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Could you give me an opinion of my interaction with a certified financial planner (CFP)? I’m trying to decide whether to move on with him or not. I understand choosing a financial professional is a personal decision, but I’m not sure what I’m really looking for.
I am conservative and wary. I am 72 and have been a self-directed investor for 20 years. I have tried over the years to work with broker-dealers and the like, but the results were always ugly. I know full well that I could have done better, but at least I was able to sleep at night. I am on solid ground and have enough for retirement.
My goal in hiring a CFP is to unburden myself, as well as prepare my children for their inheritance. One of my children is a bit savvy and the other is not at all. So this adviser would also work with my children.
The adviser I picked worked for 17 years at one of the major financial companies, and then left for a boutique financial advisory. His references were impeccable. We discussed his normal fees and negotiated a rate that took into account that my portfolio is very conservative. We also agreed that the fee included my children at no additional cost (that is their normal arrangement, not a special deal) — this part was very important to me.
We got to the finalization and I asked him to provide me with an engagement agreement that lays out the services that are included. What I got from him after he spoke to his chief executive was a generic form to sign that detailed what I “can” be charged for, not what I will be charged for, and the rates were different than what we had discussed.
From my perspective, not only did this undermine our bargaining in good faith, but also his CEO should have called me directly and taken the hit rather than sacrifice the credibility of the CFP, who owns the one-on-one relationship. Should I continue on with this relationship? If not, how do I find a better fit for myself and my family?
Baited and Switched
I feel like you answered the first part of your question for yourself. This is not the relationship for you.
You’ve been doing this on your own for a long time and have been doing a good job, so it’s going to be hard for you to turn over the reins to somebody else even on the best of terms. There’s little chance of things working out if you start off on the wrong foot, and not dealing with somebody you trust is a big misstep.
As you said, choosing a financial adviser is a very personal decision, and you have to feel right about it. While any certified financial planner you pick will have a fiduciary duty to work in your best interest, they are not all the same. CFP professionals operate in a range of circumstances and fee structures, and at the end of the day, they’re human beings, and everyone is different.
That said, your children are also human beings and are different not only from each other, but also from you. If they are adults, they should be making their own financial choices, and that includes picking their own advisers. You may have to let go of that a little bit, and that especially goes for the one you think is not so savvy. Even if you can exercise a little bit of control over their situation while you are alive and the money is still yours, you have no say once you are gone unless you leave all your assets in a trust to be managed by a paid third party.
Most individuals who inherit from a deceased spouse or family member move on from that person’s adviser at some point. So unless you are going to bring the kids into the meetings and make sure everyone is on board, prepare to think of this as a choice only for yourself, and not for them.
To properly vet a financial adviser for yourself, there are generally three things to consider:
Your step here to contact a CFP instead of an investment broker is a good one. A CFP is a fiduciary who is ethically bound to work in your best interest, while those who are not fiduciaries only have to follow a “suitability” standard. Fee structures can vary with both types of advisers, but even if a CFP is earning a commission from a certain investment they guide you to, they still have to make sure it’s the best thing for you.
You have to know up front what the relationship will look like. You should know what to expect in terms of regular meetings, other communications and how to get in touch. Some boutique firms offer concierge-type services that extend to helping you buy cars, and you become close enough that they’re invited to your kids’ weddings. Others just schedule quarterly phone calls. This is where the “vibe” comes in. You need to feel in sync with the adviser to know whether you can make good decisions for you together. If you’re a spreadsheet person and they’re a storyteller, you might not be the best fit.
This is always the last thing people talk about, but it’s the most important. It should be extremely transparent what you are paying. The bait-and-switch you’re describing sounds more like a stereotypical car-buying experience than settling on an adviser to manage your life savings. If you’re concerned about the value you’re getting for your fee, ask about this first, and if the answer is not what you want, move on to the next choice. You hold all the cards in this situation. You know you can handle your money on your own just fine, so choosing an adviser should feel like a relief, not more stress.
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