Does your financial advisor need to be local?

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Luis Rosa has met with clients remotely for years, even before the pandemic. When the certified financial planner and member of the Zoe Financial planning network moved from New York to the West Coast, the clients of his firm, Build a Better Financial Future, followed him virtually.

But even now, clients who live close to Rosa’s home in Pasadena, California, still opt to meet over Zoom because of the pandemic. Financial advisors across the country have made the same transition. So do you still need your advisor to be local? Here are the pros and cons of an all-digital relationship with your financial advisor.

Pro: Scheduling is easier

Alva A. Fuller, a VP wealth advisor for Farther, a wealth advisory firm, says many of her clients find remote scheduling simpler.

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“They can book follow-up meetings seamlessly and do not have to plan for commute time,” she says.

Virtual meetings are especially convenient for couples, who can meet with Rosa together even if one is at work and one is at home. Virtual meetings also don’t require parents to hire a babysitter so they can attend.

Con: Technology barriers

Not everyone is comfortable using the technology required to make a virtual relationship with a financial advisor work. Others might not have access to it at all.

“If you have a poor internet connection, you might not be able to see the video or share the screen,” Rosa says.

You’ll need to familiarize yourself with virtual scheduling tools and learn how to share documents digitally with your advisor. While many people have become more familiar with these tools during the pandemic, some people simply feel more secure going to an office and handing their sensitive financial documents to someone in person.

“Each client will need to weigh the tradeoffs in convenience, cost, and accessibility with the ease of building trust in a financial advisor in person,” Fuller says.

Pro: You can find a specialized advisor

Keeping your search to advisors who are local might limit you from working with someone who has special expertise with your financial situation. For example, if you want to retire in a foreign country, you might want to seek an advisor who is familiar with that country and its tax laws.

Financial advisors are increasingly specialized, Rosa says. For example, they may focus on families with children with disabilities or people with stock options or workers in specific fields.

That expertise should take precedence, Fuller says.

“I encourage clients to consider an advisor’s expertise, credentials, and whether or not they feel the advisor is really a fit, rather than prioritizing finding someone local,” she says.

Con: You’ll miss local expertise

Particularly if you plan to rely on your financial advisor to handle your taxes, they should have some knowledge of your state and local tax laws. For Rosa, an enrolled agent who is licensed by the IRS to prepare taxes, that local knowledge is important. But, he says, “an advisor can familiarize themselves with a state’s laws without living there.”

Ultimately, location is just one of many factors to weigh.

“Before hiring a financial advisor, you’ll want to meet with them to understand their level of expertise, their credentials, their style, the costs of working with them, and whether or not you feel they are the right fit for you,” Fuller says. “The same factors apply in choosing an advisor whether you are looking to work with them remotely or in person.”

This article originally appeared on Policygenius and was syndicated by MediaFeed.org.

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10 questions to ask a financial advisor

 

If you’re considering hiring a financial advisor, you’re ahead of the game — almost half (45%) of adults ages 40 to 59 would rather make an appointment with a dentist than with a financial planner, according to a survey from AARP.

But getting your financial ducks in a row is a good idea. According to one study, perceived financial well-being — feeling that you’re on the right track and secure in the direction you’re headed — is a key predictor of overall well-being. And consulting with a financial professional can help you get there.

A financial advisor is a professional who can work with you to manage your investments or advise you on your financial life in general, from retirement savings and college funding to life insurance and estate planning. Choosing the right financial planner for you will depend on your particular needs and your planner’s individual style, so it’s important that you ask questions before you settle on a pro.

Here are some suggestions of what to ask a financial advisor.

 

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Being a fiduciary means a financial planner always must put the best interests of their client above their own. That means acting prudently and avoiding conflicts of interest, among other things. When someone is a fiduciary, they’ve essentially agreed to offer you their best advice.

“I think that’s important,” said Howard Pressman, a financial planner in Vienna, Virgina. “A fiduciary is sort of at the very top of what’s owed to the client.”

 

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There are a variety of ways a financial planner can be trained, and it’s important that you understand what training yours has received. You might find, for instance:

  • CFA: chartered financial analyst (from the CFA Institute)
  • PFS: personal financial specialist (from the American Institute of Certified Public Accountants)
  • CFP: certified financial planner (from the CFP Board)

Many experts recommend finding a CFP, a designation that requires thousands of hours in education, testing and field experience to acquire.

“I think the CFP designation, for financial planning, is kind of the pinnacle of what you’re looking for with someone,” Pressman said. You can verify someone’s designation by checking with the issuing organization.

