What Questions Should I Ask A Financial Advisor?

Today we're going to talk about “Before you hire a financial advisor, what questions should you ask?” Some you may have heard before, others maybe not.

So, what questions to ask an advisor before hiring them. First, what licenses do you hold? The important thing here is, do they have securities license? Because we've had a lot of circumstances with clients working with insurance agents selling certain annuity products who called themselves financial advisors. So make sure they have securities license 7, 66, and 65.

Next, are you a fiduciary? There has been a lot of talk about this. Recently the FCC passed a new ruling on this, still trying to figure it all out, but what it basically says is always put your client’s interests first.

Next, how long have you been in the business? I think this is important. Obviously you want to give everyone an opportunity but a little gray hair never hurts.

How do you get paid for your services and how much does everything cost, all in? There are a couple of things to consider here. You have the cost of the investments. You could have mutual funds, check those fees. You can have individual stocks and bonds which you’re not going to have fees for but you will have trading costs. And then you have ETF’s, Exchange Traded Funds, which is what we use, which are very low cost.

How many households do you work with? For us, our stated goal is 100 households. We know we can't no more than that. So make sure you ask because you want to ensure that you get the attention you deserve. With that number of households, how often can I expect to hear from you?

How would you manage my money? There are those that use the Buy and Hold method. You've got tactical, making changes throughout the markets, something we do. We feel we're end of cycle right now so we add in things like utilities, REITS and bonds. Then you have TPM’s, Third Party Money managers.

How do you manage taxable accounts? Important, I’ve seen a lot of horror stories. Money gets moved over, they sell out of positions and create huge tax bills. Not a good idea. We always make sure to set the expectations, if we're going to sell anything, how much tax bill can you handle each year and put together a plan.

What other services do you offer? I talked about financial planning, insurance, life insurance, long term care and consulting. For us, we do that with our clients, especially our business clients, because of my background.

How will you consider my assets that are not held directly with you? So, if you're still working and have a 401K or a 403b, whatever the case might be, we need to know that because we're looking at the entire financial picture. As a fee-based client we don’t charge you to have this information. However, if you hire us specifically to create a financial plan and once a year we make an allocation change, that would be constitute a charge.

Next question. What happens if I, your client, become incapacitated or pass away? Well, one we want to make sure when you come in, as part of our service, that you have the proper documents. Living wills power of attorneys etc. We're going to adhere to that, whatever that says is what we're going to do. Same with the custodian, who's holding your money.

So last question is, what certifications do you have? This could be a little controversial. One is the CFP. We get a lot of questions about that which is certified financial planner. Then you have some others for the insurance business. CHFC, CLU.

Personally, I don’t hold these certifications for several reasons. One, when a CFP puts together a financial plan they’re using the exact same software that everyone uses, including me. But more importantly I feel my experience on the corporate side of the financial world, where I managed a very large organization, multiple million dollar budgets that were very complex, balance sheets, and forecasting taught me all the things that you learn in a financial planning class, but with real world experience.

The last thing is, this is a relationship business. It's not a question, it's a matter of can you get along. Do you have a lot of same qualities because this is a deep relationship that’s personal and will last years. You want to make sure you get along with that individual and that you are on the same page.

Preparing for the Financial Impact of Dementia

Watching someone you love lose their independence, memories and financial well-being due to dementia or Alzheimer's is devastating. It can often become very overwhelming and as a caregiver you don't always know if you're doing everything you can to protect them and yourselves. This infographic shares 10 ways you can help your loved ones financially prepare for the impact of dementia.

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An Executor's Checklist

The steps you may need to take to fulfill a major responsibility.

If you are an executor to an estate, you must carry out your duties responsibly. Fulfilling these duties is not only a measure of your ability, but a measure of your character. You can approach these tasks methodically. In fact, it is probably best if you do. Here are the common steps required of executors, before and after the death of a testator.

What should you do now, before having to assume the role of executor? The most important thing you can do is to communicate with him or her. Ask where the will and other foundational estate planning documents are, so you can locate them when the time comes. See if they want an elaborate funeral, a simple service, or no service at all – and yes, ask whether burial or cremation is preferred. Ask for the contact info of the key financial, insurance, tax, and legal professionals connected to the testator’s financial situation, plus contact info for business partners, creative collaborators, and any relatives you may not know well.

There is merit in compiling and confirming certain things. Many married people choose to leave the bulk of their assets to their spouse. To facilitate that, assets should be jointly titled where appropriate. Is the testator okay with the named beneficiaries of their retirement plans and life insurance policies? Who should receive this or that item of sentimental value? (Make a list.) Ideally, an executor assumes their responsibilities with an up-to-date list of all the testator’s assets and a sealed document (prepared by the testator, to only be opened upon death) containing logins and passwords for digital accounts, so the executor can close them or claim balances belonging to the estate.1

When the time comes, what steps need to be taken? The first step is to determine whether you require assistance in carrying out your executor duties. You may want it, particularly if the deceased had notable tax or legal problems, significant business or real estate investments, or disputes with intended or potential heirs.

Does that mean hiring an attorney? Maybe, maybe not. Attorneys can be hired for a lump sum, an hourly fee, or a consulting fee payable from the estate. They can take on all the work or serve as consultants. (If someone challenges the legality of the will, hiring an attorney is a must.) Did the deceased have a simple estate? Then a lawyer’s advice may not be necessary. Your questions might be adequately answered through a chat with a probate court clerk. Or, you might find them online or in a guidebook.2,3

Speaking of probate, the next step is figuring out the degree of probate for the estate. Many assets do not require probate. Assets with designated beneficiaries, jointly owned assets, assets held within trusts, and securities and bank accounts with “payable on death” transfer forms are commonly exempt from the process.2

In most states, probate is necessary to legally validate a will and close an estate. That means filing the will in probate court. As you do that, you must ask the court to confirm you as executor, and you must also notify the actual and potential beneficiaries of the estate’s assets: the named beneficiaries as well as immediate family members who could be in line to receive assets should the probate court rule the will invalid. Next, you must compile an inventory of all the assets of the deceased, those subject to probate and not. (Non-probated assets, of course, may be distributed well before the end of the probate process.)2,3

Probate may go on for many months. During this time, you will have more duties to carry out. You must manage assets on behalf of the estate. You must contact Social Security, Medicare, and other state and federal government agencies, and perhaps past employers.2

Payments must be made from the estate, too: tax payments, mortgage payments, homeowners insurance premiums, and utility bills related to a primary residence. Outstanding consumer debts have to be addressed, and state laws will tell you how to notify any creditors who should be told of the testator’s death. Typically, they have up to six months to file a claim for collection of a debt; as executor, you make the call whether that claim is valid or not.2

There will also be inflows to the estate, not just outflows – setting up a bank account on behalf of the estate may be very useful. It may come to hold dividends, royalties, rents, and forms of work-related income.2

Finally, the executor oversees the distribution of assets per the instructions in the will or other estate planning documents. Once you follow through on that task, the last step is to ask the probate court to formally settle the estate.2

It is no small responsibility to serve as an executor, especially for a complex estate. Prepare for the tasks ahead of you, so that you may do them well.2

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Citations.

1 - investopedia.com/articles/retirement/11/executors-checklist-7-things-before-they-die.asp [4/30/18]

2 - nolo.com/legal-encyclopedia/executor-estate-checklist-29458.html [12/12/18]

3 - info.legalzoom.com/assets-distributed-after-probate-will-3959.html [12/12/18]