I am a first-time parent to a now 9-month-old daughter. It has been an incredible experience, and for the first time, I understand what parents meant when they said, “trust me when you have kids, you will understand.” I am lucky that my wife has a degree in childhood development and has been a preschool teacher for 9 years. Even with that support, I am reminded daily that this is my first time doing this, and sometimes I feel like I have no clue what I am doing.
I am a researcher at heart, so I enjoy doing a deep dive into current topics on child development, and how I should be feeding, playing with, and mentally engaging my daughter. Before checkups with our pediatrician, I like to get a list of questions prepared.
However, I have noticed in our meetings that I get a little hesitant and reserved about asking questions. I don’t want to ask a stupid question. I don’t want my pediatrician to think I don’t trust her or the recommendation. And I especially don’t want to annoy hers by being yet another person with questions they found on Google or YouTube.
But the reality is, our doctor has done hundreds if not thousands of 9-month checkups…but this is my first ever. And when we do asks questions, he does a great job and walks us through the answer in plain English, reminding us that she is also a parent of a young daughter, and thinks the same things all the time. We are all human.
Questions to ask a financial advisor
I often consider how people could feel the same way when they go to speak with financial planners, whether it be a first-ever meeting or an annual review after working together for years. Many of us have that feeling where we don’t want to ask a routine question that shows how utterly confused about the topic we are. I think of that person who is in their first meeting with an advisor who is talking in complex terms, and the client is getting lost but does not feel comfortable speaking up. Or the client wants to understand what a bond is exactly, but doesn’t ask for fear of feeling like they are supposed to already know. And without answers to their silent questions, the meeting was not nearly as productive as it could have been. The advisor has done hundreds if not thousands of these meetings, but this could be the client’s first. Always ask the question.
I was reminded of this recently with new legislation that was passed by the Securities and Exchange Commission (SEC). This legislation requires a new form called CRS, which stands for “Client Relationship Summary” to be sent to all current and prospective clients of a broker dealer or investment advisory firm. Our clients at Wealth Analytics would have seen this form sent to them a couple of weeks ago and available in their client portal. The goal of Form CRS is to simplify and summarize the relationship, fees, and services. It also exposes any potential conflicts an advisor or firm might have when working with clients. This form even has a few suggested questions people should ask of their advisor.
At Bull Oak Capital, our CRS is short and sweet, two pages long. It says we provide financial planning and investment management services, we are fee-only, and we are fiduciaries (meaning we take a legal oath to do what is in your best interest at all times).
You want a fiduciary fee-only financial advisor
I decided to review Form CRS of the bank where I have a checking account and credit card. This is a bank everyone will know. They also have investment accounts available with all sorts of fancy terms for their staff such as financial advisors, wealth managers, private client groups, financial consultants, and private wealth groups. I still have no clue what the difference between all those are. The form started similarly to ours, but then it kept going past page two, and on page four is where the party started. To summarize page four, they state that they are legally bound to do what is in your best interest only some of the time. They sell proprietary products (their own products) in which they could receive extra compensation in doing so. They can even get paid by third parties and receive extra sales commissions and kickbacks for recommending certain investments and accounts to you. The icing on the cake was when they stated that when they recommend selling a stock or buying it, they can be the ones you are selling it to or buying it from. The bank could be on the other end of your trades, doing the opposite of what they told you to do. That sure is interesting.
While this form is a step in the right direction towards clarifying things for the public, it will still be very confusing for many. This is why you need to feel comfortable asking questions. If you are unsure about something, or just need further explanation to be comfortable with your next step, ask for clarification.
This is your money, it is your financial plan. You are allowed to be involved, to care, and be passionate. You are allowed to ask that question you saw in a Google search or heard about in a YouTube video. There is never a stupid question. Be your own advocate.