Meeting with a Fee-Only Certified Financial Planner, Part 1: Finding an Advisor and Gathering Info

Back in June when I did the Fox Business segment, I was asked what investments people could trust in these tough economic times. I wasn’t prepared to give a million different people (…okay, maybe just a few thousand) advice on retirement specifics, so I somewhat skirted the question and said that everyone should seek the advice of a fee-only financial planner, specifically a Certified Financial Planner (CFP), to help them sort out where they are and what they need to do to get prepared for retirement.

While I stand by my words, I felt guilty that I’d never taken my own advice. I’d never been to see a CFP. Most of my retirement investing advice had come from books, blogs, and employer retirement plan administrators. That was about to end. I decided I needed to go visit a local CFP.

How to Find a Certified Financial Planner

NAPFA Logo I went straight to www.napfa.org (The National Association of Personal Financial Advisors) and performed a search for a local advisor. The top result was Frisco Financial Planning, LLC.. Under their bio was the sentence, “If you have no outstanding credit card debt, are spending less than you make, and see the value in paying a reasonable fee for professional financial help, we may be the planning firm you are looking for.” This, along with the fact that they claimed a Christian worldview, struck a chord with. I decided to give them a shot.

Frisco Financial Planning’s principle advisor is John Gay. After a quick look at his credentials, I emailed John and told him I’d like to discuss meeting with him to review my current retirement savings status. I met with John for lunch and we discussed his business, blogging, and how my retirement planning session would work.

What Makes a Good CFP and CFP Client?

I asked John what readers of my blog should look for in a financial advisor. He said they should be:

A Certified Financial Planner Professional with several (at least 10) years of experience.
Not employed by a large financial institution (bank, brokerage fund, or life insurance company).
Fee-only (paid directly by the client and receives no commission).

I also asked John to describe his typical client. He said that his services were cost effective for people with no consumer debt, who were already saving at least 10% of their income, and who make over $150,000 a year and/or have $250,000 saved already for retirement. I explained to John that I wasn’t quite in this range yet. He was kind enough to work with me anyway since I was sharing my story on the blog.

Preparing for the Planning Session

I thanked John for his time and he let me know he would be sending Mrs. PT and I some materials to prepare for our full planning session. Here’s what John sends over to clients:

Client Agreement, Payment Request (half of the fee), and General Client Survey
Retirement Information – This is where I put all of our current retirement savings figures.
Tax Information
Request for Investment Account Statements – I emailed John the electronic copies of all of our retirement, investing, and other savings accounts.
Risk Profile – Mrs. PT and I each had to complete our own risk assessment. It was quite in-depth, probably taking the majority of the preparation time. At the end of the survey I was told my risk score, which I’ll reveal in part 2. The survey was run on software from Money Guide Pro.
General Considerations and Life Insurance Information – Finally, John sent over some general information about healthy personal finances (no consumer debt, emergency savings, etc.) and a great primer on life insurance. John really gets it when it comes to personal finance basics and you could tell by this material.

Once I completed these items, I scheduled my planning session with John. He said it would take a couple of hours and that he’d like both Mrs. PT and I to attend.

Takeaways from Part 1

Here are some of my thoughts about this first, planning phase of the CFP process:

1. It’s easy to find a good planner. If you are interested in this service, visit www.napfa.org and find a planner near you.

2. A certified financial planner only makes sense for certain people. There may be certain CFPs that take on a wider range of clients, but John seems content only working with those most prepared. I found myself in the gap between John’s key audience and more general advice like Dave Ramsey provides.

3. John’s approach and position on the basics was impressive. The icing on the cake throughout this process was how much John aligned with my own beliefs and thoughts on personal finance. I knew I was working with someone who thought like me but who could help me take it to the next level.

4. I was glad that Mrs. PT was encouraged to be involved. Finally, throughout the process John heavily encouraged me to get Mrs. PT involved. She’s pretty busy these days, so although it was tough connecting on everyone’s schedule, I was glad she was a part of the process. After all, we are saving for retirement together. It only makes sense that we plan together. In part 2 you’ll really see why this matters.

That does it for part 1. I will discuss the actual planning session and John’s recommendations for our retirement savings in part 2. Stay tuned for that.

