Episode #5 – Fiduciary vs. Salesperson: How to Pick the Right Financial Advisor

Welcome to the Millennial Money Moves Podcast. On this episode, we’re going to be taking a look at what it means to be a financial fiduciary. Then with that knowledge, how do you pick a financial advisor that’s right for you?

This content is purely educational and does not tend to be financial advice or financial planning. Please consult your professional financial advisor or tax professional to receive tailored advice to your personal situation.

Babin Wealth Management is not responsible for action taken by listeners based on the educational content provided. If you would like to receive personal financial advice, please reach out to Babin Wealth Management directly at babinwealth.com.

Let’s make moves. All right. Welcome to another episode of the Millennial Money Moves Podcast.

I’m your host, Sean Babin, and we got our co-host, Blake Bandini.

The one and only.

Back at it again. Good to see you, man.

Always good to see you, Sean.

So today, we are going to be talking about what a fiduciary is, what it isn’t, kind of go into the depths of that. I think fiduciaries become such a buzzword.

Big time.

In the financial industry space, and there’s good marketing ploys behind it, so you see it on TV. Anytime you Google, working with a financial advisor, typically it comes up, make sure they’re a fiduciary. So let’s talk about what that is.

And then I want to dive into, now that we have the knowledge of what a fiduciary is, let’s talk about picking a financial advisor, interviewing them, what questions to bring to the table, things that I tell clients and prospects to do.

Just if you’re interviewing me, here’s what you should be asking the next person.

Love it.

So that’s kind of the outline, I think, that I want to go today with. Anything from you?

No, I think that’s perfect. You said it best earlier. It’s just the buzzword, so you’re gonna hear it a lot, but what does it actually mean?

Exactly.

It gets thrown around a lot. All the time. And the definition is ridiculously simple.

And so it’s kind of fascinating, I think, when you unpack it, how simple the definition is, but it goes so much deeper under the surface. And so we want to kind of unpack that for the listeners. So yeah, let’s kick it off.

Let’s start.

So what is a fiduciary, Sean?

Yeah, man, I’m just gonna read some definitions. It’s probably the easiest here. We’ll kind of go into it.

And let’s unpack it.

Yeah, let’s do it. We can read it and then unpack it.

All right, so a fiduciary is a person or entity who acts on behalf of another and is legally obligated to prioritize that person’s interest over their own. So that’s literally what a fiduciary is. My job is to put your interest ahead of mine.

And so they must act with loyalty, care, and in good faith when managing the other person’s money or property.

Sounds pretty straightforward as far as having someone be your financial advisor. You kind of hope they’d be your fiduciary, no?

Absolutely. But think of how simple that is. I’m putting your best interests ahead of mine.

How do you know that’s actually happening? Okay, so a little more detailed explanation. And so fiduciaries are entrusted with making decisions or managing assets for someone else, such as a client, a beneficiary, or a company.

And a fiduciary, there’s three duties that kind of come with the definition of it. There’s the duty of loyalty, the duty of care, and the duty of good faith.

So the duty of loyalty, fiduciaries must act in the best interests of the person they represent, avoiding conflicts of interest, and prioritizing their client’s needs.

Duty of care, they are expected to exercise reasonable care and diligence in managing the assets or making decisions, ensuring they act prudently and avoid causing harm.

Duty of good faith, fiduciaries must act honestly and fairly, avoiding self-dealing or actions that benefit themselves at the expense of the person they represent. So, some good examples of being in a fiduciary capacity is a trustee for a trust.

You have a fiduciary responsibility as the trustee to make sure the trust is followed as it’s written.

Guardians, taking care of miners, you have a fiduciary responsibility to make sure any assets that they inherit are executed in the best way for the benefit of those kids.

And then estate administrators, company directors, and then finally, financial advisors.

Well said, Sean, as far as the definitions. But I guess, help me understand. When I hear you talk about it, shouldn’t every financial advisor be a fiduciary then, if you’re trusting someone with your individual wealth?

Yes, you would think that they all are, right?

Like you just hear those definitions and you’re thinking, yeah, that’s gotta be what they’re all doing, right?

I would think so, but tell me if I’m wrong.

Yeah, I think you are wrong just by the way that the industry is kind of set up.

So how I look at it from my point of view is a fiduciary, a true fiduciary is somebody who has reduced all conflicts of interest to pretty much nil, meaning that their interests are aligned with you, and it’s that Fisher Investment commercial, God

love them, it’s so brilliant, that they do better when their clients do better. And that’s what a true fiduciary is, and they only get paid when you’re making more money, the advisor in that capacity is only making more money.

