Mistakes When Choosing A Financial Advisor

Plan With The Tax Man

Uncover the critical mistakes many make when choosing a financial advisor. We're cutting through the noise to highlight what often goes wrong—from misplaced trust in big names to overlooking the fine print. This episode is your essential guide to avoiding those pitfalls and making informed decisions that align with your financial goals

Important Links: Website: http://www.yourplanningpros.com

Call: 844-707-7381

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Transcript:

Marc Killian 00:01

On this edition of the podcast, we're going to uncover some critical mistakes many make when choosing a financial advisor, we'll try to cut through the noise and figure out where we go wrong when it comes to finding the right financial advisor here on plan with the tax man. Look up in the sky. It's a bird.

Announcer 2 00:18

It's a plane. No, it's the tax man. He may not be a superhero, but Tony Morrow has saved many retirement plans with his extreme knowledge of tax planning strategies. It's time for a plan with the tax man.

Marc Killian 00:33

Hey, everybody, welcome to the podcast, Tony and myself here to talk investing financial retirement, and mistakes made when choosing a financial advisor is the topic of conversation. See if we can go through a couple of things here I got a I got a pretty long list. But we'll do at least a few of these, Tony and see how we can highlight some stuff for folks, how you doing?

Tony Mauro 00:51

And well, how

Marc Killian 00:52

about you hanging in there looking forward to a good conversation with you, as always, in getting ourselves into the groove with our podcast here, everything's going well for you.

Tony Mauro 01:03

It's going good, you know, tax season is as we're recording this now behind us, we have a few clients that we still they still owe us some information to get those done. But everybody is kind of taken care of and course around here now that the sun is shining a little bit everybody's getting outside more so like everybody's always a little happier. You don't want to come around. I'll

Marc Killian 01:26

tell you what, my neck of the woods, it's rained for like six days straight and about over it. Yeah, ready for some sunshine, we had a lot of sunshine for it. So I guess can't complain too much. But let's get into our topic today. Here. I've got a bunch of these, like I said, I don't know, we could easily turn this into a two parter. We'll see how it goes. But let's let's get started. See if we can run through some mistakes that people make when choosing a financial advisor. First and foremost, not understanding how the advisor gets paid. Look, this doesn't have to be a taboo thing, right? I mean, you guys don't work for free. But certainly as the client or potential client, it's okay for us to ask and understand how do you get paid? That's

Tony Mauro 02:01

right. And I think you do have to ask that to, you know, have your advisor. And you know, when you're choosing advisors, they should be able to tell you exactly how they're how they're doing that right. commission based fee based what right? Yeah, and you know, it's a little it's in yet you, what you need to do is maybe take a step further and ask for an explanation, if you don't understand most advisors today are either that they're either commission fee based or asset based, you know, and what we try to do is stay away from the commission based, you know, if at all possible, and what we do is we go kind of go over it and writing with our clients, you know, here's the way we get paid. And they have a choice, basically, at least with us, is they can just pay us a financial planning fee, just like they would if I put on my accountant hat and pay for that. Or they can and then go take and then invest and manage the assets themselves. Or like a lot of advisors, they call it an asset based fee, it's usually between a half and 1%. And what that is, is, you know, based on the amount you have invested, say it's $10,000, the advisor then makes you know, a half to 1% of that as his or her fee for, you know, helping you with your plan. And then you know, so you both grow together, but it's not based on any types of commissions or anything like that. Gotcha, gotcha, key, yeah, it's just really get it out in front of you. And, and then make sure you understand it, and ask a lot of questions.

Marc Killian 03:31

Exactly. And there's, people get a little weird sometimes when asking about that part of things, which I don't nearly understand in the financial services world, but it does happen. You go to you go to your mechanic, you ask him how much they're gonna charge you to fix the car, right? So I don't understand, sometimes you will get a little bit, you know, trepidatious around dealing with the how do you get paid question when it comes to financial advisors, but certainly nothing wrong with it, they expect it. So don't make that mistake, folks, and just talk it through and make sure that it's the right type of fee structure for you. Alright, number two, what about putting too much trust in big name brands, Tony, like, you know, I think the with the way it works now, with so many independent financial advisors, like yourself all across the country, you know, it doesn't necessarily mean because you're working with this person's smaller practice, that they can't do the same things that a big national brand can do, especially when a lot of times, you know, you guys are middle of people are going through fidelity or or whoever as the backing? Is it make a difference? does is it needed any more to go with the big name brand?

