Financial Advisors: Interview Questions

These basic questions are a good starting point to understanding any of the financial advisors you may interview or meet.  Let us know if this list was helpful.  Thanks!

PERSONAL

How long have you been in the financial services industry and/or a financial advisor specifically?

Briefly describe your work history.

What is your educational background?

What licenses and/or designations do you currently hold?

Have you ever had any formal client complaints filed against you? If so, please explain.

SERVICES

What services do you and/or your firm offer?

Do you specialize in a particular area?

Please explain your approach to investing and/or financial planning.

Who will provide ongoing service to my account?

If you are unavailable do you have back-up support team?

How often do you perform account reviews?

How many clients do you currently have?

Do you provide ongoing education for your clients?

Will you provide me with your form ADV Part II or the state equivalent?  If no, please explain.

Are you and/or your firm registered at the state and federal levels as an investment advisor?  If not, please explain.

COMPENSATION

How do you charge for your services?

Do you have a business affiliation with any company whose products or services you are recommending?  If yes, please explain.

Do you receive compensation for referring me to other business professionals? If yes, please explain.

In the event of an emergency, how long will it take to get all of my money out of the investment account we have discussed? Please explain in writing.

Do you provide clients with a written letter of engagement? If no, please explain.

Rebalancing Your Retirement Investments:

No one has been sheltered by the latest economic downturn, including your retirement portfolio.  This may be the opportunity of a lifetime to rebalance your investments to take advantage of the future upswing of a recover.

Rebalancing your portfolio should be done with a money manager, financial advisor and/or a financial planning professional, as it is truly a difficult task to accomplish on your own.

You can do most of the leg work first, however, by evaluating your existing investments and assets, then present them to your existing or your newly found financial advisor and discuss what you want to change, alter, or liquidate.

First, why do you need to rebalance?

Typically you need to rebalance your portfolio because of your age, your risk tolerance has changed for any number of reasons (see latest economic crisis), or the relative values in your portfolio have changed and no longer meet your desired asset and risk allocation.

Age
In your late 20’s, you were probably inclined to invest in high risk, high yield, but once you are closer to retirement age, converting most of your assets into more liquid forms will probably be your primary goal.  Deciding and weighing the risks and benefits of these type changes are best suited for a financial advisor who has a diverse client base and a varied background of experiences to draw from.

Risk Tolerance
Again, when you were younger and still had a long-term time frame to invest for retirement, you were willing to tolerate higher risk. On the other hand, an investor in their 50’s who is counting on using their retirement fund as a reliable source of income might not be comfortable with a large decline in their portfolio’s value, even for a short period of time. It’s time to lower the perceived risk.

Asset Allocation
There are really only two choices to rebalance your portfolio’s asset allocation: either make direct adjustments by reallocating funds from one asset class to another (as you grow closer to retirement age you may divert some of your stocks and properties into something more liquid), or add new stable investments (such as bonds or cash) to the portfolio.

Any number of high-quality money management advisors within our independent directory ( All Financial Advisors ) can help.  Maybe selecting 2-3 to talk with before you make your decision; will help you get a feel for each financial advisor’s experiences, background, credentials, client to advisor ratios, etc. 

We hope this helps!

Important Beneficiary Designation Considerations

Although you may have a formal estate plan established with a trust or will — make sure beneficiary designations on all accounts are consistent with your goals. 

Accounts having beneficiary designations will control who receives the assets.  Common assets with beneficiary designations are:

• Annuities
• Individual Retirement Accounts (IRA)
• Life Insurance
• Qualified Retirement Plans (401K, 403b, 457, SEP, SIMPLE, Pension, ESOP)
• Employee Benefit Plans (Group Term Insurance, Stock Option, Stock Purchase, Non Qualified Retirement Plans)
• Transfer on Death (TOD) Accounts

Additional items to consider:

• Update designations for life events such as birth, death, marriage and divorce.
• If you make changes to your will or trust ensure beneficiary designations are up to date.
• Name contingent beneficiaries
• Use caution when naming a trust as beneficiary, get a legal opinion from a estate planning professional
• Consider naming a charitable organization as a beneficiary

Beneficiary designations are a powerful tool allowing for efficient transfer of assets to heirs.  Consult with an estate planning specialist to ensure beneficiary designations have been recognized and completed throughout all assets.

