More than a Checklist: Finding the Right Financial Advisor

About the Author

brian e. parker

true Brian E. Parker, CFP®

Co-founder and Managing Director
Torrance, California

About the Author

brian e. parker

true Brian E. Parker, CFP®

Co-founder and Managing Director
Torrance, California

Author: Brian Parker

Check out this article that was originally featured in TheStreet. 

More than a checklist: The softer side of finding the right financial advisor

In the wake of 2020's pandemic-related market volatility, many investors turned to financial advisors for guidance, some for the first time. In a Nationwide Retirement Institute survey of over 2,000 U.S. adults, the pandemic prompted nearly half to conclude they need financial and investment management support, while almost 25% said they are turning to an advisor for the first time. The decision to work with an advisor should not be taken lightly, and investors should strategically consider who they will partner with to help them meet their goals.


To start, there are some standard questions you can ask. For example, is the advisor a fiduciary? What designations do they have? Are they fee-only or fee-based, or do they receive commissions? If they are fee-based, what are they doing for that fee; do they work on tax returns or review insurance? Is the fee flat, or is it determined by the client’s assets under management? Do they tax-loss harvest? Does the advisor actively manage investments? Do they rebalance portfolios? How many clients do they have?


How (and why) to uncover a deeper connection with your advisor


These questions just scratch the surface, and are incredibly important in the selection process. But they don’t hit on intangibles, which are just as important. The intangibles focus on the emotional and personal side of wealth management, and their merit is supported by data. Research by Vanguard, among other academic studies, found that behavioral coaching could result in an extra 1% to 2% in net return. This means that finding an advisor is about more than checking off boxes on a list. It’s about building a relationship, and this is where “softer” questions come into play. Ask yourself, do I feel they care about me and my loved ones, as well as my goals? How is their bedside manner? How do they respond to adversity? Do they put my mind at ease? Are they cutting-edge? In other words, do they keep up on policy changes and how they could impact clients? How committed are they to the craft? Will they be proactive? Are they responsive when I reach out?


The latter can be especially key. It’s not uncommon for investors to feel their advisor isn’t hearing them. Natixis Investment Managers this year surveyed 300 financial professionals in the U.S. The survey found two main reasons why advisors may be missing the mark in client relations, “not communicating with clients in a way that meets their expectations” and “not listening to the needs of clients.” The importance of communication is underscored by a Spectrum Group survey, which noted that almost two out of three high-net-worth respondents ages 71 and up would sever ties with an advisor who fails to return calls in a timely manner. This emphasizes that working with an advisor is about more than just numbers in a spreadsheet.


Let’s not forget: Although building a relationship is important, advisors still need to know their stuff


Working with an advisor who you trust, who listens to you and truly cares about your situation, your goals and your legacy makes all the difference when it comes to executing on your financial plan. Below are a few examples of how you could benefit from working with a financial advisor.

1. Designing your financial plan

While you may be eager to jump into the stock market, it’s important to start with a financial plan. Communication is key, as properly establishing a financial plan means diving into your history and your current data, including your income, assets, expenses and risks. Not every advisor is a Certified Financial Planner (CFP®), so you’ll want to check for designations here. It’s also important to note that financial planning is not a one-time event. Ensure your advisor will take the time to understand your situation and strategically help you approach different scenarios as they evolve.

2. Leveraging comprehensive services for further support

Consider this question: Are you simply looking for someone to help you with your finances? A comprehensive advisor can offer additional support through a wide array of services. They can help you understand Social Security and Medicare, invest in real estate, and evaluate property and casualty insurance or life insurance. Some advisors also offer small business consulting, life transition planning and estate planning, among others services. The key is to determine what you’re looking to accomplish and then seek an advisor who has the services to support your goals.


3. Implementing tax strategy

Tax planning is an especially important area to keep an eye on, as policies regularly change. In wealth management, tax planning and retirement planning often go hand in hand. For example, it may be a good time to pull money out of your IRA, if it means paying taxes in a lower bracket. Often, investors want to wait to pull money out until they are required to do so at age 72. This can be a mistake because they end up with large required minimum distributions (RMDs), which are taxed. It’s important to balance taxes year-to-year, so this might mean removing money from a qualified plan before you need to take an RMD. An advisor who has your long-term goals in mind will be able to advise you in unique situations that can better position you in the future.


4. Managing company stock options

Another example is utilizing net unrealized appreciation to leverage a capital gains treatment on company stock at retirement. This allows you to pull company stock out of a 401(k) and take capital gains between your cost basis and current value. Say you bought an employee stock ownership plan at the cost basis of $12 dollars a share, and it’s now $80 a share. You can pull the stock out of your 401(k) and put it in your after-tax account. In this case, you would pay the ordinary income tax rate on the first $12 a share, and anything above that would be capital gains when you go to sell it. This is beneficial, since the capital gains rate is lower than the ordinary income tax rate.


5. Funding your child’s education

Today, there’s very few ways to grow dollars tax-free, but the right advisor can help you explore these avenues. For education, pairing 529 plans can offer tax-free growth on funds. With the possibility that tax rates could increase in certain locations, and the fact that education is generally increasing in expense, optimizing tax-free growth is more important than ever. Plus, withdrawing funds from 529 plans has become more flexible in recent years. Withdrawals can now be used for private elementary or secondary education in addition to college. For younger beneficiaries, it may make sense to invest funds more aggressively, allowing them to potentially grow further in a tax-free manner. Pairing 529 plans is especially relevant for high earners who are not eligible to contribute to a Roth IRA. In essence, the 529 plan acts as a Roth IRA for education.


Looking above and beyond for success

Finding someone who understands your financial situation and who will be with you for the long-term can offer strategic advantages. Generally speaking, the most successful advisors go beyond analyzing cash flow and income to truly understanding each client’s history, goals and motivations, whether they involve saving for retirement or funding education for the next generation. The goal is to find an advisor who understands — and cares — about your personal objectives and needs. As previously mentioned, there are some questions you can ask to start. These questions and other considerations for the advisor selection process are available here.


Brian Parker, CFP®, is co-founder and managing director at EP Wealth Advisors, an independent registered investment advisor that specializes in client-centric financial planning and investment management services. Brian co-founded the firm in 1999 to change how consumers received financial services. He encourages clients to dream big and then helps them to plan accordingly. He has been in wealth management for over two decades.


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