How do the wealthy in Malvern, Pennsylvania find the best financial advisor for their needs? The same way people of other income brackets and in other geographical areas do, by deciding which financial advisor best fits their needs.
Here are a few considerations to keep in mind as you begin your search:
Look for experience in your income bracket
Investors should look for financial advisors who have experience with people whose income and assets are roughly the same as their own. Why? Because many aspects of your financial situation may not be shared by people in a different income bracket.
Wealthier people tend to have more assets. You want an advisor who is experienced with the type and amount of assets you have, and can recommend strategies to both maximize them and protect them from risk.
Your financial advisor needs to be knowledgeable about the issues that accompany high net worth – and that stems from a client base of people whose assets are roughly equivalent to your own.
You may have trusts, several homes, considerable income from your investments or other situations people with a lower net worth are not as likely to have. You may want to set up bequests for institutions along with bequests to your family and friends as part of your estate plan.
Look for experience in your region
If you live in the Greater Philadelphia Area, it’s also a good idea to find a financial advisor in the area for the following reasons:
First, you want people with hands-on knowledge of how the region affects your financial plan. Pennsylvania levies an inheritance tax, for example, 4.5 percent for direct descendants (children or grandchildren), 12 percent for brothers or sisters and 15 percent for all of your other inheritors. While inheritors pay these taxes rather than yourself, you may want to plan for the impact of the taxes.
Pennsylvania also has relatively high property taxes. The effective 1.55 percent rate ranks #13 in the nation.
Second, you may want to meet with your advisor in person, at least once. You need to ask them questions about their experience. But perhaps even more importantly, you need to ascertain the fit and comfort level between you and your financial advisor. Those qualities are easier to determine in person than online.
Knowledge of the area and geographical proximity are an important part of financial expertise and service.
Look for a fiduciary
“Financial advisor” is a somewhat amorphous term. Almost anyone can call themselves a financial advisor. They can be brokers or wealth managers. No particular set of qualifications are required to use the title “financial advisor.”
Fiduciaries are required to offer sound and accurate advice, and to place the interests of their clients higher than their own. They need to disclose any conflict of interest created by any part of their financial advice. Fiduciaries are regulated by the U.S. Securities and Exchange Commission.
Does this sound like the advice any good financial advisor should follow? Well, not all are required to place their clients’ financial well-being above their own. Brokers, for example, can recommend trades whose commission structure benefits themselves.
Brokers are held to a suitability standard overseen by the Financial Industry Regulatory Authority. This standard mandates that they recommend suitable investments vis-à-vis your goals. If you want to conserve capital, for example, they should not be trading options for you! But within the range of suitable investments, their trades can offer financial benefits to the broker rather than to you.
A fiduciary, on the other hand, would have to use a commission structure beneficial to you, rather than themselves.
Find one who can provide comprehensive financial planning
A good financial plan will be comprehensive. Each piece of your financial life affects all the other pieces. If you’re getting married or divorced, for example, every part of your finances, from assets to living spaces to retirement plans, may be impacted.
A comprehensive financial advisor, in other words, won’t look just at your retirement plan or your investments. They’ll review your goals and the entire picture of your finances, including:
- Financial (and Non-Financial) Goal Setting and Goal Achievement
- Investment Management and Asset Allocation
- Retirement Planning
- Retirement Distribution Cash Planning
- Estate Planning
- Cash Flow and Savings Analysis
- Insurance, Risk Analysis and Risk Reduction
- Tax Planning and Effective Tax Reduction Strategies
- College Funding (for Children & Grandchildren)
- Getting the Most from Executive Compensation and Stock Options
How do you know that the advisors you’re talking to will be qualified in all these areas? It’s prudent to find advisors who are certified financial planners (CFPs®). CFPs® have complied with the Certified Financial Planner Board of Standards requirements, including finishing courses, passing the CFP® Board’s exam, having several years of experience in financial planning, and upholding standards of conduct.
The CFP® exam establishes proficiency in financial planning principles, retirement planning, investments, risk management, education planning (for college savings), insurance, tax planning, estate planning and professional conduct and regulations.
At Financial Freedom, ALL firm members are CERTIFIED FINANCIAL PLANNER™ professionals. We believe that the education, examination, and experience requirements of the CFP® program are a required minimum to provide outstanding wealth management services.
You should also find an advisor who feels that communication with clients is important. Financial advisors should review the performance of your assets on a regular basis. Your financial advisor should interview you in-depth about your goals initially, and conduct at least a yearly review after that. The annual review should examine any changes that might affect your goals or your financial life.
Financial Freedom Fee-Only Wealth Management is committed to transparency, we also expect you to hold us accountable. To help you do that, we provide you with an annual performance package. This package recaps the comprehensive financial planning we have provided to you during the year. Additionally, we compare your actual portfolio returns to appropriate industry benchmarks. This performance package helps you clearly see how we’re adding value to your progress.
Interview potential candidates and ask questions
During your interview process, you may want to ask specific questions that give you an overview of their background, approach, and qualifications, such as:
- How many years of experience do you have?
- What is the average net worth of your clients?
- Are you a fiduciary?
- What certificates or designations do you possess?
- Are you a CFP®?
- Tell me about your ideal client
- Explain [this] to me (ascertaining how an advisor answers open-ended questions, such as “what’s the best plan for my children’s college education?” is one of the best ways to find out what working with them is like)
- How often do you communicate with clients?
- What method of communication do you use? (video chat, phone, e-mail)
- Who do you work for?
- What is your payment structure?
- Which firm will be the custodian of my assets?
At Financial Freedom, our team of fee-only fiduciary wealth management professionals helps you achieve your life goals and objectives. Contact us today to schedule a conversation.