Q&A: How to make sure your financial planner is looking out for you

Dear Liz: As a recent retiree, I opened an IRA with a well-reputed, independent financial planner. I was assured of our fiduciary relationship and told “besides, it will soon be law” that advisors will have to put their clients’ interests first when offering advice about retirement funds.

I guess that whole “soon to be law” thing is out the window along with many other consumer protection regulations. My question is, should I ask my advisor to reaffirm our relationship formally and if so, is there a mechanism available to me to assure this relationship?

Answer: Technically, the U.S. Department of Labor fiduciary rule for advisors is still scheduled to begin taking effect in April, despite fierce opposition from the financial services industry. The Trump administration, however, has asked for a review to see if the rule should be modified or scrapped. That has been widely taken as a signal that the rule may never be enforced, even if it does go into effect.

So yes, retirement savers should continue to be skeptical. One way to make sure that your advisor is ready to put your interests first is to ask him or her to sign the fiduciary oath that you can find at www.thefiduciarystandard.org. The oath was created by a group of financial advisors who think that advice should always be in the clients’ best interests.

Q&A: How to tell if you’ve got the right financial advisor

Dear Liz: I have met with a financial advisor, but he wants every investment to go through him. Although he is an advisor, he works for a company and wants me to buy their products. I’m a little resistant about this. What’s your advice?

Answer: Anyone can call himself or herself a financial advisor or a financial planner. There are no education, experience or ethics requirements for using those titles. A more accurate job description for this guy might be “product salesman.” He may not charge you upfront, but he’ll make commissions from those products and will recommend them even if there are better, cheaper options available.

If you want someone who puts your interests first, look for a fee-only advisor who’s willing to act as a fiduciary. “Fiduciary” means the advisor promises to act in your best interests. And don’t confuse “fee only” with “fee based.” Fee-only advisors are compensated only by their clients. Fee-based advisors may charge their clients while accepting commissions for the products they recommend. You can get referrals to fee-only advisors from the Garrett Planning Network at www.garrettplanningnetwork.com and the National Assn. for Personal Financial Advisors at www.napfa.org.

If you want someone to give you comprehensive financial planning advice, make sure that he or she has the appropriate credential such as Certified Financial Planner (CFP) or Personal Financial Specialist (PFS) and that you verify the credential with the group that issued it (the CFP Board of Standards for the CFP, and the American Institute of Certified Public Accountants for the PFS).

If all you want is help with investment management, though, you may not even need an advisor right now. “Robo advisors” offer automated portfolio management using computer algorithms. Robo-advising began with start-ups like Betterment and Wealthfront and it’s now offered by more established companies, including Charles Schwab and Vanguard.

Q&A: Paying an advisor vs. doing it yourself

Dear Liz: I started with a fee-only advisor 10 years ago. She moved to another company a few years after and I followed. She’s really done well for me. My question is, now that I’m getting ready to retire, should I manage my own accounts to avoid incurring commissions or fees? I don’t anticipate making any major changes to my portfolio.

Answer: If your advisor is truly fee-only, then you aren’t paying commissions on your investments. You’re paying fees to her plus fees for the various investments you own.

You can’t avoid fees. While you’re smart to want to avoid paying too much, you also need to consider the value you’re getting. Is your advisor a comprehensive financial planner who can answer your questions on most aspects of your finances, from budgeting to estate planning? Has she helped you stick to your investment plan in good times and bad? Can she serve as a watchdog as you age, monitoring you and your accounts for signs you’re at risk for fraud or bad decisions?

If you’re not getting your money’s worth, then you have two options: looking for a cheaper deal or an advisor who will give you more service.

For example, if your advisor is just providing investment management and you’re paying more than about 1% of your portfolio for her services, then you might well consider doing it yourself or turning to one of the many automated investing services that charge one-quarter to one-half a percentage point. Alternatively, you could look for an advisor who can be a comprehensive planner for the same fee, or less, than you’re paying now.

Q&A: What to do when a financial planner gives bad advice

Dear Liz: I personally like my fee-only financial advisor, who has been managing my portfolio (gained as inheritance) for the last six years. But she has me invested in bonds and gold only and insists that we wait until stock prices fall to get back in the stock market. We have been waiting for six years! My portfolio was not making much but now is declining with projections of interest rates increasing and the new administration’s potential financial implications. My current balance is only half of what it could’ve been had I stayed in my previous portfolio, set up by my previous advisor, of 60% stocks and 40% bonds. Is it time to change advisors again, or should I continue to trust my advisor’s advice? I’m one to five years away from retirement.

