Episode 08: Hiring A Financial Advisor? Listen To This First
In this conversation, Brent and Rob discuss the critical aspects of hiring a financial advisor, emphasizing the importance of trust, understanding fiduciary responsibilities, and aligning values with financial goals. They share personal experiences and insights on navigating the complexities of financial planning, the significance of asking the right questions, and the necessity of building a strong advisor-client relationship. The discussion also highlights the generational shift in financial planning, where individuals are now responsible for their retirement savings and investment decisions, making the role of a financial advisor more crucial than ever.
Links, resources, books mentioned:
Topics we are covering in this episode:
Hiring a financial advisor is a significant decision that requires careful consideration.
Trust is the most important factor when choosing a financial advisor.
Understanding the difference between fiduciaries and salespeople is crucial.
Asking the right questions can help you evaluate potential advisors effectively.
It's essential to align your financial advisor with your personal values.
The timing of hiring a financial advisor can impact your financial future, especially before retirement.
Regular communication with your advisor is key to a successful relationship.
Newer advisors can be effective if they have a strong support team behind them.
Understanding your relationship with money can guide your financial decisions.
You should feel comfortable discussing your financial situation with your advisor.
Transcript:
Transcript Disclaimer - May contain the occasional confusing, inaccurate, or unintentionally funny transcription moment. It’s all part of the show.
Lena: Have you ever hired someone you instantly regretted? Brent and Rob have, and they're not shy about it. In this episode of Midlife Circus, they dive into the world of financial advisers. They explore what smart questions to ask before you sign on, how to tell a true fiduciary from a slick salesperson, and why the best adviser isn't the one with the best returns. It's the one who actually understands you.
Time to separate the pros from the pitchmen. Let's go.
Brent: Rob, have you ever hired someone you regretted?
Rob: Yes. Yes.
Brent: Tell me more.
Rob: Well, know today's topic is talking about hiring a financial advisor, so I'm not going to talk about having regretted hiring an advisor. I'm actually going to talk about a leader that I hired years and years and years ago as a new branch manager. And I had this person that I hired that I knew as a teenager. So I coached them as a teenager. And fast forward, you know, this person is now 25, 26 years old, and I'm hiring as a manager in the branch that I was running, to come in and help hire and launch new advisors.
And as a teenager, he was a pain in the ass. Just hard to deal with. He was, always getting in trouble. I don't think I had to bail him out of jail, but I do know that he probably had some run ins with the law from time to time. When I interviewed him, I had that in the back of my mind, but I wanted to give him the benefit of the doubt.
And it felt like he had changed. It felt like he was more mature. You know? I mean, teenagers make mistakes. They do dumb things.
Right? They're still developing. They're still testing boundaries. And when we got into the interview and I didn't know him as an adult. He had lived on the other side of the country.
He had started in the financial services industry as an adviser on the East Coast, and he wanted to move back to the West Coast, and he wanted to move into my branch. By the way, was funny because he didn't know I was the hiring leader at the time he applied. And so when he saw my name, I think it was probably, oh, oh, wow. This will be great. I know Rob.
He knows me. This will be fun. He interviewed really well, and I wanted to give him the benefit of the doubt, and I did that he had changed, that he had grown up, that he had matured. And for about the first month or so, I saw a new person. I saw somebody that I wanted to hire, and he was great at hiring new advisers.
He was great at coaching people. I was really impressed with him. But pretty quickly, about a month and a half, two months in, I saw a lot of the same poor decisions being made by him that I saw when he was a teenager and ended up at one point having to take away his corporate card. I So had a credit card that allowed him to manage expenses from help run the branch. And at one point, I had to take away his credit card because of poor decisions he was making and purchases he was doing on his own without asking or even purchases that you or I would never contemplate ever doing on a corporate card, even personal things he was buying on the corporate card.
And so I knew better. I really should have thought back to who this kid was when I knew him growing up, because I saw exactly the same things as an adult. I'm hoping he's changed, but I eventually did have to remove him from the position.
Brent: I give you credit though. I mean, you want to give somebody the benefit of the doubt. And it's one of those challenging things where did they grow out of those behaviors? Some people do, some people But the idea of today's conversation and what we want to talk about is hiring a financial advisor. It's one of the most important roles or partnerships that you establish when you go into retirement.
And it leads several years prior to retirement, but more importantly, what is the role that you have with your financial advisor and how do you partner with them? I use the word partnership or partner because that's what it is. So we're going to talk about that today and really with two key themes. One theme is how do you work and identify your financial advisor that aligns with your values? Because it's easy to get caught in the trap of beautiful spreadsheets and projections and so forth from like financial returns.
And then second is how do you identify the financial advisor? There's thousands of financial advisors to choose from in The United States as an example. And what are the questions you're going to ask? So we have a benefit today because Rob, you've spent the majority of your career in that space. So before we kick off with a few kind of Q and A type questions, can you just talk a little bit about your background?
I know we've talked about another episodes as well, but just as a refresher, so people get a sense of how you operated in the financial services space and how you can bring some of your knowledge and experiences into our conversation today.
