5 Important Things Your Financial Planner Should Do For You
Are you on the verge of hiring a financial planner but unsure what your financial planner should be doing your finances. You know you want to work with someone who you trust wholeheartedly with your hard-earned money. While your schedule is insane and unpredictable, you want to know your planner is always going to make decisions with your best interest in mind.
But how could you know if your financial planner is doing exactly what you need for your portfolio? Should there be some sort of checklist or benchmark to determine their performance?
The answer is yes! There are things your financial planner should be doing not only for your portfolio but for your overall financial management. What you might be surprised to realize is we aren’t referring only to the growth of your account when it comes to determining the true achievement of goals.
Whether you are comfortable working with your current planner or starting to question the decision you made to hire one, here are the 5 things you should be on the lookout for when it comes to working with a financial planner.
Your Financial Planner Should Not Be Selling Products to You
There are two types of financial planners, fee-based and fee-only financial planners. It is absolutely critical to know the difference between the two. Mixing these up can cost you hundreds of thousands of dollars over your career.
Fee-Based Financial planners and What They Do
Fee-based planners – which the majority of planners fall into this category – not only manage your investments, but they also sell additional products. At first, it might sound harmless. Who can blame someone for wanting to earn additional income?
But when you dig a little deeper, you’ll find how many financial planners can sell additional products such as insurance policies or annuities, make commissions, bonuses, and even referral fees.
Imagine the conflict of interest this can create when someone is managing your portfolio.
If someone is able to receive additional revenue by selling you additional products, then you can’t be sure your best interest is being considered when you’re presented with options for your portfolio.
Fee-Only Financial Planner and What They Do
Although the name sounds almost the same, the two concepts for financial advising couldn’t be more different. Fee-only planners are almost always a fiduciary. This means they have a legal and ethical obligation to manage your portfolio without any commissions, bonuses, or referral fees.
Fee-only planners will disclose the fees upfront, as well as their fiduciary guarantee.
Because of the fiduciary guarantee, the financial planner will not sell any additional products to you and they won’t be afraid to put in writing for you either.
My firm, Physician Wealth Services, is a full-service fee-only firm that focuses on working exclusively with physicians.
Because we are fee-only, the goal is to be as transparent and free from conflicts of interest as possible. This way, the focus can be on your goals, dreams, and financial milestones without muddying the waters by trying to sell you something.
You should never have to question whether you were recommended a product or a certain professional (such as an attorney, or realtor) based on your planner’s connections.
You should feel certain you are being advised to do something because it’s what’s best for you, and not someone else’s wallet.
Your Financial Planner Should be an Expert in working with Physicians
Being a physician will all but guarantee you’ll never have a normal, 9-5 Monday through Friday workday. There are some days you don’t even know what your schedule is going to look like or how you’ll possibly treat all of your patients.
Your financial planner should understand this and be willing to work with this reality.
It’s not only your schedule which can be unpredictable, but your money goals are probably quite different than many other professions. Some of your financial milestones (such as buying your first home, having a positive net worth, saving for retirement) have been delayed compared to others. When you’re in school for twice the number of years (at the minimum) it tends to delay your big purchases.
Then there’s the matter of your student debt. With most physicians graduating with six-figures worth of student loan and credit card debt, it’s going to make your goals look different. You may want an accelerated plan to pay off your debt, or you could be choosing to pursue PSLF for your federal loans.
Either way, you need a planner who understands your unique situation with your debt.
There is one caveat to this idea of someone working exclusively with physicians. You will find it can be tougher to find someone who truly specializes in working with doctors.
It will be even harder to find one who is also a fee-only planner. But no matter what, finding one is worth the effort. Fortunately, fee-only planners who specialize in working with physicians do exist. If you haven’t found one by now, Physician Wealth Services is physician family owned and available to work with physicians and their families all across the nation.
Your Financial Planner Should Have a Holistic Approach
You may think the only number your financial planner cares about is your total amount of assets. But if you’re working with one who’s truly vested in your best interest, then they should be looking at your entire financial picture. Your portfolio goes beyond what can be measured in an assets column.
What exactly does an entire financial picture look like? You’re the only one who can fill in all the blanks but think of your goals and retirement dreams you want to be considered in your overall plan. You also know there are debts to be paid and perhaps investment opportunities you want to think about later down the road. You need a financial planner who understands the multiple facets of your money and your unique timeline.
Your financial planner needs to take into account not only your assets but also your liabilities. For instance, your portfolio may show you have six-figures stashed away for your retirement. However, you still may have quite a large amount of medical student debt. They should be looking at both these items to help you determine the strategy for getting rid of your medical school debt while growing your retirement nest egg.
In addition to the goals, your planner should be willing to get into the details of your budget with you. After all, it doesn’t do you any good to put goals on paper but not break it down into a monthly or quarterly action. Some of you cringe at the thought of developing a budget, and admittedly it’s an easier concept for some than others. But a financial planner who is looking at your entire financial plan should help you devise a budget so you can achieve your big goals.