 

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Some financial planners offer planning services, which means looking at your whole financial picture — assets, liabilities, insurance expenses and employee benefits, for instance — and helping you make a plan. Others offer investment management only, which means managing your investment portfolio without looking at the rest of your life.

“Certainly investment advice is part of a good financial plan, but we also need to be discussing risk management, things like life insurance, retirement income planning or retirement savings, saving for goals, estate planning, often tax planning,” Pressman said. “Things like that all need to be factored into what a financial plan is.”

 

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Some advisors charge by the hour, while others charge a percentage of your investment portfolio each year or a fixed fee based on your portfolio’s value. Some planners also charge a flat fee for certain services, such as an annual checkup or portfolio overview. Some (non-fiduciary) planners receive commissions for recommending certain products.

“There are many different models by which financial planners charge their clients, and I don’t necessarily think anyone is better than the other,” Pressman said. “But moreover, does the consumer understand how this person is being compensated and all the ways this person is being compensated?”

The average fee for those charging a percentage of assets under management is 1.02% for a $1 million account, according to a 2017 AdvisoryHQ study. The number gets slightly higher for smaller accounts (1.12% for a $100,000 account, for instance) and slightly lower for larger accounts. The average fee for

 

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Some advisors specialize in certain groups, such as people with portfolios worth at least $200,000 or people nearing retirement. You may be better off working with someone who understands the stage of life you’re in, so make sure your planner works with clients like you. If a planner tells you they typically work with clients who have six-figure assets and you’re 25 and just starting out, you may want to search for someone who’s more familiar with the issues you’re facing.

 

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The relationship between a planner and client should be a personal one, but it doesn’t always work out. It’s useful to hear why someone may have left the advisor’s services — and to know that your advisor is authentic enough to tell you about it.

“I had one client who decided to leave me because he felt that I was too conservative,” said Marguerita Cheng, a financial planner in Gaithersburg, Maryland. “I feel that if you are too aggressive with clients’ money early on and they lose money, it’s very hard to rebuild trust.”

In general, asking advisors this question will help you get a feel for their honesty and forthrightness. If a planner goes on the defensive or seems like they’re not being square with you, you may want to move along.

 

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Each financial advisor has their own preferred style of investing, and you should make sure it fits yours. Cheng, for instance, doesn’t accept money for investment management unless she also can do planning for the client. And while she participates in both passive and active investing, she doesn’t do a lot of stock picking. “I don’t think I can do a good job for you managing your money if I don’t understand your goals,” Cheng said. “You’ve got to make sure that’s what you want.”

If your planner likes value investing — searching for equities they think are underpriced — and you’re a fan of a more basic approach to your portfolio, you have to decide if that’s the best place for you. Similarly, if you’re looking for someone who can guide you on socially responsible investing, you’d want someone who is familiar with environmental, social and governance (ESG) funds and knows how to help you invest in them. If you don’t agree with how a planner approaches investing, look elsewhere.

 

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It’s helpful to hear how someone’s investment approach worked during the most recent recession, as there’s always the chance of another market dip. This question can help you get a read on what that planner learned (if anything) during the market fall and how they’re safeguarding clients against something similar happening in the future.

One study found that the vast majority of financial planners report some level of post-traumatic stress as a result of the recession, so if your planner can’t easily verbalize a strategy for weathering the next downturn, that could be a red flag.

 

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Sometimes you’ll have an initial consultation with one advisor at a firm and find yourself handed off to someone else for your regular planning needs. Or you’ll be handled by a different person during each check-in, depending on everyone’s workload.

Gauging an advisor’s response to this question is entirely personal: If you don’t care whom you work with, it doesn’t really matter. But if you like the planner you’re interviewing and you’d like to stick with them, you may not want to hear that you’ll be handed off to someone else at the firm.

 

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Does your advisor prefer to speak to you on the phone, or will they email? Do they mind if you text them? How often will you hear from them? Make sure your communication style will complement that of your advisor.

“I have some clients I don’t really hear from, but they’ll text me,” Cheng said. “I just want people to be comfortable with their money and working with their advisor. That’s why it’s OK for them to send a quick text message. True story: Someone once texted, ‘I’m buying a Tesla. How do I pay for this?’”

In the end, it’s also important to trust your gut. Your planner may give satisfactory answers to all these questions, but you still might not have the best feeling about them — and that’s fine. “We, as humans, have very good gut instincts, but we tend to ignore them at times,” Pressman said. “It doesn’t matter if a friend referred you or if you read great things about this person. There are enough good financial planners out there that if this one isn’t hitting all the boxes, move on.”

This article originally appeared on MagnifyMoney.com and was syndicated by MediaFeed.org.

 

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Myles Ma

Myles Ma is an editor at PolicyGenius.com.