Rob: Brent, I had twenty-six, twenty-seven years in financial services in different roles. And really the area that I specialized in or focused in was direct to client. And so I started my career as an entry level financial adviser, eventually became a branch manager responsible for hiring and training advisers, into a national, vice president role where I was responsible for the development of curriculum and approach to help existing financial advisors both run their business better and help their clients more often. And so I've had direct interaction both at the client level, so working directly with a client, but a big portion of my career was actually working with financial advisors and helping them find ways to impact more clients' lives financially.
Brent: I know for me, when I was evaluating making a change in financial advisors a few years ago, it was just right after when I decided to retire. You were super helpful because you not only had this broad network of people that you knew in the industry, you didn't put your emphasis there. You actually put the emphasis in our conversations on understanding values and understanding differences of what would a firm, if you work with firm XYZ, what do they bring versus what does an individual, maybe a small practitioner bring? And they all have great strengths and great opportunities. You're really helpful through that process with me.
And one of the things that you started with and just explaining to me, and I've been around financial services and I had a general understanding of this, but you actually gave me a lot more clarity is what's the difference between a fiduciary and a salesperson? And let me give you some context there. As we understand there's a term out there is like, everybody wants to be a fiduciary. They're going to be at the best interest of the client. That's part of it.
And then a salesperson is, there's a lot of flash that goes on with this industry. People have these beautiful presentations and look at my returns I've given my clients and here's my strategies for stocks and ETFs and so forth. So maybe you can just talk a little bit about your viewpoint because you've been in the space for so long, fiduciary versus salesperson. So
Rob: fiduciary is it really, it's a level of ethical standard. That means that an adviser will act in the client's best interest at all times. They'll disclose any conflicts of interest, so anything that might be of conflict in working with that client or conflict that they have resources, different resources from the firm that they're affiliated with. But really the fiduciary standard is a level of service and a level of ethical standard that an that an adviser will try to meet with their client. Many advisers now are considered or need to be considered as fiduciaries.
The laws changed a few years ago, and that standard of care, the way in which you work with a client, depending upon the licenses that an adviser has and the types of products they offer, they're required to act as a fiduciary for their clients. And so if they're doing any fee based work for a client, they are required to live up to a fiduciary standard, act in the client's best interest. Does not mean though that a fiduciary always does that or can't be a salesperson at the same time. And I think about it, Brent, as how they approach the interaction with a client. Whereas a fiduciary would likely provide if they're going to act in the client's best interest, really what they're going to end up doing is providing the client with options to choose from.
Whereas a salesperson is likely to provide less options and try and convince a client to make a fast decision or a quick decision into something that they the that adviser believes as a salesperson they think might be in the client's best interest, but also might provide the highest income to that adviser or to that practice or to the firm. And so really when I think about that salesperson, it's how they approach the interaction with the client rather than the types of products or licensing and things like that available. You can find fiduciaries that are going to act as salespeople in that client interaction.
Brent: When you describe that, I had a scenario that took place with a family member that is on the elder side. And this took place about a year and a half ago when we needed to make a decision on who their financial advisor was. It was just where they were at with their stage of life. I'm familiar with, and a lot of it is because the way you've taught me the difference between a salesperson and a fiduciary, are they acting in the best interest for their client? So I sat down with the existing financial advisor for this relative of mine.
And I said, Why don't you show me your fee structure? And I instantly got, well And then the response came back, you know what? We only make money when you make money.
Rob: Yeah. Common answer.
Brent: Yeah. Very super common answer. And I said, just break it down, send me a spreadsheet of just the fee structure. So they did. And what came back wasn't at all in the best interest of my relative.
The reason why I share this is you have to be willing to ask questions about that. And it doesn't have to be complex questions. All you have to do is ask, tell me your fee structure. And when you say we only make money when you make money, that's not true. It wasn't true at all.
And I found that so shocking that this individual was trying to represent themselves as I'll call it the good guy. But when I asked simple questions, I got a pause. And then when I asked for just written evidence, completely exposed them. It was sad to me because these were elderly individuals that I was trying to help and they don't know this. We start out with fiduciary versus salesperson.
It's important, and we'll get into a little bit more key questions you can ask, but I'm just wanted to share that experience because it started out here. And I thought that their job was to do what's in the best interest, and it clearly was not.
Rob: And just because there's multiple fees on an account doesn't mean it's a bad thing. That's actually very common in the industry, and the fees might be fractions of a percentage that exist on a different type of investment, and there might be three different fractional calculations that happen. The fact that there's fees isn't bad. The fact that you asked a very simple question, Brent, it actually is a very simple answer for the adviser to provide. And those that are acting in a fiduciary capacity easily provide that.
A lot of times, they'll have written documentation. They'll just hand to you and say, oh, absolutely. Let me let me share. Let me be very transparent with how fees work at our firm and fees work with these types of accounts. They're not going to be ashamed of that answer.
They're not going to hide it. They're going to come back with a very quick answer, a very simple answer to your very simple question. That's maybe an easy way to think about fiduciary versus salesperson is if you ask a question, actually, a fiduciary will typically answer the question very directly. Whereas a salesperson might talk around the question for you.
