FAQ's
Introductory
I have never used a Financial Planner before, what should I expect? At our office, we like to keep things simple. Before you have a thorough understanding of our relationship, you will not be expected to pay for services. Initial consultations are complimentary.
Will I be asked to fill-out a lot of paperwork and reveal all my financial information prior to our first appointment? You will only provide what you feel comfortable with. We view the first appointment as an interview process, you are trying to figure out if you want to use our services and we are trying to figure out if you are a good fit for our firm.
I have a relationship with my bank, insurance agent and I have a retirement plan through my work. Why would I need a financial planner? You may not need a financial planner at this point in time. What we find is there are certain situations where people see a need for our assistance. Typically, this is when you have a lump sum of money and you are not sure what to do with it. This usually comes from: a retirement plan when you leave a place of employment, an inheritance, a sale of a business or real property.
Planning Considerations
I think I am getting close to being able to retire, how will I know if I am prepared to do so? The fundamentals of retirement are relatively simple; will your income cover your expenses. To figure this out, you need to determine: sources of income, cost of living adjustments, interest rates, inflation and rates of return to name a few. This is where we find some people need assistance.
We have heard about families who ended up in family disputes over money, do you have any ideas of how to prevent this? Sometimes the solutions are relatively simple and may just require some forethought. More complex situations might require you to seek advice from a team of experts. This may include an: attorney, tax accountant, professional trustees, real estate professionals, etc. We believe successful financial outcomes are usually coordinated efforts.
There are many investment advisors who make claims of superior performance or processes, however after I invest my money my portfolios never seem to be able to achieve the same results. One of the things to remember is the way investments gain popularity is by having superior past performance. One of the ways investment companies, money managers and investment advisors are able to distribute their products is by using historical information. As an investor, you hope to see a strong, long-term track record, but sometimes the investments that have performed well in the past, might just be the ones you don’t want to purchase today.
Fees and Expenses
Some people I have spoken to say to never use a financial advisor because they are too expensive and they only work with super wealthy folks. Is this true? If you are the type of person who lists their own house "for sale by owner" or likes to draft their own legal documents, our services might not be a good fit for you. That said our firm has been utilized from clients from all walks of life, races, professions and levels of net worth. We don't force investment minimums on new clients.
I have heard about financial advisory firms taking clients to five- star resorts, exclusive restaurants and providing high-end gifts. If I become your client, will I receive this kind of treatment? Whenever a business provides this type of treatment, I wonder who is paying for it. We would rather run a cost effective business that is sensitive to what you are paying. By doing so, with your excess income you can make the decision if you want to stay at the Ritz-Carlton, Motel 6 or something in between.
Investment Solutions
Previously, I invested some money with a financial firm but found the money was difficult to access or transfer after I made my initial investment. Is this how your firm operates? In our opinion, one of the most important benefits you should have is liquidity. What I mean by this is, if you invest your money today and later you change your mind or happen to need the money back, you are able to access it. Some financial institutions today attempt to "tie up" your money which is usually good for them, but not good for you.
I have heard about investments like Index Funds and Exchange Traded Funds that I can purchase for very little cost. Why wouldn't I just use these types of products instead of paying a higher cost for an advisor? A couple of things in relation to this. If you are going to manage the money yourself, this may be one of the least expensive ways to do it. A caveat to this is low cost funds like these used in a portfolio where you are still paying a higher than average fee to an advisor. Also, research has shown that the majority of investors lag in performance because of investment selection and poor timing, not the of cost their investments.
I have been approached to purchase an investment that I was told is a limited offering and will only be available for a short period of time. It sounds like a really good deal, although I feel pressured into making a decision while I have limited knowledge about it. What should I do? Usually, if it sounds too good to be true it probably is. If I am questioning my decision, usually I will resort to seeking counsel from qualified advisors. This may include your: attorney, tax accountant and other professional's who have knowledge in this area. After seeking this level of advice, you will most likely be making a much more informed decision.
Rules, Regulations and Safety
What is a Fiduciary?
The term “fiduciary” can be defined as an individual or entity that acts on behalf of someone or something else. In this role, the fiduciary must operate as if they are who they represent, in an effort to make decisions that are in their best interest.
To help protect consumers from conflicts of interest, the Improving Investment Advice for Workers & Retirees exemption requires that fiduciary investment advice providers:
- Give advice that is prudent,
- Give advice that is loyal,
- Follow their firm’s policies and procedures,
- Avoid misleading statements about conflicts of interest, fees, and investments,
- Charge no more than is reasonable for their services, and
- Give you basic information about their material conflicts of interest.
Since I am dually-registered with the SEC (Securities and Exchange Commission and FINRA (Financial Industry Regulatory Authority), I have the ability to operate under either the Investment Adviser Fiduciary Duty (SEC) and Regulation Best Interest (FINRA) arrangements.
I have heard about the Department of Labor's Fiduciary Rule, but it seems confusing. Can you explain how this applies to regular consumers like myself? This rule was passed in 2016 and went into effect on June 9, 2017. Essentially the rule states that advisors must act in the best interest of their clients. What this will most likely mean is the fees and expenses you pay will be more clearly disclosed. There also may be changes to the investment products and policies for your existing and future accounts. This rule is still being reviewed and we may continue to see revisions to it.
As of June 21, 2018, The U.S. Fifth Circuit Court of Appeals officially vacated the rule.
What is the Regulation Best Interest (Reg BI) standard? On June 5, 2019, the SEC adopted Regulation Best Interest (Reg BI) under the Securities Exchange Act of 1934. Reg BI establishes a “best interest” standard of conduct for broker-dealers and associated persons when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities, including recommendations of types of accounts. Firms must comply with Reg BI by June 30, 2020.
With the rise in identity theft, what security measures are taken to safeguard my assets? At Cetera Advisor Networks we recognize and respect the importance of your security, and take the protection of your personal information seriously. We are provided with a variety of financial software to assist in the day-to-day maintenance of client accounts. Some of the core features of the program include: policies and standards that govern information technology, resources to protect information assets and safeguard personal information. In addition to technologies such as: firewalls, encryption, endpoint protection, intrusion detection, intrusion prevention, and data loss prevention.