9 Questions To Ask A Flat Fee (or any!) Financial Advisor As You Near Retirement

Looking to hire a new financial planner to help you transition to retirement? With the flat fee financial advisor model being a relative newcomer within the financial planning industry, potential clients have a number of questions they tend to ask. Some that I get are unique to a flat fee financial advisor, while others could be asked of any financial planner you are considering working with. Here is a list of the 9 best questions I have personally been asked over the years that I believe are important, along with comments and answers for my own firm:

1. How many clients do you work with?

Some firms operate at scale and may serve hundreds of clients per advisor, while others prefer a more customized approach and therefore serve a smaller subset of families. Each approach can have its pros and cons, so it is important to understand how much time your advisor may be able to actually spend with you if you decide to work with them.

My goal is to maintain around 50 households that I work with on an ongoing basis so that each one is top of mind when things come up with markets, tax laws, or something else that may impact their financial life.

2. What happens if you get hit by the proverbial bus?

No matter how young or old we are, none of us are going to live forever. It’s good to understand that there is a contingency plan in place in case something unexpected happens to your advisor.

I have a contingency plan in place with another local fee-only financial planner who is approximately my age and also has a lot of experience. That way I can sleep a little better knowing both my clients and my family will be OK if anything ever happens to me.

3. Do you have your own financial planner?

I work with a lot of very financially savvy clients. Some of them even have the time, talent, and temperament to successfully manage their own investments. But whether they want to get a second opinion on their financial life or just want to have a trusted advisor in place for their spouse, they value having an independent third party to help them make financial decisions and quickly step in if they’re no longer able to continue managing their own financial life.

I can manage my own investments and enjoy implementing various financial planning strategies within my own life. But to me, it is incredibly valuable to know we have a trusted advisor in place that knows our financial situation well and can easily step in to help my family if I’m no longer able to do so.

4. What is your investment philosophy?

There are two main investment philosophies, active and passive, with many nuanced variations in between. Active investors watch the market and make moves trying to outperform it. Passive investors tend to focus on a proper allocation based on their risk tolerance and time horizon, keep their expenses low, and let the markets do the work. Historically, active management tends to underperform passive management over long time horizons. In fact, according to the most recent SPIVA Scorecard which ranks active fund managers against their appropriate index, over 95% of active U.S. equity funds underperformed their benchmark on a risk-adjusted basis over the last 20 years ending December 31, 2021.

I implement a passive investment strategy for both myself and the clients I serve. I look at client accounts at least quarterly, with rebalancing sometimes as little as once per year, based on market conditions and other factors. Tax loss harvesting strategies are also implemented when it makes sense to do so.

5. What fees will I incur working with you?

Depending on the relationship, financial advisors can charge a number of different ways, and it’s important to understand any financial incentives they may have before making a decision on whom you should hire. If you’re looking for a flat fee advisor, be careful of financial advisors who advertise they are “flat fee” for planning and then end up charging based on assets under management once you become a client. Also note that some advisors will get compensated more by placing you in certain products, such as an annuity or permanent life insurance policy that may or may not be in your best interests.

As detailed on my website, for ongoing services clients pay $950 upfront and then $2,500 per quarter. There is no additional fee for my firm to manage your investments, whether you’ve saved $1 million or $5 million. The only additional cost above that is if you decide to have us prepare your tax return, which varies depending on complexity.

6. Do you allow clients to manage their own investment portfolios?

While the typical person looking for a financial advisor would like assistance with managing their investments, there are a number of people who are very comfortable managing their own investments. Which one are you?

A number of the clients I serve self-manage their investments and look to me for guidance and to make sure there is nothing they are missing, typically with a focus on financial planning strategies.

7. What credentials do you have?

The financial industry is laden with various credentials, some with much more rigor and effort than others. Within financial planning, the three big ones are Certified Financial Planner (CFP®), Chartered Financial Analyst (CFA), and Certified Public Accountant (CPA). An Enrolled Agent (EA) can also be helpful for knowledge about taxes.

Personally, I hold the CFP® and CPA designations, as well as the Personal Financial Specialist (PFS) designation.

8. Are you a fiduciary ALL the time?

Many advisors are “dually registered.” Dually registered advisors can act as a fiduciary when providing financial planning advice, but might not be always acting in your best interests when trying to sell you an insurance policy, private REIT, or other financial product.

Fortunately, I am not dually registered and always put my client’s interests first.

9. Do you work with clients like me?

Ideally, your financial advisor will understand the challenges you are facing and will have faced similar questions and situations with other clients in the past.

The majority of our clients are financially independent or are striving to retire before the traditional retirement age of 65, with a number of them retiring in their 50’s or early 60’s and facing questions about health insurance before Medicare. We also work with mid to late-career professionals and DIY investors with more complex planning needs.