Brent: And that's what was happening. Exactly. He was talking around the question. And I'm a 100% with you. I believe if you're getting a quality service and you see value in that service, then there should be fees associated with it.
It shouldn't be a 100% free. Where I go with it is it was actually something that he was hiding from the fee structure. And I'm like, how long has this been going on? I didn't say that because I knew we were going to make a change. And we made a change for the right reasons.
It was time to move to somebody that was more able to service them and their needs at that moment in time in their life for the next ten to fifteen years. So how I think about the next key question, and you helped me a ton on this one, is how do you know when it's time to bring in help? And I'm going to share how I experienced this. I've worked with different financial advisors over the years and everything's stage appropriate. And I've worked with some really good ones.
I've worked with big firms. I've done stuff on my own. And you've also shared, you even have a financial advisor. I do. It was really fascinating on how you approach the timing associated with when do you actually know when to bring in help to bring in a financial advisor?
Rob: So think there's a couple of key places. And as you brought up, Brent, I do have a financial adviser. In fact, while I've been in the industry for twenty-six, twenty-seven years, I outsourced financial advice to somebody else because I wanted an unbiased person helping me with my finances. I bring a bias to the table. Having been in the industry thinking about things in a certain way, bringing a different perspective to me, I found as being valuable.
And so I pay a fee for someone just to provide me with a different perspective on my money. That is a key reason why you might want to hire an adviser is to bring a different perspective to the decisions that we are making with our money. We want a different perspective. I also wanted to take the stress out of my life a little bit. And so for me, at that point in my career, I was talking about finance every day.
I was working in the industry every day. I didn't want to go home at night and have to then think about my own money again too. That was another stressful decisions that I was going to have to make. I wanted somebody else to be able to take that stress off of my shoulders. And so I think about a couple of places where somebody might want to start thinking about hiring a financial adviser.
One is where there's no joy in actually doing the work. If you don't want to spend the time doing the research, you don't want to spend the time behind the scenes analyzing and doing the calculations, that's a key time to bring a professional to the table. The other time, I would say, is when your wealth gets to the point, and I know this is where you and I spend a lot of time, Brent, talking about hiring a professional or not, is where your wealth gets to the place where mistakes become very costly or your situations become complex enough from a tax standpoint that you need a professional helping you make decisions to actually reduce the complexity or take into account all the different moving pieces financially. And so when your wealth gets to a certain place, you really would benefit from having another set of eyes helping you make decisions. That's really what a good adviser will do is help you make decisions.
But I will say that in my opinion, and again, it's just my opinion, a key time that everybody needs to really get serious about hiring and working with a professional is as they're getting close to making the retirement decision. And I say close anywhere from three to five years out from wanting to retire. There are some key decisions that need to be made in that phase of life that, that an adviser will bring things to the table that you'll benefit from twenty years from now. And so you make a decision to retire. How you start withdrawing money from your accounts is a big deal, and that's going to feel different for you.
It's going to be a different emotional experience because you spent your entire life accumulating wealth. Now you're distributing wealth. And even now living in that personally, that's a weird emotional change for me. I'm not adding to my accounts. I'm actually subtracting from the accounts.
And that's a good time to have an adviser helping you think through the decisions. But three to five years out, they're helping you make the calculations on what retirement looks like. Can you retire on a certain date? How much money can you start taking out? Because if you start pulling money out too fast, you don't realize you did that until you're in your seventies or in your eighties that you may have done a distribution a little too early.
And so that adviser will be able to help you make really important decisions leading up to that retirement date. And then more importantly or just as importantly, helping you figure out how you're going to be taking distributions. When should you start Social Security? When is that the best time for you if you're going to be using that during retirement? How you elect pension plans, all of those decisions, an adviser can help you make a better decision in that area.
So I do kind of get into place. I typically don't talk about absolutes very often given the background I come from, but I do a 100% believe when someone's three to five years out from retirement, it's really important to bring a professional to the table to help you make an informed decision from that point going forward.
Brent: I'm glad you started out with your personal example because what I found is I was super stubborn for a lot of years and stubborn was I was looking at fee structures and I'm like, why am I going to pay somebody to do that when I can just pick an ETF? I can just pick one and it'll be great. And what I learned, personal experience, was it created a lot of anxiety at one point in time for me when I was trying to manage it all. When I say all, I'm not talking about huge, huge dollars. It was just purely there's over, I think, I don't know what the latest numbers.
Let's say there's 4,000 stocks to choose from. So if you go down the stock route, there's a lot of options of companies you can invest into. Now, a lot of professionals say, don't do stock picking, pick an index fund. Well, guess what? Today, there's so many index funds.
You can do an index fund on anything under the sun. So I was like, okay, that's a lot of options there. But then what started to come into me where I was getting anxiety is, yes, there's a lot of options to invest into. I think you can narrow that down with some research, especially with AI, it can give you some information pretty quickly. But then the tax side of things and understanding short term decisions can impact your long term access to your money.
