What to Ask When Choosing a Financial Advisor

Hedge funds, asset classes, benchmarks, alpha…these are all terms that Financial Advisors spew at a disturbing rate in an attempt to sound smart, win your business, and differentiate themselves from all the other standard-issue advisors out there.

But confusing you into becoming a client isn’t the way a true partnership should work.

In fact, before pitching you on any “smart” ideas, a TRUE Wealth Advisor will be transparent and try to build trust and credibility by learning about YOU and your unique goals.

Too often, advisors blur the lines between portfolio management and actual wealth advice to win business. Why? Because charging fees on portfolio management is the only way many (most) advisors collect fees and get paid. And that leads people to assess the value of the advice they are receiving solely on the performance of a portfolio.

This is all wrong.

If you are seeking real wealth advice, focus on the entirety of the advice you receive as a clients of any advisor or advisory firm−and your investments are only one component of that advice.

Real advice requires straight talk and unfiltered opinions without jargon and the sizzle talk of hot investment strategies. Your advisor should not be afraid to give you unfiltered opinions and advice. (We have plenty of it, just ask.)

If you want to know—and clearly understand—the most important questions you need to ask when evaluating a Financial Advisor or choosing a new one that can offer wealth advice without all the sizzle talk….then you’ve come to the right place.

Keep in mind these questions are just the starting point—they are the basic elements you should expect of any wealth advisor. Read to the end to learn the next steps in finding the right wealth manager for you.

Question #1: “What services do you offer?”

The first question to ask is about the services. When you get the answer, if it entails just ‘investment management’, this is a red flag. Why?

Well, it’s a lot like seeing a doctor.

When something ails you, you don’t go see a doctor and demand they write you a prescription for medicine without an exam and a discussion about the symptoms. You see them to seek their advice on the cause and prescribe a treatment plan (which may include both medicines along with other treatments) to alleviate the affliction and maintain a plan to keep it from coming back.

An investment portfolio constructed without the context of a financial plan is like getting a prescription from a pharmaceutical company’s sales representative matching your perceived medical need to the benefits of their drug. Even if it were legal – you’d never do that.

What you would do is see a doctor, have an exam, and let them outline their advice for a treatment plan based on their medical training, experience, and expertise.

You should think of your relationship with a Financial Advisor in the same context. Together, you should examine your needs and create a plan, and then they should advise you on myriad wealth topics in ADDITION to investments that are relevant to you – like tax strategies, cash flow needs, estate planning, the appropriateness (or inappropriateness) of insurance, and charitable giving.

In other words, a wealth plan includes both financial planning and investment management. Listen for both parts to their answer. It’s never just about managing the investments.

Listen For an Answer Like This:

Your wealth advisor will take a customized, collaborative approach to turning a wealth of diverse opinions, resources, and ideas into a plan that represents the life YOU want to live. It starts with asking “What’s the money for?” and frames decisions and actions to align with YOUR big picture, creating a living blueprint that evolves and adapts over the years to your shifting wants and needs.

Because every wealth plan looks different, you should expect:

• A wide-ranging discovery session and audit of your financial life as it currently exists to create clarity surrounding the factors that will drive your final design.
• Cash-flow analysis and modeling that tests the success of different PWD scenarios with conforming investment plans and portfolios. We discuss the benefits of each different scenario and help guide you in picking the one that best fits your goal and risk profile while always considering how your estate plan, taxes, and other issues that matter most to you (like charitable giving or passing down wealth to the next generation) factor into the picture.
• A recommended investment portfolio to meet the unique needs of your PWD, managed in-house by our Monument Portfolio Management Team to reduce costs while managing taxes and turnover.
• Ongoing reviews and actionable advice that capture the dynamic realities of life as it unfolds.

At Monument Wealth we call this process, Private Wealth Design.

Question #2: “Who is your typical client?”

At this point in your life, you’re not trying to save for a down payment on your first house or pay off student debt.

You’re looking to build something of worth and value—for yourself and the people you love most.

To be successful in doing that, you should select an Advisor who specializes in working with clients who have your level of complexity and range of assets—that way, they have the expertise needed to help you achieve your goals. A lot of advisors position themselves as a one-stop shop, and this often means they are not focused on a niche type of client. Be sure that your financial situation is similar to the majority of an advisor’s client base. That way, you know they are focusing their time on the issues and solutions that specifically relate to you.

No one can be all things to all people.

