By interviewing multiple financial planners, you can learn about their investment style, qualifications, expertise, and how each conducts business. Because you are seeking to develop a long-term relationship with your adviser, you should also be concerned about how your financial planner gets paid.
Commission-Only Versus Fee-Only
A commission-only planner is paid when you buy specific products he recommends, such as a mutual fund his firm represents, or possibly an insurance product from an affiliated bank. If this is the case, you have to wonder if the product he is selling is ideal for your financial situation, or if he is suggesting it for his own benefit and compensation. A fee-based or fee-offset planner may charge both a fee and receive commissions on products sold. A fee-only planner can charge for services in several ways: by flat fee or retainer, an hourly fee, a percentage of assets, a project fee or a percentage of income.
We suggest that you use only fee-only financial planners, as they work for the client with no agenda other than helping the client reach financial planning and investment goals. A fee-only planner is not obligated to a particular bank, brokerage firm, investment product or insurance company. Ideally, they provide advice that is designed to be in the best interest of their client, without taking excessive risk or incurring unnecessary trading costs. Henssler Financial is a fee-only advisory firm earning compensation by flat fee, hourly fee or fees based on a percentage of assets under advisement. Our incentive is in direct relation to our clients’ portfolios; as our clients do better, so do we.
Meeting for the First Time
Your first meeting with most financial planners will be an interview process. Just as you are interviewing the financial planner, the planner is interviewing you to see if you will benefit from the firm’s investment philosophy. If your goals are more aggressive than the firm traditionally works with, they may suggest a colleague or different firm that is better suited for your financial situation.
When you have found a match that makes you feel comfortable, your decision on how best to use your financial planner may come down to money—what amount of service do you want, and what are you willing to pay for it. Your answer to that question may change as you begin developing your financial plan. Many financial planners will offer you a host of different programs with different fee structures that allow you different levels of involvement. While program names can vary between planners, generally speaking, there are two distinct program types—financial planning and asset management.
Financial planning programs usually involve creating a plan of action for a client that is specific to his situation and goals. It is then left to the client to implement that plan. This type of program is ideal for people who handle their own specific investments, but would like guidance with the big financial picture. At Henssler Financial, our comprehensive Financial Consulting program includes financial, retirement, and insurance planning, along with specific investment recommendations in both retirement and brokerage accounts. Implementation of the plan is left up to the client to coordinate using his own stockbroker, insurance agent, tax adviser and estate-planning attorney. Our services in the Henssler Financial Consulting program are either flat fee or billed hourly.
Asset management or money management programs generally involve directing a client’s portfolio without regard to financial planning. This type of planning is pure asset allocation based on the planner’s investment style (i.e., Large-Cap, Mid-Cap, etc.). This type of program is ideal for someone who has a financial plan or financial planner, and based on their allocation, seeks to invest a portion of their funds in a certain style. Henssler Financial Asset Management programs are investment-based money management programs where we direct your investments to adhere to our philosophy and strict investment criteria. Our goal is to grow your portfolio at a steady rate without incurring unnecessary risk. We offer both stock based and mutual fund based portfolios, and manage these portfolios on a long-term investment horizon, placing trades on your behalf. Our Asset Management program fees are based on a percentage of assets under management.
Some financial planners may fuse together aspects of Financial Planning and Asset Management programs. This thorough approach is best for individuals who want a professional to devise a financial plan and wants a professional to put the plan into action on their behalf. At Henssler Financial, our Traditional Management and Wealth Management programs incorporate financial planning with portfolio management. In these programs, we educate ourselves on a client’s particular situation, and develop a comprehensive plan geared toward meeting the client’s life goals. With program fees based on a percentage of assets under management, we profit when we provide effective financial planning and asset management. We sit on the same side of the table as our clients. We earn more as our clients assets increase in value. This makes us partners and establishes a long-term mutually beneficial relationship.
If you have any questions about financial planning or would like to speak with an Associate from Henssler Financial about our financial planning strategy, contact us at 770-429-9166 or [email protected].