And it was just a really interesting thing that I started to experience to say, you're hiring a partner and your partner is, if you hire the right person, their job is to help you navigate the complexity and help you make better decisions. And that was really important. So I like how you structured it and saying, in your case, you're like, I don't want this to be my Life360, even though I'm in the industry, I also want a sounding board and I don't want to live and breathe my personal wealth situation every day and trying to make all the decisions on my own. Yes, I know you're capable, but also there's other people that can give you an objective view, which you need. Then the three to five years out from retirement is there's a planning aspect that comes in.
You have all these things. There's a strategy on how you access that money into retirement. That's going to be the most advantageous for you.
Rob: And, Brent, we're part of the first generation that is having to make those choices. Prior generations had pension plans. And so the traditional retirement was you work for a company for thirty years, you retire, and they give you a fixed income stream for the rest of your life. And you make one choice as which version do I want? Do I want it just for me, or do I want it for me and my spouse?
And that was your income for the rest of your life. And our generation is the first generation, one that had the Internet, so had access to being able to run their own investments and build their own portfolios and do all of those things. And then two, had different types of accounts to actually use. You have a a four zero one k. Pensions kind of went by the wayside by most companies, and now you have to save for your own retirement.
Isn't the company saving for you? It's you saving for yourself. You now have a Roth four zero one k. You have an IRA. You have a traditional IRA or a Roth IRA.
How Social Security plays into the equation. It's all part of a new decision process that we're going to have to navigate through as a generation. So our generation, Gen X, is really the first generation that is all in with this being how we get into retirement. It's as accounts we take distributions from, not an income stream that the company provides to us because we worked there for so long.
Brent: Add on top of it, in my situation, one of my kids is in college right now. Another one's going to college in a year. And now you factor that in and how do you manage money going into the 529 plans? What's the tax advantage if your state offers that? And then what's the tax advantage that you get on the growth?
If you can select different ways you invest in a 529 plan. Having somebody that looks at all of these things, you're spot on. I mean, our generation has more complexity than our parents' generation or even our grandparents' generation. And so we have to have partners that help us navigate that. And there's a legal component, there's a tax component, there's wealth preservation versus wealth gain.
I mean, that's one of the things that I actually have gotten into learning more and more about is understanding that it's not about always trying to grow the account. Sometimes it's trying to sustain the account. Absolutely. Because one of the first questions people ask you is like, what's your risk tolerance? Okay, I get that.
It's hard to predict risk tolerance if you're trying to look at a time horizon of thirty, forty years out. You know? And yes, the decisions I make today can impact my portfolio balance in twenty, thirty years from now. Having somebody who's a pro at that is so, so important, which leads me to the next part of the process that you've done so well of, and I keep saying, because you've coached me really well through this process and I truly appreciate it, is describe why it's critical to understand your values before you evaluate someone's expertise. And so the difference there is expertise is they might have all these credentials and they're a licensed professional, but then understanding your values, Why is that important?
Why do you encourage people to really step back and say, what are your values as you approach identifying a financial advisor?
Rob: Your values help guide your decisions in life and especially with money. And so truly understanding what your personal and family values are will help you begin to identify does that advisor either align with those values or does their approach to financial planning and financial advice align with your values? So, Brent, when you were you said you've been through this experience just a couple years ago, and I and I suggested, you know, you and for you and Carolyn to talk about values and what is important to you before you met. What was that experience like for you? So both having done the conversation, had the conversation about values and then going in to talk to adviser.
How did you benefit from that?
Brent: I think what we had talked to because we experienced some of our relatives going through some struggles with their advisor. We started to ask, what's important to us? Number one was trust. And trust was who we hire, do we trust them? And what was interesting, trust started to come and manifested to us on not only trust of the advisor, but trust of the firm that they work for.
And trust was, do they have a track record? Meaning what did they do in the last financial crisis as a firm? Did this person, how did they navigate it? How did they communicate? And so there was this second tier was trust within their communication practices.
So as an example, the advisor that I'm working with now, he proactively calls me when there's sometimes some things that are a little bit disruptive in the marketplace And he asks simple questions. How are you today? How are you feeling about things? And he's not trying to sell anything. He's trying to get a pulse for how am I feeling today?
So you and I both being in our fifties, we've come across so many people that have come and gone in the financial services industry. And what I look to value is how do they manage their money? I've had people that have signed up and gone through all the education certification that had said, I'm now a financial advisor. And then they reach out to me, of course, that's part of their strategy is to try to get friends and family to join on with them. And I have a simple response is, Call me in seven years.
And they hate that. And I'm like, Call me in seven years and tell me how it's going. And usually a lot of them don't make it seven years. And I'm not trying to discount or make it more difficult for somebody starting out in the industry. But for me is you have to go through a few cycles and I want to see how somebody responds to it.
So the values for me, there's a trust component, there's a communication component, and then there's a track record. And what are they excited about? Are they excited about like, hey, Brent, you should get into this high flying stock. I don't value that. Because I know those come and they go.
But there's certain people that love that. And I don't want to discredit that either. Some people want to be stock traders. I don't. And so it came down to me understanding their life.