Contact a qualified estate planning financial advisor within our free and secure directory — to discuss your exact needs.  SEARCH HERE.

Thanks for using AllFinancialAdvisors.com

Michael Jackson’s estate was not kept up to date.  A news worth event for fans and the general public alike.

Michael Jackson’s estate plan included a will… in conjunction with a family trust.  Unfortunately, Michael Jackson’s will was missing vital information, beneficiary designations!

When this happens, this critical estate planning omission temporarily disqualifies the originally appointed administrator and executors from exercising their powers to privately settle the estate. 

As a result, the estate now must be exposed to the state probate system; the state probate will then determine who gets control over the estate and make many of the proceedings public record.

Mrs. Katherine Jackson, Michael Jackson’s mother, was one of the original administrators of his estate.  She was apparently in various disagreements with two of Michael Jackson’s former business colleagues, an attorney and a recording label executive.  Michael apparently appointed them as his executors, when he established the estate plan in 2002.

Any individuals like these type business persons, would obviously be interested to gain immediate control over the estate for business purposes.  You can see how the viewpoints of a mother mourning the loss of her son could differ from two businessmen awaiting to take control of her son’s estate. 

Estates with multiple administrators and/or executors who have differing agendas can become very difficult to settle, expensive and emotionally taxing.

This is a great example of why it’s important to keep an estate plan updated.  Additionally, be very careful and ask lots of questions before deciding who will handle your affairs.  Not all financial advisors are equal in their experience and/or education. 

Don’t let your estate become a “Thriller”…

IMPORTANT QUESTION:
Who will take control of your estate plan when you are gone? 

Choosing 2-3 qualified Financial Advisors with Estate Planning expertise — may be the way to go!  That way you can interview them to see if they have past clients with similar estate planning issues that you have.  Just a thought…

Meeting your new Financial Advisor for the first time…  Expectations / Goal Setting!

Once you’ve chosen the financial advisor you feel is best for you, what can you expect from your first meeting?  Every advisor is different, of course, but a few things will likely happen the first time you sit down with your new financial advisor.

Come prepared to ask and answer questions, and bring any documents that might be helpful (for instance, copies of wills and trusts, insurance policies, account statements, etc.).

At the meeting, your financial advisor will likely ask you detailed questions about your current financial situation.  Answer honestly, even if you’re not happy with where you are currently.  The more information your advisor has, the better he or she can meet your needs.

The advisor will also ask you about your future needs.

Before the meeting, think about where you want to be in terms of retirement (when do you want to retire, and what kind of lifestyle do you want to lead in retirement?). 

• Do you plan to pay for your children’s college education?
• Do you currently save anything, and if so, do you want to save at a higher rate?
• Do you plan to leave your job to start a business, start a family, or for any other reason?
• Do you have a will and other estate planning documents in place?
• Are you financially prepared for the unexpected, such as a job loss, illness or major life change?

These are all things a financial advisor needs to know.

Your financial advisor will talk with you about your financial goals.  Then, using all the information you’ve provided, he or she will come up with a plan to meet all your goals. 

That plan may include anything from getting on a budget to investing aggressively; it all depends on your unique situation.  Once you approve the plan, the advisor will implement it–and you can relax, knowing you’re one step closer to realizing your financial dreams.

NOTE: Experts recommend contacting 2-3 financial advisory firms, so that one may compare/contrast each firm, thus making the best-qualified choice.

Are You One of The Millions of Americans Making These Top 10 Financial Blunders Every Day?

There’s plenty of advice out there about what you should be doing financially. But what about the things you shouldn’t be doing, the financial blunders to avoid? Let’s look at our top 10:

1. Living beyond your means. If you’re using credit cards and equity loans to afford your lifestyle, or if you have several panicky days at the end of each month when the money runs out before the next paycheck, you’re headed for disaster. Living above your means will prevent you from saving for emergencies like a job loss, and what about retirement? You can’t solely depend on your pension or 401(k) to see you through the decades between retiring and dying. Stop spending now and talk to a financial advisor about what you need to do next.