Let’s dive into it, like how advisors can get paid in a fiduciary capacity.

And before we do, sorry to throw a curve ball at you, but there was the fiduciary ruling, I think in 2016 era, maybe, where it used to be if it was a suitable investment, the advisors were protected.

I don’t think it ever officially got passed through.

But there was ideas that it can’t just be suitable, meaning if it suited the client, it had to be a fiduciary ruling, meaning it was the best interest for the client, not just that it was suitable for the client.

Is that where this all kind of stemmed and why it became a buzzword and a hot topic because of that whole suitability versus fiduciary?

Yeah, great point. Absolutely. I think that’s where it gains traction anytime they put it into law.

So yeah, so now not only do you have a suitability duty, you have a fiduciary duty too. So one, whatever our recommendations are, have to be in your best interest and suitable for you. Those kind of go hand in hand, but there are some caveats to it.

Well, and I bring it up because it kind of helped me understand fiduciary a little bit more.

If you think about it, not to name names, but you could, as a company that I represented, or I represented, you could ultimately pick suitable products. They suited the client, and you could defend that.

But were they the best product out there for the client?

Correct.

Right? That’s the key. Right now, the fiduciary side of things is saying, I’m not going to do what’s suitable.

I’m going to do what’s best. And that’s what scared a lot of broker dealers, RIAs, you name it, because, whoa, whoa, whoa. We used to be able to defend that this was suitable.

We may not have access to the best options in the market or the best products out there. And that scared the heck out of a lot of big firms and wirehouses and broker dealers, right?

Absolutely. And those big firms, and when Blake says wirehouses, Yeah, sorry about that. You want to break it down?

No, I owe a dollar in a jar or something for using terminology like that.

Go ahead.

Yeah, so big wirehouses are like the Morgan Stanley’s, Merrill Lynch’s of the world. They’ve kind of got everything, the all-in-house kind of products for you and kind of want, you’ve got your banking, you’ve got your wealth management.

Wirehouses, right.

Yeah, big time institutions. So you’re absolutely right.

So what has happened is in my, I don’t even think it’s, I think there’s factual, like a place like Morgan Stanley, JP Morgan Chase, Edward Jones, Fidelity, they can’t call themselves fiduciaries.

Because they have so many different revenue streams, so many behind closed doors deals to allow products on their platforms.

Like, that was fascinating, learning about Edward Jones, was the amount of money that companies like BlackRock, American Funds, MFS, all these big mutual fund companies, the amount of money they paid Edward Jones to be on their platform for their

advisors to access, I think that eliminates their fiduciary role right then and there. It’s a pay-to-play system. Is that in their client’s best interest?

Well, was it suitable? Maybe, but is it in the best interest? That’s the key for this conversation today.

So now we get back to your point. Prospect, looking for some help managing their money and their individual wealth, do they just flat out ask in meetings, hey, are you a fiduciary? Is it as simple as that?

Yes, in the sense of a lot more people are asking that question, are you a fiduciary?

But again, and somebody can answer yes, but you need to understand kind of their business model, which is a little bit deeper for the average person, but basically it’s asking, how do you get paid, and what products do they have access to?

So going back to kind of the big institutions, the big companies, they have so many different products that they can sell and end client.

They can sell you life insurance, they can sell you an annuity, they can sell you investments that they charge you a commission, or that you charge a management fee. And that’s four different ways that they can make money off you.

So if you came to them with $100,000, and you’re interviewing an Edward Jones financial advisor, for example, you’re sitting across the desk from them, hoping that with this $100,000, they’re going to listen to you and put that money to use in your

best interest. And that Edward Jones advisor could potentially push that $100,000 into a more beneficial position for them.

They could make more money off of selling you an annuity, off of a whole life policy, than putting you maybe into a better suitable product, like maybe just an investment portfolio.

They can also put you into an investment portfolio that charges commission versus a management fee. So they make, I don’t know what the exact percentage is, but let’s call it 3% or 4% right off the top from you.

And then every time they make a recommendation, they could make another commission for that recommendation.

So those are the questions you have to be asking, and we’ll get to that when picking a financial advisor, is understanding the way that they make money off you, and does that align with your interests?

So again, back to the Fisher Investment commercial.

You see it all the time.

We do, yeah, it’s everywhere. And I love, and their marketing scheme is amazing. It’s so simple.

We do better when our clients do better. So there’s two terms I want the listeners to know. There’s what’s called a fee-only advisor and a fee-based advisor.

Big difference, huh?

Big difference.

Sounds very similar, though.

I’m already a little confused, so break it down for me.