And so that was something that Carolyn and I put an emphasis on. And I wanted from a value standpoint, I also, while I take the lead in my household of navigating our finances, just with our advisor and so forth, Carolyn needs to be super comfortable with the advisor as well. If something happens I to want her to feel comfortable to call the advisor at any point in time in which she will, you know, and that's an important part of the process as well.
Rob: So there's a couple of things as you were just speaking, Brent, that we should probably unpack a little bit more. And the first one, I'll go back to understanding your personal values and kind of your mindset around money in particular. And so why it's important for you to understand it for you and your spouse to understand your own mindset and your own history around money? It helps you think through and helps your advisers work through how you're going to view changes that happen in the economy. And so I think I've shared with you, I grew up in a household as the oldest of four kids, had a single income household.
As I was growing up and money was very scarce at times, which influences my financial I'm actually very conservative when I'm dealing with my own money. My advisor has to push me to be more aggressive at times. But my advisor understands that. She knows a little bit more about my history. So a good advisor will ask you questions about your values and kind of your history with money and what really shapes your financial decisions.
And they're going to help you work through that. Now, we don't always agree. She doesn't just follow and say, Oh, Rob's a little bit more conservative because of what happened when he was a kid. We're only going to use conservative investments. We go back and forth, and she helps educate me on why I need to be more aggressive in a certain area because it's going to benefit me down the road, helps me feel comfortable with that change.
Sometimes she pulls me back if I'm being too aggressive. So it's quite a bit of give and take, but understanding how Tara and I think about our money is really good for the adviser to help give us really solid advice. You mentioned newer advisors joining this industry, and I've hired a lot of advisors that have never done financial planning before, never worked with a client. I help them pass all their licenses, and they start working with people. It's not bad to have a new person in the industry as your financial advisor.
It's not a bad thing. In fact, I worked with one advisor that was in her second year in the industry and we were meeting with a anesthesiologist. And we're in this meeting with the anesthesiologist and the person looks over at her and asks, how long have been doing this? And the person said, I'm in my second year in the industry. And the anesthesiologist looked at me because I was in the meeting with her.
And he said, I'm guessing you're here to help make sure she doesn't make a mistake. I said, exactly. This is our training program. I'm helping her. You'll see both of us in all of our meetings.
We're going to be work together to provide you with really, really solid advice. And his answer was, oh, that's great. I was putting needles into people before I knew what I was doing too, and someone was looking over my shoulder as well. And so it's not bad to have a newer adviser, but you want to understand what that newer adviser is getting from a resource standpoint. Are they part of a bigger team?
Now if you have significant wealth, I a 100% agree with you, Brent. You want someone that knows complexity and has been through a number of investment cycles, drops in the market and help navigate that for you if you have significant wealth. But if you're just starting off and you're starting to you're in the big accumulation phase, you're maybe younger, working with a new adviser isn't bad because they're usually less expensive. As long as that new adviser is working with a team of people that are helping them provide really good advice to you as a client, that they're not just completely off on their own. So there should be a team of resources behind that individual.
And the last thing you said, and I'm really glad you talked about trust. That is the number one thing you want to look for in an adviser. I do believe that people should meet with their adviser with their spouse early and often through that relationship. Once you develop a a strong relationship and you've been working with that person for years, it's okay for one of the house one of the people in the household to meet with their adviser from time to time. But I do believe that spouses should meet with their adviser together regularly and for really just a couple of reasons.
You mentioned one of them. If something were to happen to you, Brent, Carolyn now has to pick up the pieces and you want her to have had a relationship and at least understand what the strategies have been. The second thing, and it goes back to you identifying trust, having two people in the room meeting with an advisor allows somebody to actually make the gut check. Is this somebody we can trust? Well, one person may take the primary drive on running the finances in the household.
Usually, the other person has a little bit more emotional awareness around, is this person someone we like? Do we think we can trust this person? And so having both spouses in the room, you kind of go got to go back and forth and really identify, is this somebody we can trust long term to help us with our money? 100%, I think spouses should be meeting with their advisors together early and often.
Brent: And I like how you talked about understanding your relationship with money. And that's an important part of the process. And understanding if you're in a situation where you have a spouse or a significant other, it's understanding their relationship with money as well. And being very careful of trying to have your financial advisor be your counselor. A lot of couples do have issues with finances.
And so yes, some financial advisors are super skilled, but at the end of the day, what are you hiring them for? And having good clarity there. You're talking about your experience with your family growing up. I had a very funny upbringing as it related to money. Parents grew up in this small town in Illinois.
The laughing joke is they kind of grew up on either sides of the tracks. So my mother grew up in a very blue collar family. My grandmother was the hook, the local high school, and my grandfather worked at a machine shop. And so my mom's relationship with money, it was very scarce. And so whatever she had money, she held onto it.
She was a great saver and so forth. My father on the other hand, on the other side of the tracks, grew up more white collar. Both my grandparents had college degrees. There was a lot of success on that side of the family. And so I always laugh about that situation because I've got this kind of dichotomy of my parents.