2. Neglecting to save. This one is tied to living beyond your means for some; for others, saving is simply a vague plan that never quite materializes. Build saving into your budget, and to make saving easier, set up an automatic deposit each month into a separate savings account.

3. Living without a budget.  If you don’t have a plan for where all your money will go each month, you’ll almost certainly spend it all–and not necessarily on the things you should be spending it on. Not living by a budget and hoping you’ll meet your financial goals is like drifting at sea and hoping you come across a luxuriously appointed island.

4. Carrying credit card balances. This is an exercise in futility, particularly if you only make minimum payments. If you can’t afford to pay off your credit card in full each month, then you can’t afford to be using it. Carrying a balance just racks up interest payments that could have been used to earn money for you elsewhere.

5. Making impulse purchases. This is closely tied to living without a budget (and, often, living beyond your means). By definition, an impulse purchase is something you can live without–and although you can certainly budget for wants in addition to needs, random spending on non-necessities just makes you work longer and harder for the things you do need–like retirement or a college education for your kids.

6. Not communicating with your spouse about purchases. If the right hand doesn’t know what the left hand is doing, both hands are going to be wondering where their money went. Discuss purchases over and above the amount of any “mad money” you and your spouse get each month, and you’ll save yourself money and countless headaches.

7. Failing to keep track of your money. This is another one closely tied to budgeting. Do you rely on your online account summaries to tell you where your money is going every month? If you aren’t balancing your checking account to the penny yourself, how will you know if errors are made in your account? (It happens.) Or, for perhaps a more hard-hitting example, how will you know if you’ve accidentally spent your budgeted coffee money on new shoes?

8. Making late payments. If you must use credit cards or loans, never, never, never make a late payment! They will always result in additional fees and, often, in jacked-up interest rates–both of which are money down the drain. Because they’ll be reported to the credit bureaus, late payments will also adversely affect your future purchasing power for big-ticket items like real estate.

9. Neglecting to make goals and plans to achieve them. We talk a lot about financial goals and planning here at AllFinancialAdvisors.com, and there’s a reason: They’re the foundation of any solid financial plan. If you haven’t defined your goals, you’re not likely to reach them. If you’re having difficulty figuring out your goals, get yourself a financial advisor who can walk you through the process and develop a plan to help you meet them.

10. Not participating in company retirement plans (especially if your employer matches contributions).  If your employer matches any portion of your contribution to your employee retirement plan, that’s as good as free money and you should be taking advantage of it. Even if your employer doesn’t match, you should still be contributing to your corporate retirement plan to get the tax benefits.

Are there other financial mistakes you notice people making (or that you’ve learned the hard way to avoid)? Leave a comment and share them with our readers!

NOTE: Experts recommend contacting 2-3 financial advisory firms, so that one may compare/contrast each firm, thus making the best-qualified choice.

Estate Planning and Charitable Giving Options:
You might be thinking about incorporating charitable giving into your financial planning.  Your reasons may be altruistic–to give back, to support a worthy cause, to uphold the teachings of your faith–or they may be motivated by personal gain–to lessen your tax burden, for instance.  Your motives for wanting to give charitably are yours alone, and although we are not going to delve into them in this forum, you should be able to define them for yourself and your financial advisor before planning your giving.

AllFinancialAdvisors.com recommends working with your personal financial advisor to create your giving plan.  There are many ways to give, and an independent registered investment advisor (RIA) can help you determine which is right for you.  A financial advisor will also be able to help you figure out how much you can afford to give, work this ‘giving’ component into your budget, while taking tax issues into consideration, and evaluate giving opportunities.

That said, let’s take a look at some of the ways in which you can build charitable giving into your financial plan.