Tony Mauro 04:29

Short answer? No, I would say, right, well make it easy, you know, and that not to knock the big, big houses and things like that. They certainly have a name and brand recognition and things like that. But these days, you know, every financial adviser has access to depending on on how they're licensed and whatnot, how access to pretty much every types of of investment, you know, whether it be stocks, bonds, mutual funds, all the way across the board. And so what it really comes down to in my mind is the relationship Forget about names, and make sure you have a good relationship. You understand what this advisor is going to do from you, regardless of where you're at, you know, I think the, you know, in the old days, you know, when everybody was you watch the movies and whatnot, and you see those big wire houses and things, peddling individual investments and things like that. It's not like that anymore. You know, it's about the planning and whatnot. But I don't think it's, you know, it's putting too much trust in or maybe even lack thereof of I don't think in any of us are a better option than the other just because of a name, I guess.

Marc Killian 05:38

Yeah. And I like that, too. It's about the relationship. Right? You know, you can certainly go to one of the big name places, but they also do have sometimes agendas, right. So they may have quotas that they're asking of their, their franchises across the nation, or whatever. And so sometimes you look like a, you know, a nail, because they, they've been given a hammer to use, right. So you want to make sure that you're having those conversations as well. And, you know, when you're talking about making mistakes here, as the end user, as the client, if you're sitting there meeting with an advisor, you're going through the the initial consultation period to find out if it's the right fit, don't just sit nod your head and smile. If you don't truly understand something, don't be afraid to look like you don't understand, right? There's nothing wrong with that. That's why you went to see them and to begin with, because this is not your forte. So ask clarifying questions, right? You do, you

Tony Mauro 06:25

got to ask a lot of questions. And it's any advisor that is comfortable in what they're doing. We're not afraid to answer questions, because like you said, that's what you're paying us for. Otherwise, you go out, and you certainly can do these days on your own. And

Marc Killian 06:39

you know, and it's only if the advisor is, is is over talking right? Maybe over explaining or using, you know, terminology that you're not used to, you know, a that's part of the feeling out process, okay, maybe you decided that this person is not going to be the right fit for you during that consultation period, because they're not explaining it to you in a way you can understand. But they also might just be give them the benefit of the doubt that they might just be so used to talking in that way that they need you to kind of say, Hey, I'm not quite fall on you. Can you explain that more? And I think an advisor worth their salt is going to be absolutely no, no problem. Absolutely. Let me back that down and talk to you about it. Right. Absolutely. And I think that's something that we got to be comfortable with as the end user that, you know, that's why the that's why all advisors that I know really do offer that consultation, and conversation that thing complimentary, because it's like, it's a feeling out process. Does my communication style work for you? Does it work? You know, do you receive it? Well, actually, I'll just go to that one. Next on my list, covering expectations and the communication style. Tony, I'll jump around on here. Yeah, I think that's a great one too, right? Because if you meet with someone, you say, okay, hey, what are the expectations for us getting together? How often are we doing this, right? So that you don't feel like later on? Well, my, my guy or gal never calls me that kind of thing.

Tony Mauro 07:52

Exactly. And any advisor that is worthwhile, in my opinion, is going to lay this out, even in the initial consultation, it's what we do, we basically go over, you know, here's what you can expect of us. And here's how we like to communicate. And it's not just, you know, in generalities, we say, we're going to meet this many times a year, right. And if you prefer communications in person, that's what they will do them, if you want zoom calls, we'll do them that way, or even phone calls. But we are going to set up an agenda. And here's what we do all the way through the plan and then monitoring the plan. So they understand what they're getting. Because obviously, we're here to provide value. And if we can't show that we're providing that value, for the fee that they're paying, you know, obviously, they're not going to be real comfortable with that. But in that respect, also, you have to understand too, as as a client, that if you, you know, obviously, advisors are like everybody else, the more work you do, the more you expect to be paid. And so it's different, because you're talking about, you know, clients that their advisor never calls them, well, there could be a reason for that. Because, you know, if you're a client, let's say, and you're putting, for example, by $1,000 $6,000, into a Roth IRA every year, which is great, you should have the expectation that your advisor should at least be meeting with you, I would say annually, maybe a little more. But if you're calling that advisor expecting a meeting every month, they may tell you and they should upfront we do is that that's that's not this relationship, because of the fact that we meet that many times if there's no way that the advisor can be profitable. And I think that's where some of this, you know, voodoo and nobody wants to disclose fees, because there's that disconnect between the value given and the fee earned. And if you're upfront with clients, you know, and they understand that upfront, I think it just sets the tone for a much better relationship. You take the same investor that has say $2 million and a complex situation. Well, they well not only is the advisor going to make more Yes, but they probably need more meetings. But some people, we get it a lot, you know, where it's the young person wants to come in, and they want to talk about stocks. And every time they see us, you know, something on TV, they want to call on talk about it. Well, you know, the advisor might say, Well, wait a minute, you know, that's great and all but, you know, we can't really write to add value with that. And, you know, time is of the essence all the time. And so, the more we're upfront with people with that, I think, the better the relationship is,

