Happy Wednesday!

Whether you’ve never worked with a financial advisor or you currently have an advisor and are considering a change, I’d like to share a few things for you to consider before you make this important decision.

And while I’m using the term “financial advisor,” the same applies whether you’re considering a financial planner, wealth manager, or any of the other titles floating around these days.

One more qualification:

The following is my perspective based on my 30+ years as a practicing personal financial advisor.

If you disagree or have questions about any of this, please leave a comment or get in touch and share your thoughts.

And buckle up…

There’s no way I can do this topic justice without going a little longer than my typical weekly article.

First, a little history…

I started my career at Merrill Lynch, fresh out of college, at the age of 22. This was in the early 90s.

Mobile phones and the internet weren’t yet a thing.

Unfortunately, cold-calling was still very much a thing, and that was how I spend most of my days, evenings, and weekends the first few years.

If I cold-called you in the 90s and interrupted your dinner or family time, I apologize.

I had a positive experience at Merrill, but in March, 2006 I resigned.

Upon leaving Merrill, I dropped my securities licenses (more on that later), and set up my own fee-only, fiduciary Registered Investment Advisor (RIA) firm here in Atlanta.

I called it Thornton Wealth Management.

Most, but not all, of my clients decided to join me for which I’m still grateful.

I signed a 12-month lease for a modest office right around the corner from where I worked at Merrill Lynch.

And it was me, myself, and I.

Here’s what I learned:

I loved the independence, but I didn’t relish the business of “running the business” as it took away time and attention from my clients.

And my relationships with my clients are what I love most about the work I do.

So in late 2008, I started conversations with Wealthcare Capital Management, a much, much larger RIA based in Richmond, VA, about offloading some of my back office responsibilities to them while still keeping and running my own firm.

After not quite 12 months of having Wealthcare help me out behind the scenes, I decided to shut down my 1-person firm and join them as an employee-advisor.

And that’s where I’ve been ever since.

For me, it’s a perfect balance of having the support and resources of a much larger organization behind me while still having the independence and autonomy to serve my clients to the best of my ability. And in the manner I choose.

In summary, I’ve worked for one of the largest financial advice companies in the world, and I’ve also started and run my own company of one.

Along my career journey, I’ve done a lot of due diligence and examined a bunch of different business structures and firms.

And I’ve gotta say, despite the Bernie Madoffs of the world, the vast majority of advisors I’ve interacted with over the last 3 decades are good people who are trying to do what’s best for their clients.

Having said that, there are unfortunately some bad actors and jackasses out there.

And the challenge is figuring out which is which when you’re hiring an advisor to help you and your family.

With that in mind, here are some things to think about:

• Planning or products?
• Compensation?
• Affiliation?
• Simple or complex?
• Number of clients?
• Communication?
• Similar values and outlook?
• Are you listening?

The list above isn’t exhaustive.Far from it.And I could write hundreds, if not thousands, of words on each of the bullet points above.Instead, I’ll share some of my thoughts and why I believe it’s worth your consideration.Planning or products?

When you first communicate with a potential advisor - whether in person, on Zoom, or via email - you’ll have a feel for whether the person you’re talking with has a planning mindset or a product mindset.I have a planning mindset and it comes through in my writing and conversations. At least I hope it does.A product mindset isn’t a bad thing. If all you need is a product.Problems arise when you hire an advisor wanting or expecting one thing but then you receive something else entirely.And a word of caution: some product-focused advisors will talk a lot about financial planning, because for them “financial planning” is nothing more than a product pitch.While there are certainly exceptions, if insurance products (which includes annuities) seem to keep coming up in your conversations you might be talking with product-focused advisor.Also beware of pitches for anything sounding like “bank on yourself” or “infinite banking” or “becoming your own bank.” These are all just another name for buying a lot of whole life insurance and borrowing from these policies in the future. I wouldn’t recommend it.Compensation?

