There comes a point in time when we reach an inflection point. Perhaps it’s a milestone birthday, a new baby in the house, an empty house when the last child goes to college, a divorce, remarriage, or even the passing of a beloved family member or cherished friend that spurs the realization that having professional financial advice would be valuable.
However, many people do not take the next logical step for a variety of reasons:
— They do not know how to find a competent and capable advisor.
— They are afraid they have waited too long to start financial planning.
— They are embarrassed because they do not understand financial terminology.
These fears are valid. Fortunately, because they are also common, financial advisors will work hard to make you feel comfortable from the first meeting. The initial meeting is truly a conversation to determine if you have compatibility with the advisor and for the advisor to have a clear understanding where you are today and where you want to go financially.
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Finding an Advisor That You Like
While the recommendations you will ultimately receive are important, finding an advisor you like and trust is paramount. When an advisor asks you insightful questions and truly listens to your needs, your confidence in implementing their recommendations soars. Advisors also recognize that there are specific behavioral styles around money and may ask you to complete a profile to determine the compatibility of your individual styles. This is especially important if you have a spouse or partner involved, so that all partners feel heard and respected.
The easiest way to learn about advisors in your area is to ask friends for referrals to theirs. You can also ask your other trusted advisors, such as your CPA or attorney, for recommendations. Don’t hesitate to interview each advisor before choosing to see if there is the appropriate professional chemistry. And don’t be afraid to walk away if you feel even slightly uncomfortable with them.
Initial Logistics
The first meeting’s timing and agenda will vary by advisor. Some advisors want to dive deep into the conversation around your goals, fears and concerns and give you plenty of time to ask questions. Usually, this meeting is scheduled for about an hour. Others will schedule a longer initial meeting with the goal of moving forward immediately if you agree with their style and investment philosophy. There is not a right or wrong approach; it really comes down to the advisor’s business preferences. However, if you do not feel compatible with the advisor, you do not have to continue the meeting for the full time period.
The majority of advisors will hold the appointment at their office. Video calls, such as Zoom, are becoming more common for additional meetings, but the initial meeting is important to do in person so that you can assess chemistry, and the advisor can observe your body language. The latter is important as you may not yet have the confidence to speak up about sensitive topics which can impact the overall success of your planning. The astute advisor may ask further questions or simply make a note to circle back as your relationship with them develops.
It is important to bring your spouse or partner to this meeting if the planning involves them. At the office, staff will likely direct you and any others to a conference room and offer a beverage to enjoy before the advisor arrives. Take note of how welcoming the staff is toward you, too, as you will likely work with the entire firm, not just your advisor.
If you are working with a registered investment advisor, or RIA firm, the firm is also required to give you a packet of documents detailing the fees you will pay and what services you will receive for that fee. If you do not understand the fee structure, good advisors will encourage you to speak up and ask questions. The documents will also cover a variety of topics like conflicts of interest, cybersecurity and succession plans. It is important to read it fully.
Worried About Starting Planning Too Late
As the greetings conclude and the initial paperwork exchange begins, people often become nervous about their starting point. Rarely do people start their financial plans exactly when it is optimal. Planning for the future is a big project; career and family needs are unrelenting. However, this is one of the most immediate values that a planner can bring to the table — helping you start and holding you accountable to your actions.
Initially, the advisor will ask a lot of questions about what steps you have taken and where you want to go. By necessity, these questions are personal and may feel intrusive. Feel free to ask why they are important to the conversation. Examples of typical questions include: “What is most important to you?”, “Do you want to pay for your child’s entire college experience?” or “How do you envision your retirement years?” An insightful planner will dive deeper at times, which is why having confidence in them early is critical.
In order to successfully travel from Point A to Point B, it is important to define both clearly. Many advisors will give you a list of important papers to bring to the meeting. These may include pay stubs, bank statements, brokerage account statements, retirement plan documents and insurance policies. They will also need to know how much you owe in mortgage and car payments, credit card debt, student loans and other debts. Business owners will have similar documents pertaining to their structure and operations.
All these documents will help the planner give you a snapshot of your personal starting point, including:
— Balance Statement – Determines your net worth, which is the difference between all the assets that you own outright and those that you still owe money. It will also help the advisor understand the liquid assets currently available to invest toward your goals.
— Cash Flow Statement – Defines exactly how you much you bring home each month and how it is being spent or saved. A cash flow statement is important because it will help determine how much you can safely spend and still invest to meet your goals.
Additionally, your planner will need to understand your risk tolerance for various kinds of investments. Some people are ultra conservative, while others have the stomach to take significant risks. Therefore, you will be asked to complete a small set of questions to help clarify your risk profile.
Financial Literacy Is Not Required
There is a lot of jargon in the financial industry, as well as words that are commonly used, but not always well understood by people. When you’ve been brave enough to step up and begin achieving your goals, it is important to continually ask questions about anything that is not clearly explained to you — until you are certain you understand the topic. Relationship-driven advisors are comfortable with explaining a concept more than once and asking you to repeat it back to them, in your own words, to confirm clarity. This is your money, your goals and your decision to pursue any recommendations that the advisor may make.
Closing the Meeting
By the end of the first meeting, you should walk away with an understanding of your current Point A, clarity around your Point B and, most importantly, whether you have trust in the advisor’s knowledge, experience and demeanor. You should have a good feeling as to whether this advisor is right for you and your needs. If you choose to move forward to a second meeting, the advisor will typically provide an explanation of what to expect next. Best of all, you will feel confident that you have the tools to make informed decisions with your partner in this journey.
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What to Expect From a First Meeting with a Financial Advisor originally appeared on usnews.com
