Wealth Decision #9: Hire a Financial Advisor

The Wealth Decisions Podcast: Wealth Decision #9- Hire a Financial Advisor Transcript

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In today's episode, we're gonna be talking about Wealth Decision Number Nine, Hire a Financial Advisor.

So what does a financial advisor do?

The first thing is a financial advisor is going to sit down with you, understand what's important to you, and help create a financial plan.

They're going to look at your saving and your spending behavior.

They're going to look at your debt levels, your cashflow, income, and your healthcare expenses.

They're also going to look at your insurance and making sure that they properly get the amount of insurance that you need at your particular point in life.

And they're also going to look at your legacy planning.

Is it important for you to leave a lasting legacy for your family?

An advisor is going to give you peace of mind, financial peace of mind.

They're going to give you a sense of success and accomplishment.

They're going to do some behavioral coaching to make sure you make good decisions throughout your financial life.

And they're going to give you confidence in your financial future.

And then once they've created a financial plan, they're going to create a portfolio designed for your stage in life and your individual risk tolerance.

They're going to look at portfolio risk and return characteristics.

They're going to look at tax efficiency if they're investing some of your money in a taxable account.

And they're going to look at the fees that you're paying on your investments.

There's three things that I get asked the most when I'm at a networking event or in a social situation.

I get asked, what do you do?

What do you charge?

And what do you think of XYZ stock?

So I want to just talk a little bit about the answers to those three questions.

What do I do?

I help people make important wealth decisions so they can build and keep more of their wealth.

So they can live a richer life.

And whatever that means to you, whether that's centered around experiences or freedom or peace of mind.

The second question I get asked a lot is what do I charge?

I'm a fee-only fiduciary, which means I don't have any products to sell, no conflicts of interest, and I don't make commissions.

I built Momentous with the client in mind.

I charge one simple monthly advisory fee that covers both ongoing financial planning and wealth management and really all those important wealth decisions along your financial journey.

And the third question I get asked a lot is what do I think of XYZ stock?

I believe buying stocks should be centered around having a process, not media hype or a stock tip you got from an uncle or brother-in-law.

I have a process for picking quality companies today called the Prudent Process, which identifies companies with strong fundamentals and competitive moats.

So when I get that question of what do I think of XYZ stock, without knowing anything about an individual that's asking that question, I can't really give any particular advice and I usually don't.

There was a study done that asked people to describe how finances make them feel in one word.

And the most common answer was anxious.

We all have a story with money.

And wherever you are right now, the question I'd like to ask is, do you want to be feeling the same way about money five years from now, 10 years from now, 20 years from now?

Maybe you feel behind or money in lack thereof makes you feel anxious.

Maybe you feel like you're on track, but you'd like to create financial freedom and quit your day job sooner than later.

So rather than taking the next five minutes and talking about me, I'd like to take a little bit of time to make you a little bit less anxious about money.

I think there's six things you can do right now to make sure you take anxiety out of the equation.

Number one, start paying yourself first at least 10 to 15 percent of your income.

Number two, set some goals and create a financial plan.

If you don't know how to create a financial plan, this is where a financial advisor can really add a lot of value.

Number three, stop investing everything pre-tax in your 401k, etc.

Number four, create a budget that balances experiences today with saving for the future.

And number five, get out of credit card debt.

A balance of 10,000 at a 28 percent rate of interest will compound to 40,000 in five years if you just pay the minimum payment.

And number six, this is a little self-serving, but listen to The Wealth Decisions Podcast.

It's 15 minutes every week on Friday, packed with financial wisdom to help you make better decisions.

So let's dig into today's topic, and that is hiring a financial advisor.

I think there's six questions that you should consider asking a financial advisor before you hire them to manage your wealth.

Number one, are you a fiduciary 100% of the time?

A fiduciary advisor has to put your interests first.

They're prohibited from selling you a financial product and making a commission.

Their compensation is directly in the form of fees typically, and they need to be transparent.

Number two, ask a financial advisor, what is my total all-in cost to work with you?

You know, just because a financial advisor is a fiduciary does not mean it's easy to understand their all-in costs.

Some of the most common fees that you might pay when working with a advisor is advice fees.

There could be one-time financial planning fees or some type of percentage of your investments.

There may be transaction fees that are charged by the custodian when your advisor buys or sells investments on your behalf.

And then there's the internal expense ratios of the different investments that advisor uses, whether they're using mutual funds or ETFs.

The third question I'd ask a financial advisor is what experience do you have with financial planning?

A financial advisor's experience is not just the number of years they have in business, but what kind of experience do they have, for instance, dealing with reducing taxes in retirement, creating a tax-efficient income, lowering risk while maximizing investment returns, increasing tax deductions through charitable giving, and then ask them what certifications they have, whether they have an AAMS or a CFP.

Those can be important and show how truly dedicated that financial advisor is to their craft.

And number four, ask them to provide you with a comprehensive list of their advisory services.

Ask a financial advisor if they have a documented process and procedure in place to take care of their clients.

Do they focus on one particular area of wealth management or do they take a holistic approach?

Some advisors may offer more add-on services such as stock option optimization or Roth IRA conversion analysis or social security planning or charitable giving.

The fifth question to ask is where do you keep my money?

Does your financial advisor use a reputable third-party custodian to hold your investments or retirement accounts?

Some well-known custodians include Fidelity, Schwab, Pershing, or some broker-dealers actually hold those investments as their own custodian.

And the sixth question I'd ask a financial advisor is what is your investment philosophy?

Some advisors that work for bigger firms maybe have the investment philosophy that's given by their firm.

If you're working with a fiduciary advisor, they may have their own investment philosophy, and it's important to know what that is.

Do they believe in a low cost approach to building portfolios?

Do they use individual stocks for their clients' investment portfolios?

Do they have a process for tax loss harvesting?

And what is their process for picking quality investments for their clients' investment portfolios?

Hiring a financial advisor can be a crucial step to help you work towards building more wealth and keeping more of your wealth for you and your family.

And it's especially important as you're approaching retirement and need a paycheck from all of the money that you accumulate over your working years.

Accumulation is fairly easy, but when you get to that distribution phase, that's where a financial advisor really can add a lot of value to help you create a tax-efficient income and make sure that your money lasts longer than you do.

So that's it for today's episode, Wealth Decision Number 9, Hire a Financial Advisor.

If you'd like to schedule a discovery call with me, you can go to my website at momentouswealthadvisors.com and I'll spend some time to get to know you a little bit and find out if I might be able to steer you in the right direction or help you with your financial future.

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-Brian D. Muller, AAMS® Founder, Wealth Advisor

Disclaimer: This material is for informational purposes only and should not be construed as investment advice. Past performance is not indicative of future results. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.

Investors should understand the risks involved in owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates and investors can lose some or all of their principal.

Always consult with a qualified financial professional before making any investment decisions.