If you already have a financial professional, chances are you’ve reached out during the coronavirus pandemic for guidance on next steps — especially if you’ve suffered portfolio losses or found yourself out of work. Moments of hardship are when we need trusted guidance the most. But what do you do if you don’t have anyone to call?
According to a 2019 survey by CNBC, 99 percent of Americans do not use a financial professional—many said they either manage their own money or rely on a spouse, parent, or someone other than a financial professional to handle it for them.
That makes it difficult to make informed decisions in times of turmoil. But it’s never too late to get the help you need.
“I’ve found that during market downturns, including now and the stock market crashes in 2001 and 2008, I actually acquire more new clients than when the market is up,” said Tim Essman, a financial professional with West Coast Wealth Strategies in San Diego in an interview. “If the market was always up, you wouldn’t need us. We are here to guide you through these treacherous times of uncertainty.”
In many cases, moments of market insecurity also precipitate a flight to financial professionals who deploy a more comprehensive approach to planning, said Daniel Drabinski, managing director of business and estate planning for MassMutual in Dallas-Fort Worth, Texas.
“We have been as busy during the past month as we have been at any time during my career, doing 10 to 12 teleconference calls a day,” he said. “Some of the people calling me have spent the last 10 years with an advisor who has been managing their money and allocating their funds, and there’s nothing wrong with that as a business model. But they don’t necessarily know their client’s spouse, children, or career goals—or they only understood a slice of their financial situation. Those clients now realize they want a more holistic financial plan.”
Finding a financial pro
Despite the social distancing measures now in effect, the process for finding (and vetting) a financial professional is no different than it’s always been — or at least not much different, said Essman.
You can still use your network of social and professional peers to solicit recommendations, which remains the most common strategy. For many, this approach helps to pair them with professionals who have an established reputation and work most frequently with clients in their tax bracket.
Online search tools can also be a valuable resource in helping prospective clients locate professionals who may meet their needs.
For example, if you prefer to work specifically with a financial services firm you trust, you can reach out to that firm directly. Many, including MassMutual, offer search tools to help connect you with a professional nearby.
Search engines also make it possible to cast a wider net for financial professionals with specific expertise. The Financial Planning Association allows you to screen for professionals who hold the Certified Financial Planner (CFP) credential. Similarly, the National Association of Personal Financial Advisors online tool allows you to search for fee-only financial advisors, who are registered financial professionals with a fiduciary responsibility to act in their clients’ best interest. (Learn more: Two types of investment professional: Which is right for you?)
Set up interviews
Once you have culled together a list of three to five names, reach out to each via email or phone to schedule an interview. In the time of coronavirus, this will involve teleconferencing.
“If you are going through the initial interview process, don’t just do it over the phone,” said Essman, noting consumers should interview multiple financial professionals before they decide. “Make sure it’s as face to face as possible because this is a personal relationship. It’s someone you may be partnering with for the rest of your life.”
Indeed, visual cues play an important role in the relationship between financial professional and client.
“I really like to see all of my clients face to face, even if they’re not directly sitting in front of me, because I’m always pivoting my approach based on my client’s reactions,” said Drabinski. “I like to be able to read those visual cues and see their body language, which helps me make sure that we’re on the same page.”
When clients hesitate or seem unsure, he said, that’s an opportunity to educate them about their options. When they express concern, it’s a chance to review their asset allocation and tolerance for risk.
Ask the right questions
As you prepare for your interviews, draft a list of questions that will yield greater insight into how that individual can help you meet your financial goals. At a minimum, your questions should include:
- How are you compensated? Some financial professionals get paid based on assets under management, by commission based on the financial products they sell, by annual retainer, or a flat fee for advisory services—or some combination. You need to understand what the cost will be to you. Whatever their fee structure, just make sure it’s transparent.
- How often will we communicate? Will it be annually, quarterly, or as needed? Ask, too, whether you will communicate most often with your financial professional directly, or with a member of their team. For his part, Drabinski said he meets with clients in person or via teleconferencing four times a year. They do a deep dive on cash flow in the first quarter, investment strategy in the second quarter, financial protection tools in the third quarter (life insurance, disability income insurance, property and casualty insurance), and tax efficiency in the fourth quarter.
- What is the profile of your typical client? Some financial professionals work exclusively with high net worth clients. Others cater to retirees, the LGBTQ community, or small-business owners. Finding the right fit means pairing up with a financial professional who understands your unique goals and needs.
- What are your credentials? There are literally dozens of credentials in the financial planning industry. For example, those who have earned the CFP certificate, or the Chartered Financial Consultant and chartered financial analyst designation, must pass rigorous exams. Meanwhile, certified public accountants and enrolled agents are highly trained in tax planning. Other financial professionals obtain special training in retirement planning, estate planning, life insurance, or setting up donor-advisor funds for philanthropists. Make sure you know who you’re working with and how their expertise can benefit you.
- How will you protect my privacy? Any relationship with a financial professional will require the transmission of personal financial information, including account numbers and Social Security numbers. Make sure the professional you will be working with has encryption technology in place to keep your private information safe.
- Can you provide references? This is an important part of due diligence. Ask for the names of two or three existing clients you can call to find out how their experience has been thus far — and actually call. It’s worth the few extra minutes it takes.
- What is your investment philosophy? Are they focused on short-term wealth accumulation, which might favor higher-risk investments, or building a more diversified portfolio to balance volatility and promote retirement readiness? Do they rely on active or passive investment strategies most? Such questions will not only yield valuable insight into whether or not you may be a fit, but it will also reveal how effectively the financial professional is able to communicate with you in terms you understand. If it’s too complex or doesn’t make sense, move on.
Check their history
Lastly, you’ll want to confirm that the financial professionals you are considering do not have a track record of disciplinary action. The Securities and Exchange Commission (SEC) provides a searchable database as does the Financial Industry Regulatory Authority (FINRA) with its BrokerCheck tool.
Social distancing measures due to the coronavirus haven’t changed the basic approach to finding a financial professional. If you’re looking for financial advice, or ready to switch to someone who uses a more holistic approach, ask your peers for recommendations, interview candidates carefully, and check their track record to be sure that you find someone who can help you through the current market downturn — and beyond.
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