And people mess it up. I think I’ve messed it up in a meeting, too. So a fee-only advisor is a financial advisor that only charges a management fee.

There’s no other way for them to make money. And what a management fee is, is they charge a percentage of the assets that they manage for you. So let’s just do simple numbers.

You have $100,000 invested with your financial advisor. They’re charging you a management fee of 1%. They are making $1,000 a year off you if the $100,000 stays the same for the whole year.

But what I love about a management fee is it aligns both advisor and client’s best interests. The advisor makes more money when the client makes more money. So if $100,000 grows to $120,000, yes, 1% of 120 is greater than 100, but that’s the point.

Now the advisor is kind of incentivized or wants you to do better, so in turn they do better. And that is the Fisher Investment Commercial. We do better when our clients do better.

And that’s exactly what you want. And if the market goes down and your 100 goes to 80, then the advisor’s revenue is lower too. Again, you’re in the same boat rowing the same direction, and that is the fee-only model for financial advisors.

Then there’s the fee-based model, meaning they can charge a fee, and they can charge, and they can do all kinds of other things too.

They could sell you insurance, they could sell you annuities, long-term care, whatever the case might be, and they’ll make a commission off that as well as managing your money. There is one other avenue.

Oh boy, I just had it, John.

That’s kind of come to the table. Fee-for-advice model.

Basically, instead of paying an advisor a percentage of the assets they manage for you, you are just paying either a monthly payment or a one-time payment, something like that, where it has notes tied to how much money you have, and it’s just, hey,

we’re gonna create a financial plan for you. It’s gonna cost $5,000, and then you’re gonna pay like a subscription model, $200 a month for ongoing advice and planning.

But regardless of how the portfolio does or the investment account, they’re getting their fee.

Correct. And typically, the investment accounts aren’t with the advisor. They’ll help set you up at Schwab or something like that.

But you’re kind of managing your own money, but you have the guidance of a professional financial advisor.

I mean, the fee for advice may sound good if the accounts keep rising, but if the account’s falling, you’re still paying that same fee, whereas the fee for advisory, right? They’re falling with you, as you said, rolling the boat.

Yeah. I mean, you invest to make money. It kind of is supposed to make money.

I think it comes down to the position that you’re in. For sure. Let’s say all your money is in your 401k.

And this advisor has a $250,000 minimum to work with them to do like AUM model or fee only model. And you don’t have that kind of money. So then they have the fee for advice model, where yes, you can still work with us.

You can get our guidance. We’ll put a financial plan in place for you. We’ll help review your 401k, make sure it’s invested the correct way.

And you get a financial advisor for that 200, whatever they’re charging them on. But I love that service model too.

So do you, in your own practice, is it based off of the client you’re working with, or do you typically lean on one of the options? What do you typically do?

Yeah, the client gets to choose if they want to do what we call comprehensive wealth management, where we actually manage your money and do that ongoing financial planning and financial advice, and charge that AUM fee or fee-only kind of management

fee. And then we do have that fee-only advice model for clients that don’t have maybe our minimum, but still want to work with us. So that’s why I wanted the two different service models, is basically allows me to work with all walks of life.

Exactly. What makes most sense for the client.

Exactly.

But so then the fee-based perspective, and we’re doing a lot of the different models here, but the fee-based is not something you would do.

No, the fee-based model is not something I even have access to. Like, I’m not set up that way. As an RIA, registered investment advisor, and a fiduciary, I just have those two service models.

So the fee-based is more like the big institutions that do have all the products available to you. Now, I think they do a good job of selling you. Like, that’s good for you.

It is nice that your advisor at a big firm, maybe like a Fidelity, Charles Schwab, Edward Jones, can help you get long-term care, help you get life insurance, get an annuity for you, if that’s what you really, really want.

But I think you’ll see a shift in the industry towards having the fee-only model and then utilizing experts like brokers to do the other business. So like if a client with me wants an annuity, then I say, that’s great.

Here’s, I have a couple people that you can talk to, or you can do the diligence on your own and kind of meet with them, talk to them, and then we all will meet and talk together.

And I’ll help you pick the best annuity for you, and I can act as like an independent third party in that case, versus being like, oh great, you want an annuity? Yeah, I can sell you that. Here’s an annuity I like.

And you don’t know that it has a 5% commission upfront for me, and we just put some of your money into it, and then I just made a bunch of money off of it.

But it is still fair to say that in either scenarios, they could all still claim to be a fiduciary.

I guess they could. You don’t see, though, and I find this interesting. In the big time companies, you do not see their commercials saying that they’re fiduciaries.

