If you’ve been a listener to this podcast for some time, you are likely well aware of the things to look for when hiring a financial planner. However, your friends may not be. If the topic of finances comes up, do the right thing: educate your friends and family on how to find a good advisor.
What happens when you don’t help your friends and family
I recently had a client who came to me with a concern for a family member. Her cousin inherited a sizable sum of money and hired a financial advisor to assist with the logistics. My client expressed concern about a few aspects of the plan her cousin received, in particular, the number of life insurance policies she was encouraged to obtain, and did not understand some of the recommended investments.
When it comes to Financial Advisors: Ask the Right Questions
We talked about how my client could help her cousin with regard to asking the right questions of her new financial planner. This advice applies to anyone interested in obtaining financial services so I decided to share her story and a list of nine questions anyone should ask when hiring a financial advisor. I’ve also taken the liberty of including my answers as a reference point for any interview conducted with potential financial planners.
9 Questions to Ask When Interviewing a Potential Financial Advisor
- Are you a fiduciary?
- YES! I started my own Registered Investment Advisor (RIA) company, licensed in the states of MA, CA, and PA. These states require that I act as a fiduciary for my RIA and all my clients.
- What are your professional qualifications and credentials
- I am a Certified Financial Planner (CFP®), a Registered Life Planner (RLP®) and a Chartered Financial Counselor (ChFC®).
- When I started my RIA in 2018, I immediately enrolled in the CFP® curriculum. It took a few years to complete the required college-level courses, pass the comprehensive exam, and fulfill the work requirement (2-3 years of full-time work in the industry).
- I have also taken the required coursework for the Registered Life Planner in 2021 – a year of classes and work provided by the Kinder Institute.
- How are you paid? What are your fees and how are they structured (hourly, flat fee, percentage of assets under management)? Are there any additional costs I should be aware of?
- I typically work with new clients in a flat fee arrangement to provide comprehensive planning. You can always find the latest fees and services listed right on my website. This is a one-time fee to cover all the initial planning together.
- Often, clients will engage me to provide ongoing services. This service is also a flat-fee, yearly arrangement, based somewhat on net worth and paid monthly. Again, those transparent fees are listed on my website.
- There are no other fees paid to me. Sometimes I will recommend services that have associated costs (estate planning, tax preparation, life insurance, etc) – but I always let you know the potential costs of these services, paid directly to other professionals, with no commissions or incentives for me.
- How long have you been working as a financial advisor? What is your experience with clients in situations similar to mine?
- I started my own RIA in 2018 and have been working with clients in the years since. I primarily work with busy parents who want to get organized with their finances to ensure a successful future for themselves and their children.
- What is your investment philosophy? How do you select investments for your clients? Can you explain your approach to risk management?
- I believe in using low-cost index funds, in a mostly buy+hold approach, which involves monitoring and rebalancing throughout the year. I use academic research (rather than hot stock tips!) to drive my investment recommendations. Money is a tool to be used to live your best life and your investments should support that goal.
- What services do you provide? How often do you communicate with your clients? Do you offer comprehensive financial planning?
- I typically start new clients with comprehensive financial planning. We cover topics such as budgeting, education planning, insurance review, estate planning, investments, and taxes over a few meetings spanning a couple of months together. I also provide ongoing financial planning, accountability partner, and investment advice for those clients who want a working partnership throughout the year.
- I only work with a small number of clients, so I am readily accessible. Every piece of advice or recommendation you receive comes from me directly, not from staff or assistants.
- What is your financial planning process? How do you determine and prioritize financial goals for your clients?
- I have a standard process that I take all new clients through, which includes a set of meetings, questionnaires, information gathering, analysis, and recommendations. While the process is standardized for all clients, the information, analysis, and recommendations are all unique to your situation.
- How do you communicate with clients, and how often? How can I reach you if I have questions or concerns?
- During our initial planning process, I will communicate with clients before, during, and after each of our meetings. I send out an agenda, keep us organized during our meetings, and write summaries. I use email, text, and a customer portal to organize our communications and information.
- Can you provide references from current or past clients? Have you had any disciplinary actions or complaints?
- I typically do not provide references because all my communication with clients is confidential. That said, I do have some clients who have volunteered to be a reference for me, so I can usually match you with someone in a similar position who is willing to chat about my services and approach.