Listen For an Answer Like This:

The value of what we do is in the quality of our work, not the sheer number of clients. Due to our highly-customized and in-depth approach, we are best positioned to help clients who generally have at least $3M in assets. We often work with business owners looking to sell their business or other individuals and families with complex financial situations who are looking to remove hassle and gain more control over their time and their options.

At Monument, our biggest niche is working with clients in this asset range who are not happy with the advice they are getting from their current Advisor. Not every Advisor out there is qualified and experienced in providing advice at this level, and oftentimes, we find that new clients hiring Monument simply outgrew their Advisor as their wealth and need for advice grew.

While we choose to focus on working with clients with investable assets of $3m, there are always exceptions; however, we are not a good option for clients who have investable assets below $1m.

The good news is that we can always help – we have a fantastic network of advisors we routinely refer people out to because we believe that everyone should be able to get the help they need from an Advisor that specializes in the situations that we do not.

Question #3: “What is your fee structure?”

Financial Advisor fees can be unnecessarily confusing—and not all forms of compensation are obvious. Three common fee structures are Commissions, Fee-Based and Fee-Only, which we write about in more detail on our blog. You need to understand and be comfortable with how you’re paying for advisory services and make sure there are no conflicts of interest, which can oftentimes benefit the Advisor more than the clients.

Many advisors operate under both a commission structure and a fee structure simultaneously or can change back and forth. Be sure to know if your Advisor operates under this structure, generally referred to as a “hybrid” and they refer to their practice as “fee-based”.

Additionally, there is a difference between paying the Advisor their “advisory fee” and paying portfolio manager fees. The advisory fee is what it sounds like; you are paying the Advisor for their advice. But if their advice includes hiring outside money managers, they will generally charge their own fee as well. Be sure to fully understand if those third-party managers’ fees are in ADDITION to the advisory fee you pay your Advisor.

Listen For an Answer Like This:

We are a 100% fee-only registered investment advisor. We charge a fixed, one-time fee to create your Private Wealth Design. This compensates our hardworking team for their expertise, time, and the effort they put into creating your Private Wealth Design.

If you choose to retain us to provide ongoing wealth management advice, our standard practice is to charge an ongoing fee based on a percentage of your assets held at Monument.

For relationships above $10m, we offer the option of a negotiated annual fixed flat fee that is charged quarterly.

We do not charge commissions, nor do we accept any sort of revenue-sharing compensation from third-party investment managers.

Question #4: “Who will I be working with, and what are their credentials?”

The goal with this question is to find out if your “Advisor” will be the one providing you with advice, or if their role primarily focuses on business development.

You want to find out WHO on the Team will be answering your questions and managing your wealth. Ask questions like, “What is their availability” and “Are they qualified to give wealth advice?”

Often, traditional teams at the larger firms are organized between two distinctly different roles – advisors and operations assistants. Many times, each Advisor maintains their own group of clients separate from the other advisors. This is less of a real “team” and more of a group of advisors sharing conveniences and resources while each Advisor acts as their own revenue unit.

This is in stark contrast to a team of professionals who are harnessing the collective power of their unique skills, credentials, and experiences on behalf of an entire client base.

Make sure the people who are managing your financial plan and investments are more than just salespeople. They should have obtained the expected education, credentialing, and training necessary to give you advice.

Your advisory team should have CERTIFIED FINANCIAL PLANNERS^TM (CFPs^®) who will create your wealth plan and Chartered Financial Analyst (CFA) charterholders if your portfolios are managed in-house by the Advisor.

Listen For an Answer Like This:

We are different than most teams you will encounter at the large firms or at independent firms that have migrated out of those large firms, because all clients are clients of the firm, rather than of one particular advisor.

We’ve built our Team to be a collective mastermind whose members have varying certifications, specialties, and experience – including CFA charterholders, CFP^®s, and a Certified Private Wealth Advisor (CPWA^®). Our clients are also well-served by having dedicated Client Experience Managers as part of this team-based approach. This structure makes our team much more accessible and knowledgeable than working with one single Advisor and allows our clients to benefit from a wealth of diverse opinions and experiences.

Question #5: “Are you a fiduciary?”

A fiduciary is someone legally obligated to operate in your best interest, not their own. Do not assume that your Advisor is always acting in your best interest or is actually required to.

