It’s always a sad day when a financial advisor receives a call that a client has died or experienced a tragic event.
Throughout their careers, advisors work with clients to navigate different types of life events and can be a valuable resource for their families. They typically have checklists, relationships with planning attorneys and tax professionals, and contacts within the community who can help manage the change.
But what if it was the advisor who died?
Understanding the work of the advisor will help you understand what to do in this scenario. Those licensed as Investment Advisory Agencies (IARs) act on behalf of their clients with third party custodians such as Charles Schwab and Fidelity.
In the event of an unexpected death or disability, your money is safe and accessible at the custodian’s institution. Advisors may buy and sell investments on behalf of their clients, but custodians hold the money. and track your cost base and generate statements and tax forms.
As a custodian client, you have access to your investments, statements and tax forms. However, without an advisor, the account is not actively managed. Hopefully your advisor has a succession plan in place and you can easily transition to a new advisor who is professional, trustworthy and likeable. If not, you should start the process of finding a new financial advisor.
looking for an advisor
In your search, consider looking for a financial advisor who is a certified financial planner. This designation is considered the highest qualification for a financial advisor. To become a CFP, an advisor must complete her four Ess:
— Education: CFP candidates must have completed coursework in financial planning through a registered program and have a bachelor’s degree or higher from an accredited college or university.
—Examination: Candidates for the CFP certification must pass a rigorous exam that assesses their ability to apply financial planning knowledge to real-world situations.
—Experience: CFP candidates complete 6,000 hours of professional experience related to financial planning or 4,000 hours of apprenticeship experience meeting additional experience within 10 years before passing the CFP exam or within 5 years after passing the exam is needed.
— Ethics: CFP acts as a fiduciary. This means that we act only in the best interests of our clients when providing financial advice. The Accreditation Committee conducts a detailed background check on all candidates. Once a CFP is assigned, they undergo an ethics exam twice a year. Passing is mandatory to maintain designation.
To verify your license, search the internet for the potential advisor’s name and check their website for partner profiles, services they offer, industries they serve, and information about potential clients.
Having access to the internet has made investigating credentials much easier. You must ensure that your advisor is licensed, has clear records, and is not using designations you do not have. The three best places to do that research are:
—FINRA BrokerCheck: Commission-based brokers and insurance or annuity salespeople are regulated by financial industry regulators. Use the FINRA BrokerCheck tool to examine your history and entitlements. Visit brokercheck.finra.org.
—The Security Exchange Commission Investment Adviser Public Disclosure Website: Use this site for due diligence with respect to fee-only Registered Investment Advisers (RIAs). Visit advisorinfo.sec.gov. FINRA’s BrokerCheck website connects to the SEC’s site if the individual is working only as a paid advisor.
— Online Database of CFP Boards: All CFPs are listed in this database so you can see the credentials of each advisor. Visit letsmakeaplan.org.
CFP.net also provides resources to help with this task. Posted on the site is a list of questions to ask a potential advisor. The list can be found at letsmakeaplan.org/how-to-choose-a-planner/10-questions-to-ask-your-financial-adviser.
ask an advisor
Fee-only advisors are paid either a percentage of the assets under management, or a set project, or an hourly rate. This fee typically starts at 1% of his assets under management and decreases as assets grow.
Fee-only advisors do not receive commissions or other payments from the providers of the financial products they recommend. Fee-only advisors have a fiduciary responsibility to their clients. In other words, we must put our client’s best interests first.
Fee-based advisors are paid by their clients, but they can also earn income from other sources. For example, we may receive commissions on the financial products we sell to our customers. This relationship may create a conflict of interest. However, in the right circumstances, fee-based advisors are subject to the same fiduciary responsibilities as fee-only advisors, so it is important to understand how advisors are compensated.
Fee-only advisors earn their income by receiving commissions for the products they sell. These products may include financial products such as insurance policies, annuities and mutual funds. The more transactions you complete or the more accounts you open, the more payments you get. As with fee-based advisors, this payment structure can create conflicts of interest. Or, at the very least, it might make you question whether your advisor has only your best interests in mind.
Before you talk to your advisor, ask if there is a succession plan. This plan outlines contingency plans in the event of an advisor’s retirement, disability, or unexpected death. Succession planning can include younger partners who are geographically close and affiliated with the same investment manager and custodian.
You’ll also want to understand their personal niche. To do this, ask your advisors what types of clients they serve. Advisors may be generalists helping many different clients with different needs, or they may specialize in specific demographics. Areas of expertise include women, athletes, widows, doctors, business owners, or ultra high net worth families. You will want to find someone who fits your needs.
Finally, be sure to ask about expected communication. Remember, your advisor runs your business, so you should set clear expectations about how and how often they will communicate with you. Ask your advisor what their practices are for returning calls and emails.
When you leave them a message, should you expect to hear from them directly? Or will their assistant respond? And how quickly? It is standard business practice for an advisor to return a call or email by the end of the day, or within her 24 hours at the latest. Also, ask how often you plan to meet with your advisor. Are these meetings typically held in person or virtually?
Following your research work, set up your first meeting. I recommend interviewing at least two of her advisors. Ask them to review their contract (i.e. the contract you sign with your advisor) and ask them about the process and timeline for opening a new account and transferring assets.
Don’t be afraid to ask many questions. Ultimately, you’ll want to find an advisor who is aligned with your goals and objectives while putting your best interests first.
Teri Parker is Vice President of CAPTRUST Financial Advisors. She has been practicing financial planning and investment management since her year 2000. Teri.firstname.lastname@example.org.
https://www.ocregister.com/2023/02/05/when-its-time-to-find-another-financial-adviser/ When to Find Another Financial Advisor – Orange County Register