Marc Killian 10:32

and to me, that sounds like maybe a bit more of a broker type relationship than looking for a financial advisor, financial advisor, really helping you kind of build, you know, your, your wealth, not only building the wealth, but also obviously, the preservation side of it, which actually really walks me into this next piece, which is picking someone with the wrong specialty. So part of that communication issue could be the fact that you know, you're younger, and you don't need a financial advisor per se, that specializes in retirement or whatever, you need someone who specializes in just wealth accumulation. Or maybe you just need a broker. But if you're over 50, you probably don't want a broker anymore, you want someone who's going to be talking to you about the other piece is like Social Security and like legacy, and so on and so forth.

Tony Mauro 11:16

Yeah. And it lends itself to even if you are a young client, it may start out fairly simple, you know, with a Roth IRA. And that's true, as you you know, as you grow, and as you get older, then it morphs into a different type of relationship more like you say, on the, on the planning side. And I think, you know, there are, it's a question to ask an advisor in the initial consultation is, you know, who basically, do you work with most of that time?

Marc Killian 11:44

Yeah, that's where I was gonna go, I was gonna say, Tony, ever, everybody's different. And you being also having the tax practice of the CPA and stuff, I imagine, there's, there's two types of clients that you guys have that might be good on that front, but they're really not the they're not in the right spot, or they don't need to pay you for the financial side of things yet, because it's just not where they're at right? Now.

Tony Mauro 12:03

It's not where they're at in their life. And we get it a lot of times with the young tax clients that they, they want to they want to bounce ideas off of us, you know, and they're just, they want to say, you know, I want to go out and buy some stocks, I want you to tell me what you think, right? Well, you really don't need us for that there's so much information out there, we have access to pretty much the same information you do. That probably is not a good fit for us. But right, maybe it is for somebody else.

Marc Killian 12:28

Exactly. Yep. Yeah. So there's nothing wrong with specialty, right? You don't go to the PD pediatrician anymore when you're 50. Right. Lily, yeah, you could you go to a different kind of doctor. Right. So same kind of thing, financially speaking. You know, how important is it to check their credentials? You know, it kind of ties back into the speciality, maybe, right, making sure. Are they a fiduciary? Is that what you need? Right? Do you need someone who's insurance only? Or need someone who can do both sides? Right, both, you know, equities and insurance products and things of that nature?

Tony Mauro 13:01

I think so I think it's important that you have an advisor that can do all of that. I mean, it's not necessary, but it's easier as a client. I think, the fiduciary it's been a big term in the financial planning circles. Now. I think it's important. I mean, this is just my opinion. Of course, I'm biased, because you know, I have to be held to that as you are one. Yeah. Because I am one in you really, all that means is that, you know, we're supposed to put the client interest before our own meaning that we should not be biased, as to the fact that well, we will, we're going to do this for you, Mr. Mrs. Client, because we earn more money on that, right. That's where we're, we're advisors whether or not telling people because it it, you know, it might look bad, right?

Marc Killian 13:46

Well, so Tony, think about this way, tell me if I'm wrong here. So like, if you're not a fiduciary, if your suitability only right, and you have three options to put client a into, and of those three options, you get a bigger perk as the as the person handling it as the suitability advisor, by putting him in option C, you get a bigger perk, or maybe even a trip or something like that, you can do that. Because technically, it's still a suitable investment for the end for the client a, but you also get to kind of reap the benefit on picking the better one, whereas the fiduciary, that's not the case, you have to tell client a the absolute, you know, this is the reason why this is the one you must be using, regardless of what how it benefits you, correct? That's correct.

