What to Expect When Working with a Financial Adviser

Michael Hartman

By Michael Hartman, RICP® | May 9, 2017

I recently led a Lunch and Learn session for the associates at Penn Mutual’s home office on what to expect when working with a financial adviser. The session was very popular, which shows that people everywhere – even those who work at a life insurance company – have similar questions and concerns about working with an adviser.

People don’t understand what it’s like to work with an adviser, or they think that they need to be wealthier than they are. Actually, working with a financial adviser is an easy experience. As for waiting until you have more money, the idea behind working with an adviser is to use the resources you have now to build for your financial future.

Here are some of the questions that came up during our discussion:

What are the benefits of working with an adviser?

There are three big benefits to working with an adviser, as opposed to doing it yourself.

Coaching. Professional athletes, even the best in world, know that working with a coach can make the difference between being good and being great. The same can be said when working with a financial adviser. A financial adviser can serve as your coach, providing you with guidance suited to your personal financial needs and holding you accountable for achieving the financial goals you set for yourself.

Training and expertise. A financial adviser has expertise gained from working with a wide range of people for a variety of needs such as retirement or college planning. This expertise might lead them to suggest options you might never have thought about yourself.

Time. If you’re a true do-it-yourselfer, that’s a big time commitment to ensure your plan is updated, monitored and performing optimally. A financial adviser has the tools and the time to do this properly, saving you time and worry.

Why should I work with a person rather than use a robo-adviser?

Working a financial plan ultimately comes down to human behavior. Robo-advisers are positioned by their proponents as providing the same advice at a much lower fee, and they can certainly use a computer formula to determine the proper asset allocation based on your age, goals and other attributes. But what happens during a 2008-type scenario, when the market seems to be in a free fall and people are panicking? Will a robo-adviser be able to keep you from making a rash decision? There is a substantial difference in the financial returns for someone who stayed invested and stuck to their financial plan through 2008 and 2009, versus someone who sold out of the market and waited until 2010 to get back in. Vanguard also recently conducted a study that showed that people who work with a financial adviser could experience as much as an additional 3 percent investment return over the long term. This difference was in part attributed to the behavior coaching the advisers provided to the client.

When’s the right time to start working with an adviser?

I think you should start as early as possible. Once you get your first professional job out of school, I think it’s good to sit down with a financial adviser and discuss your goals. Sometimes people think, “I need to save an emergency fund, or buy a house, before I can think about life insurance or investing,” but those are actually things that an adviser can help you work towards. Even if you are only living paycheck to paycheck, it may be worthwhile to engage with a financial adviser to help you find ways to free up money in your budget.

How much money do you need to have to work with an adviser?

This is something that varies across the industry and across advisers. There are certainly advisers that require a certain minimum of investible assets. Our own team, however, is really looking to develop long-term relationships. It’s less about where you are now than about where you want to be. There are good financial advisers available to you no matter how much money you have to invest.

One comment on the “minimums” that some advisers ask for. People who have $50,000 to invest often have different issues than people who have $250,000 or $5 million. I believe that you should seek out an adviser that is in tune to your specific needs and situation. You want an adviser that is a good fit for you.

How should I go about finding the right adviser?

Our team meets new clients primarily through referrals and introductions from existing clients or other professionals we have relationships with. I would encourage anybody that’s seeking a financial adviser to do the same: Talk to your family, friends, and work colleagues – and ask them if they’re working with an adviser they would recommend. I would try to speak with two or three different financial advisers, to see which you feel most comfortable with.

What should I look for in a financial adviser?

This is an important question, and there are a number of things you should look for:

Licensed. First and foremost, you want to work with somebody that’s fully licensed to work with insurance and with securities and equities.

Accredited. If you’re looking to develop a comprehensive, thorough financial plan, somebody who is accredited as a Certified Financial Planner (CFP®) could be a good fit. In my case, I am accredited as a Retirement Income Certified Professional (RICP).

Part of a team. While many advisers work solo, the latest trend is to work as part of a team. There are a few advantages to working with a team. First, they can bring in teammates to deal with specialized questions. I focus my practice on retirement planning, but if I have a client with a complex estate planning question, I can bring in a colleague with that expertise. Second, by working with a team of advisers, there is always someone on the team available to help you if your primary adviser is not available at that moment.

A good fit. Finally, you want someone that you are comfortable with. A relationship with a financial adviser can be measured in decades, and, just like getting married, it’s worth taking the time to find the right person.

What should I expect from my first meeting with a financial adviser?

In our firm, we start our first meeting by introducing our firm, describing the type of clients we work with, and exploring how we might be of service. From there, and more importantly, we will discuss the client’s goals and objectives. What would be their definition of a successful relationship in working with us? What are they looking for from us?

Only then, and only if this is appropriate and they feel comfortable, we will begin talking about the details of their current financial situation. We have a financial document checklist that we give everybody after their first meeting, with the goal in mind of having them gather all their financial documents prior to a subsequent meeting where we begin the development of a financial plan.

How does the adviser get paid?

This is something that everybody wants to know, and that typically is something we discuss with prospective clients at that initial meeting. In my case, I am a licensed insurance and investment professional and I get paid through the implementation of products and services by the various insurance or investment companies we represent. That’s one avenue of payment. Other advisers charge a fee based on the assets they are managing for you. We also offer a fee-based planning option where, after working with the client to understand their situation and their goals and objectives, we will develop a financial plan for a flat fee.

How often should I meet with my adviser?

As a general rule of thumb, you want to meet at least annually with your adviser to review your plan and your situation. I also recommend meeting whenever you have a change in job status, income, or personal status. Sometimes I meet quarterly with a client, but that is the exception. Of course, I am always happy to take a phone call from a client with a question.

How can I get the most out of meeting with a financial adviser?

The best thing people can do when meeting with a financial adviser is to come with an open mind and an open book. Be prepared to discuss what’s important to you, open and honestly, and be open to new ideas and suggestions.

As for preparation, I would suggest spending some time prior to the meeting to think about your goals and objectives, not just financial goals but also life goals. This will help guide the discussion. Beyond that, it’s good to have a working understanding of savings, expenses, account balances, insurance coverage, and other general information would be helpful typically at a first meeting. The details will follow in later meetings.

Summary: Financial advisers are not just for investing

There is this mistaken idea that financial advisers are only helpful for managing investments, but they are much more than that. I strongly believe that in order to have a successful financial plan, you really need to be working with somebody who does more than just manage investments. Insurance – be that life, disability, or liability insurance — is a big piece of this as well. Legal documents such as Wills and legal power of attorney need to be put in place. An adviser may not be able to do these for you, but they can help you understand how they all work together to form a solid foundation for a financial future. No matter how good an adviser is at helping manage your investment portfolio, if you experience a situation like death or disability or even a lawsuit, that can really change your financial plan in a heartbeat. Working with a financial adviser can be a “holistic” relationship, supporting you in all aspects of your life.

For informational purposes only. Not meant as financial advice for your specific situation. Please consult with a licensed professional about your individual goals.


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