My mom is a complete saver and my dad being an entrepreneur as well was a complete spender. Spend it if you got it, save it if you got it. And so one of the funny stories with my mom, I asked her at one point in time, this was years ago. I said, if you won a million dollar lottery, what would you do with it? And she goes, I would get it all in $1 bills and I would count every single one of them.
Rob: So And then stick them in the mattress.
Brent: Totally. And then my dad was the exact opposite. I would spend it before I got it. So next business, next cool adventure, whatever it might be. But understanding that, and I share that story because understanding how you were raised with money, but then what do you as an adult, how do you treat money?
And then sharing that information with your advisor, it's better than just the simple question where they could say, Woah, what's your risk tolerance? They need to learn more about you. So how do you approach that from a questioning standpoint? Do you have a set of key questions that we can share And recognize we're just trying to give everybody pathways here. We know the importance of a financial advisor.
We're not recommending that you change if you've got somebody great. We're not recommending that, Oh, you have to have somebody. Everybody's circumstances are different. We're just trying to give you some ideas. So when you're evaluating a financial advisor, what are some of the key questions that you like to ask, Rob?
Rob: There's a long list of questions that I would think about asking an advisor, but it starts for me in recommending as a client. If you're looking for a new adviser, is where do you start looking? And the first place I would go to is the people that you know, people you respect, asking them for a referral. So it's asking somebody you know, hey, who do you work with? Who helps you with your financial decision?
And they might tell you they don't have somebody. They do it themselves and why you should do it yourselves. But, ideally, they're going to say, here's somebody that I've worked with. And then asking that person, why do you like working with them? What do they bring to the table?
How do they approach working with you? So it's not just getting a name, but it's understanding what your friends or a colleague, someone you respect and like, what their experience is with their adviser. And a key question I would ask that person is what do you wish they would do differently? So they're going to give you all the great things they do, but what don't you like? What do you wish that adviser would do differently with you?
Okay? So that's really kind of where I think it starts in finding an adviser. Sure. You can look them up online. You can just see who's locally in the area.
You might get a phone call from somebody directly, but I go to the referral and ask them what their experience is. The next thing I would do is I would look them up, and you can search for them on a website. But there's a couple of key things in the industry, Brent. You can actually look at somebody's background, and it's fully transparent. You can see how long they've been in the industry, what licenses they hold, and do they have any complaints against them.
And so there's, two websites. You got Broker Check is one website that has a majority of advisers, but there's also adviserinfo.sec.gov. We'll put these in the show notes so people can access these. And just because an advisor is not listed in there doesn't mean it's a bad thing. Most advisors are listed on either one of these sites, but you can look to see if there's been any action against these advisers.
Have they received a complaint? Now just because an adviser has a complaint doesn't mean it's a bad thing. So part of my role, Brent, is I was on the other side of the table when a client called in with a complaint or wrote a letter in complaining about their adviser. I was part of the investigation process behind the scenes to figure out, did the adviser do wrong by the client? Any complaint that comes in will go on to these reports, whether the complaint is justified or not, whether the advisor did wrong or not.
And there are great advisors that have received a complaint that did nothing wrong for a client, and the company even settled with the client because it's easier to settle than it is to go into arbitration. And so it just you're looking for trends. Someone that has five or six complaints against them, there's a trend there. Someone that has one, look at the information, take it with a grain of salt. But you're just looking to see is is there a trend of behavior that somebody doesn't regularly disclose information?
That's the complaints that exist for somebody, they have five or six of them. There's probably something there you should look at. And then it goes into meeting with that adviser. So you have a referral to an adviser. You do a quick background check.
Asking the advisor what their background is in the industry. Where have they been? Have they been at multiple firms or have they stayed at the same place for their entire career? Somebody that bounces and changes between three, four, five companies, there might be something there you want to avoid. I'm not saying that people that move between companies are bad, but somebody that moves regularly throughout their career, it's either something they keep making poor choices with the company they affiliate is kind of how I think about that.
Or they're chasing a paycheck. They're getting paid more by going and changing to a new company. Spouses should meet together, and you're going to talk to the adviser about what their approach is. What process do they follow? How do they provide advice to you as a client?
How do they approach making recommendations? So what is the process they're going to take you through? Is it going to be, give me a bunch of information. I'll come back next meeting with answers for you and suggestions, or it's going to be a multistep process where they really get to know you, really understand how you think about money. You want to find an advisor that's going to take multiple steps in this process and work alongside you and provide you with multiple options.
There isn't one right answer. I wish it was that easy, Brent. The industry would probably go away if there was one right answer, quite honestly. But because there's not one right answer, a really good adviser in their process will ask you a lot of questions and start providing suggestions or options to get your mindset of those. How do you feel about this?
What do you think about that? And actually kind of dovetail their recommendations to a lot of the questions that they've asked you along the way. The last thing I would suggest is asking how often that you should expect to hear from the adviser. How often do you meet with clients? Is it regularly or not?
And does that meet the cycle that you want to meet with your adviser on? So I meet with my adviser every six months. I think she wants to meet with me more often. I don't need to meet with her more often than every six months. I pay attention to what's going on financially, having had a background there.
