Disclosure: I am a financial planner. With that said, there are many people who do not need a financial planner to live their best lives. However, there are probably many more who could benefit from professional financial advice in at least one aspect of their lives. Especially if they're current or former members of the military. This article is for them.
The Benefits of Financial Advice
In the military, we’re pretty familiar with the financial counseling resources that are available either through our commands or the installation’s support services. However, there comes a time when we’ve paid off our credit cards, established an emergency savings account, and started putting money away for retirement.
At this point comes a logical question: “Even though I feel like I’m doing all the right things, could I be doing more?” This is where a financial planner can help you out. However, with almost 300,000 financial advisors in the U.S., finding one that meets your needs can be difficult. (For related reading, see: 9 Tax Issues for Transitioning Service Members.)
Here are six steps to help you select the right planner for you.
Start With "Self-Help" First
No one will ever know more about your situation than you do. There are plenty of Facebook groups with service members, military families, etc. who are willing to share with their community. There are also some very good personal finance blogs focused on service members.
Sometimes it’s just a matter of connecting with someone, or reading an article that answers that one question which will help you put everything together. Some groups include:
- Personal Finance for Military Service Members and Families: Led by Rob Aeschbach, this is a great place for people to hang out, post questions, and receive advice.
- Veteran 2 Veteran Info: If you’re looking for information related to the VA or veterans' programs, this is a good place to go. Even if you don’t find what you’re looking for in the group, there are over 300,000 members. Odds are you might find someone who can help you with what you’re looking for.
- Military Landlords: You might be an accidental landlord. If that’s the case, you might find some useful help in this group.
You might find what you’re looking for in one of these groups, or by further research. However, you might decide that you still want to work with a financial planner anyway. That’s perfectly fine. Let’s go to the next step.
Figure out What You Want From an Advisor
There are many reasons people form a relationship with their financial advisor. Here are a few of the top reasons:
- Building confidence. Perhaps you’ve been doing all the right things all along. You just need a review and some validation from a professional.
- Spending time elsewhere. You might know what you’re doing, but personally managing your personal finances isn’t an efficient use of your time. You’d rather focus on your career, family or personal pursuits.
- Getting organized. Many times, personal finances are a reflection of one’s personal life. Many people feel so overwhelmed by taking that first step that they never start. Hiring a professional can be that first step, which allows you to know that it’s a step in the right direction.
Whatever the expectation, you should be able to define that expectation before you start looking for a financial planner. If you don’t, it will probably be harder to find a planner who is the right fit for you. (For related reading, see: The Best Life Insurance for Military Families.)
Figure out Who You Can Trust
You don’t have to blindly start interviewing people you don’t know. Most financial planners work with people who are referred by mutual contacts. This could be through friends, family, or trusted professionals such as accountants, real estate agents or estate planning attorneys. Odds are, if you know people who already have a good relationship with a financial planner, you’re probably going to be a happy customer as well.
If you don’t know anyone who can connect you, a good place to start is the National Association of Personal Financial Advisors (NAPFA). NAPFA is the world’s largest organization of fee-only financial planners. A fee-only financial planner is someone who doesn’t receive commissions on any insurance or investment recommendations. That way, you know that the planner’s advice is aligned with your best interests.
NAPFA has a search tool that allows you to find registered advisors in close proximity to where you live. If you don’t have any idea how to find a planner, NAPFA is a good place to start. If possible, select three to five planners to research. (For related reading, see: How to Select a Financial Advisor.)
Research the Financial Advisors
If someone is referring you to a financial planner, you might not need to do much research. You’ll still want to ask your referrer some basic questions about their relationship. This way, you’ll have a better idea if your initial meeting or phone engagement is in line with your expectations. If you’re having to research NAPFA advisors, you can learn a lot just by looking at their website. Every NAPFA advisory firm is a registered investment advisor. Registered investment advisors have two distinctions.
First, they must uphold the fiduciary standard. This means they are legally obligated to hold their clients’ interests before their own.
Second, registered investment advisors must file a form known as an ADV. An ADV, which is filed with the advisor’s state or the SEC, is a plain-language document that informs clients:
- What the advisor does (or doesn’t do).
- How the advisor is paid (NAPFA advisors must clearly state they do not accept commissions since they are fee-only).
- How that fee is structured (retainer, assets under management, etc.).
- The advisor’s education and experience.
Financial advisors are legally required to present their clients with a copy of their ADV when their contract is signed. However, you can research this online either through the advisor’s website or through the state regulatory agency. That way, you’ve got a pretty good idea of what the advisor does before you decide you want to meet with them. (For related reading, see: Shopping for a Financial Advisor.)
Interview Your Prospective Advisors
Once you’ve researched the people you’d like to talk with, you should set up times to talk with them. Most financial planners, or their firms, will offer some sort of introductory phone appointment to discuss their services. This is your opportunity to discuss the "wave-top" issues that concern you, and determine if the firm can help you.
However, don’t expect to go into depth about solving your problems. Financial planners aren’t keen on doing so unless your needs are too basic to warrant a relationship. In that case, the planner might give you similar advice to what you would see in one of the above forums or refer you to another planner.
During your initial appointment, you should cover the following:
- Ask for a copy of their ADV if you haven’t already reviewed it. Going through the ADV and asking informed questions will allow you to gauge how a planner will respond to your financial situation.
- Ask about the firm’s experience working with people like you. Financial planners usually try to relate to their clients by communicating their experience. You should ask the planner situation-specific questions that will allow you to determine whether their skill set will be sufficient for your situation.
- Ask about the process. Financial planning isn’t about a desired end state. There’s a process involved, which usually adheres to the professional standards outlined by the CFP® Board.
If you’re going to work with a planner, it’s worth understanding how their process works. (For related reading, see: Steps in the Financial Planning Process.)
Once You Select an Advisor, Trust Them Until They Give You Reason not to
You’re going to put a lot of work and effort into hiring a planner. Once you’ve decided they’re worth hiring, you should trust that they know what they are doing. You might not solve all of your issues and concerns overnight. However, within your first year, you should definitely feel as though you’re well on your way, or that most of your concerns are behind you.
With that said, you may have some indications that your planner’s not doing their job. Here are some guidelines:
- Non-responsiveness. While you might not always have access to your planner, you should expect timely responses from their admin staff, para-planner, or another planner in the firm. Most firms have a policy of returning phone calls and emails within one to two business days. They should also be able to set up appointments within a reasonable time to address unexpected concerns.
- Complacency. Your concerns are serious, even if they might be relatively simple. Your planner should take your concerns seriously as well. If not, that’s a concern for you.
- Attitude. Clients are the reason that financial planning firms exist. Your financial planning firm should definitely keep that in mind.
The Bottom Line
Hiring a financial professional is not something to take lightly. In a true relationship with a financial planner, many people disclose information they would never tell their own family members. If you feel that you are in a position to hire a financial planner, it’s definitely worth taking a little time and effort to ensure that your relationship will be a fruitful one. (For more from this author, see: 5 Debt Plan Considerations for Military Families.)