Fisher, for example, is one of the largest, if not the largest, RIAs in the country. So again, RIA, Registered Investment Advisory Firm. So they’re independent.

They’re their own firm. They’re not a big wire house, like Blake talked about, or one of the big, big bad boy financial institutions.

So they do have their model structured where they’re just making that fee based off of the AUM that they’re managing. AUM stands for Assets Under Management.

Dollar in the Jar?

Yup.

But, okay, so I think it’s, what’s important to unpack here is even in this fee-based idea where they can sell you on the investments, but they’re also gonna probably pitch some product lines that they have access to that can help them make a little

Yeah, I think, I mean, there’s nasty stuff, there’s things I’ve seen.

I know. Prior companies I’ve worked for and other companies that I know people who work at. So like, let’s say your advisor works on a commission base with you, meaning they only make money when they sell you something.

So what happens is you come in the door, they’ll sell you, hey, instead of paying me 1% a year, you’re going to pay 4% or 5% up front, and then you’re done. You don’t have any fees after that. But guess what?

Two years into it, they come knocking, and they tell you, I don’t like this company anymore. We’re going to go buy these funds. And then, boom, you are now getting hit with another commission.

A firm, I won’t mention the name that I worked at. But I saw advisors flipping A shares. A shares are mutual funds that have commissions up front, flipping A shares every two years to their clients.

So basically, hey, I hadn’t made any money off this client in the last two years. I’ve met with them. We’ve done good financial planning.

It’s time for me to make more money off of them. Whether that is their real thinking or not, they sell you something new. And that isn’t a relationship that you want with a financial advisor.

Right.

I say pay the 1% a year for the rest of your life versus for one minute thinking that this guy or gal is trying to sell you something so they can make more money off you.

So like when I recommend a change to my clients, whether it’s just, hey, we found a better fund that fits our portfolios better, it’s cheaper, it’s got a better return, whatever the case might be, it doesn’t cost my clients a penny.

And the hope is I’m making this recommendation or change throughout our entire firm because it’s gonna make all my clients more money, and then in turn, myself more money.

And prioritize that person’s interests above their own.

Exactly.

Which was in that nice, what’s the dictionary, Webster dictionary? Is it Webber?

Yeah, in the Webster.

Webster of what a fiduciary is. So that’s huge, Sean, right? Because at the end of the day, why are you even using a financial advisor in the first place?

I think because you hope to have your best interests in mind.

Exactly.

And I don’t know, sitting across from you, I wonder why I would ever not do something in that capacity of, well, if the account’s growing, you do deserve a raise. If it’s dropping, you don’t deserve a raise, right?

That is just a nice kind of way to have it. Again, it aligns both your interests. I love this line.

You’re in the same boat rowing the same direction. You do better, I’m doing better.

So how could a prospect or client that maybe is using a current advisor sniff this out? How can they look out for this? Was it what you said earlier?

Just ask how you get paid?

Yeah, you have to be blunt. What am I paying you? And what are other ways you can get paid?

So do you have the ability to charge commissions or sell other products? So do you have the ability to sell me an annuity, a long-term care policy, life insurance, different commission-based investments?

And so yeah, your next review with your advisor, if they’re not proactively telling you every year how they make money off you, they absolutely should be. And if they’re not, you should ask that.

And then ask even a step further, if they say, hey, you’re in a managed account, meaning that management fee model that I talked about, they’re making money based on the value of your account, is that the only avenue you have to make money off me?

Because that was the big firms I worked at. Yes, the fee model was very much a thing, and a lot of clients had money in those accounts. That was just a natural fit for most people.

But do you have the ability to call me in a down market and sell me an annuity based out of fear and make another, like I said, 4% to 6% in a commission? So that’s the issue, like I’m saying.

If a visor is able to grow across that many different product lines, they can take advantage of up markets, down markets, sideways markets, and come to you with a bunch of good ideas that make them more money than a bunch of good ideas that hopefully

they only make more money when you make more money. They have to actually come to fruition for that visor to make more money.

And I think it’s important to highlight that we’re not here today just saying, oh, well, you don’t need long term care, you don’t need an annuity. It’s important to highlight that that still may be a very much needed product.

But what you need to think about is, was it the right product and why this product specifically?

Exactly.

And when the visor gets to act in a completely unbiased third party in that situation, whether they’re putting you in touch with their annuity person or their long term care person, or you go find them themselves, and they can come to that meeting

and ask really good questions, how much does it cost? What are your commissions? I mean, that’s an interesting thing that I would say 90% of clients don’t even ask, like, hey, how much are you making off this annuity?