Answer: Your advisor is trying to time the market, despite ample evidence that market timing doesn’t work. You’ve missed out on a lot of growth, and your portfolio could take an outsized hit because bond prices suffer when interest rates rise. Big investments in gold are also problematic, given how volatile the prices of this commodity can be.

Increasing your stock exposure now comes with its own risks, of course, since the long-running bull market could end at any time. Still, you almost certainly will need the inflation-beating growth that only stocks can offer if you want a comfortable retirement. If your advisor isn’t willing to admit that she blew it, then you may want to start interviewing her replacement.

Q&A: Where to find help with managing your finances

Dear Liz: I am a mid-30s single woman who needs accountability in managing my finances and paying down debt. I have about $7,000 in credit card debt and $9,000 in student loans and I earn $55,000 a year. I feel as though I may have the financial means to do this but require a knowledgeable, structured approach. I’d like to work with someone to set up a plan and help me stay on track with it. I’ve considered trying LearnVest as well as smaller privately owned financial planning companies and a financial coach. Do you have any recommendations for finding assistance that could best suit my needs? Does what I’m looking for even exist?

Answer: It’s not always easy to find a fee-only financial planner who will help with budgeting and debt repayment. Many advisors cater to high net worth individuals who typically don’t have the same cash-flow issues as middle Americans.

The Garrett Planning Network offers referrals to fee-only planners who charge by the hour at www.garrettplanningnetwork.com. These advisors have the certified financial planner credential and, unlike many other fee-only planners, don’t have minimum asset requirements for new clients. You can interview a few prospects by phone to get an idea of the cost, but expect to spend at least a few hundred dollars to get started and then hourly fees for ongoing help.

If you’re OK not meeting with your advisor in person, LearnVest offers email access to a dedicated advisor who is either a certified financial planner or a registered investment advisor representative. For a $299 setup fee and a $19 monthly fee, you’ll get a customized financial plan as well as step-by-step instructions for implementing it.

Another option to consider is a nonprofit credit counselor. These agencies offer debt management plans for those who struggle to pay their credit card bills, but many also offer budgeting classes and financial coaching. You can get referrals from the National Foundation for Credit Counseling at www.nfcc.org. Your initial meeting with a counselor will be free. If you opt for a debt repayment program, the enrollment cost is capped at $75 and the monthly fee at $50, although many agencies charge less.

Q&A: CPA vs. financial planner

Dear Liz: I read your recent response to the lottery winner. You made some really good comments and suggestions. However, you suggested that the person seek out a trustworthy, fee-only financial planner.

I am a certified public accountant. As you know, CPAs have historically been one of if not the most trusted advisors. I do get defensive when I read articles such as yours because never do people suggest that a CPA be consulted in situations such as these. In my opinion, financial planners do not have the overall breadth of experience and knowledge of the income tax and estate tax ramifications of decisions that need to be made.

Answer: If you’re holding yourself out as an expert in financial planning, you’d better be one.

There’s no question that CPAs are tax experts. But how knowledgeable are you about investments? Insurance, including life, health, disability and long-term care? Retirement savings and income planning? Education planning and funding? Social Security, Medicare and Medicaid? Employee benefits, retirement plan selection and business succession planning?

Those are only a few of the dozens of topics that a certified financial planner is required to know. CFPs are expected to look at clients’ entire financial picture and understand how the pieces should best work together. They are supposed to know that taxes may be a factor in many financial planning decisions, but taxes shouldn’t be the only or even the driving factor in any of them.

CFPs may not be able to match your breadth or depth of knowledge in your area, but that’s why they would refer clients to certified public accountants for detailed help with those issues. They also would know when to get estate-planning attorneys involved, and insurance agents and so on.

Some CPAs do become comprehensive financial planners by earning the personal financial specialist or PFS credential, which is similar to the CFP. The additional training and experience helps them understand how taxes fit into their clients’ larger financial picture. It also helps them know what they don’t know, so they know when to consult more knowledgeable experts for help.

