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Interview your Planner

untitledTim has answered 18 “What to Ask” questions from the popular book by Jason Zweig, “The Little Book of Safe Money”. It’s a fantastic way to get to know our firm and planner.

What made you want to become a financial advisor? I began my career in financial services thinking I was a financial advisor, but came to realize that I was essentially just an investment salesperson. In time I was able to see that my clients wanted objective advice and answers to financial planning questions and problems, but the conflict was apparent when the advisor is only paid for selling different financial products- like loaded mutual funds, annuities and other things. I saw the niche of working for my clients as a “Fee-only” advisor who is paid for my time and advice rather than for selling investments as what many clients were looking for.

Do you focus primarily or exclusively on asset management, or do you also have expertise in taxes, retirement, and estate planning, as well as budgeting and debt management? What education, training, experience, and licenses do you have in these practice areas? Timepiece Financial Planning focuses primarily on Planning, hence the name. Our philosophy is that investments are best implemented to match a personalized financial plan, which accounts for the items mentioned in the question. We do offer and provide ongoing investment management, however, it’s not required as part of working with us. With obvious bias, we feel that we bring a tremendous value to our clients who have us manage their investments, but for those who are happy and comfortable managing their own accounts we wholeheartedly provide planning advice only and continue to work with you on a project/hourly basis. I have a degree in Accounting from Washington State University and I’m a Certified Financial Planner (CFP®). I began working in financial services about 10 years ago.

What is your philosophy of investing? Do you rely mainly on index funds? (If the answer is “No,” ask to see evidence that the alternatives actually have worked.) How often do you typically trade for clients? Our investing philosophy does indeed rely on index funds. The data is very conclusive that actively managed mutual funds and other techniques of timing and selection have a super low probability of success compared to a static, diversified portfolio of index funds. Outside of annual rebalancing of portfolios, there is rarely any need to trade your accounts.

How high an average annual return on my investments do you think is feasible? (Anything above 10 percent suggests the adviser is either delusional or dishonest; answers below 8 percent start to make sense.) From year to year, asset classes such as stocks and bonds can vary up or down a great deal. For planning purposes, we use a “blended” return of the suggested allocation of different asset classes. Most often the average return for the long term is between 7 percent and 4 percent, depending on the individual situation and suggested allocation.

How do you manage risk? The key to successful investing is developing a strategy that will service your investment goals and then find a way to not abandon the portfolio when the inevitable periods of market stress come. Our strategy is two-fold: First, do the necessary work of creating a comprehensive financial plan that will dictate the overall investment portfolio and secondly, have someone to talk with when things get tough. A large part of why clients elect us to manage their investments is to keep themselves from making serious mistakes with their portfolios that investors are generally “hardwired” to make.

What needs and goals does your typical client have? We work with clients from all walks of life, but most of our practice involves working with couples a few years from, or recently, retired. It isn’t unusual for our clients to come to us frustrated with the conflicts of interest they experienced working with stockbrokers and insurance agents who they feel didn’t have their best interests in heart. Our typical clients describe their wish for an independent assessment and suggestions for their financial goals in a way that doesn’t make them wonder what the advisors incentives are.

How many clients do you have, and will you personally manage my account? How much time should I reasonably expect you to devote to me over the course of a typical year? We don’t disclose how many clients we “have,” but I personally manage client’s accounts who’ve elected to have it. For managed accounts, we attempt to meet at least once a year, and also talk by phone or email about 4 times per year. For planning only clients, we work together ongoing as they see fit. Some meet with me every year or so, other’s perhaps every few years.

Describe something you achieved for a client that makes you proud. I recently put a retirement plan together with a single woman who was perhaps frustrated and a little sad about her circumstances when she came to meet me. She had a number in mind of amount of money she needed to retire and didn’t have it. As a result, she had a hard time committing to the planning process and doing the work of determining what she needed to retire on her own terms. It was a special pleasure to help her realize that she had ample resources to retire with what she already had. I took pride in prodding her to work with me in putting the plan together when she was certain she wouldn’t like what we determined.

What’s the worst mistake you’ve made with a client? We’ve been very fortunate that we’ve never had what I’d consider any serious mistakes or problems that we’ve experienced with clients. The worst mistakes I recall are where our clients didn’t have a good understanding of what the advice would actually entail. For example, a client once asked what option he should elect for payout of his pension. The answer involves giving numerous assumptions that need to be considered to elect the best option for him. He just wanted me to check the box and was frustrated that my answer was, “it depends.” How do you go about resolving conflicts with clients? We guarantee our planning work, so if we present a plan and our client was unhappy with it for any reason, we would not charge for the work. (However, we keep the plan.) Since we’ve been in business, nobody has ever taken us up on this, but there is a first time for everything.

Describe the process you have in mind for helping me achieve my goals. How will you monitor our progress? By definition, financial planning is a process and not a one-time event. The process involves putting together a plan at the beginning and then revisiting the plan about once per year to see how things are progressing and what actions need to be taken. Along with this, it’s necessary to avoid doing things that hurt the plan, such as moving investments to cash during a bear market.

When recommending investments, do you accept any form of compensation from any third party? Why or why not? Timepiece Financial Planning is a “Registered Investment Advisor” and not a broker-dealer. Our licensing forbids any compensation from any third party. We are compensated only by our clients for financial planning projects and asset management fees from clients who elect to have us manage their investments.

How long will I have to decide whether to commit to actions you recommend? Are there circumstances under which I would have to make my mind up immediately? (That would be a no-no.) I’ve never had or can imagine a circumstance that a client would have to make a decision quickly.

What are your services likely to cost me in a typical year? What percentage of my assets will you charge in annual fees? How do you report your fees and commissions? The majority of the primary financial plans we put together typically cost between $2500- $3500. Subsequent reviews after the initial plan are usually around $350. For asset management we charge 0.75% of the accounts we actually manage. We provide advice on other accounts such as your 401K, but don’t charge a management fee on those balances. Our management fee is about 25% lower than most independent advisors and it’s shown on your brokerage statements. Clients pay trading costs in their accounts which are very low since the accounts are rarely traded.

May I see a sample account statement, and can you explain it to me clearly? Yes, of course.

What does money mean to you? Do you consider yourself financially successful? When I think of money, I think “options.” With more wealth come more options and choices for what to do with your life and your time. I would not consider myself wealthy, but my profession has helped me and my family by knowing how to make the most of what we do have and having a plan to follow our shared financial goals.

 

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