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The 4 Questions You Should Be Asking Your Financial Advisor (But Probably Aren't) · Well Advised Wealth

• 0:00
  SPEAKER_02: Ask yourself if I'm always worried about my money.
• 0:04
  SPEAKER_02: Am I truly building wealth and living well?
• 0:06
  SPEAKER_02: When people ask me what I do, I tell them I'm a professional listener.
• 0:09
  SPEAKER_02: What does financial independence look like for you?
• 0:12
  SPEAKER_02: If it's having a negative effect, I don't care how much money you have, you're probably not living a life well and you're not building wealth.
• 0:21
  SPEAKER_02: Welcome in, welcome in.
• 0:23
  SPEAKER_02: I am the host every week of the Well Advised Wealth Podcast, Justin Chastain.
• 0:28
  SPEAKER_02: I am a certified financial planner.
• 0:30
  SPEAKER_02: Hey, and it's good to be certified in something.
• 0:32
  SPEAKER_02: I'm excited about today's episode because we're going to be talking about the four top questions that everybody needs to be asking their financial planner or financial advisor.
• 0:42
  SPEAKER_02: And the reason that I say anybody, not just in initial meetings, it could be you've had a long-standing relationship, but you never really ask these from the get-go.
• 0:50
  SPEAKER_02: And these questions are very important as we have our relationships.
• 0:53
  SPEAKER_02: And I even give these questions to clients and I leverage them back if I've not heard them in our conversations.
• 0:59
  SPEAKER_02: So whether you're in the discovery phases and you're just looking for an advisor, or maybe you've been with an advisor a while and you're just a little uncertain, these questions will help you navigate that relationship just a little bit better.
• 1:10
  SPEAKER_02: So let's get kick started.
• 1:11
  SPEAKER_02: Let's rock and roll with it.
• 1:13
  SPEAKER_02: The first question that you should ask any wealth advisor, tax planner, financial advisor, whatever their name, or more importantly, whatever they're willing to answer to, this is what you need to be asking.
• 1:23
  SPEAKER_02: Number one, are you a fiduciary?
• 1:25
  SPEAKER_02: Now that F-word, typically, F words offend people.
• 1:28
  SPEAKER_02: This one shouldn't.
• 1:29
  SPEAKER_02: The only time that it would offend somebody is if they're not a fiduciary.
• 1:34
  SPEAKER_02: What does a fiduciary mean?
• 1:35
  SPEAKER_02: Are you working in my best interest before your own?
• 1:39
  SPEAKER_02: Every one of us have heard some roundabout way or leverage or communication of the golden rule.
• 1:45
  SPEAKER_02: He or she who owns the gold makes the rules.
• 1:48
  SPEAKER_02: No, that's not it.
• 1:49
  SPEAKER_02: But the most famous one that we hear is treat people the way you would treat yourself.
• 1:54
  SPEAKER_02: Oh, that's outdated.
• 1:55
  SPEAKER_02: A little narcissistic if you think about it, right?
• 1:57
  SPEAKER_02: The golden rule really should say treat people how they would want to be treated.
• 2:02
  SPEAKER_02: Listen first and then treat them with that capacity.
• 2:05
  SPEAKER_02: That's what a fiduciary is.
• 2:06
  SPEAKER_02: But let me give you a subset to that question to go a little bit further to ask the advisor.
• 2:11
  SPEAKER_02: Who or whom do you work for?
• 2:12
  SPEAKER_02: Just in case there's any English majors out there listening.
• 2:15
  SPEAKER_02: It's not just enough to say, are you a fiduciary because they could work for the name on the building and be a fiduciary for that business and not for you.
• 2:22
  SPEAKER_02: They need to be telling you, I work for you and your family, and we have an investment advisory agreement or an engagement letter to state that.
• 2:30
  SPEAKER_02: Number two, outside of money management, what is your expertise?
• 2:34
  SPEAKER_02: I hear this so much where people say, Oh, I've got somebody that manages my money.
• 2:39
  SPEAKER_02: Great.
• 2:40
  SPEAKER_02: But if you tell me your biggest pain point is taxes, if you're a business owner, or maybe you're a C-suite executive going into what we call the red zone era, which means you're within 10 years of retirement and you need retirement income distribution expertise and advisement.