- I have never had any complaints or disciplinary actions against me.
It’s important to find the right advisor for you. You hope to be in a long-term relationship, so don’t skimp on the upfront work to find the right match!
Look it didn't even give you a countdown or anything Matt, we're live.Matt:
App is not focused it says, what does that mean?Mike:
You are unfocused.
I am unfocused. Hey, speaking of unfocused beginnings apparently this is financial life planning. I’m Matt Robison with my co-host, Mike Morton. Mike, I guess for our viewers and our listeners, we're using a new recording technology platform. This goes back to our show a few weeks ago. Why is everything a pain in the ass? I love it when robots tell me that I suck in some way. It's like your app is not focused. It's like oh, okay, screw you. All right, look first of all, we're recording this right after Thanksgiving. People may be listening to this months since. But Happy Thanksgiving.Mike:
Yeah, same to you Matt. Did you end up eating a lot.Matt:
Not as much as previous ones, we made a whole point, we made too much food. This is one of the points of anxiety in my life is I never feel like there's going to be enough. And there's always been too much. My brother in law took the cake though. We had almost 40 people, but only 28 of them were adults. And he had us peel 30 pounds of potatoes. 30. There's something wrong with this math. Speaking of being thankful for things I'm thankful to have you in my life as a friend and as a co-host. And sometimes friends need to help friends and sometimes you need to be very candid with your friends. And you were telling me right before we started recording that you had a conversation with a friend recently that caused some distress, some concern, and it was time for you to get real with this friend about a problem. So walk me through this.Mike:
Alright, so yeah, just the other day, my friend Jane, we'll call her Jane, came into the office. I like to start stories that way, but I haven't, it's not coming in the office. There's no office this is the virtual office. So Jane came into my virtual office. And I could tell right away we're doing the pleasantries because we haven't seen each other in a while. And I could tell right away, she was very anxious. So I was like, Hey, how's things going? She's like, let me ask you a question. And I was like, Okay, where's this going? But she was like, Is it normal or usual to get, say, two or three life insurance policies? And I was like, it's not really typical, why are you asking? And she said, a friend of hers, right? Well, a friend of mine, and this is true it's actually a friend, it's her cousin we’ll say it's her cousin, was working recently had some inheritance, contacted by a financial advisor working with a financial advisor, and was talking with Jane about the experience, you know, very recent last six months, and said, I've got two or three life insurance policies, and she was a little confused about why we ended up doing that, and also didn't quite understand the mix of investment or hedging. And they asked their advisor about some investments, but never really understood what they are, is this normal, they're just having a conversation about their finances. And so it just reminded me, Jane had talked to her cousin before this had happened before the inheritance and if she had just explained some of the things that she knows about working with advisors, the types of advisors, her cousin may have avoided a situation where maybe the life insurance policies don’t make sense, maybe the mix of investments makes sense. But you want as a client, I always want my clients to understand why maybe we have a couple of insurance policies, what the mix of investments are. And asking if they're confused, I'm going to spend time and like work on that with them. And so you never want to have a client that's confused about why you're doing something or anything like that. And so if Jane just took a little bit of time, maybe months before, and made a recommendation, or just had a communication around, hey, here's the types of advisors you want to be looking for who you want to be working with, so that you really get the right person for you. So this episode is about if you care about your friends, or the people in your life, you the listener are very smart and know these things already because your listening to this podcast, you know a lot of this stuff. But for your friends out there, or your family members who don't know as much as you do about the financial industry and what's out there and what you should be looking out for. And so today's episode gives you a couple of tips that you can easily communicate with them to help out your friends and family to make sure they're getting the right advice for them.Matt:
I can hear you very judiciously pulling some punches in your description here, which I understand because you work with a whole range of people in financial advice in the financial services industry. They have a mix of business models, they have a mix of incentives. Some of them may have incentives that aren't the greatest but are genuinely upstanding, doing good services, people you work with and would recommend, and some of them are the opposite. So you're being judicious, I have the privilege of not being judicious. So we've just found another use case for me co hosting the show. That is bad if you're getting sold multiple life insurance policies and you find out that the person who's doing the selling has financial incentives that basically reward them for doing that. That's bad. That's just a bad setup. You don't want to be in a situation where someone's financial well being depends on selling you useless stuff that you don't need, we're over selling you stuff or upselling you stuff. It's just, it's uncomfortable, it's bad, it's not in your interest. And sometimes just a little bit of bluntness is worth it there. And part of what I hear you saying is, like, sometimes that outside perspective is worth it. And just saying to people, you're kind of getting a little screwed here. This is bad. And that's you, you don't have to say that I'm saying you don't have to say, alright, so you want to help people navigate, you want financial advice. And this can come in different forms, there can be different things you're looking for. And you need to figure out how to avoid being in one of these situations. You want to get into a good situation with someone who you can really trust. And that's basically the upshot.Mike:
That's exactly right. And so how do you find that person, and we'll have later on at bat, I do have show notes for today. I don't know if you scrolled all the way down, we have nine questions to interview your potential financial adviser. And we're not going to go through the questions on the website. But the first thing you want to do when you look for a financial adviser, is you want to hire a fee only fiduciary certified financial planner, if you start with those three things, and we'll talk all through fee only fiduciary, CFP or certified financial planner. So those three things, just use that as your search criteria. Only talk to people or hire somebody that has those. There's plenty of them out there. But those are the three things I would highly recommend that you look for in a financial advisor. Again, there's hundreds and thousands of them out there but fee only fiduciary CFP.Matt:
Let's address the elephant in the room here. I could just imagine our listeners saying, wait a second, you just told me to watch out for people serving their own interests and trying to sell me something. And so they might be thinking to themselves I'll bet Mike Morton is a fee only fiduciary certified what's a whenever, I want to start having some letter acronym after my name. I'm just gonna start making them up. I'm an L O L. That would be awesome. I'm Matt Robison LOL ROTFL, that's a useful thing. Yeah, I want to, I want to say something upfront about that, which is, I struggle with this a little bit. I don't just do this show with you I do a variety of shows. And I got to say not to sprain my shoulder patting myself on the back, but I worked pretty hard to create something that's high quality. Usually, I talk like we joke a lot about the fact that I don't have financial planning expertise. Usually I'm talking about politics and government. I spent 20 years in those fields and I bring on guests who know a ton about those fields. I bring on members of Congress, I bring working journalists, and I try to create something that is informative and entertaining. And there are 750,000 active podcasts out there. And I think that the vast majority of them. I'm not trying to diss the other people out there. But I don't think that they put that level of expertise and care and I'm trying very hard to operate a Michelin one star restaurant next to a McDonald's. And there's a time and place for McDonald's, you know, but it's it's a tough situation. So I am just going to, again, put words in your mouth and say, I fully understand where you're coming from here. You're giving people a nudge to go toward a higher quality level of advice that they can really trust because you know that someone has incentives that are aligned with your best interests. This is the way you approach your work. This is the way you believe things should be done. And I don't think you need to feel bad about it even though I caveat this an awful lot. I don't think you need to be bad about saying there's a reason that I do all this. There's a reason that I worked so hard to get these three letter certifications and to approach things the way I do. It's because I truly think it's best for people and it's in their best interest.Mike:
Yeah, yeah. Thanks, Matt. It is really important I appreciate those caveats in the way that you do things and setting it up and your comments, so thank you for that. It's just important. And the reason I highlighted these three that we’ll go over fee only, fiduciary, CFP is because there's hundreds and thousands of planners and advisors out there that have that so you can find somebody that's going to work for you. But you already know that you're eliminating 90% of the people that might not have the incentives fully aligned with you. Now they're good people throughout the industry, you already said that they're all great people. It's just you want them to be fully lined with what you are looking for. So there is a stat that was a few years ago, but 83% of advisors are fee based, and not fee only. Alright, so that only leaves 15-17% that are fee only. And when you're talking about fee based, that's life insurance and commissions. We're gonna talk about it here right now. Versus fee only you definitely want a fee only person, it's just eliminating some conflicts of interest, and aligning, you know, their advice for you.Matt:
Let’s get into it. That's interesting, right off the bat to me. If I saw that I was looking at hiring someone, I wouldn't hire someone other than you. But if I were looking at hiring someone, if I saw fee based I would use them. That's confusing to me.Mike:
Yeah, in fact, you won't even see it, man. That's the problem. So this is where I'd like those list of questions. If you're thinking about hiring an advisor, you should find a couple. I always recommend finding a couple to interview and find someone that's going to work for you. First question, how do you get paid? What's the fee structure you want, somebody that is fee only. So if you do see that on the website, do some research That's great. If you don't see it, ask the question. Okay, fee only means this, there's fee on and listen, don't worry about fee only and fee based and all this other stuff. Fee only means that you are only paid by your clients. Okay? You are not paid any commissions for selling a product, you're not paid any referral fees or kickbacks or rap fees or other ways of getting paid. But that might not be fully aligned. If I'm sitting across from Matt and I'm, and I love Matt and he's telling me about some financial stuff he needs and maybe I notice, oh, you might need some life insurance. That might be something I recommend, but if I get paid $3,000 to sell Matt some life insurance I'm really going to be thinking about that life insurance for him. That's $3,000 bucks in my pocket for 30 minutes of work telling him like, oh man, sounds like you really need to protect your family, Matt.Why wouldn't you wanna do that? The commission's on these products, either investments or insurance is it's not that you don't need them, you do need them. But work with somebody when you're talking about financial planning, financial advice, fee only, only getting paid by your client, no incentives for any kind of specific investment recommendations, specific insurance recommendations or anything like that.Matt:
Yeah, this is a well studied problem in economics, it's called the principal agent problem. And it's, it sounds really antiseptic, when you say it as well, your incentives may not be aligned with your clients incentives, but what it really means is your financial well being you as like the financial advisor, if it depends on selling stuff to your clients, then you know, you're going to end up doing it. It's the old Ride with the Devil long enough, pretty soon he's gonna take the wheel, and even good people are going to bow to those incentives. Question for you about this. So you were saying, interview people, interview a few people, right? And you want to establish upfront fee only it sounds like your recommendation. Would you even before you make the time to sit down with someone, would you recommend that you just get that information upfront? And if the answer is yes, just don't?Mike:
Yeah, send them a quick email. If you're like, Hey, I'm thinking about hiring an advisor. Here's a couple of quick questions before we sit down for half an hour. Yeah, definitely I would do all three. Are you a fee only fiduciary, CFP should be easy because it'll be after they're usually like people like a shout next to their name. So that one should be pretty easy. The other two are a little bit trickier to understand. So just send them an email and just ask those questions. Absolutely.Matt:
And I don't want to get into the alphabet soup acronyms. All joking aside, but there are lookalike acronyms out there much like fee based sounds an awful lot like fee only what you're saying is certified financial planner, CFP, don't accept lookalikes?Mike:
Now this one. The reason I like the CFP is because not only does it show that you're serious and you've spent time getting some knowledge to go through the CFP, you've got to take about eight or nine courses of courses with thick textbooks think back to college that kind of course with a test after each one and you got to pass them all and then then an overall test, it's an eight hour test about all of that stuff, yep, that's a full, it's a full day. And then also, there's a work requirement of two to three thousand hours, you have to work in the industry. So it's all that the coursework, the Comprehensive Test, and a number of hours of work two to three years, basically of full time work to get the Certified Financial Planner. So I like it not only because it shows, Oh, you took a lot of coursework, you got some knowledge, but also just the commitment to like, if you're serious about helping people, you know, it shows a level of commitment to get that for yourself, put in all that time and effort because you really want to help other people. That's why I like the CFP. And there are other ones, they're great. Other ones can be just as rigorous just if you're looking for a financial planner, or financial advisor for comprehensive financial advice from estate planning, tax planning, insurances invest, you know, kind of everything. I think the CFP curriculum encompasses all of that. Other certifications can be more direct for the particular parts of that if you're looking for the comprehensive thing, I think a CFP is a wonderful one to look for. Are you ready to create your ideal lifestyle? Let's discover what's most important to you and design a plan to have more of that in your life. Go to meet Mike morton.com. All one word, meet Mike morton.com.Matt:
Let's hit, we jumped ahead there on CFP, fee only fiduciary CFP, we've talked about it before. But explain the word fiduciary again.Mike:
Fiduciary means that you are legally responsible for giving advice that makes sense for the client. So I'm legally responsible for the advice that I give to you. And if it can be proven like, hey, I gave this advice for some other incentive or reason, then you can sue me and say, Hey, you are fiduciary and acted illegally.. And the way that I think about it, I always say this to clients: if you had all of my knowledge and experience around financial planning and financial advice, what decisions would you make for yourself? So I tryto put myself in your shoes, really understanding everything and try to think what would I do in this situation? What would I do if I was living this life? What kind of investments or insurances would I get or savings would I do and stuff like that? That's what fiduciary means. Lots of people are fiduciaries. But again, probably 80 plus percent of the industry are not fiduciaries. And I hate throwing out other things, but they will tell you there's a best interest. Oh, no, ma'am, I have to work in your best interest because that's the law. It's literally, which sounds better to work in your best interest or fiduciary. But it's not, fiduciary is what you want, legally responsible for giving advice to you. So just feel again, it's easy, Matt, fee only, fiduciary, CFP, just check those three boxes, and then find somebody that you're really going to get along with working.Matt:
And let's get a little bit into the nine questions and it sounds off the bat, I'm taken with this idea that you really should pre screen, your three part formula right up front, because otherwise, you're kind of wasting your time, you're getting into very confusing sounding distinctions between best interests and fiduciary. I know this, because I've gotten into these conversations myself, where I've had people who I like, who are intelligent, and who are trustworthy. Explain to me, I have to act in your best interests, but they're not a legal fiduciary. And I'm sort of like, I guess that sounds okay. And you just don't want to be in this position?Mike:
I actually, I really liked the way you said that, Matt, just fire off an email. All right up front here, you check these three boxes, because like I said, there's hundreds and thousands of advisors out there that check the three boxes. So just do a search and find a few of those first, before having the conversation and moving forward with Oh, yeah, I think we might work well together, at least just check those boxes. Because once you meet somebody and you're hanging out, and it's like, oh, yeah, our conversations pretty good. Yeah, I guess we could work together. And then you find out they're not one of those three, it's gonna be really hard to change.Matt:
So your first three questions here: Are you a fiduciary? What are your credentials? And fees, how are you paid? Now, we've already covered that once in the rest of the nine.Mike:
Yeah, so we're going to put the nine up on the webpage. And in the show notes, you can see those and I'm going to answer them on my website, I will have the questions and my answers to the questions because I love going through here and answering these. So I'm not going to go through all nine, you can check them out. But what I'll pull out is the investment philosophy. So I think it's a really good question to ask a potential advisor, what is your investment philosophy? How do you choose investments? How do you think about investments? What if we were working together, what kind of investments would you potentially have me choose? And I think that's really good, because my answer is, from listening to the show, low cost index funds, massively diversified set and forget and rebalance portfolio that could align with you. Okay. And if you think oh, yeah, that's a great answer, that’s a good fit. If you don't believe in that academic research, I've read some articles that's great, then you're really alone. So that's makes it a great question, but you might be a stock picker, you might love to pick different stocks and get in and out and that's really interesting. You read the news on different companies, and you want an advisor that's going to help you sort through that. That's great, too, if that's something you are interested in. So find an advisor that's going to work with you on individual companies, or I love the tech sector, or whatever it is. And so I think the investment philosophy is a really great question to ask advisors to make sure you're going to be aligned, because a lot of you know many of your conversations are going to be about investments. So make sure you're aligned with how you think about investing.Matt:
Looking down this list, we don't have to get into all of the pieces. I think it's kind of interesting. I've made a change in my own approach and in talking to people that I'm basically hiring. I used to be bashful, maybe about talking about money. I think people frequently are, I think it just feels like a delicate, gauche, as if it were a thing to bring up with someone, what do you charge? How much will this cost? And the longer I've gotten, the more I've begun to feel like, that's actually, that's backwards. And it's insidiously bad. Because it gets your relationship off on the wrong foot. And an uncomfortable foot, it actually makes things worse, it's a little bit like, I went to grad school at Harvard. And I knew a lot of people who would be at great pains to try not to sound like a jerk by saying, Oh, I go to Harvard. And so they would go through this five step, tap dance and be like, yeah, I'm in grad school in Cambridge, Massachusetts, you know, that school that you may have heard of? I don't, I don't want to say what it is. It's like, Hey, you sound like an ass, basically. And so I'm just used to coming out and saying to people, how much does this cost? And I think if you're going to get into a relationship with a financial advisor, who you know is going to be doing a deep thorough dive into some important details in your life. Just blow right through that. What does this cost? When is it going to cost me? Why do you charge this amount? Why do you charge more or less than your competitors? Get into it, Oh, and just rip the top off.Mike:
I totally agree, especially in this context, but you know, every time you're hiring somebody, you should feel, yeah, it feels uncomfortable to ask the question, but ask the question. And what you want is a response from somebody that's very clear. Oh, here's what I charge. Boom. Oh, why do you charge that way? Here's why. Here's what's important to me. Here's why. Here's how I chose these numbers. Here's our charge. And you want somebody that can clearly again, it's all about clarity, clearly tell you why it's done that way. Same with investments, insurances, why do you recommend this insurance here, X, Y & Z and you should be able to understand it. Okay. So listen to the answer. And you can always go back away after the conversation and then recall and think that I really get all you know, you don't have to do it right in the moment, you know, but ask clarifying questions, make sure you understand the answers that you're hearing. Okay? Because if you don't understand that in a 30 minute conversation or a couple times, you know, what are the chances over the coming years that you're going to really understand all the advice and recommendations that you're getting? Yeah, no, zero. Yeah, I also want to go back to what you said at the top, you know, talking about finances definitely feels kind of strange talking about money or your money. But think of it in this way, your context of what we said at the top of the show, you want to help your friend, if you care about your friends, and your family, you want to genuinely be helpful. Okay, if the conversation is coming up around something about finances or something about money, and you're talking about the markets, or the economy or whatever it is, like, Man, I think I could use some help or something just mentioned those three words, hey, you know what, just make sure you're looking for a fee only fiduciary, CFP, you know, I mean, there's certainly there's websites you can find, you can do searches all over the place, you know, to find those three, but just help out your friends, family, your community, let them know the things that you know, by listening to this podcast, that you know, these these things, but help them out as well. Because, again, nine out of 10 people they run into, say financial advisor, financial planner, are not going to have these three checkmarks. All right. And so you want to help your friends and family, just let them know, look, here's what you should be looking for.Matt:
Yeah, I think that really is the nub of it. Right? And you don't have to there's that saying, sometimes you have to be cruel to be kind. You don't have to be a dick about this. But you wouldn't go to an auto mechanic who was paid on the basis of upselling you a new sound system, you would be suspicious of what you're getting is not the basis for a healthy relationship. And your relationship with your financial advisor is about a lot more money. Depends on what kind of car, but it's about a lot more money. And it's about some pretty intimate details of your life. And so you just you want to be sure up front. All right. So you're gonna put those nine questions on your website, repeat your website, mortonfinancialadvice.com. And when people get there, what probing difficult questions do they ask you that will put you on the spot.Mike:
Put me on the spot and make me feel uncomfortable at this point? Not a lot. I've been doing this for a while. And I've gotten a lot of questions that did put me on the spot. But I've worked through them, I've heard a lot of different things. I do like the background questions. So people often ask, what's your background? How did you get into this? And I think that's a great question, too. I didn't put it in my list of nine. Actually, it's why, why are you doing this? What's your incentive to be a financial advisor? What do you love about it? Or where do you come from? And I do that question, as well. So maybe I'll throw that in as a bonus one at the end.Matt:
Bonus number 10. All right. Sounds good. All right. I think that I'm going to trust you. If I'm doing something bad, you're going to have one of those tactful conversations.Mike:
Yeah, don't worry. We'll do that next time. Man. I got a whole show ready.Matt:
I look forward to our listeners as well. All right, from Mike Morton, Matt Robinson, maybe we will see you next time.Mike:
Thanks, Matt. Thanks for joining us on financial planning for entrepreneurs. If you liked what you heard, please subscribe to and rate the podcast on Apple, iTunes, Google Play Spotify, or wherever you get your podcasts. You can connect with me at LinkedIn for Morton financial advice.com. I'd love to get your feedback. If you have a comment or a question, please email me at financial planning . Until next time, thanks for tuning in.