Your Financial Planner Should Consider Your Goals
The only way for your planner to look at your entire financial picture is to be able to understand your personal goals. Your goals could be related to your finances, your career, your family, or perhaps a combination of all these categories.
Your planner needs to know if you have a goal of paying off your mortgage early or paying off your student loan debt within 7 years. Another goal could be paying for both private education or college education for your children. Or you may choose to work all the shifts you possibly can right now, so one day you can enjoy an early retirement. Whatever your goals are, they should be considered when working with your financial planner.
I’m sure some of you are wondering how you would be open with someone and express everything you are hoping to achieve over the next few years as you may not even fully understand your goals yet either. But a planner should be ready to tackle this subject with you. You may choose to write down your goals first and then present them to your planner or you may sit down to have a frank conversation. Either way, if you don’t know what you’re working towards, then it’ll be almost impossible to develop a plan which you want to follow.
There could be a time in the future where you will talk to your financial planner about an investment opportunity or big family trip which you want to take. If the planner is doing their job, they will help you see how this particular opportunity aligns with your goals or takes you further away. Your goals will be the benchmark in which the financial planner measures your success.
Discovering all the facets of your finances and the goals you have for the short and long-term can only be achieved by asking questions. Let’s look at some of the questions you can expect to be asked so your planner understands the entire picture.
Your Financial Planner Should Ask You Tough Questions
There is no possible way your financial planner can understand what makes you tick without asking you important questions. If you have a planner who is looking at your financial picture comprehensively, then they will be able to help you by asking several thought-provoking questions.
When I say questions, I’m talking beyond the “How much money do you have now? How much money do you have to invest?” There needs to be questions around your challenges, your money goals, your dreams, and your interests.
When it comes to working with clients, I personally use the 3 questions developed by the Kinder Institute in order to pinpoint what my client’s priorities might be. These are the questions he uses for clients to think beyond financial planning and start focusing on what he refers to as life-planning.
Very few financial planners have these discussions with their clients. And while your planner may not word the questions the same way, they should be trying to understand your personal motivations for money and life-planning. Let’s look further into these questions and you can ask yourself how you would answer them and how it could impact your own financial planning.
Imagine you are financially secure, that you have enough money to take care of your needs, both for now and in the future. How would you live your life? Is there anything you would change?
This question is probably the easiest of the 3 to answer. After all, since money is no object in this scenario, it makes it easy to open your mind to all the wild possibilities of life. Would you travel more? Spend more time with your friends and family, no matter the distance? Would you spend more time reading books and watching movies since you don’t have to worry about any deadlines?
Only you can answer what you would want the most if you didn’t have any financial worries. It’s enjoyable to let your mind wander to a place where your job and your bills are no longer the focus of your attention.
Next, imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it?
This question is more difficult to answer than the first one, and it’s actually by design. The point of this question is to allow yourself to focus on the items you value the most and the dreams you want to accomplish sooner than later.
Notice how money is no longer the focus of this question. Presumably, you would have to earn some sort of living or have a cushion to be able to map out the remaining 5-10 years. If you need to work to support yourself, then what kind of work do you want to be doing? What will you do with the money you earn and the money which remains? Would you want to spend every penny you work for, or would you want to leave a financial legacy behind for those closest to you.
The question could also prompt thoughts of how you would prepare for the inevitable. Important items such as life insurance, and wills and trusts suddenly seem a little more important. You can’t waste any additional time by putting these important items on the back burner.
Again, only you can answer what would matter the most to you. But if you only have 5-10 years to accomplish what you’ve dreamed of, then how could you put together a plan to reflect these dreams?
Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?
This last question is probably the toughest to answer. No one really enjoys the thought of their own mortality. Chances are, the response to these questions will revolve around thoughts of regrets, questions of spirituality and those you love and cherish. You may even wish you had always pursued the crazy dream you swore to yourself would never be possible.
When you’re faced with a very narrow window of time such as this question poses, it makes you immediately jump to the matters closest to you. You’ll soon find out what has the most meaning to you and you can begin to incorporate this into your life-planning. Remember, this is to help you narrow down your focus to the biggest priorities in your life.
You might even surprise yourself when you realize your immediate reaction doesn’t involve the practice of medicine. If this is the case, is there a way to incorporate what means the most to you in your financial plan?
You may still be wondering what these questions have to do with finances. To some people, this may sound more like a fantasyland than real life. But the answer is simple – when you know what you want out of life then you can build your finances around these desires. You can make sure your budget and your financial milestones reflect what you desire the most.
Your Best Interest Should be the Top Priority
It’s easy to measure the success of a financial planner by looking at how much growth you’ve had with your assets. But I challenge you to look beyond the numbers.
As with many professions, you’ll find a wide variety of different types of financial planners and what they do. Each has its own approach to financial management and its own personality too. You’ve spent time selecting the one you feel you can work best with, now it’s time to make sure they are helping you achieve your goals. If your financial planner isn’t doing these 5 things, then it may be time to consider hiring a real financial planner.