• 2:55
  SPEAKER_02: Money management's not going to get you there.
• 2:57
  SPEAKER_02: Now, is money management important?
• 2:59
  SPEAKER_01: Yes.
• 2:59
  SPEAKER_02: That's why I say foundationally money management is going to be most of what any lay person in our industry is going to do.
• 3:08
  SPEAKER_02: And there's nothing wrong with that.
• 3:10
  SPEAKER_02: And to do it well, it takes time, it takes an expertise.
• 3:13
  SPEAKER_02: But most people that I work with, most people that I see, have needs outside of money management.
• 3:19
  SPEAKER_02: They need financial planning.
• 3:21
  SPEAKER_02: So you say, Justin, what's the difference?
• 3:22
  SPEAKER_02: Money management is worried about your rate of return in your investment accounts.
• 3:27
  SPEAKER_02: Financial planning is answering the bigger question: will I outlive my money?
• 3:31
  SPEAKER_02: What kind of lifestyle can I have in my life?
• 3:34
  SPEAKER_02: How much money do I need to be saving?
• 3:36
  SPEAKER_02: How much liquidity do I need to have?
• 3:38
  SPEAKER_02: What am I going to leave as a legacy?
• 3:40
  SPEAKER_02: Those bigger questions.
• 3:42
  SPEAKER_02: And if somebody doesn't have the expertise to answer that, you might not know.
• 3:47
  SPEAKER_02: For people that have spent the majority of their career accumulating assets and they've had it on auto drive, well, now the mindset's going to have to shift to saving, now to distributing, spending.
• 3:59
  SPEAKER_02: It's a different mindset, and the advisor needs to have expertise in both ways.
• 4:03
  SPEAKER_02: So always ask, what is your expertise out of money management, outside of money management?
• 4:09
  SPEAKER_02: Thirdly, and one of the most taboo questions, not just to any advisor, it's one of the reasons that most people would rather have a conversation with people about their sex life than their financial life.
• 4:20
  SPEAKER_02: How do you get paid?
• 4:21
  SPEAKER_02: How do you get compensated?
• 4:23
  SPEAKER_02: I don't think that that is an unfair question for any advisor.
• 4:26
  SPEAKER_02: There's multiple ways to get paid in our industry.
• 4:29
  SPEAKER_02: Every one of them is okay, but you need to be transparent.
• 4:32
  SPEAKER_02: I'm going to do some future episodes on this, just in general, on the different ways that we get paid.
• 4:37
  SPEAKER_02: But let me tell you what I've seen on social media.
• 4:40
  SPEAKER_02: I'm going to weed through some of the BS and the malarkey that's out there, or as my granddad would say, bull butter.
• 4:46
  SPEAKER_02: That's just not true.
• 4:48
  SPEAKER_02: So the first way is a fee-only advisor where we or they charge you a particular flat fee.
• 4:54
  SPEAKER_02: They do the service and then you're out.
• 4:56
  SPEAKER_02: The good about it, you know your fixed cost.
• 4:58
  SPEAKER_02: The downside is you might not be getting all the services, or you might not be giving everything the financial advisor needs until you meet them again.
• 5:05
  SPEAKER_02: And guess what?
• 5:06
  SPEAKER_02: They're going to charge you another flat fee.
• 5:08
  SPEAKER_02: It can get expensive for some of the services that you have, and there's not really a relationship in the meantime that stays ongoing.
• 5:15
  SPEAKER_02: It's hard for both parties, but for some do-it-yourselfers who just need a skeleton, it may work fine.
• 5:20
  SPEAKER_02: But just keep in mind if they charge you that flat fee for building a plan, when you come back next year or three years when life happens and inevitably will, guess what?
• 5:29
  SPEAKER_02: They're going to charge you another flat fee again.
• 5:31
  SPEAKER_02: The second way is assets under management.
• 5:33
  SPEAKER_02: You'll see this abbreviated as AUM.
• 5:36
  SPEAKER_02: What does that mean?
• 5:37
  SPEAKER_02: Well, when you have investment accounts at a firm, whatever the total amount of those accounts are, they're going to charge you a percentage of that.