Tony Mauro 14:29

I mean, that's it in a nutshell, and which is why most advisors now are leaning towards, you know, fee only or asset based fee, because then it takes all that off the table. You know, it's just we're making the same no matter what we do. We're more interested in making sure you have a full plan, right? And we're, you know, you're getting to your goals. Now. There's a couple of things out in the investment world, though that still aren't like that. And one of them is Insurance insurance. There's a few products out there where It's, you know, it's a flat fee, but most of the companies are going to pay Whoever sells you that policy, some sort of commission. And we disclose that right up front, we tell them what we're making. And it's a one time deal. But you shouldn't be even asking on those types of products, because it does lend itself to, you know, even with somebody with a fiduciary duty, you know, maybe they're not following their fiduciary duty, which they're gonna get themselves in real trouble if they don't Great point. But, you know, it lends itself to well, I'll do this for the client because of that, like, incentive, you know, yeah,

Marc Killian 15:34

that's a great point, for sure. Well, let me finish it off with this last one here, Tony, which I think maybe is something we wouldn't be thinking about normally, but it might be worth asking, when looking for a new advisor or looking for a financial advisor. You know, typically, the industry is starting to get younger, as far as the advisors out there, they're starting to get younger and which is good. Because it has been an industry where primarily, it was definitely ran, you know, it was older folks, right? You know, advisor has been around a long time, not young and Spry, like yourself, right? But it's it's worthwhile question to say, Hey, what is your succession plan? Because if you do meet with an advisor, and you do like them, and maybe they are a little older, right? What's their plan for stepping away from their own practice? Do they have someone that's going to be taking over? Do they have Junior advisors or people that you know that it's going to continue to serve you? Should that person retire? Nothing wrong with that question?

Tony Mauro 16:23

No, absolutely not. I think it's one of the most important because you're exactly right, is if you know, you and a lot of us advisors, especially when you go out into the smaller towns around America, it's just them. And yeah, you know, as they do age, you want to ask that, because like you said, if that something happens to them, you know, inadvertently or they just want to retire, it's gonna be a lot easier if you can stay in that firm, at least until you feel like you know, you want to move if the relationship isn't the same. Rather than getting, you know, no advice, no help, kind of not knowing who to call, things like that. So I think every advisor should be able to explain their succession plan to you. We I have one in place for myself, I have one Junior advisor, and I have two support staff. And if something happened to them that I have a backup, she has an outside adviser, a friend of mine in town, yep, that could handle these these clients, if something happens to me, because yeah, you don't know. And most advisors, you know, like you say they are at least 40 Plus ish. A lot of us are in our 50s. And even even, you know, there's

Marc Killian 17:33

there's a lot older a lot. Yeah, a lot in their 60s as well, and even even some 70s. So, I mean, you've been doing this 30 years, Tony, I mean, you're you know, you're in your 50s like I am, but you've been doing this a long time, you know, you're a CPA and a CFP and an EA, but it's still important to have to ask that question, right? You know, even if they're even if you're the advisor you found is 30 years old, you still want to ask because I mean, life, you know, a bust can come out of nowhere for anybody. Yes. Right?

Tony Mauro 17:58

It is yeah. And even at 30, you know, something could happen. And again, you could be left with nothing. So I think the team approach works better. I think to it, it's weird. Now that I am in my 50s, the old the older, my retiree clients look at me as young and you know, oh, yeah, you're gonna be in the business forever. The young people look at me, like, they'll ask that question. It's like, well, gosh, you know, you you're a little old. And we want to know, you know, when when you kick the bucket or whatever, who's gonna help us? And so it just depends on where you're at. But it is a great question. And I think it should be asked every advisor

Marc Killian 18:34

All right, well, there you go. So there was some mistakes that you might make when choosing a financial advisor. But again, the consultations and conversations are just about everybody I know. They're always complimentary. And that's the feeling out process to ask them questions, get your questions asked and answered not only about your own situation, but about how it's going, your interaction with them is going to go very, very important stuff. So make sure that you you know, think about that when you sit down and talk with someone. And of course, if you're already working with Tony Williams, you don't have to worry about that because you're already working with him. But if you're not considering doing so, make sure you reach out and have a conversation get onto the calendar at your planning proz.com That's your planning proz.com Let him know you'd like to have a conversation and a consultation about your retirement journey. Tony, thanks for hanging out with me, my friend. Always appreciate you. Alright, we'll

Tony Mauro 19:19

see you on the next one yet.

Marc Killian 19:20

We'll see on the next one. And don't forget to subscribe to us playing with the tax man on Apple, Spotify or YouTube platforms. You can just type it into the search box of those apps or just go to Tony's website you're planning proz.com.

Announcer 1 19:36

Securities offered through a van tax investment services SM Member FINRA SIPC, investment advisory services offered through a van tax advisory services insurance services offered through an event tax affiliated Insurance Agency investment strategies discussed in this episode may not be suitable for all investors. Please consult with a financial professional