Interviewing a financial
Most financial planners will offer a free initial
consultation, which they use to determine if they want you as a
client. In turn, you should interview the adviser without being
obligated to hire him.
Make sure you determine seven things during the consultation:
1. What's your financial strategy?
You must understand how the planner is
going to help you reach your goals. Ask the adviser to describe
how you will work together and how often you will receive reports
and follow-up. Be sure this person's style meshes well with your
tolerance for risk.
George Jones, president of Rich Investment in Reading,
Pa., says clients shouldn't hire a person who wouldn't use the same
investment strategy that they're recommending. "I tell my clients,
'I'm asking you to put your money where my money is, and I'll show
you my account slips to prove it,' " Jones says.
2. What's your track record? How long have you
been doing financial planning?
A key document in checking planners out is the
ADV form, which they are required to fill out when registering with
the SEC or the state. Part 2 of this form provides useful information
about a planner's background, methodology and compensation. Financial
planners are required to give clients this form or a brochure containing
the same information.
If the planner holds a federal securities license,
check his record with the National
Association of Securities Dealers to see if any complaints have
been lodged against him.
3. What sort of clients do you have? Do
you have experience in my area of concern?
Common sense suggests that if you have only modest
resources, you don't want to hire someone who has limited experience
with small accounts. Likewise, if you're a millionaire, why go to
someone who normally deals with small investors?
Here's a situation where you should ask for references.
Although the planners would never send you to anyone who is going
to trash them, it will give you the opportunity to see how they've
dealt with other clients in your category. Ask these references
about the strengths and weaknesses of this financial pro.
4. What are your credentials?
The general guideline is that the Securities
and Exchange Commission must list all planners as Registered
Investment Advisers. The exception is if the person you're dealing
with is primarily a stockbroker, insurance agent, attorney or accountant
who is not required to register because the investment advice
they give is only incidental to the other services they provide.
Ask for the SEC disclosure document, Form ADV.
5. How do you get paid?
There are several compensation
methods that advisers may use. Checking their ADV will reveal
possible conflicts. This is a crucial step in determining if you're
dealing with an independent adviser or whether they receive extra
compensation for recommending certain products or services. For
example, American Express financial advisers receive extra compensation
related to the company products their clients use. While you may
get excellent advice from them, you'd better believe that they're
going to recommend American Express products as part of your investment
"It's important that the client knows if the planner
is getting kickbacks for referring clients to other services," Roberts
says. "My office occasionally refers clients to accountants or attorneys
when that is called for. Those businesses may also send someone
to us who can use our services. We do not compensate them for doing
so. We don't want to be in the business of paying people to send
us your business."
You should know about any existing conflicts of interest
before you decide which payment plan suits you.
6. What services do I get for my money?
Some things you might want are cash flow analysis,
income tax projections, estate planning information and assistance
in selecting investments. Be sure this adviser will and can do the
things you need to guide your financial decisions.
The No. 1 thing people want to know is whether their
money will last through retirement, says Margaret Miller Welch,
CFP, of Armstrong Welch & MacIntyre in Washington, D.C. Another
common request is protecting inheritances, income and assets from
taxes. Estate planning can get complex and therefore costly.
7. Ask yourself: Am I comfortable dealing with
Remember that this person is going to be handling
your money, so you need to be able to trust him. Planners will want
to know as much about your financial history as possible. Be prepared
to answer lots of questions.
"You have to undress for us financially," Jones says.
"If you have any reservations about disclosing everything, then
that's for you to decide.
"Some people might have some money invested with a
brokerage or CPA and want us to integrate our services with theirs.
If you don't want me to handle certain parts of your investment,
I may decide that arrangement is too cumbersome, and we can go our
-- Posted: March 21, 2000