Q&A: How does a lottery winner find a financial advisor she can trust?

Dear Liz: I’m a middle-aged, single, childless woman who won a very nice lottery prize. I took the “cash value” option and after paying federal tax, I was left with $1.2 million. I would like to pay cash for a home, have a tidy nest egg put aside and have money for travel and other occasional luxuries. I also receive a disability pension of $1,800 a month, which includes medical and dental benefits. Do I need a financial planner at this point? I was figuring I knew what to do, but may need an expert to help me go about doing it.

Answer: One of the things you’ll notice, if you haven’t already, is how people will come out of the woodwork to “help” you with your money. Some position themselves as advisors, while others will be offering “business opportunities” or just looking for handouts.

You would be smart to seek out a trustworthy fee-only financial advisor to help make the most of your money and to deal with all those who want to part you from it. The phrase “That sounds interesting — let me run it past my financial planner” can short-circuit a lot of importuning.

The planner can help you determine a safe spending rate for your windfall and discuss some issues you may not have considered, such as the need for more liability insurance (since you’re now a bigger lawsuit target) and a plan to pay for long-term care.

The advisor you want won’t be found at your doorstep or in your email box, begging for your business. The best planners are too busy advising to run after lottery winners. You can find referrals to fee-only planners at the National Assn. of Personal Financial Advisors (www.napfa.org) and the Garrett Planning Network (www.garrettplanningnetwork.com). Interview at least three and make sure they’re willing to sign a fiduciary oath to put your interests first.

Q&A: Questions for a financial advisor

Dear Liz: I have some investments at a financial investment firm. My advisor said that because I am 62, I can transfer money from my 401(k) at my job into my account with his firm. He says he can do better with the amount I currently have in the 401(k). Of course I will continue to work and put in money into my 401(k). Does this sound like bad advice? The amount I would be trying to transfer would be around $62,000.

Answer: By doing better, does he mean doing such a spectacular job of investing that he rivals the legendary Warren Buffett? Because he might have to do just that to compensate for your giving up years of tax-deferred compounding.

Because you’re over 591/2, you can access your 401(k) balance without penalty, but you still must pay income taxes on any withdrawals. Investments in a regular account would be subject to income and capital gains taxes going forward.

It’s possible he wants you to roll the money over into an individual retirement account instead, which would spare you the tax bill and allow the money to continue growing tax-deferred. But unless you have a truly awful, high-cost plan, it’s hard to see how he can promise better results.

The Labor Department just approved a rule that requires advisors to adopt a fiduciary standard when providing advice about retirement funds. “Fiduciary” means the advisor is required to put clients’ interests ahead of his or her own. You might ask him if this advice aligns with the standards and if he’s willing to put that promise in writing. If not, you could be forgiven for suspecting that he’s more motivated by what he can earn via commissions or other fees than by doing what’s right by you.

Q&A: Finding fee-only financial planners

Dear Liz: Every so often your column mentions an organization that lists financial planners that are fee-only. I cannot find this information on your site. Please keep mentioning this in your column.

Answer: You can get referrals to fee-only planners who charge by the hour at www.garrettplanningnetwork.com. If you’re looking for fee-only planners who charge a retainer or a percentage of assets, you’ll find those at

Q&A: Fee-only financial planners

Dear Liz: When you recommend a “fee-only adviser,” do you mean an adviser that charges customers by the hour for advice or one that charges a percentage of the customer’s portfolio that the adviser manages?

Answer: Fee-only planners charge their clients in a number of different ways. What distinguishes them is the fact that they are only compensated by their clients; they don’t accept commissions from the products or services they recommend.

Some fee-only planners charge by the hour, which is helpful for people just starting out or those who need targeted help, such as advice on their retirement portfolios. You can get referrals to fee-only planners who charge by the hour from the Garrett Planning Network at www.garrettplanningnetwork.com.

Many fee-only planners charge a percentage of your assets that they manage or a percentage of your net worth. Another popular method is to charge a quarterly or annual retainer fee. You can get referrals to these types of planners from the National Assn. of Personal Financial Advisors at www.napfa.org.

It’s a good idea to interview a few planners to discuss what they can do for you and the expected costs before making a decision. In addition, the Financial Planning Assn. has tips on choosing a financial planner at www.plannersearch.org.