• 5:45
  SPEAKER_02: Generally, it's a little over 1%.
• 5:48
  SPEAKER_02: I've seen it around 1.25, and then it goes down the larger those accounts grow.
• 5:53
  SPEAKER_02: Now, what are some pros to that?
• 5:54
  SPEAKER_02: Again, well, you know the percentage you're paying, and generally there's an incentive for the advisor as long as they're not selling any products like proprietary mutual funds or front or back end loaded mutual funds, and they build their own models.
• 6:07
  SPEAKER_02: Well, you're only paying that 1%, and there's an incentive for that advisor to have you do better because as you do better, they do better.
• 6:14
  SPEAKER_02: But when the markets are down or recessed, as inevitably will, they're not going to do as well.
• 6:18
  SPEAKER_02: So there's an incentive for that advisor to do well.
• 6:21
  SPEAKER_02: And generally speaking, it keeps the relationship ongoing because that's a reoccurring charge.
• 6:27
  SPEAKER_02: Generally, you see those fees running out quarterly every four months.
• 6:31
  SPEAKER_02: Any adjustments in planning or tax planning, retirement income planning is still ongoing and being leveraged.
• 6:37
  SPEAKER_02: That's the big key to you.
• 6:39
  SPEAKER_02: And then thirdly, there's commission based.
• 6:40
  SPEAKER_02: So this means that somebody can sell products, proprietary mutual funds, anything that charges a straight commission, and they can make it.
• 6:48
  SPEAKER_02: So what are the pros to that?
• 6:50
  SPEAKER_02: Well, you know what you're getting, and they're probably getting a rate of return in that proprietary mutual fund that could be a little bit better than if the money was just sitting in a money market.
• 6:59
  SPEAKER_02: But here's the downside: when the markets go down and you trade in and out of that account, if there's front or back end loaded fees in there, you could be getting charged fees in a down environment.
• 7:09
  SPEAKER_02: So as the markets are doing worse, the advisor's doing better.
• 7:12
  SPEAKER_02: That's the downside.
• 7:13
  SPEAKER_02: Which one is the best?
• 7:15
  SPEAKER_02: Whatever one that you feel comfortable with.
• 7:17
  SPEAKER_02: As long as the advisor is transparent in how they're getting paid and you know up front, transparency is more important than what or how they're getting paid.
• 7:24
  SPEAKER_02: You as the client just have to be comfortable in the value you're getting and what they're earning to maintain that value.
• 7:31
  SPEAKER_02: If it's just money management, okay, you have to ask yourself if somebody's only managing our money, is this cost worth it?
• 7:37
  SPEAKER_02: If they're doing money management plus retirement income planning, business exit strategy planning, tax planning, there's a lot that goes into it.
• 7:45
  SPEAKER_02: And if they're meeting with you multiple times a year, they're adding a lot of value for this.
• 7:49
  SPEAKER_02: And I go back to this when we define what wealth is.
• 7:54
  SPEAKER_02: Wealth is not just financial or looking at a net worth.
• 7:57
  SPEAKER_02: Your wealth encompasses your time, your physical, your mental, your social, and your financial health.
• 8:03
  SPEAKER_02: When I've talked to certain people, do it yourselfers, who say, Oh, I manage all my money.
• 8:07
  SPEAKER_02: And on vacation, all they're doing is on their computer watching the markets.
• 8:11
  SPEAKER_02: I'm in this industry, and I'm telling you right now, when I travel and I love to travel, if I'm going to Europe or I'm going to the beach or the mountains, I am not on my computer looking at markets.
• 8:20
  SPEAKER_02: I'm just not.
• 8:21
  SPEAKER_02: I am there to be present in that time.
• 8:23
  SPEAKER_02: Now I have a staff that's doing that for me, so my clients are still getting the information.
• 8:29
  SPEAKER_02: But ask yourself, if I'm always worried about my money, am I truly building wealth and living well?
• 8:36
  SPEAKER_02: That has to be for you to answer, not me.
• 8:38
  SPEAKER_02: And then fourth, I would say this is a good wrap-up question.