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Last Edited: April 4, 2012 @ 1:06 am

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Another Guy 5 pts

While I would agree fee only advisors will typically provide better advice, the desire to be compensated works both ways. If someone has $50,000, needs a bond portfolio for the next 20 years, this might cost them 3.5-4.5% upfront in commissions. There is nothing to manage and only dividends to be collected. Most Fee Only advisors will charge .50-1% annually to provide this. Which is better for the client? Are there times you should have something that would require a commission be paid yet a fee only advisors provides you something else?

I always question an advisor that only accepts certain types of clients. It's usually a form of puffery and at the same time is a margin building technique that helps bring more of the most profitably clients to your office. Most will still accept your business unless it is too much work to pay their hourly rate. Think about it: $50,000 at 1% is $500. Notice how John told you he would help you anyway because of the blog. I think Bernie Madoff would tell people it was because he liked them. An advsor can't meet with you for 1 hour a year to keep you on track for $500. Sometimes Christianity or Church is used. A Christian wouldn't take advantage of you would he? I don't want you to think I'm against this advisor, because I don't know him and he is probably an excellent advisor. My point is that as a consumer you need to be able to do a little of the homework yourself because anyone that will be collecting money from you whether in the form of a commission or a fee, is in the business of selling.

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Bret @ Hope to Prosper

Evan,

Thanks a bunch for your response.

There are good and bad members of every profession, including doctors, lawyers, financial planners and bloggers. By good and bad, I mean qualities like competence, integrity, knowledge and experience. I'm sure there are some terrible fee-only planners, which is why you should check their background very carefully. PT has done a great job covering this subject and I agree with his criteria for selecting a planner.

You also have a valid point about the cost of B and C shares vs. paying a retainer, for investors with small portfolios. My opinion is that an investor with a $5K portfolio should probably choose their own mutual fund and skip the high fees. It's ironic that at the time novice investors need guidance the most, it is also the time when they need every dime going into their portfolio. But, there are a lot of great no-load mutual funds available and new investors can sign up directly.

Financial Advocate

What if the client doesn't like the "plan" ? Do they still pay the fee?

Most plans recommend the placement of financial products, where do these products come from? Who makes the commission? (By the way- there is always a commission, if a rep doesn't get it, the company i.e. Vanguard, Fidelity, etc. just keeps it).

Everything we buy, financial products, cars, houses, books, electronics, even groceries- have a commission tied to them somewhere in the pipeline.

I do agree with the advice to work with a certified professional and would add that people would be wise to find someone with experience, in their age bracket + or - 10 years, who they can work with for life. Most people fail financially because they only "plan" to get to retirement instead of planning for the life events that can impact financial plans (marriage, children, college, weddings, disability, retirement, premature death, grandchildren, legacy, etc. etc. etc.)

Good luck middle America, keep buying books, watching shows, and supporting "financial entertainers" who don't even follow their own advice!

Evan

Bret,

I am not pro-fee only or anti-fee only. I just think it is ridiculous to assume (and I am not saying you do) just because someone is fee only that they are hands down better than a commissioned based advisor. How easy is it for the fee based person to just up-bill a client? It is down in the practice of law ALL THE TIME. They write you a letter its .7 (most billable situations work in 10 mins) - Like that letter really took them 45 mins and cost you what? $100 or $150 bucks? Additionally, what about the client who only has $5k to invest. Maybe A, B or C shares would be better than no-load + a $2k retianer?

Again, I am not saying one is better than another but to have a hard and fast rule about almost anything doesn't usually make sense.

There is a very good reason most PF bloggers don't trust financial planners; most of them are just glorified salespeople. They work for big firms that sell high-fee / low-yield products and it's their job to convince naive investors that a whole life insurance policy is a good investment.

When you hire a fee-only financial planner, you pay them directly for their advice and you usually get advice that suits your best interests, instead of their firm's. That's why most of the PF bloggers I know recommend a fee-only advisor.

Mark

Good article. I am a fee only financial advisor and sadly it is only cost effective for clients looking to invest large sums.

@Katie - It's a one man operation. So I'm assuming it's partly a matter of limiting his clients to what he can handle. For those not in his ideal range, I'm sure he would point someone in the direction of a CFP would be a better fit. He also give a lot of information away for free to those trying to evaluate if he's a good fit.

Katie

It's a little frustrating that he only wanted to work with people who are well off or "prepared" as you said. I wouldn't fit in his clientele and yet I feel like I would benefit from advice from a CFP - we all probably need a little help figuring out our financial future. I'm hoping not all CFPs think the way he does.