Let's take a look at the fee-only adviser. This individual will likely put together a financial plan for you and charge an hourly or flat fee for that advice. It can be a broad plan outlining strategies to save for retirement, or a comprehensive financial plan that covers college savings, estate planning, tax management, as well as retirement planning. The fee can be looked at as a measure that allows the adviser to make unbiased recommendations that best suit the client, rather than developing a plan that will earn commissions on the funds recommended.
If the adviser is only a planner, this may be where your involvement with this individual stops. He may not be licensed or may not desire to help implement the plan for you. This also can be seen as a way to ensure the advice is what’s best for you and not designed to benefit the bottom line of the planner.
Many planners will offer ongoing advice as you implement the plan with other financial professionals to help make sure you stay on track with the original recommendations. This adviser can be looked at in the same way as an architect: He designs the building and may oversee its construction, but never picks up a hammer and saw.
If the adviser does help you implement the plan, you need to understand the fee-only portion of the advice may be ending, and you could be heading into a commission relationship. This has to be fully disclosed by the adviser before any further service begins, and you should feel comfortable asking why certain investment products were recommended over others. You can see what the adviser is able to charge you by simply reading his Form ADV Part 2. The adviser needs to give this to you before the engagement can begin.
Before choosing any adviser it is recommended you check them out as best you can prior to engaging services. You can search many sites online to check for clean records and proper licenses. In order to charge for advice, advisers need to have a series 65 or 66 and currently be registered in your state. You can visit the FINRA and SEC websites to begin background checks. And don’t forget about recommendations and referrals from colleagues and friends or family you trust.
Joe Wirbick is president of Lancaster financial services firm Sequinox and specializes in retirement planning and distribution. This allows him to concentrate on developing strategies that help address the unique issues that confront retirees and those approaching retirement.