• If you want the tax benefits associated with charitable giving, be sure you and your financial advisor are following the Internal Revenue Service (IRS) guidelines.
• Donate assets like vehicles, art, real estate, retirement accounts, household goods and other items of value; all can be tax-deductible.
• Set up a charitable remainder trust.  A charitable remainder trust is your own private fund to which you can contribute cash, investments and tangible assets. It will provide a designated taxable income for life, payable to yourself or to your beneficiaries. After the income is paid or all beneficiaries have died, the money remaining in the trust is given tax-free to the charities you name. 
• Give appreciated stocks. If you’ve held stocks or a mutual fund for at least 12 months, you can gift those assets to a charity and receive a tax deduction of their fair-market value.
• Bequeath money to charity. When you write or revise your will or living trust, you can include instructions to distribute a portion (or all) of your estate to specific charities. Assuming those charities are qualified according to the IRS, your bequest can be deducted from the federal tax on your estate.
• Name a charity as the beneficiary of a life insurance policy.
• Give to a pooled income fund. These are similar to charitable remainder trusts, but the charity is in charge of the fund, and you simply contribute to it. The charity pools all contributions to the fund, invests them, and pays you a taxable income. When you die, your interest in the fund reverts to the charity.
• Volunteer.  Many charities need the time and talents of people from all walks of life.  When you volunteer, you can deduct some of the expenses associated with that volunteer work–including the mileage you drive to volunteer.
• Give good old-fashioned cash.  It’s quick, it’s not complicated, and you can deduct the amount you give from your taxable income, provided you donate to a qualified charity and get a receipt.

 
Your financial advisor and/or financial planner can explain these and other ways of giving to charities (including gift annuities, donor-advised funds and private foundations) and help identify ways to make the most of your contributions, such as employer matching funds.  Financial advisors have varied views on the appropriate fashion to give, so check in with your current financial advisor and ask these questions.

If you don’t currently have a financial advisor, simply SEARCH HERE for qualified financial advisors who have various specializations in Estate Planning, Charitable Giving and/or Money Management — or start by entering your Zip code in the space provide above — to begin your search.  Best wishes. 

Today’s blog is in honor of Martha Brogley’s lifelong charitable giving of herself and her artistic talents.  MB

Dodd-Frank Wall Street Reform and Consumer Protection Act:
The CFPB Explained

We’ll be doing a series of posts this week about the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173).  In today’s post, we’ll take a look at the Consumer Financial Protection Bureau.

H.R. 4173 creates the Consumer Financial Protection Bureau (CFPB), a new regulatory entity within the Federal Reserve. 

The CFPB is completely removed from any influence from the banking industry.  It is intended to oversee all financial products offered to consumers by just about any financial institution, large or small.  For example, when you have a complaint about a shady payday loan company, or if a credit card company is charging you exorbitant fees, a consumer can take it up with the CFPB, which will have the authority to investigate your complaints and make new rules to respond to new problems.

We can also expect the CFPB to crack down on big banks and their scads of fees that nickel-and-dime consumers.  But if you get a car loan through a dealership and something goes south, don’t call the CFPB: Thanks to successful lobbying by car dealers, they won’t be regulated by the CFPB.

All the other lenders that will fall under the CFPB’s oversight, however, can expect to clean up their acts—or pay up.   H.R. 4173 gives the CFPB some real enforcement muscle, including the authority to impose fines of up to $1 million per day if a lender fails to follow consumer financial protection laws.

President Obama is expected to sign H.R. 4173 into law this week.  Before the CFPB begins protecting anyone, it has to be created; the front runner to head up the new agency is currently Elizabeth Warren, chair of the Congressional Oversight Panel, who introduced the idea of the CFPB back in 2007.  Consumer protection groups support Warren, which is a good sign; it remains to be seen whether President Obama will make her head of the CFPB.

This week we will also discuss specific ways in which the Dodd-Frank Wall Street Reform and Consumer Protection Act could affect you, so make sure to bookmark AllFinancialAdvisors.com.

Here on the AllFinancialAdvisors.com blog, we’ve talked about various aspects of choosing a financial planner. But we haven’t yet talked about exactly what it is a financial advisor actually does.