How is the advisor you’re talking to compensated?When I worked for Merrill Lynch I was a W-2 employee. My paycheck was signed by Merrill Lynch.But most of my compensation, especially early in my career, came from commissions paid by mutual fund or other asset management companies whose products I used in my clients’ portfolios.This was also true if I helped a client get a life insurance policy.Or get a mortgage.And Merrill had their own asset management company, so naturally they wanted you to consider their mutual funds as well. It wasn’t a requirement to use their funds in place of something else, but they weren’t shy about reminding you about their product offerings.I mentioned above that when I left Merrill in 2006 I let go of my securities license. I had a Series 7 license which allowed me to recommend and sell “securities” and other products to clients and be compensated by the product manufacturers.Yes, Merrill was my employer, but A LOT of the company’s revenue came from asset management companies whose products my colleagues and I recommended to clients.Over my time at Merrill Lynch, many of these products were replaced by “fee-based” management where clients paid fees directly to Merrill Lynch and me instead of product-related commissions. But that didn’t eliminate the opportunity for advisors to still sell products and earn commissions on top of or in addition to client fees.Today, I still manage most of my clients’ investment portfolios in the context of their financial plan. But my only compensation comes from fees paid directly to me by my clients.I don’t, nor can I, accept payment from anyone other than my clients.I can’t get paid by a mutual fund company, directly or indirectly.I can’t get compensated for referring a client to another professional like a CPA or Attorney.No matter how you slice it, my ONLY compensation comes from fees paid directly to me by my clients.This is the definition of fee-only advice which can be very different than “fee-based” advice.This isn’t to say that “fee-only” is good and “fee-based” is bad.It’s just 2 different ways to approach the business of financial advice, and it might be worth your consideration.Affiliation?

Is your advisor affiliated with a broker-dealer?A quick way to check is if your advisor’s (or their firm’s) website has this line at the bottom:

“Securities offered through…” is legal speak for having a relationship with a brokerage firm.The image above is from a random Atlanta-based financial advisor I found on Google. Their broker-dealer is Raymond James. There’s nothing wrong with this random advisor (that I know of) or with Raymond James.But if your potential advisor has a relationship with a broker-dealer, it means they “can” sell you securities and be paid by someone other than you.It doesn’t mean they will, but it leaves that door open.When I left Merrill Lynch in 2006, I made the decision to get out of the securities business altogether. Which is why I dropped my Series 7 securities license.Having said that I know several advisors that still have a broker-dealer relationship, and that doesn’t at all diminish the good work they do for their clients.Bottom line, the more disclosures (or links to disclosures) you see at the bottom of an advisor’s or firm’s website the more you might wonder what all they have to disclose and why…Note: at the bottom of my website as well as at the bottom of each of these articles is a link to MY disclosures page. If you read my disclosures you’ll see they’re relatively short and in plain English.Compare that to a large brokerage firm like Morgan Stanley’s “index of disclosures” page which links to more than 25 more disclosure pages just for their wealth management group alone.Regardless of how your advisor operates, financial advice is a regulated industry. As it should be.A brokerage affiliation may not have any bearing on your advisor. Then again, it may.Simple or Complex?

I’ve written before about my preference for simplicity.Isn’t life already crazy and complex enough?However, many so-called advisors love to make things unnecessarily complex.I think it must make them feel smart. Or make it easier to obfuscate their above-average (and sometimes ridiculous) fees and expenses.Maybe both.Just know that working with an advisor should make things more simple with your personal finances. Not more complex.Consider this quote:

If you can’t explain it to an 8-year old, then you don’t understand it.

While this has been attributed to Einstein, Feynman, and others, I don’t really care who said it.I like it and try to incorporate this “explain it to an 8-year old” idea throughout my work and communications with clients.Some days I’m more successful than others. 😉Bottom line: personal finance, financial planning, investing, and your retirement can easily be made complex.But there’s absolutely no need for them to be.A big part of what I do is getting and keeping things as simple as possible for my clients.Number of Clients?

A great question to ask a potential advisor is how many clients they personally work with.There isn’t a right or wrong answer here.But I think it’s instructive to know if you’d be one of 50 clients or one of 500 clients.Speaking of which, do you know the definition of a client?

While both definitions above are accurate, I’m really drawn to definition #1… “one that is under the protection of another.”Another thing you might take note of is whether your would-be advisor refers to the people they serve as clients or customers.I personally have about 55 clients today, and I’ll never have more than 75. In fact, I may never even get to 75.And while it’s challenging to find a reliable average number of clients among advisors, I personally know advisors that have 300+ clients.And regardless of who your advisor is, we all only get 24 hours in a day.I’m not sure how you can truly have a real relationship with more than about 75-100 clients. I’m not saying it can’t be done, but I sure can’t imagine it.Sure, an advisor might have hundreds of “customers” but that’s not the business I’m in.Might be a good question for you to ask before you hire a financial advisor.Communication?