But some advisors will meet with their clients quarterly. Some will meet with their clients annually. There's unfortunately, there are some people that will sell you something right away and then not talk to you for five years. So you really want to understand that they have a process involved for continuing to meet with you on a regular basis.
Brent: I know with my advisor, they're willing to meet whenever. So there's that ad hoc, but we meet quarterly. I like the quarterly aspect because I also invest in private companies outside of the public markets, not through them. So then I can give them updates of my larger financial picture So then they can make adjustments if need to be. One thing that I want to highlight that you didn't mention, and I've learned this is you didn't start out saying, What is your returns for your clients?
And here's where I've made the mistake with that. I remember this was years ago when I started to have some savings and I wanted to start investing in the market. When I was interviewing advisors, that was my first question. And the more seasoned advisors would say, Everybody's circumstance is different. So we should start to understand what are your expectations?
What are your goals? And understand, can we achieve that? And can I provide you with examples where I've done similar things with clients that are in a similar needs and wants that you have? But me comparing you, and at the time I was probably 28 years old. You 28, and then one of my clients who's 65, we're talking apples and oranges here.
These are two different things. So being very clear. Now you can benchmark to the S and P 500 as an example, but there's a ton of risk associated with that. I mean, as we're recording this, the S and P is driven by just a few stocks right now. So is that truly reflective of the broader market?
No. So there's different ways you can benchmark, but that's why you ask the advisor certain questions about your goals, your aspirations, your values, and see how they respond back. And I like how you've talked about doing some of the simple things upfront. Is there a referral out there that somebody's worked with them just to get their experience? And then number two is do some homework.
Is there a background check? Because what if you could avoid a catastrophic situation because they've got a track record of treating their clients poorly and it's visible? What if you can avoid that? Save yourself the time. There's lots of really good options out there.
And then getting into the conversations of scenario planning and discussing with them in person or however you choose to do it virtual, in person, whatever works for you. More recently, when I was interviewing advisors, how did you respond in the great recession? How did you respond? And depending on the age that they are and their experience, I gave them some scenarios because I just wanted to understand how did they treat their clients.
Rob: I'm glad you brought this up, Bren. A good indication that you asked me a question about earlier is a fiduciary versus a salesperson. A lot of times salespeople in this industry will talk about returns because it's flashy. It's sexy. Right?
I can tell you what my returns were. I can't tell you what they're going to be. So telling you what were your returns during this period of time is somewhat irrelevant because you're not going to experience that as the client because you weren't investing with that person fifteen years ago. And your returns truly might be different based on the type of portfolio you have going forward, what happens in the economy going forward, and things like that. And so a lot of salespeople in the industry will fall back on, well, here, look how great my returns are.
Let me show you how good and successful I have been. The real question is how do you interact with your clients when you are having success? How do you interact with your clients when the market goes down? And a lot of advisers stop calling their clients when the market goes down because they don't want to talk about negative returns. Guess what?
We're going to get negative returns. Everybody experiences it. In fact, I it's built into the portfolio modeling that advisers are doing for their clients going forward. But a really good adviser is going to reach out like yours did, Brent, and ask, how are you feeling right now? Let's talk about what's happening in the economy.
How are you feeling right now? So they're going to reach out to clients very proactively and regularly just to find out how they're feeling to determine if any adjustments need to be made to the portfolio because of the tummy factor, how a client is feeling about their investments right now. Or they might talk you off the edge of making a really bad decision of pulling all your money out of the market, which I had to do a lot of times back in the late nineties with clients as we're going into Y2K. And for all of our listeners, you remember how big of a deal y two k was going to be. Everything was going to shut down.
We had no idea if there was going to be power the next day. We did all the redundancies in financial services on paper in the offices because we had no idea what January 1 was going to feel like. Right? We saw a decline in the market, but having an adviser that reaches out and has that conversation with you to understand, do you need to take money out of the market? And I didn't.
I told clients not to take it out. And guess what happened over the next eight years? We had some of the greatest growth in the marketplace over the next eight years that a client would have pulled their money out, they would have missed all of that growth. And so a good adviser is going to listen. They're going to stay in contact with you.
The last thing I'll say about really good advisers is just understand the team of people that support that adviser. Is it important to you to have the person that's locally in town? Or is it important to you to have an advisor that has a team of people? Maybe has a paraplanner, has an investment specialist, has a couple of staff people working for them. More established advisors will typically have multiple people in their practice that you might interact with.
Just understand who those people are that you'd be interacting with within their practice.
Brent: And for me, for my personal situation, that was really important because as I mentioned earlier, I have private investments. So I need to make sure that they had people that understood the tax side of it, the legal side of it. So there was a team behind the team. And that was important for me because I was trying to avoid having to piecemeal a team together of multiple different firms. I just wanted to make sure that I could have a single point of contact that could get an answer to a question that I have.
You've done a good job over your career of trying your best to match clients with advisors. Can you share an example where it turned out to be a really good match or maybe even a total mismatch? Because I think that's going to happen. You're going to get a good scenario and a bad scenario. And I just want to paint a picture.
I've got a pretty good mismatch one, so if you've got one on the good side, how did it work out?
