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Choosing Your Personal Financial Planning Team

Mar 29, 2008
You know you need to hire professionals to guide your investing and that competency is key. But how do you know ahead of time if an advisor has the expertise to handle your level of needs? Similarly, how do you know when you have outgrown your advisor(s)? Here are some things you need to weigh when evaluating your choices.

Experience - as an advisor. The starter pedestrian question, "How long have they been advising or working in the field?" is a good start, but can only show longevity and having survived a boom and bust cycle. A key follow-on question is, "Can they describe successes and failures and key lessons learned?" However, don't let "years in grade" be the only guide. A brilliant 20-year old with only a year of experience may be a better choice for you. BUT, you must recognize the trade-offs and be prepared to compensate. Additionally, by following the points below, the inexperience of one advisor will be offset by other advisors.

Experience - personal. They should be their own best client. What have they got to show for themselves? Whether your planner is younger or older than you (and thus has different growth and cash flow needs), they should still be able to lead by example - to demonstrate that they know what they are doing by discussing their personal portfolio. Are they willing to show you their portfolio? Does it demonstrate their skill?

Currency. Laws are constantly changing, thus creating and eliminating possible choices. Is your advisor familiar with the current changes? This one takes a little research. Call several advisors and ask them what were the three most important changes in the last year or two. Google these items. Then ask your own advisor the same question. Ask about the topics others mentioned but which your advisor did not. If you have had the same advisor for years, get an independent check-up.

Comprehensive - in space and time. In computer science, we talk about a "greedy" algorithm as one that takes the current best apparent choice without regard to future actions. We contrast this with algorithms that attempt to achieve "global optimization" by considering the consequence of the current choice in light of other (future) choices. Bringing this back to our topic, we note that finances thread through every part of our lives. So we must be careful that adjustments for a quick tax fix do not have a huge adverse impact on cash flow. Similarly, we need to be concerned how tax savings in the current year will effect a clients long term estate plan goals. The whole picture (in space and time) needs to be brought into play.

Collaborative. As finances thread through every part of our lives, they inherently create an overlap across specialties. E.g., taxes, legal, insurance, real estate, and financial planning. We need not only an advisor who can think in comprehensive terms, but also one who will collaborate with other advisors.

Integrated. If your advisor thinks of collaboration as doing their part and then handing off the client and results to the next advisor, they are completely missing the boat. Individually, each specialist has his or her expertise and, given the same information, will recommend a perfectly valid solution. Unfortunately, you would be ill served to divide up and parcel out your planning because with four different advisors, you will get four, often conflicting, answers. It is not their fault, per se, but rather it points out the need for an integrated plan. The solution is to work with advisors who promote not simply "collaboration", but working in an integrated team (which might be composed of advisors from 4 different companies). Only by true collaboration amongst advisors (where they are willing to sit down in a room together and hash out an integrated plan) will you be best served because the best solution is often none of the individual answers, nor even a compromise between them, usually it is something different that requires input from all advisors - a synergy of their specialties.

In summary, the over-arching goal is a Comprehensive, Collaborative, Integrated Financial Planning Team.
About the Author
Robert T. Boyer, Ph.D., Vice President of San Diego's Finest Real Estate, developed the unique concept of Real Estate Financial Planning (REFP) to fill a void left by the financial planning industry. By incorporating REFP into a collaborative financial planning team, we are able to develop a fully integrated financial plan, both saving and earning clients millions of dollars.
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