How much are you making off this long term care policy or this life insurance policy that you’re selling me? So if an advisor is in that meeting, I guarantee they’re going to ask that broker, okay, what’s your commission? How much are you making?

What is the different commissions between the different products? And that’s what I love about the role of being in a true fiduciary standpoint is now me and the client don’t have to make a decision right there.

We can go back with all the information we have and make the best decision together. Which again, you hope that if your advisor is selling you this, that they’re doing just that too. They’re laying it out as clear as day.

And if they are, great. You’re working with a great person. They outline the pros and cons of the different ones.

They show you how much they’re going to make versus the other ones. And then you get to kind of digest it, take it home, see how it feels, and then come back and make the decision. Wonderful.

But I would say the majority times the in clients don’t want to put in a ton of work into understanding the difference between this annuity and that annuity. They trust their advisor to make that decision for them.

The advisor comes to the table, says, hey, this is the product that I think best fits this current situation you’re in. And they sure as heck most times do not tell you how much they’re going to make off of it.

And I think that’s the key word in this conversation is trust, right? Because a lot of times, and I’m one of those consumers where if I trust someone, I’m not really second guessing anything because I have built that trust.

But how many times do you hear about it in the news lines and the story lines about pro athletes that are suing their brother or suing their brother-in-law, right?

Because they assume that they were taking care of their accounts, but they really weren’t.

Or their quote unquote professional financial advisors that probably weren’t acting in a fiduciary capacity.

So it’s just as the viewers hear this and think about it, and we hate to get too technical, but it is these are important questions to ask yourself when you decide to work with the financial advisor, because this is your money, you’ve accumulated it,

Exactly.

And so it’s understanding again, I think the two biggest conflicts of interests are, how do they get paid, and what products do they have access to?

Right.

Because a trusted friend and somebody I know who’s worked at one of the large companies has told me stories internally of them getting pressured to sell more of that firm’s investments. It starts with an F. I’ll let you guess from there.

It’s a big company. It starts with an F. Your 401Ks might be there.

But in house, they would have like, hey, you need to get more of these clients’ money into our own products and competitions and promotions and different carrots tied to getting your money into their internal proprietary funds.

Is that in the client’s best interest or is that in the firm’s best interest?

And they could probably argue, well, it was suitable for the client, but was it the best interest of the client?

Correct. And I think if you, the end client, knew that if your advisor was calling you and saying, we need to put more money into these funds, I don’t like those funds.

And if you knew that they were going to make more from that recommendation than not making that recommendation, would you go through with it or not?

I love it.

So, again, the two biggest conflicts that I think you need to have a full understanding when, if someone’s a fiduciary or not, is how do they get paid, and what are the different products that they can sell you?

And if it’s one way to get paid, and one form of, you know, product line, that in turn, that is my belief that they are a true fiduciary, and they’ve eliminated as many conflicts of interest as possible.

Well said. So, now into the other aspect of the conversation, and obviously being a fiduciary, as we mentioned, is a key point, but picking an advisor, right? Obviously, are you a fiduciary?

How do you get paid is great questions. On top of that, is it, what should a prospect be looking for?

Like, outside of the fiduciary, and how do you get paid, and how do you make commissions, and all that, what are some other things you think are important for a prospect to ask an advisor if they’re filling out different advisors?

Let’s dive into it.

Yeah.

Okay, but I want to start with this one with you. Just because I’m curious, if you had to look up a financial advisor or find one, what would be your first move? Like, if you’re like, hey, I need a financial advisor.

I think I’ve got some, you know, I want somebody to look at my money. What would you do?

I would call you, but if I didn’t have access to you, I’d probably Google.

Okay.

Yep, and then not just Google, you know, what is a financial advisor? I’d probably use Google to see what advisors are nearby, proximity, right, in my backyard. And honestly, no different than like a restaurant.

Maybe look at some reviews and see what people are saying that have worked with those advisors. Am I wrong with that answer or what?

No, I think that’s exactly what people do these days. It’s either they ask their friends, hey, do you work with somebody, or they Google it and they look at five star ratings, the closest to them. So that’s a great start.

And that’s where I think most people go from. But it’s daunting. You’re just interviewing, you know, like it’s like interviewing for a job.

You’re gonna go sit on these, there’s a lot of work. We request, you know, typically documents from people. Anyways, and don’t want to get too deep in that.

But why I say that is, as easy it is to find them, it’s time consuming to interview. But I always tell every prospect, you need to interview two to three financial advisors.

Minimum, huh?

Absolutely, because you want to see different, you know, services, different prices.

Compare.

