Make the Most of Your First Meeting With a Financial Adviser

Wall Street Journal article published Monday, November 5, 2012:

A really helpful article discussing what folks may expect at a first meeting with a financial adviser.

Unfortunately, the article doesn’t shed very much light on some essential issues – the differences between a Registered Investment Adviser and a representative of a Broker/Dealer, for example.  And while it mentions conflicts of interest in the context of folks who sell products and get commissions, it does gloss over the issue a bit.  (For example, a fee-only planner/adviser who provides financial planning as part of an assets-under-management agreement still has a conflict of interest – it’s in his interest to maximize the assets under his management.  And an hourly planner has a conflict – it’s in his interest to bill for more hours.  As someone once pointed out to me, any time money changes hands, there’s a conflict of interest.  The best you can do is make it exceedingly clear exactly when money is changing hand and what it’s paying for — which may be the bigger problem with commission-based services.)

Nevertheless, it’s a great article and highly recommended.

As Meyers Wealth Management, we provide folks with a Client Data Packet which includes some forms, a few worksheets for budget and balance sheets, and a long list of documents we ask folks to bring in with them, if they can, the first time they come in.

As indicated in the article, one of the things we ask for is recent tax returns.  Your tax return is a wealth of information about your situation, and we always find it valuable to review both for our knowledge of the client’s situation and to help the client understand what’s going on.  Your taxes are likely the biggest single category of spending in your life, perhaps short of your mortgage (though often not even short of that).  We strongly believe you should understand how much you’re paying and how we can try to optimize that.

Another thing the article discusses is that many advisers and planners offer a free consultation.  We used to do that, but it doesn’t really fit well with our model of business, since most of our work is either hourly or project based, it turned out that it just didn’t make sense.  Too many people got all they needed out of the consultation and we realized that our business model needed to change – if all folks need is a one time consultation, we’re very happy to do that.  And many folks don’t really need more than sitting down for an hour or two with a professional.  But for a variety of reasons, if we’re going to spend an hour or two talking, it’s impossible to do that and not give financial planning advice in the course of that consultation.  Which means it is a financial planning engagement.  And it means that we ask anyone doing such a consultation with us to sign a standard financial planning agreement — and to pay us for our time and advice.

Usually, what we do is have a free, no-obligation, brief conversation, usually by phone, usually under 20 minutes, to determine if someone wants to come in.  And we make it clear that if they come in, unless we agree to a larger scale project, we expect to be paid for the consultation.  Typically, for that very first meeting, we won’t “start the clock” until we’ve at least had a chance to meet and make sure that the clients are comfortable going forward and working with us.  In our experience, people really appreciate everything being clear and up front this way.  We are happy to fold the time spent in that first meeting into a larger scope project if appropriate, but we want to give our clients the chance to get exactly the right scale of engagement for their needs, which may well be as small as just an hour or two of consultation.  We call it On The Spot Finance, or Financial Planning On Demand.  (Maybe we should try to trademark those names!)

Nobody expects a “free consultation” from most other professionals.  Moreover, they should be aware that nobody provides a “free consultation” without an expectation that it’ll turn into enough business to justify the time spent.  An assets-under-management shop may provide a free consultation because if they turn a prospect into a client, they’re likely to collect a minimum of thousands of dollars in fees.  A typical AUM shop may have a minimum of $500,000 in assets to be turned over to them for management and charge upwards of 1% on that, often more for accounts that size and a sliding scale as the accounts go into the millions.  It’s rare for such a shop to charge any client at all less than $5-$10 thousand dollars per year.  Of course the consultation is going to be ‘free’ if they are going to be converting prospects into clients paying that much.

No matter how you approach a financial adviser, and whether you’re working with someone like us or someone who sells products or someone who requires assets under management, make sure you’re dealing with a trained, experienced professional.  Unfortunately, unlike other professions, there isn’t a central board to regulate who may call himself a financial adviser.  It’s an undefined name.  We’re proud to be Certified Financial Planner® professionals, members of the National Association of Personal Financial Advisers.  The CFP designation requires extensive training, testing, experience and ongoing education.  NAPFA requires a peer-reviewed comprehensive financial plan, training, experience and ongoing education.  And both CFP and NAPFA have a fiduciary requirement – all CFP professionals and NAPFA members must act in their clients best interests.

And no matter how you approach a financial adviser, remember to bring all the information you can, do as much organizing beforehand as you can, and be honest.  An adviser’s advice can only be as good as the information with which he or she is working.  It’s not always easy to trust someone and open up, especially about something so personal and private as finances.  If you’re not comfortable doing that with the adviser you’ve met, you may have met the wrong adviser.  Find one with whom you are comfortable and ready to be that open and honest.  Your relationship with your adviser will be vastly better, and the advice you get will be, too.

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