what their business model is.
Finally, consider how comfortable you feel in communicating with the advisor you are interviewing: Do you like their overall approach? Do they listen to you and ask pertinent questions? Do you feel comfortable sharing your private financial information with them? These are all subjective questions that, answered affirmatively, can make all the difference in deciding who is the right financial planner for you.
Fee-based: Use of this term indicates the advisor will generally accept fees from clients, as well as additional compensation in the form of a commission from recommending and selling investment products, like insurance, annuities, and/or mutual funds.
Fee-Only: Use of this term indicates the advisor does not accept compensation from any source other than directly from their clients. The Fee-Only advisor receives no kickbacks from the sale of any financial products.
Financial Planning Association’s (FPA) definition of Fee-Only
CFP® Board’s definition of Fee-Only
National Association of Personal Financial Advisor’s (NAPFA) definition of Fee-Only
Based on the above definitions, a fee-based advisor who accepts commissions or trails of any kind (trails are trailing commissions or 12(b)1 fees) cannot ethically indicate they offer “Fee-Only” planning.
Consider how sales people are often stereotyped: they have something to sell you that they assure you is going to make your life better. What they may not tell you is that when they make a sale, they get a commission from the product’s maker. Some financial products pay higher commissions than others, making the temptation to sell you the higher-paying product a very real possibility. Some financial products may be things you don’t need, so the sales person may be put in the position of needing to sell you something, anything, to get that commission. You can see how this may be not in your best interests.
Financial planners accepting a fiduciary standard are willing to put their clients’ best interests ahead of their own, and they are willing to put that commitment in writing. Please read our Fiduciary Pledge to our clients. You can print out this pledge and present it to your current planner or any planner under your consideration to determine whether he/she is willing to act as a fiduciary when working with you.
However, if you are a self-directed person who is willing to be actively involved in monitoring and managing your own accounts, and if you are self-disciplined enough to navigate down as well as up market periods, an hourly engagement may be right for you. While we seldom offer that service, we will gladly refer you to qualified Fee-Only advisors who do.
One example of a common financial issue follows: It may be in your best interest to consolidate accounts to save money on custodial fees and to simplify recordkeeping. Implementing this consolidation may require opening new accounts, transferring existing assets, determining and tracking cost basis, and/or working with other advisors or custodians that may resist letting those assets transfer away.
Other common issues to consider is that investment securities and asset allocation plans requiring ongoing monitoring, accounts need periodic rebalancing to maintain your appropriate risk tolerance, and, during times of market and economic downturns, you may need advice and counsel regarding prudent financial decisions for long-term financial success to prevent you from harming your long-term plan. Knee-jerk reactions to scary news in the media may not be in your best interests long-term.
Resolving such issues involves a significant investment of time, which many people simply prefer to not take upon themselves. That’s when Mote Wealth Management can be there for you.
You may have seen an increasing number of “alphabet soup” letter designations following planners’ names. It seems nearly anyone, including insurance sales people and stockbrokers, can call himself or herself a financial planner, or any number of other financial services related titles.
Searching the Internet for both the definition of a title or designation and the legitimacy of the institution offering it may assist you in determining their validity. Some titles and designations are offered for a fee and have little or no training or expertise actually associated with them.
We believe the CFP® is the gold standard designation for comprehensive financial planners. CFP® stands for Certified Financial Planner. Attainment of the CFP® involves a rigorous course of study and requires passing several intermediate tests, which qualifies the student to sit for the 6-hour comprehensive CFP® exam (changed in 2016 to a 6-hour electronic test from the former 2-day, 10-hour paper “fill-in-the-circle” exam. The comprehensive exam is an all-or-nothing exam, and the pass rate is generally in the 40% to 60% range. All Mote Wealth Management financial planners hold the CFP® designation or are actively pursuing the designation.