• 8:42
  SPEAKER_02: What does success look like for our relationship and how do you measure and track success?
• 8:48
  SPEAKER_02: Now you're going to get the basic lingo in our industry.
• 8:51
  SPEAKER_02: Oh, we use Monte Carlo, which you're like, okay, cool.
• 8:54
  SPEAKER_02: I'm a NASCAR fan.
• 8:55
  SPEAKER_02: I know what Del and Hart drove.
• 8:57
  SPEAKER_02: My dad had a Monte Carlo in the late 80s.
• 8:59
  SPEAKER_02: No, not that Monte Carlo.
• 9:01
  SPEAKER_02: This is more of what we call the probability of success rate where we're putting all your variables in to the financial planning model and it runs through thousands of variables and it says, okay, if we spend, if we live our life this way, how much probability of success will there'll be money left over when I leave this planet?
• 9:20
  SPEAKER_02: That's standard.
• 9:20
  SPEAKER_02: And hopefully they're doing that for you and not just selling you products like you are literally working through a financial plan.
• 9:27
  SPEAKER_02: I'd like to go a little bit deeper though.
• 9:29
  SPEAKER_02: That's great, and I think that's a great answer if you got that in return.
• 9:33
  SPEAKER_02: For me and what I tell my clients, we're measuring wealth outside of just what you're doing in your finances.
• 9:39
  SPEAKER_02: Yes, we are tracking that objectively with Monte Carlo, and you have access to this, and we're gonna meet on a regular basis.
• 9:47
  SPEAKER_02: But I'm also I want to be involved and I want to make sure that you're taking care of your time, your physical, your mental, your social health outside of just the financial health that we're managing.
• 9:58
  SPEAKER_02: So I'm gonna write cards on birthdays.
• 10:00
  SPEAKER_02: I'm gonna check in even outside of our meetings just to see how you're feeling.
• 10:04
  SPEAKER_02: Even if I'm sitting down with a client and I'm talking with them through a transition stage of life, it could be maybe they're they're going through a marriage, that's great.
• 10:13
  SPEAKER_02: Maybe they they've experienced a death.
• 10:15
  SPEAKER_02: Before I talk about anything around money, I want to know how they're doing.
• 10:19
  SPEAKER_02: They are more important to me than just data and numbers.
• 10:23
  SPEAKER_02: But if they don't have all the elements of wealth moving in the right direction, the finance is really going to struggle.
• 10:29
  SPEAKER_02: I care more about my clients as human beings, and then we put a number on the backside of that.
• 10:35
  SPEAKER_02: As I said, there's no right or wrong answer.
• 10:37
  SPEAKER_02: For any advisor, and this is going to be more of a monologue for you, you should be asking these questions to your advisor at some level.
• 10:44
  SPEAKER_02: It'll feel like a little bit of a monologue as you're asking some of these questions.
• 10:48
  SPEAKER_02: But the advisor should be asking great questions to you and listening more.
• 10:52
  SPEAKER_02: When people ask me what I do, I tell them I'm a professional listener.
• 10:55
  SPEAKER_02: Some of the questions that I ask any prospect before they come in, if I could give you a genie in a bottle and not a real one, just the CD from Christina Aguilera, and I said, Hey, here are three wishes.
• 11:07
  SPEAKER_02: They're unlimited.
• 11:08
  SPEAKER_02: If you could tell me money was not a tool that we're using, what does financial independence look like for you?
• 11:14
  SPEAKER_02: And I'm just going to take a step back and be silent.
• 11:16
  SPEAKER_02: I think so many times we get nervous by silence, but silence is a good thing.
• 11:21
  SPEAKER_02: As you're going into your meeting with an advisor, have your four questions ready, but you need to also be able to answer a question like that.
• 11:29
  SPEAKER_02: And if you don't know that answer, you and your partner or whoever you're doing your finances with need to sit through that and listen and talk with each other about it because that is just as important as how much that you have saved.
• 11:41
  SPEAKER_02: Every one of us will get to a point where we have to distribute this money and it's a different mindset.
• 11:46
  SPEAKER_02: Why do we use money to do the things that we love to do?
• 11:50
  SPEAKER_02: How do we build wealth and live well?