You want to be able to compare, and you want to find somebody you hit it off with.

Of course.

Like you want to leave that meeting feeling like that advisor understands you and your financial goals, and that you could see yourself working with that person.

So unless that happens on the first time, you know, typically, for me, it’s like if a friend comes and wants to work with me, or, you know, a really warm referral, great.

And you want to move forward after that, you don’t need to talk to anybody, fine.

But if you’re just searching coldly, and you’re just going down the Google, make sure you’re interviewing at least two to three financial advisors before you make your decision up. So that’s where I start with everybody.

The next most important thing, I think, is experience over credentials. So credentials…

Break that one down.

Experiences how long… If you’re going to go work with a financial advisor, how long have they been doing this?

And so if they’ve been an industry vet, and that to me is like ten years plus, you’ve been doing this for a while, they’ve seen almost everything, they’ve had the time to hone in their craft, that’s to be more sought after than let’s say someone

who’s been in the industry for two years and is a CFP. So what I see a lot now is kids coming out of college because there’s CFP courses. CFP stands for Certified Financial Planner.

And there are courses in college that you can take, so when you leave, you go sit for the CFP exam, you get it right away.

It is definitely a good thing to have if you’re going to be a financial advisor and in this industry for a while, because I would say in the next 20 years, if you don’t have one, people aren’t going to work with you.

But again, it’s expertise or experience over certifications. So that’s another thing that I tell people, make sure you know how long that person has been in the industry, in that financial advisor capacity. And if they have a CFP, then great.

But if you’re looking at a 10-year vet versus somebody who just started two years ago and is a CFP, I’m going with the 10-year vet.

And to your point, Sean, I mean, the CFP is grueling. It’s a hell of a credential to get.

But just like in any other type of service or anything you may be looking for as a consumer, do you want someone with the alphabet soup that has only been doing it for a year and a half?

Or do you want someone that’s actually been doing it for 10 years plus? In any type of product solution service, you’re going to take the experience all day.

Yeah, I mean, from personal standpoint, I wasn’t fully comfortable with every situation until probably year four or five.

Bingo. Because it’s stuff that textbooks can’t teach you, and that’s anything, anyone that’s been through schooling knows, it’s like, yeah, you can pass a test, but when you actually have to apply it, does your study guides help you apply stuff?

Not all the time.

Yeah, and I would say most of us study for a test, and as soon as the test is over, it’s over.

So what it takes is seeing something multiple times, and being at different firms and seeing the hiring processes and bringing in new people all the time is great because it allows a lot of different backgrounds to come into the industry, and

eventually those people are going to be wonderful. But if you’re interviewing someone to trust with your money, again, unless it’s friends or family and you’re helping them out and going for it, great.

Don’t have that set up and you really need to interview unbiased financial advisors, make sure that experience is there for them. Because there are a lot of things that take it from me.

You don’t get right or you don’t fully understand, or you give some bad advice in those first three to four years.

Totally agree. But I do, I guess, want to point out and have a soft spot is, it doesn’t necessarily mean that that person that’s only has a year and a half experience is a bad choice either, right? Is it the best?

Maybe I can’t make that call, but I also say, I don’t think you should not give everyone an opportunity, but I think to your point, it is probably a pretty good deciding factor when you do select an advisor.

Yeah, absolutely.

Because we all start somewhere, Sean, you know?

No, and I did too. And I appreciate everyone who gave me the confidence. And I had to back some things out, call some clients, and be like, hey, I gave you some wrong advice here, and unwind it, and fix it for them.

But yeah, I guess what I’m trying to say is line up, if you’re interviewing three, two people, line up their experiences and their certifications, and just kind of see where they match.

Again, if you’ve got someone who’s doing it for two years and they’re a CFP versus somebody who’s doing it for 10 years, and the services are pretty similar, fees are pretty similar.

That’s the key.

It all goes in it. And this is another thing that I find fascinating that people confuse, too, is they look at the competen… How do I say this nicely?

It is not the competence of the firm that you work with. It’s the competence of the advisor that you work with. And again, I’m picking on Edward Jones because I was there for five years.

A lot of clients, when I left Edward Jones and came and started my own company, a few of them didn’t come with me because they thought Edward Jones was this end-all be-all.

Like, they didn’t know Babin Wealth Management, but Edward Jones had been around for 100 years. And so there’s this interesting thing that I think a client who works at a big firm, they get comfortable with that.

But Edward Jones doesn’t owe you a thing. Fidelity doesn’t owe you a thing. Charles Schwab doesn’t owe you a thing.

