What do you do for clients?
Given the fluid definitions of different types of advisers, finding out exactly how a potential adviser works is key.
Most financial planners, such as DC’s Alexandra Armstrong, look at a client’s goals—such as where he wants to live and when he wants to retire—and help the person come up with an overall financial plan, including investment recommendations. If the client needs an estate plan or tax preparation, Armstrong connects the individual to people who specialize in such matters. Some of her clients also have a separate investment adviser to manage their portfolios.
Michael K. Farr is a financial adviser, but he focuses almost exclusively on investments. Farr—of DC’s Farr, Miller & Washington and author of A Million Is Not Enough—is a former stockbroker.
Many firms, such as the Family Firm, offer financial planning and investment advisory services in one place, including help with estate, tax, and insurance planning. If a client is also going to work with an estate attorney, the Family Firm will prepare for that meeting by having balance sheets and other paperwork ready. One-stop shopping can make it easier for clients to stay organized and consolidate fees, but some people prefer to get different perspectives.
Will I also need to work with other advisers?
While a financial planner or adviser may suffice for many households, people with high net worths or complicated family situations often need extra help with estate plans, taxes, and insurance.
Estate-planning attorney Nancy Fax says that while almost everyone can benefit from visiting an estate attorney, it’s particularly valuable for people who have children from a prior marriage, are involved in same-sex domestic partnerships, or have legal complexities.
Estate-planning attorneys help clients create wills, medical directives, revocable living trusts, power-of-attorney documents, and other tools that help people prepare for incapacitation and death. They make sure clients keep their retirement-plan beneficiaries updated and check that their assets fit with their overall estate plan.
David Wexler of the Bethesda insurance-and-benefits firm Greenberg, Wexler & Eig assists clients in setting up life insurance, often to fund estate plans. When people take out life insurance on their own, he says, they often overlook details in the contract, such as the ability to exchange a term policy for a permanent policy without a new medical exam before the term policy expires. Setting up beneficiary designations—and understanding the tax impact—can also be complicated.
Sometimes tax expertise is necessary. Certified public accountant Amelia Hillman, a partner with the Vienna firm Baker Tilly, helps people understand how tax laws affect them and what they can do to minimize their taxes. Because taxes are likely to go up next year, she’s urging clients to pull as much income into 2010 as possible and save eligible deductions for next year.
What are your qualifications?
There’s no one right answer to this question; advisers can be certified financial planners, registered investment advisers, or chartered retirement-planning counselors, or they may hold other certifications and titles. What’s important is to know what expertise the adviser brings to the table—and what her limits are.
If you’re looking for someone to help with your overall financial life, then you probably want a certified financial planner.
“Certification doesn’t guarantee they’ll be perfect, but it shows they have experience, ethics, and education,” says Rita Cheng, a financial adviser with Ameriprise Financial in Bethesda.
If an adviser is helping you pick investment products, then you want to know if he or the firm holds a registered-investment-adviser license, which means he must act in a client’s best interest. Broker-dealers, on the other hand, abide by the less stringent requirement to sell only “suitable” products to clients.
How do your fees work?
Some advisers operate under a fee-only system, which means they charge either an hourly fee or a percentage of assets managed and don’t accept commissions for selling financial products. Because they don’t receive money from other sources, many experts consider them to be free from conflicts of interest compared with advisers who charge under a fee-based model, where they can accept commissions or finders’ fees.
“It’s incumbent on investors to find out how much they’re going to be paying when all is said and done. Ask, ‘If someone else is paying you besides me, how might that influence what you recommend?’ ” says Gendelman.
Hourly fees for financial planners generally range from $75 to $300 an hour, which means that developing a complete financial plan typically costs $2,000 to $5,000, depending on the complexity of the client’s goals, says Cheng. She’s fee-based except for insurance, where it’s more common to accept commissions.
While Armstrong now operates under a fee-only system, in the past she collected commissions, and she still does so for some of those older clients, because switching to a fee-only payment system would be more expensive for them.
You've Earned It. Now What?
Comments () | Published November 9, 2010
What do you do for clients?