Do you have a financial planner? Are you satisfied with your working relationship with them? Do you wish you had a better working relationship with your planner? As a newer planner myself, I can only speak as to what I believe will enable you and your planner to have a healthy working relationship. What is important for people to understand that there is no cookie cutter process to developing a financial plan for someone. As everyone is different with different goals and expectations it is thereby reasonable to assume that what may be a complete plan for someone may not be in fact what you need in order to achieve your goals. Both parties need to express to the other what the goals and expectations will be in this partnership. And it is important to remember that the more you are willing to tell and share with the individual you chose as a planner the better they will be able to serve your needs. But here are some questions that you may want to consider when looking for a planner.
What will be the expectations of this working relationship for each party? It is very important that both you and your planner are on the same page with what is expected of them and what your expectations are for their services. A planner can only help you and keep you on a path that fits your needs if you are effective in your communication with them. It will never end well if you have the desire to only invest in government bonds and want returns of the S&P 500. No matter how good your planner or well developed a plan may be this is a receipt for disaster. You need to communicate your risk tolerance and return expectations with your planner so they in turn can create a plan that will achieve your goals.
Building on some of the expectations question it leads directly to how do you manage to get our desired returns? This answer will depend a great deal on how honest you are with your planner on your risk tolerance. Beware of a planner that tells you he can outperform the markets as no one knows what they will do in any given period of time. Historic performance may be used a guide but that should be about as far as you would want to rely on historic performances as they are no guarantee to future performance. A good planner should be able to explain things such as market risks, diversification and asset allocation to prospective clients. While returns are important it is sometimes more important to have a diversified portfolio that covers several asset classes.
Is your planner willing to be a teacher and help educate you in your finances? Not everyone will begin at finance 101 and not everyone will have advanced degree knowledge. As you are reading this blog you may be at one or the other end of the spectrum or more likely you are somewhere in the middle like most people. But your planner needs to be able to explain what it is they are proposing in your plan and it is up to you to understand it as well. That way the first question is always satisfied which is expectations. Planners may not know everything but they need to have a comprehensive knowledge base and be able to explain the plan that they have developed to you in a manner in which you fully understand.
Taking from the last question it leads to the next one. Can you please speak in English? While you do want to hire a competent planner that has the needed education remember that as a general rule the more educated someone is the more likely they will speak in technical terms. While there is nothing wrong with this as long as you understand what the terms mean. In the event you are not familiar with something never be afraid to stop your planner and ask for a simplified explanation. Also, not everyone needs a comprehensive plan so only ask for what it is you need and have that delivered to you in a manner in which you will understand.
Who all is on your team? While some planning services are offered through a group of professionals many planners are small independent operations. Never be afraid to ask them who they work with for such issues as taxes, charity gifts, trusts, estates or research analysis. Also it is worth noting if they have a backup in the event they are not available when you are in need. While a planner may be a one man shop it is good to know who they work with and respect in other related fields who may be called on in certain situations. Also it is a good idea to have specialist available for those unique situations when one is warranted.
How can my taxes be minimized? This is a question that may be an important one depending on the size of your portfolio and the income it produces. A good planner will look at ways to minimize your tax liability and they may work in conjunction with a CPA or tax advisor to ensure compliance. A trained planner is aware or some basic methods that can minimize or reduce their client’s tax liability. In order for them to help devise an investment plan that will aid in your taxes it is very important that you give them access to prior year’s returns to get a feel for your unique situation.
How often will we hear from you? This is a question that may have several different correct answers. Some clients prefer to meet face to face a few times a year to discuss things with their planner. Others may want a call to give them an update on things in general terms with an annual meeting. This is a question you need to discuss with your planner so he knows what is expected of them and they will also know what it is you expect in the way of communication. Do not be afraid to tell your planner what it is you want in the way of communication and hold them to that standard.
And look for a planner that is willing and in many instances insists on to both the husband and wife be present so that everyone is on the same page. Also, it is important that both parties are engaged in the process because you never know when something might happen to one party leaving the other to make all the decisions.
While there are other questions I am sure you may have for prospective planners these are just some that I feel are very important and some that need to be asked regardless of others you may have. If you have any questions or would like an opinion on something a planner has told you feel free to contact me.