Evaluating and Selecting a Professional Financial Advisor, Part II

Dear Financial Advisor Letter™

The previous post introduced and provided the Financial Advisor Evaluation and Selection Tool™; a checklist with key questions to ask of a potential financial advisor. This post takes those key questions and molds their essence into a letter which can be provided to a potential advisor, laying out your expectations and requirements of that professional financial advisor.

Why should I care?
Not every reader will use a financial advisor, but for those that do, the information in this and the previous post can save you from a lot of strife. The previous post took critical facts and lessons learned from 20 years of observing and working in the financial services industry and compiled them into a single checklist called the Financial Advisor Evaluation and Selection Tool™ (“Tool”). The Tool can help steer you away from salespeople, unqualified “advisors”, those who don’t or can’t offer thorough financial planning, and those who might only focus on investments (believe me, there’s so much more than just the investments).

While the Tool from the last post is really valuable, you still need to interpret and evaluate an advisor’s answers to the questions in the Evaluation Tool! Are their answers good or not? If you want to take your evaluation and selection process to the next level, you can utilize a second tool, discussed in this post, called the Dear Financial Advisor Letter. Simply give the Dear Financial Advisor Letter to any potential (or current!) advisor and ask them to read it carefully and agree that they can meet your expectations. The Letter provides them with a well-thought out roadmap of your expectations in terms of professional education, fiduciary duty, level of analysis and planning, and client education. You don’t have to decipher the advisor’s marketing spiel to wonder if they are competent and will address your needs. No need to worry that you aren’t asking the right questions. Providing this letter to a potential advisor will either result in the advisor agreeing that they can meet your expectations and needs or looking for excuses as to why this letter isn’t appropriate.

So, don’t settle for a subpar advisor (or worse, a financial product salesperson calling themselves an advisor) who doesn’t meet your needs. Just because a friend, family member or coworker recommended them to you doesn’t mean you have to use that advisor. Don’t worry about making your friend, family member or coworker feel bad! It’s your life and your financial situation. You must feel confident in the person helping you make important financial decisions. Time to take charge!

Without further delay, let’s take a look at the Dear Financial Advisor Letter™

Dear Financial Advisor,

I write this letter to let you know exactly what I need from a financial advisor. I am widowed and my spouse/partner handled most of our finances, so I need your help.

Most importantly, I need you to act as a fiduciary at all times, disclosing all conflicts of interest and always putting my interests first. You must conduct our relationship with a duty of loyalty and care (Fiduciary Standard).

Meeting a fiduciary duty requires you to have a professional education – having earned and maintained a CFP®, CPA or CFA designation in good standing. As a fiduciary I expect you to continue your professional education and participate in a professional organization such as the FPA, NAPFA, AICPA or CFA Institute. Barring an unusual situation, your regulatory and professional background should be clean of complaints and disciplinary actions. In fact, you must be ok with me running a background check.

You must be a financial planning-oriented advisor, not an investments-only advisor. After addressing my most pressing issues, help me develop and update a financial plan that will guide me toward achieving and maintaining financial security and independence. I do recognize that I have a role and responsibility in carrying out my financial plan. For your financial plans, explain the assumptions used and how you arrive at these assumptions. Important assumptions include: long-term compound rate of return, inflation rate for living expenses, life expectancy and any other assumptions you consider significant. Investment/portfolio volatility must be modeled using Monte Carlo analysis or similar tools.

My immediate concerns are how will I get paid each month and how do I prioritize the time-sensitive tasks from those that can wait? I have no interest in dealing with any of this but I know there may be urgent issues to address.

Help me get organized, financially. Papers are everywhere, and I fear certain accounts, investments, insurance policies or debts may be missed or overlooked. Please assist me in reasonably accounting for potentially missing assets and liabilities. The assets I am aware of are held at several financial organizations, and if it makes sense, I want to simplify my financial life through consolidation. Help me get my accounts properly titled and make sure the cost basis is properly adjusted in my taxable investment accounts.