Rob: So I do have a positive one, and it's actually a personal client of mine back when I was working with clients directly. And so as I mentioned, started my career as a financial adviser. I had a good number of clients that I was working with on a on a very regular basis. And as my career progressed, I moved into more of a leadership and management type of role where I was running branches, running regions, really responsible for the work of other advisers. So I had my own personal clients, and then I had a responsibility overseeing other people's work.
And as that role continued to grow, I started to feel guilty I wasn't giving my own clients the best service possible. I wasn't meeting with them as regularly. I maybe wasn't as proactive making phone calls to those individuals. And so I found a different adviser to take over and begin to work with my clients. And fast forward about two years, I got a letter.
I got a card in the mail from a client and the card was a thank you card to me. While the client was disappointed, they said that I was no longer working with them, they realized that I was not providing the type of service and care that I was capable of doing. It was actually a positive card saying thank you because the new relationship was way better than where I had left those clients personally.
Brent: That's a great story because it's hard to do. I mean, pat yourself on the back for that one, to get a client to actually send a card. Maybe you just don't get that in today's day and age. Right. But more importantly is it was handled really well.
And as you described, you met with your clients, you shared with them the reason why, and then they got the benefits of that and you were thoughtful in your approach. Now, mine is a bit opposite of that. This was several years ago. My advisor was working for a really large firm. He chose to move to another firm.
We had a good relationship, but he didn't let me know that he was leaving. And I'm sure there was a reason why, because there's a non compete in there or something that he'd signed up for when he originally signed on with that firm. So I got a form letter in the mail saying, we've moved you to so and so. And I never heard from that person. So then I reached out to him proactively because I was meeting with my advisor quarterly.
So and so had no idea who I was, really demonstrated they had no interest in knowing who I was. And it was just a complete mismatch. And then they fumbled once they realized, Oh, you're one of them. And I was like, I'm one of them. Now I wasn't asking for special treatment.
I realized I wouldn't trust this person because they didn't put any interest in getting to know me. Sometimes that happens in large firms and it can happen in small firms too. The person was probably so overwhelmed because I picked up too large of a book of business. They were drowning in the number of clients that they had and they didn't know what to do. But it wasn't a good fit for me.
So it was a mismatch. And I just made a change. That's when I went through the process of identifying my next financial advisor. Just know in this space, there is movement. Sometimes movement happens when people age out of their job, that they retire, advisor can retire at one point in time.
And sometimes people do move from firm to firm. And you'd mentioned earlier, Rob, yeah, that happens in the industry. But if you start seeing a large number of moves, you got to be careful there. Cause you've got to go through all the transitions every single time, the paperwork and understanding the new firm's practices and policies and so forth. Movement does happen, but make sure that you own your situation.
Like you own the relationship. So as we wrap up today, Rob, we've covered a lot of grounds, but any final thoughts that you have for people as they're navigating, identifying their potential next financial advisor?
Rob: I'll go back to the thing you mentioned early, Brent, is as you're trying to find an advisor, trust is the most important thing. Do you and your spouse trust this person to help navigate and help you make better financial decisions? That's the number one thing you're looking for in hiring your advisor. You don't have to rush into it. So if there is a transition that happens between adviser moving between companies and that your adviser retires and they have another adviser for you to begin working with, it's a chance to interview both that person and seek somebody outside that you might want to interview.
So take that as a chance to really look back and say, is this the type of person I could trust going forward? The last thing I'll say, and Brett, this is more of a generational thing for us. Generation x is now hitting 60, which means that we're getting close to our retirement years or we just started retiring. And now is really the time to start assessing and building a trusted relationship with an adviser. So I'm an advocate of finding someone to help make better financial decision.
We can all do this on our own. You can find tools online. You can do calculations. You mentioned AI can help you with a lot of areas of financial advice, but you want a real professional that's been around in the industry, has done this before, has helped people retire, help you make better decisions as you get closer to retirement. So we're all hitting the age where we're getting very close to pulling the trigger and actually retiring.
Now is the time to start considering working with a professional.
Brent: Thanks, Rob. And that's super helpful. You got to own the process and spend time in it. You'll get the benefits of it in the long run. So to recap our discussion today, we really feel it's important and Rob hit this one, I hit it is good advice reflects your values.
So understand your values, not just your financial goals. So that's a good starting place. Then think about what are the right questions to ask that you can manage successfully the relationship with your financial advisor going forward. So what are your key questions and spend some time in that. And then once you know you've got the right person, keep nurturing that relationship.
And if you don't feel like you have the right person, spend a little time to potentially approach them and say, Hey, I don't think this is working out. A lot of times they may respond in a very positive way and they'll give you the service you need. And if it's not, then go find the next best adviser. So thanks for spending time with us today, and we look forward to our next conversation.
Lena: That's it for this episode of Midlife Circus. Visit midlifecircus.fm for show notes, transcripts, and all the latest happenings. And while you're there, be sure to sign up for our newsletter so you never miss an update. Don't forget to subscribe wherever you get your podcasts so you never miss your next great act. Before we go, a quick reminder.
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