• 11:52
  SPEAKER_02: And what is wealth?
• 11:53
  SPEAKER_02: It's how money affects me and the relationships with the people I care about in my life.
• 11:59
  SPEAKER_02: If it's having a negative effect, I don't care how much money you have, you're probably not living a life well and you're not building wealth.
• 12:07
  SPEAKER_02: So hopefully that helped.
• 12:08
  SPEAKER_02: Ask the questions.
• 12:09
  SPEAKER_02: If you're with somebody that you feel like is not giving you that, ask and go and interview others.
• 12:14
  SPEAKER_02: There's nothing wrong with that.
• 12:15
  SPEAKER_02: Sometimes we outgrow different relationships, and I'm not telling you to let go of an advisor because here's the other thing.
• 12:22
  SPEAKER_02: At the foundation of any meeting with your advisor, we all have to like each other.
• 12:25
  SPEAKER_02: It's like a marriage at some point, right?
• 12:27
  SPEAKER_02: The foundation better be we kind of like each other.
• 12:30
  SPEAKER_02: If not, that's going to be a really hard road to travel if you don't mildly like each other.
• 12:35
  SPEAKER_02: And I tell people that all the time when they're like, Justin, what's your ideal client?
• 12:38
  SPEAKER_02: I said, the first thing, they can't be a jerk.
• 12:41
  SPEAKER_02: That has to be the foundation to the relationship and making it move forward.
• 12:47
  SPEAKER_02: So bouncing into as we wrap this podcast, I want to go through our true wealth moment and what I think is something that you really need to evaluate.
• 12:56
  SPEAKER_02: You need to always understand if your financial planner is a fiduciary in understanding that.
• 13:02
  SPEAKER_02: That very first question I got you to ask.
• 13:04
  SPEAKER_02: A fiduciary is somebody that works on your best behalf, but don't just stop at that question.
• 13:08
  SPEAKER_02: I see so many clients stopping.
• 13:10
  SPEAKER_02: Are you a fiduciary?
• 13:12
  SPEAKER_02: Yes.
• 13:12
  SPEAKER_02: And then they move on.
• 13:14
  SPEAKER_02: Stop, slow down, and ask this follow-up.
• 13:16
  SPEAKER_02: As a fiduciary, who or whom do you work for?
• 13:19
  SPEAKER_02: Is it the name on the building or is it for the name that goes on our checks or our tombstones?
• 13:25
  SPEAKER_02: And by tombstone, I don't mean your grave, that's morbid.
• 13:28
  SPEAKER_02: I meant your pizza.
• 13:29
  SPEAKER_02: That's what you need to be asking.
• 13:30
  SPEAKER_02: Whom do you work for?
• 13:31
  SPEAKER_02: Who do you work for?
• 13:32
  SPEAKER_02: When you get the answer that you want to hear, I work for you and your family.
• 13:36
  SPEAKER_02: The name on the building is a sign that we are just leveraging to help navigate this journey.
• 13:41
  SPEAKER_02: That's what you want to hear.
• 13:42
  SPEAKER_02: That is the answer that you want.
• 13:43
  SPEAKER_02: They should be working for you and your family.
• 13:46
  SPEAKER_02: So let's get to this point.
• 13:48
  SPEAKER_02: I think that does it for this show, but where we wrap this up like a cheap RB sandwich.
• 13:53
  SPEAKER_02: As always, my motto, my brand, everything that I say to clients, prospects I like, build wealth, live well.
• 14:01
  SPEAKER_02: Until next week, have a good day.
• 14:04
  SPEAKER_00: Parallel Financial, LLC, is a member firm of the Fiduciary Alliance, LLC, which is a registered investment advisor.
• 14:13
  SPEAKER_00: More information about Parallel Financial can be found in Form ADV Part 2, which is available upon request.
• 14:21
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• 14:34
  SPEAKER_00: Opinions expressed herein are solely those of parallel financial LLC, unless otherwise specifically cited.
• 14:42
  SPEAKER_00: Material presented is believed to be from reliable sources, and no representations are made by our firm as to another party's informational accuracy or completeness.
• 14:52
  SPEAKER_00: All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.