Curran Financial Partners - Complete Plan Review (CPR) Planning Process

If an advisor recommends a specific type of investment or a specific company, chances are the advisor is representing his/her own interests, not yours. One of the biggest red flags that screams product salesman instead of valued advisor is if he/she only recommends a certain investment type or product (for example, they only recommend mutual funds or only annuities). Would you trust a doctor who represents a specific pharmaceutical company? Of course not. What are the chances you’ll receive a good financial “prescription” from an advisor who only recommends a single or a couple types of investments?

The only right way to give healthy investment advice is to offer a broad, diversified range of approaches and advice that is custom-tailored for each client, not some cookie-cutter approach. Contrary to much of the “advice” being tossed around, there isn’t a “Swiss army knife” investment product that can solve all of your problems; all investment vehicles have pros and cons. A true wealth advisory team will articulate those pros and cons and custom-blend a holistic investment strategy specifically designed to help you achieve your unique goals.

As soon as you see the shimmer of a slick-looking marketing sheet with impressive historical returns, your antennae should go up. Although it may sound surprising, this is a danger sign because this proves the advisor consistently recommends the same investments to each and every client. You deserve to be treated like a human, not a number. How could your unique challenges and aspirations be like every other client? For years we’ve struggled when asked this question because we don’t have a one-size-fits-all plan. We believe in taking great care and time in tailoring each investment plan, because you are unique and no two clients are the same. The optimal, holistic approach to managing wealth is not only to take into account the investment strategies, but also make them tax efficient by reviewing the tax return each year and crafting a personal pension plan so you’re confident you won’t run out of money in retirement. We call this Total Wealth Management.

There are three ways financial advisors get paid for their advice, and each approach has pros and cons.

Fee Only

Fee-only advice is when you pay a one-time flat fee for a physical financial plan document. Fees often generally range from $500 to $10,000 or more depending on the complexity of your plan. When paying a flat fee, it’s important to understand what value you’re receiving for the fee you’re paying. The downside to paying a flat fee for a financial plan is that most of the time you’re responsible for actually implementing the plan, kind of like buying the blueprint for a house but you have to buy all the materials and build it yourself.

Fee Based

Another popular approach to paying for investment advice is fee-based management. This typically is a percent fee levied on your portfolio in return for professional management. Fee ranges are all over the map, but generally average somewhere between 1-2.5% of the total value of the investments being managed. (Note: paying a management fee to someone to pick a portfolio of mutual funds can be costly! Easily 3-4% or more a year in fees!) The most crucial component to deciding whether a fee is low or high is what value you’re getting from paying the management fee. If the portfolio is closely mimicking the overall market, it’s probably not worth paying for an advisor, but if the advisor tends to generate reasonable returns regardless of the market’s temper, you may have a winner. The downside to fee-based management is that even in troublesome years in the market, the advisor still gets paid, so it’s important to hire advisors who can weather the bad times.

Commission Based

The more popular option (by many advisors) is to earn a nice commission by recommending a fund or similar investment. There’s great confusion surrounding commission-based compensation, but it may not be all bad for you because there are two types of possible commissions: one type comes out of your pocket (a sales load, usually 3-6% of your investment right off the top) and the other is paid from the company’s pocket (paid to the advisor from the company he/she is recommending – the commission is considered a marketing expense by the company). Either approach, however, naturally can create a conflict of interest for the advisor to recommend the option that pays him/her the most, which is why it’s critical to hire only an independent advisor who is legally bound to be a fiduciary (i.e. to put your interests above and beyond theirs). Be sure to ask your advisor or the one you’re considering if they are a true fiduciary. In its simplest form, a fiduciary is required by law to do what is in his/her clients’ best interests; not what’s in his or her company’s best interests. This sounds reasonable, right? CFOs of major companies are fiduciaries, church and nonprofit treasurers are fiduciaries, and even your doctor is a fiduciary because he/she must give you advice designed to make you healthy. So shouldn’t the person managing your money also be a fiduciary? 

What’s the best option to pay for quality wealth advice? A combination of them. A true wealth advisor will offer any of the three or a blend of them based on your personal preferences.

All businesses go through different stages of growth, and the financial advisory business is no different. During their early years, financial advisors will accept any client who has two nickels to rub together and can fog a mirror, but as their business grows, matures, and becomes more sophisticated, smart wealth managers will set an investment minimum that you must meet to work with them. If an advisor accepts clients of all ages and investment sizes, how could they possibly create a compelling client experience for you and the rest of their clients? 

In any business it comes down to the choice of quantity or quality. For example, big box stores focus on quantity (herding a high volume of customers) and the customer experience suffers greatly, whereas a boutique shop focuses on quality (serving the right customers) and their client experience is second to none. We purposefully choose to create the boutique experience for our clients because we would rather give each member of our client family the care and attention they deserve and desire.

If an advisor can’t answer this question clearly, find the exit door. Quickly. An advisor cannot be all things to all people and still be exceptional at what they do. As in the medical profession, it’s important to seek out the advice of a specialist when your situation demands it. For example, if you want to reduce your debt and you hire an advisor who specializes in people ages 50+, chances are you have the wrong advisor. Conversely, if you’re seeking wisdom on how not to run out of money in retirement and your advisor doesn’t specifically specialize in creating retirement income plans, chances are you won’t receive the best advice. The key is to align yourself with the financial advisor who specializes in people just like you!

We recognize we’re not the right fit for everyone - nor do we want to be - and not everyone is the right fit for our client family. We believe that you can only be the best at what you do if you specialize. We specialize exclusively in helping people near/in retirement, beneficiaries and trustees, business owners, and do-it-yourselfers.