Help me determine a smart Social Security claiming strategy and/or pension payout decision. Review my tax returns every year for possible opportunities such as a Roth conversion or taking distributions from tax-deferred accounts during lower tax years. Review, keep on file, and help me implement my latest estate planning documents such as my last will, trust, and powers of attorney. Communicate, coordinate, cooperate and collaborate with my legal, tax and other professional advisors.

As a fiduciary you must provide ongoing financial advice.  Timing the stock and bond markets is not expected – I understand these markets have ups and downs and there is no way to consistently determine when these ups and downs will occur.

Suitable to my situation, educate me regarding my cash flow and expenses, investments, taxes and estate plan.

I expect you to earn fair compensation for the level of services rendered and keep my investment expenses at a reasonable level. I will not pay wealth management rates for just investment management. Charge me a reasonable fee for my financial plan; If you offer a free plan, there must be a good reason, otherwise I will re-evaluate my use of your services. Most of the investment or insurance recommendations provided should not be biased toward expensive commission products unless there is a good reason to use them and you can explain why these recommendations meet a fiduciary standard.

You must have an ample amount of experience assisting widows and widowers after the loss of their spouses or partners. Please tell me of the specific financial, tax and legal challenges through which you helped your widowed clients.

As a widow, my financial advisor needs to understand that:

  • I may forget things easily; reminders might be beneficial.
  • Too many tasks can overwhelm me; please just give me one, two or maybe three tasks to work on at a time.
  • As I work through my grief, I may change my mind, a lot, or I might be indecisive. Be patient and show compassion for me and my world that just got turned upside down. But be firm when urgent or time-sensitive issues must be addressed.
  • It’s ok to talk about my deceased spouse/partner. Let’s not act like they never existed.
  • Certain phrases are not appropriate:
    • He’s in a better place.
    • He’s not feeling pain anymore.
    • Time will heal.
    • Isn’t it time to get over this and move on?
    • You shouldn’t do this or shouldn’t do that (you are in no position to tell me what I should or shouldn’t do unless I specifically ask you).

Once my financial advisor research is complete, I will let you know my decision as to which financial advisor fits my needs best. Your time is truly appreciated. Thank you so much.


Dear Financial Advisor LetterSo, what do you think? Does this cover all the really important areas of your financial life, your concerns about working with a competent advisor and wondering if you’ve forgotten to ask an important question or didn’t even know such a question should be asked? I don’t recommend copying this blog post directly to provide it to a potential advisor. You can get the nicely formatted Dear Financial Advisor Letter™ as part of the Financial Advisor Evaluation & Selection Tool™ by clicking the image to the right.

For most new widows and widowers this letter should meet your needs. However, if your situation doesn’t match the contents of this letter, please contact me to discuss the possibility of customizing this letter for a fee.

Jim Schwartz, Certified Financial Planner™ ProfessionalNext Series of Posts. Social Security!  Answering the most asked question of the recently widowed, What Social Security benefit do I get after the death of my spouse? We’ll cover the basics, review the SS benefit statement, and look at many different scenarios involving younger widows, children, ex-spouses, remarriage, retirement versus spousal versus survivor benefits and more.  

Jim Schwartz, CFP®, RICP®
[email protected]
Blogger, Widowed Community Financial Blog
Twitter, @WidComm, @JimSchwartzCFP
Website, www.WidowedCommunity.com

Jim Schwartz is a Scottsdale, AZ fee-only financial planner with an expertise and interest in financial planning and education for widows and widowers.  Years of working with and advising widows, widowers, and surviving partners has provided a wealth of experience and knowledge in this complicated financial arena.  He is particularly skilled in his ability to guide his clients through difficult decisions while ensuring the stability of their finances. 

Contact Jim: If you would like to contact Jim directly, without submitting a public comment below, feel free to use the Contact page.

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