First, let’s be clear:  All of the financial advisors listed with AllFinancialAdvisors.com are registered investment advisors, or RIAs.  That means they’re registered with, and regulated by, the U.S. Securities and Exchange Commission (SEC) (or with their state, if they’re managing less than $25 million).  As RIAs, these financial advisors are required to uphold fiduciary duty, meaning they’re legally required to look out for your best interests. (For more about fiduciary duty)

So just what does a financial advisor or RIA do? That depends on the RIA and his or her practice and expertise, but in general, you can expect a financial advisor to do the following:

• Look at the big picture.  A financial advisor will sit down with you and get a clear idea of exactly where you are financially today and where you want to be in the future.          
• Make a plan.  Once your financial advisor has a clear understanding of your current financial situation and your goals, he or she will create a plan to take you from where you are to where you want to go. If you’re just starting out, this may include everything from budget advice to estate planning. If you’re in the process of accumulating wealth, your plan will probably focus more on growth strategies.           
• Prioritize.  Maybe you have 20 years until retirement, and in the meantime you want to send your kids through college, pay off your house, take a vacation each year and build savings. Those are all significant goals, and a financial advisor will help you to work toward achieving all of them by recommending investments with the appropriate amount of risk and allocating your money accordingly.     
• Navigate potential roadblocks.  You might not think about taxes and estate planning, but your financial advisor does.  He or she will maximize your pre-tax investments, minimize your tax risk, and work to ensure your estate passes intact to your heirs.     
• Stay ahead of the curve.  Once your financial plan is established and agreed upon and working smoothly, you can expect your financial advisor to check in with you each year or as needed to fine–tune your financial plan.  This is your chance to check in, discuss your portfolio and talk about any new financial goals.

If you really want to know what a financial advisor does, the best course of action is to find out up front.  Interview several financial advisors and get a clear understanding of exactly what they’ll do for you (and get it in writing).  When you know what to expect from the get-go, your relationship with your financial advisor will run smoothly–and neither of you will be in for any unpleasant surprises later on.

Phased Retirement Strategies [PART 2]
Excerpts written by Richard W. Jackson, Principal: Schlindwein Associates, LLC

If managed and planned properly, Phased Retirement can help individuals to:

• Gradually ease into retirement, rather than end their career abruptly.
• Decrease the need to draw on reserves and investment portfolios to generate income for current cash needs. This can enhance the growth and longevity of savings.
• Delay receiving Social Security benefits, which can yield larger benefits.
• Continue funding tax deferred accounts like 401(k)s and IRAs.
• Continue receiving company-provided or subsidized medical benefits.
• Enjoy physical and mental well-being and personal fulfillment.

Preliminary Steps To A Phased Retirement

Here are some suggestions and tips that can facilitate a successful phased
retirement:

• Talk with your employer about phased retirement and understand the implications to your benefits.
• If you are currently retired and want to work, focus on your industry of expertise for best results.
• Determine your retirement living needs and create a budget that lists your fixed and variable expenses. 
• Determine potential sources of income. 
• Determine how much income you can reasonably expect to withdraw from your assets and any shortfall that may exist. 
• Determine how much you would like to earn and how much you may want to work.
• Make certain that your portfolio’s asset allocation is appropriately matched to your financial goals and updated periodically as your situation and circumstances change.

 
Our Next Post will cover:
Key Factors To Consider For A ”Phased-Retirement”
 
To Be Continued… Stay Tuned.
***
Many of our advisor partners are members of the National Association of Personal Financial Advisors (NAPFA), which is the leading organization promoting Fee-Only comprehensive financial planning.  Many advisors we have within our directory belong to the Financial Planning Association (FPA) as well.  Utilizing the services of a qualified financial advisor and/or financial planner will ensure you can retire comfortably!  They can help you identify the strengths and weaknesses in your financial picture.  The Time to Act is Now!

NOTE:  Experts recommend contacting 2-3 financial advisory firms, so that one may compare/contrast each firm, thus making the best-qualified choice.