The term "annual review" doesn't usually cause a feeling of excitement for anyone who comes across it. Yes, there
The value of a financial advisor
Some time ago we wrote about the disruption in the financial services space being led by companies like Wealthfront. This led some of our members to ask if we saw value in having an actual financial advisor. Our answer is that of course, there is a place for a financial advisor the same way that there is a place for having diversified assets in a portfolio. You will need different advice and perspective on different investments and a human advisor still brings a great deal of value to your financial life. What we want to share with you are some things to keep in mind as you choose someone to help you navigate these issues.
What’s a fiduciary?
In the United States there is a new regulation due to come into effect in Spring 2017 that will heighten awareness of the term “fiduciary.” There is a new standard being put into place to force financial advisors to put the interests of their clients before their own interests. You might think this is a given, but it isn’t. Long before these new regulations some advisors had already taken on the role of being certified as a “fiduciary,” in which they take an oath to act solely in the interests of the client. A fiduciary is a gold standard among financial advisors.
How long should they have been in the industry?
At least 3 years. There’s two reasons for this. The first is that you cannot qualify to be a CFP (Certified Financial Planner) unless you have had a practice for at least that amount time. The second is that the turnover in the industry usually happens before the three year mark, and you may not want someone who is using you as a chance to learn the trade. As you interview potential advisors, find out how and why they have a passion for this industry.
Fee vs commission?
The aforementioned fiduciary financial planner will generally have a “fee-only” practice, meaning that they usually don’t take commissions off financial products they sell you. Your fees can vary based on the amount of assets under management, anywhere between .5% and 1.5%. As a rule if you are paying 1.25% or less, you are in good shape.
One of the things we discussed in the Wealthfront article is the fact that the robo-advisors make you take a test to find out what your risk tolerance and goals are. But a human advisor can go beyond that: being available for important life events, advice about other investments, or even just joining you for an occasional meal. “There are complex issues that will arise that simply require an experienced professional,” says Dustin Tondre, one of the principals at TL Private Wealth. “A robot can’t answer your call when you’ve just found out you have an inheritance and want to know the best way to deal with it that minimizes the tax burden and maximizes earning potential,” he added. Having that personal relationship opens the door to opportunities and lines of thinking that simply cannot be replicated by a robot...at least not yet!
Your money is important! Take the time to find a good custodian for it to accumulate, be preserved, and, when the time comes, get distributed.
We have several members of The Gents Place who meet or exceed the standards expressed above. If you’re interested, send us a Tweet and we will message you privately with a few names of people you can interview to find the right fit for you.
About Ben Davis
A serial entrepreneur, Ben Davis is founder of The Gents Place and a leading investor in gentlemen's refinement and confidence.
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