It’s all about the competence of the financial advisor that you’re working with at said firm. So I thought that was fascinating, because what happened was the person who backfilled my office was brand new.

And so clients decided not to come with me and stay with Edward Jones, and they traded a 13-year experienced advisor for someone who had been there for 18 months.

Because of the name.

Because they thought Edward Jones was still there for him.

Great point.

It makes me crazy, because Edward Jones doesn’t come to their advisors and say, hey, did you make sure that Blake Bandani maxed out as Roth for 2024 or as Roth for 2025? Hey, did you know Blake Bandani should be doing backdoor Roth contributions?

You can’t do it. They don’t give you the advice that you should be giving your clients. They give you the platform to be a good advisor and give you everything you need to make sure Blake succeeds.

But again, it’s all about the competence of the financial advisor you’re working with, not the competence of the firm. Right. I’m going to dive into a couple more points that I think really hit home on trying to work with a good financial advisor.

I’m going to have to shop you, Sean, after this.

I don’t know, man.

Yeah, dude, you never made the appointment after the Roth conversation. I’m still wondering when we’re going to get to that.

Let’s get into it, though. So obviously, yeah, go ahead.

So we did step one, ask friends and family or go on Google. I think that’s potentially where we live now.

It’s our new day and age.

Two, experience over credentials. And then three is understand the advisors process.

Break that down. Come on.

Okay. So a finance, you go interview a financial advisor. They should be telling you what they’re going to do for you.

Are they doing financial planning? Are they doing retirement planning, tax planning, estate planning?

What is their process going to be for you in regards to downloading everything there is to know about you and your family and putting a plan in place to hit your financial goals? So is that going to take a month? Is it going to take a year?

A week? What does that process look like? So understand that because everybody’s process is a little bit different.

I think you should leave that first meeting feeling like you’ve been heard, that you’ve been listened to. If you go in there and it’s a 50-minute presentation about how their firm is so awesome, what do they know about you? Like, they don’t.

So I always try and take the time for my meetings, the first 30 minutes, is tell me everything about you and your family and where you’re from, what you’re doing, and what you want to accomplish with your money.

And then let me tell you about my firm, because you got to leave the meeting knowing something about how we work with our clients, what we charge, blah, blah, blah, blah. So make sure that you feel like you’ve been heard when you leave that room.

And if you haven’t, and they just talked about themselves the whole time, red flag. Again, understand how they’ve been compensated. We talked about that a lot.

Huge.

And ask.

If they didn’t bring it up, you have to ask. Obviously, they should disclose all of that. You’re not going to move forward, I would imagine, with somebody if you left the first meeting and you’re like, how do they make money?

But ask those couple of next questions. Is this the only way you make money? Can you sell me other products?

What, you know, is there any commission tied with working with me? Do you work off commission? Are you salary?

How does that work? Understand their pay, because that will inevitably affect your overall relationship with that advisor. Thoughts?

Any thoughts on that?

I think that’s spot on. Okay.

And then a couple last ones. We got understand your commitment, meaning what is it going to get? What is it going to take from you to get up and running with this advisor?

And then what are your scheduled meetings with this person or firm? And is that enough for you? You know, typically I would say depending on how much money you have, you’re meeting with an advisor one to four times a year.

We are proactively going to reach out to you this many times a year. Is that enough or is that too much for you? And then this is something I think most people don’t ever think to ask about, but you absolutely can ask for references.

Oh, well said.

I didn’t even think about that.

No, and I think most people don’t know that you can absolutely ask a financial advisor for references. Now, hand up, we ask our best clients to be our references.

But if you have trouble giving two referrals or references, that’s a red flag.

Yeah, absolutely. All right. It is gonna be a little biased, no matter where you go.

But still.

But it is nice hearing from other clients that are getting serviced well that will tell you, if you ask, like, hey, does Sean actually reach out to you twice a year or three times?

Like you said, does he adjust this? Does he actually do tax planning? You know, those kind of things.

You can have those conversations with a real live client. Again, it’s a little biased, but it’s also something that I think is absolutely suiting. It’s something you should ask for if you feel comfortable asking for that.

I love it, Sean.

So we got in very in depth on to what you should ask, what you should look for, how do you look for an advisor?

Obviously, we earlier spoke about fiduciaries, but if you’re cool with it, I’d love to just ask from your perspective, and I bet you could ask 10 advisors and probably get 10 different answers, but when should someone look to seek an advisor?

Kind of a loaded question. And again, I think you’ll get 10 different answers, but just from your perspective, I’m sure there’s a lot of different variables to this answer, but when is a good time to seek an advisor?

