Five Questions Teachers Should Ask A Financial Advisor

Be honest. How did you choose your Financial Advisor? Did you ask a co-worker? Did you sign up with them because they brought in free pizza or doughnuts and seemed nice? After all, the school district approved them, so they must all be good options, right? WRONG! The decision on which financial advisor you work with could be the difference in hundreds of thousands of dollars in your retirement account throughout your career. So that pizza or doughnut might be the most expensive meal you ever eat!

Please take the time to review all the available 403b options in your school district. You rely on an advisor for their guidance. Shouldn’t they be looking out for your best interests at all times? For example, you can read a review of each of the eleven options available to Depew teachers HERE.

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Here are five questions that teachers should ask a Financial Advisor:

1. Are you a Fiduciary, and will you put that in writing?

A fiduciary is someone who puts your interests ahead of his or her own. Not all Financial Advisors are not required to put your interests first. Yes, you read that correctly. Most of the wealth management firms and banks you know by name provide financial advice under the “suitability rule.” If a financial product or solution is “suitable” for your risk profile and investment objectives, the “advisor” can sell it to you. They are not required to take costs or quality into consideration.

On the other hand, financial professionals who adhere to a Fiduciary Standard (yours truly!) are required by law to put their client’s interests first. Among other things, this means removing any potential conflicts of interest and seeking the best investments at the best prices at all times.

Sounds crazy, right? Shouldn’t all Financial Advisors be required to put their client’s interests first?

If you get anything but a Yes, it is time to look elsewhere. Ask your financial advisor to sign a Fiduciary Pledge to be sure. You can see a copy of mine HERE.

2. Are you a CERTIFIED FINANCIAL PLANNER™ professional?

The CERTIFIED FINANCIAL PLANNER™ certification is one of the highest standards in our industry and means the Financial Advisor takes what they do very seriously. Only 25% of all financial advisors* in the industry can claim this distinction. Choosing a CERTIFIED FINANCIAL PLANNER^TM professional means selecting an advisor who has passed a rigorous entry process, requiring:

• Education: Complete the education requirement to demonstrate theoretical and practical financial planning knowledge.
• Examination: Pass a 10-hour exam.
• Experience: Have a minimum of three years’ experience in financial planning.
• Ethics: Agree to act fairly and diligently, with integrity and objectivity, when providing financial planning services to clients.

This is like comparing a teacher with a Master’s degree versus someone off the street. Wouldn’t you want your children to be taught by someone that put in the time and dedication to advancing their knowledge?

*Source: www.cfp.net, www.cerulli.com

3. Will you itemize all your fees and expenses in writing?

The costs should be straight forward and easy to explain. You may want to avoid paying commissions as well as having surrender charges. Both of these are way too common in most teachers’ retirement accounts.

While the difference between a 1% annual fee and a 3% annual fee may seem trivial, it can amount to almost half your investment return over 30 years (Source).

We have listed our prices directly on my website, which you can view HERE.

4. What is your investment philosophy?

Pretty much every Financial Advisor has a different investment philosophy, so it is essential to understand what they believe. Ask detailed questions about why he or she is recommending each fund or other investment, including whether a commission is paid by selling it to you. Your advisor may only be authorized to sell certain products, which could impact objectivity.

We’ve written about ours in some detail HERE, but we’ll try to summarize it. The odds of picking a handful of stocks that can beat the broad market are typically not good. The odds of picking a mutual fund manager that can pick a handful of stocks that can beat the market are probably worse. And the odds of you choosing a financial advisor who can pick a manager that can pick a handful of stocks that can beat the market are probably worse still. We don’t try to do those things. We recommend an investment plan that is simple, low-cost, and backed by research to help improve expected returns.

5. Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance?

If you are paying a Financial Advisor, it is essential to know what you get for their fee. Some Financial Advisors only offer investment advice, whereas some others provide comprehensive financial planning.

We offer different services and prices, which you can see in detail HERE. We can provide portfolio management and comprehensive financial planning services. That means building and managing your investments and talking about cash flows, taxes, retirement accounts, retirement spending strategies, Roth IRAs, life insurance, appropriate levels of cash, student loans, college savings, estate planning. To learn more about our Financial Planning Process, click HERE.

We’ve covered a lot here, and we sincerely hope we’ve been able to provide you with some valuable questions to help identify potential red flags. Doing so can serve to keep tens of thousands of dollars in your pocket.

Our mission is to help teachers use money as a tool to help them achieve their financial goals. We’d love to hear from you and provide more information on how we can help with your financial planning, whether it be retirement, insurance, student loans, or other critical financial matters.