This question is necessary, and you must verify the answer to ensure you’re in the right hands. By asking someone if they are required to exclusively act as a fiduciary by their firm, you will be able to better determine the answer to this question. If an advisor can buy and sell commission products, they are not obligated to exclusively act as a fiduciary. If an advisor advertises that they are a “hybrid” advisor or they offer “fee-based” advisory services rather than fee-only, they are not always obligated to act as a fiduciary. KNOWING the answer is more important than the actual answer – hybrid advisors are not bad, but they have the ability to swap hats, and you may not want that kind of relationship.

Open architecture is also important. Advisors who can or do sell proprietary products for their firm have a conflict of interest. You can read more about fiduciaries on our blog.

Listen For an Answer Like This:

We are a 100% fee-only SEC-registered investment advisor who, as a fiduciary, is legally obligated to act in our clients’ best interests at all times.

No hat switching here.

We do not view the fiduciary standard as a burden. We view it as a privilege, enabling us to work with our interests completely aligned with yours, as it should be.

In fact, we are no longer registered nor licensed to sell products or earn commissions – we are 100% out of that business forever and have been for years.

Every team member who holds the CFP(R) or CFA designations is required by law to act as fiduciaries as a function of holding those designations.

We are accountable to our clients—we say what we do, and we do what we say because our firm is built on integrity and trust.

At Monument, the value we bring is in our unfiltered opinions and straightforward advice, which helps clients make the best decisions for themselves. That’s all we need to be paid for, so that’s how we have it set up.

Question #6: “How would you invest my money?”

Let’s take this back to the example in question #1 – an investment portfolio constructed outside the context of a wealth plan is like getting a prescription from a doctor who has not diagnosed any specific medical problem.

We believe that advisors who are acting in the best interest of their clients should not be answering this question without the full picture of your life through conducting thorough wealth planning.

Being pitched on products or investment strategies before creating a wealth plan is an indication that your Advisor may not be acting in your best interests. Not all prescriptions are compatible, so just like you’d never have a prescription drug mix without considering how they all work together to solve the health issues a doctor has identified, you’d never just mix investments together without having a professional evaluate how they all work together.

Listen For an Answer Like This:

We do not believe we can recommend investment strategies without first knowing the answer to, “What’s the money for?” We answer this question through a 90-minute discovery meeting followed by a written blueprint that details the priorities for your plan. We then co-create your Private Wealth Design plan, which guides us to make the best recommendation for how to invest your funds to ultimately achieve your goals.

Question #7: “What is your succession plan?”

If you are working with or considering a “solo advisor” and their employees (meaning a team that is comprised of a single advisor and several operations assistant) it’s important to ask about their succession plan. You must identify if there is a “succession plan risk” should your Advisor retire or pass away.

Ensure that any team you work with has a solid, qualified team in place to continue advising you if your primary Advisor retires.

Listen For an Answer Like This:

You will have a deep bench of talent to advise you. Our employees have a “Path to Ownership”, designed to retain our valuable team members and eliminate any “succession gap” for providing you with high-quality, ongoing advice.

To address this at Monument, Jessica L. Gibbs, CFP^® and Emily M. Harper, CFP^® became Partners in the summer of 2021.

As a multi-generational practice, we are organized to manage wealth and wealth transfers for generations to come.

Finding Your True Match

Most Financial Advisors are too buttoned up to give it to you straight. And it’s hard to differentiate between them when all you get is the same “blah, blah, blah,” every time. We refer to that as a “copycat brand.”

But take a close look at their opinions when it comes to managing your wealth and whether you are in alignment with those opinions. Because opinion will make its way into advice, and if you’re not in agreement, neither of you will be happy in the long term.

You can read our Team’s opinions all over our website and throughout our “Off the Wall” Blog. In fact, our clients hire us because they recognize the value of our Team’s unique, straightforward, unfiltered opinion and our tailored advice designed to answer THEIR questions, not everyone else’s.

Not everyone will agree with our opinions (we know that), but we are not trying to resonate with everyone…we are just looking to resonate with someone.

If this resonates with you, see if we’re a fit.

Additional Resources

Certified Financial Planner Board of Standards, Inc.
800.487.1497 | www.CFP.net/search

North American Securities Administrators Association
202.737.0900 | www.nasaa.org

National Association of Insurance Commissioners
816.783.8500 | www.naic.org

Financial Industry Regulatory Authority
800.289.9999 | www.finra.org

Securities and Exchange Commission
800.732.0330 | www.sec.gov

CFA^® and Chartered Financial Analyst^® are registered trademarks owned by CFA Institute. Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER™, CFP^® (with plaque design), and CFP^® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.