The Blog

June 27, 2019

Who do you want to handle your financial planning?

by Steve Doster

Financial planning is a way of figuring out whether and how a person can meet their life goals by properly managing their financial resources. There are a lot of people and companies out there who want to take on the role of a financial advisor in your life – but that doesn’t mean you should let them.

These days, it seems like everyone wants a hand in your financial planning.

Banks, insurance companies, brokerage firms, and mutual fund companies – they all would like to manage your portfolio and “deepen” their relationship with you. So, should you hire these companies to serve as your financial advisor?

The quick and short answer is no! These companies are not required to operate under the fiduciary standard, which would require them by law to always put their clients’ best interests first. Financial advisors who follow the fiduciary standard must disclose any conflict of interest (or potential conflict of interest) to their clients before and throughout their relationship.

That may come as a surprise to many of you.

Financial advisors at banks like Chase, Wells Fargo, and Bank of America can recommend investments and products that earn your advisor a bigger commission rather than recommend what is best for you. Financial advisors at large brokerage firms like Fidelity and Schwab are not required by law to make financial planning recommendations that are in your best interest as a client. Financial advisors at insurance companies like Lincoln Financial or Prudential can sell you expensive variable annuities even though low-cost mutual funds are much better for you.

That is a big list of companies you don’t want involved in your financial planning.

With those groups ruled out, who is left to act as your financial advisor and help you to meet your life goals and manage your money well? You can start to answer this question by looking for financial advisors who are also fiduciaries. Legally, these advisors are known as Registered Investment Advisors (RIAs). RIAs are required by law to always act in your best interest and will only make financial planning recommendations that benefit you as the client.

Where can you find these financial planning professionals?

RIAs can be found at the website for the National Association of Personal Financial Advisors ( NAPFA is a non-profit organization promoting fee-only advice where consumers can find financial advisors who adhere to the fiduciary standard and won’t sell them expensive or unnecessary financial products and investments.

This website has other helpful resources for consumers, including a Financial Advisor Checklist. The checklist has 25 questions for potential advisors to answer before you decide to meet with them. These questions reveal the advisor’s experience, how they get paid, and what services are provided. It also includes a Fiduciary Oath for the advisor to sign. If they won’t sign this, you shouldn’t work with them! If your current advisor won’t sign the Fiduciary Oath, it’s time to find a new financial advisor!

Once you have narrowed your options to a final two or three potential advisors, you can send them the Financial Advisor Diagnostic. Compare their answers to the “answer key” provided by NAPFA. This pamphlet is written in a straightforward way and is a valuable tool to use in your search. Give it a try by downloading and sending this Diagnostic Tool to your current financial advisor. The responses you receive may surprise you.

When it comes to financial planning and protecting your investments, it’s important to work with someone you can trust.

Everyone wants to be your financial advisor, but not everyone should be. Before agreeing to work with any company or individual, confirm they are legally held to the fiduciary standard. That is the most important factor in selecting someone to aid you in your financial planning.

In this post, we covered who you want to handle your financial planning needs. In our next post, we will discuss the value you get from receiving financial advice from a professional – in other words, why you should work with a financial advisor.