What type and frequency of communication can you expect from your potential financial advisor?It’s another good question to ask.And just as important, how responsive is your financial advisor to your calls, emails, texts, and other inquiries?This is a conversation I have early on with every client because I want to make sure we’re both on the same page in terms of our expectations of each other.I write this email every week, which serves as a touch point with my clients.But I also meet with my clients at least twice each year. More, if and when necessary.I also check in from time to time with a call, email, or text to see how they’re doing and if they have any questions or need anything.Sadly, I’ve heard many stories of “advisors” who seems to do nothing but over-promise and under-deliver. Or they pass you off to an associate or assistant as soon as your client agreement is signed.If you don’t feel comfortable communicating openly and honestly with your financial advisor, I’d encourage you to find a new advisor.This is your money (and your life) we’re talking about here.Similar Values and Outlook?

OK, this is subjective and difficult, if not impossible, to quantify.You might have to rely on your “gut instincts” here.But as I mentioned above, you need to find a professional you feel completely comfortable sharing your thoughts, feelings, hopes and fears with.And more often than not, I believe finding someone with similar values and an outlook on life can help in this effort.If you’re an eternal optimist, be wary of an advisor whose glass is always half-empty.If you’re focused on caring for yourself and your family, and you’re interviewing an advisor that doesn’t want to discuss anything outside your investment portfolio and the market, that might not be the advisor for you.If your advisor seems to be anchoring or projecting their behavioral biases onto you, that could prove detrimental to your financial planning.Don’t be afraid to ask personal questions of a potential advisor.You have the opportunity to develop a close and long-lasting personal relationship with your advisor.Make sure it’s someone you like and respect.Note: one of the benefits of working with a financial advisor is accountability.If you need some help and encouragement in your financial planning, someone that can deliver some tough love from time to time might be just what you need.But if you don’t like and respect the person, how likely are you to follow their counsel?Are You Listening?

What are the qualities of a good listener?Perhaps most important is a willingness and ability to actually shut-up and listen.Yet, many advisors can’t get enough of hearing their own voices.And I’ll be honest, I like my work and get excited about the opportunity to help others. Sometimes this results in me doing way too much talking and not enough listening.But it’s something I’m conscious of and and constantly working to get better at.Here’s a quick story from a now long-time client…When we first started talking about working together several years ago, I’d asked about their current advisor at the time.She said every time she and her husband would meet with him in his office, other than saying hello, he wouldn’t so much as acknowledge that she was in the room. And he didn’t ask for her input or opinion during any of their conversations.She was and is an executive at a large company and a major contributor to their family finances.But her prior advisor wasn’t talking to her. And he definitely wasn’t listening either.I believe listening, empathy, and an above-average emotional IQ are all key ingredients in professional and personalized financial advice.Just make sure whoever you’re working with is genuinely curious about you and they want to know what you think each step along the way.You can tell if someone is listening - really listening - to you.Be especially sensitive to this when interviewing financial advisors.Final Thoughts

Whether you’ve worked with a financial advisor for years, or you’re approaching retirement and would like get some help for the first time as you prepare for and transition into life after full-time work, I have a couple more suggestions in closing.

1. Always talk to and thoroughly interview at least 3 advisors. Even if you were referred to an advisor by a close friend or family member, I’d still encourage you to talk to at least 3. One advisor might mention something that you’d like to ask another advisor about. Or if you meet with the advisor you were referred to and things just don’t feel right, don’t hesitate to keep looking. This is an important decision and you should treat it as such.
2. Write down a list of questions to ask each of your advisor candidates. It can be instructive to see how different advisors answer different questions. You can also see their comfort level and the ease with which they address different topics. I’d recommend having these conversations via Zoom or in person so you can see their body language as they talk with you. You miss out on this critical feedback on a phone call.
3. Finally, don’t be afraid to ask any question that is important to you. The advisor doesn’t have answer every question you ask, and you can be the judge on if/how they answer certain questions. But if you hire an advisor, they’re going to be asking you a lot of personal questions (or I hope they would), so there’s no reason you can’t include some personal questions when you’re interviewing advisors.

By my count, I’m already over 2,500 words and I could easily keep writing thousands more words on this important topic.Please don’t misunderstand me.This isn’t a roundabout sales pitch to hire me as your advisor.I know from experience I’m not the best advisor for most of you reading this.However, I do enjoy helping people which is another reason I write these weekly letters.There are bunches of great advisors out there who can make a positive impact not just on your money, but on your life. And the lives of those you care about most.But there are also many very talented financial salespeople disguised as professional advisors, and I want to try to help you be more aware of who’s who in the world of personal financial advice.Often, it’s not very clear.Any feedback, questions, comments?Let me know.

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Until next Wednesday,

‍Russ

‍Retirement Planning for Women