How to shop for a financial planner

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I have seen answers to this question from pundits like Suze Orman and Dave Ramsey. They usually recommend you “hire a CFP” and “ask your adviser how she gets paid.” These suggestions may be well-intentioned (if not used to sell books).

However, in my experience, they don’t actually weed out the good advisers from the bad. One reason is a good salesperson will have a crafted answer for each.

I’ve heard that Suze Orman recommends you don’t hire an adviser who comes to your house. Apparently, she was too busy in her first few years in practice to visit clients at home. But your adviser may not want to pay $30k a year or more to rent office space. Does that really mean that the adviser is bad?

Saving $30k per year could be a great business decision. What if the adviser could pass that savings on to their clients and still meet the clients’ needs? Further, I’ve found that I can learn a lot about someone by visiting their home.

I once visited a client at her home and it was decorated with pictures and figurines of horses. It turned out she was passionate about working with horses and riding but this hadn’t come up in our first two conversations held at my office.

I like to say I help my clients put the puzzle together to get them where they want to be. Maybe you want to retire to Tuscany or you’ve always dreamed of owning a powder blue ’57 Corvette. Wouldn’t you want the person helping you put your puzzle together to know that about you? What might your advisor learn about you if they were to come to you for a meeting?

Of course, there is always the chance the broker knocking on your door is just there to push products. So, let me give you a few good questions to help evaluate your next potential adviser.

Question number one is, where does this person work? Many companies founded in the 80’s and 90’s have their roots in product sales. Selling investment or insurance products is not, on it’s own, a bad thing.

You may ask yourself why someone would work for a sales-oriented organization? It may be because they are a sales-oriented adviser. Is that who you want helping you achieve your life’s dreams?

Think about it this way: do you think of CPA’s as sales people? I think most CPAs would self-describe as being not very passionate about marketing and sales. More analytical professionals tend to lean toward giving advice rather than selling.

Is there an inherent conflict of interest when selling products for a commission? Yes. But you might need to use certain products to support your plan. The important trait in any adviser is whether his approach is based in selling or advising.

My advice to you is to hire someone who will act as an adviser or consultant. Whether they sell investment products or not may be irrelevant. Choose to work with a person who is interested in your situation and wants to know more.

Watch out for “advisers” who try to introduce a product early in the process (first three meetings). It’s difficult to give thoughtful recommendations without knowing the whole picture. Let your intuition tell you if the person is steering you in one direction before they have the facts.

Question number two is about the adviser’s intentions. Ask your adviser how often they recommended the investment they are suggesting to you. If you suspect they may fit a lot of clients into this same solution, that is a red flag.

It may suggest they’ve found a product that’s both easy to sell and pays them well. Again, hire the adviser that will be your consultant. You want someone to be your advocate not someone who is an advocate for a product.

Question number three is about the adviser’s ability to listen and to teach. Ask him or her to expand on a financial-planning concept they are explaining to you. This test is great for a few reasons.

First, if the adviser is at all pushy or rude, they may not be someone you want to work with. I have seen clients be bullied into investments they don’t want or understand. Remember, when you have to make tough decisions, this is the side of the person you are likely to get.

The second reason this question is great is it tests the adviser’s desire to listen and teach. If they seem more focused on their own delivery rather than the “aha!” in your eyes, they may not be a good fit.

You also want someone who wants to learn as much about you as possible before giving advice. If a doctor only asked you one or two questions before writing a prescription, that would be concerning. Look for someone who takes plenty of time to examine the situation before diagnosing and prescribing.

I hope this helps you look at choosing an adviser differently. Incorporate these questions and reasoning into your search. I think they could help you find a professional who puts your interests first.


Neil Maxwell CFP®, EA