Muhammad Ali repeatedly let everyone know he was the greatest. And he was. Who is the greatest Olympian of all time? Allyson Felix. Other GOATs include Michael Jordan, Tom Brady, Cal Ripken, and Steffi Graff.
My friends and I played sports every day – football, baseball, basketball, golf, volleyball, tennis, Wiffle ball, etc. We were a competitive bunch, each one claiming to be the greatest at whatever sport we were playing. Our aggressive style of play was a combination of the king of the hill and survival of the fittest. We weren’t humble.
My firm receives several inquiries a week from people seeking help with currency conversions, Social Security benefits, investments, or financial planning. Most times, they want a quick answer to a unique situation. If they’re looking for a long-term relationship, they often ask why they should hire me as their financial planner. It’s a valid question, of course, but I don’t know how to answer it. I don’t want to brag or toot my own horn, and I don’t feel comfortable telling someone I am better than any other planner in Austin or elsewhere.
Last year, I was the president of the Financial Planning Association of Austin, and I spent significant time with several planners and advisors. I was fortunate to get to know them as friends, not competitors, and I was amazed at their knowledge about our industry and the level of service they provided their clients. Our association is a collection of two hundred individuals working together to advance our profession. We collaborate on several projects, and if someone is not a good fit for me, I will refer them to another firm and vice versa.
However, I understand that prospective clients want answers; they want the truth, so here are a few questions you can ask a financial planner or investment advisor.
- How long have you been in the business? Experience matters, but don’t discount youth. I’ve been in the investment business for thirty-two years, and I have learned much on my journey. However, I’m thankful I started my career in my early twenties, and I was blessed to work with exceptional mentors and colleagues.
- How do you get paid? A planner’s fees should be fair and reasonable, and they should disclose all their charges. The industry average is about 1% of the assets they manage. For example, if you invest $1,000,000, your fee will be $10,000. Our fees start at 0.50% and go down as your assets grow. As a reminder, the fees you pay your advisor do not include mutual fund expenses or commissions.
- Are you a fiduciary? Registered investment advisors, including us, are fiduciaries. We are legally bound to act in your best interest. We must put your interest first and disclose any conflicts of interest.
- What designations do you hold? Most registered investment advisors are Certified Financial Planners (CFP)™ or Chartered Financial Analysts (CFA). We earn these designations after studying for years and passing rigorous exams. Individuals who hold the CFP designation must complete thirty hours of continuing education every two years.
- How do you invest your own money? Advisors and planners should eat their own cooking. What do they own? How do they allocate their assets? How they invest their money will tell you much about how they will handle yours.
- Who is your custodian? Most advisors use third-party custodians like Schwab or Fidelity to manage your money. Your advisor should not act as your trustee and custodian.
- Have you been fired, suspended, or sanctioned because of any legal activity? Advisors and planners are required to disclose any disciplinary actions.
- How often will we meet to review my account and goals? Your advisor should meet with you as often as you want or need. We offer quarterly meetings, and we’re available at any time.
As I mentioned, there are many excellent advisors, so you need to find one you’re comfortable working with and who puts your interest first.
Here are two resources to help you find an advisor, and if you can’t find one, give me a call.
- Certified Financial Planner™ – https://www.letsmakeaplan.org/
- NAPFA – The National Association of Personal Financial Advisors – https://www.napfa.org/
“I am the greatest; I said that even before I knew I was.” ~ Muhammad Ali
August 8, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.