I love that. And then can we also talk about when’s a good time to seek another advisor?

I love it. Let’s get to the when should I seek an advisor first? In your perspective, honestly, when should a consumer or a prospect be like, you know what, I think it’s time for an advisor.

What do you think?

I think it’s when you start making enough money that you don’t know what to do with it. Not three, four, 500,000 a year, but you’re putting money in your 401k.

Maxing out K, saving.

You have more money coming in each month than going out, and you’re wondering, what tax effectively should I be doing this? How should I make this grow? I’ve got a great savings account.

Is that too much? Is it too little? Because that’s a common mistake I think most Americans make, is they don’t trust the market or investing.

They’re intimidated by it. So they shove all their money every month into their savings account. They make 3.5% for the next 10 years, while the stock market makes 10% a year for the next 10 years.

And they are well behind the game in regards to how much money they could have had at the end of it.

I love it. What about if you come across an inheritance, some type of beneficiary, you’re a beneficiary of some type of insurance? I think that’s probably another good time.

Yeah, if we’re talking life events.

Thank you.

I couldn’t think of that one.

Life events.

Huge, right? That’s probably time to consult.

Getting married, then having a kid, get an inheritance, buying your first home.

All key things to think about.

Absolutely. That’s when, you know, those are those moments in life where I think it is worth delegating to a financial professional so that that’s their job and it isn’t yours anymore.

Every day, that is their job to make sure your money is working for you and you do the best that it can be and you get to live your life. It’s all about knowing when to leverage your time.

And I think people hold on to doing finances on their own because it is so easy in regards to you get a Schwab app, you get a Fidelity app.

Put some money in it.

Just put some money in it. Oh, I can do this on myself.

Totally.

But you can easily do it wrong, which I hope the first three, four episodes have shown you that there’s a lot of nuances that a paid professional is well worth doing. I use this example in all my client meetings.

I think it’s so funny and stupid all at the same time. I pay every week for somebody to come clean my pool.

Break it down.

The amount of risk involved in a clean pool is so minimal, but I know that it’s not worth my time to clean my pool every week. And if I can pay somebody to come out every week and my pool looks beautiful every time I look at it.

Worth it.

Well worth it. The amount of risk involved with doing your own finances is so high, but for whatever reason, tons of Americans think that they can do it.

And I’m trying to break that down on the podcast episode by episode that again, it’s the best resource to leverage your time and make sure you’re getting the maximum output for your money.

Nail on the head, right? I think in any aspect, like could I learn how to sheetrock? I think so.

I’m a pretty smart guy. Could I learn how to fix up my own cart? Absolutely.

But do I have the time to actually do it properly? Why is that any different with my finances?

Absolutely. And then what’s interesting when people do manage their own money is the emotional roller coaster they’re going. Like imagine being solely responsible for your family’s finances, and the market goes down 20%.

I think you’re going to be in a bad place with your family, and they’re going to pick up.

All right. So then you wanted to wrap it up with, all right, I’ve decided to use a financial advisor, and I’ve interviewed a couple, and I really like this Sean guy. Awesome.

When should someone look at saying, maybe it’s time for a change? What are some key areas?

Yeah, I think this is a great one to end it on, is I think in your gut, for most prospects that come to me with, hey, I’m just not getting the service I need from my advisor.

So where I was going with that, is I think in your gut, you know, the amount of times a prospect comes and says, I haven’t heard from my advisor in over a year, if your advisor isn’t proactively, meaning dialing your phone number and calling you and

setting up time to talk to you at the bare minimum once a year, then what are you paying them for? Now, if you’re busy and you have life events, that’s fine. You can absolutely say, hey, now is not a good time.

But if there isn’t a proactive touch point and they’ve lost touch with you and they’re still collecting a monthly fee or a quarterly fee from you, I think that’s the perfect time to go find somebody else.

Because there’s absolutely somebody out there who would love to work with you and give you the service that you deserve.

Easy, easy flags are like, how often do I speak with this person? That’s getting one and a quarter on my money, right? But as far as monitoring your portfolio, I mean, that’s still your own due diligence.

Like, you should be seeing what you’re paying someone to do. And if it’s continuing to underperform, I think that’s a fair assessment to say, well, maybe this isn’t the right fit.

Yeah, performance is a tough one. We could talk about performance for forever. Like, firing an advisor for performance could absolutely be rational or absolutely irrational.

But again, it’s how well do they understand you and your family and your personal financial goals. And are you making progress towards those goals?

So when the prospect comes to me and says, hey, I haven’t heard from my financial advisor in two years or five years, all right, well, they obviously don’t give a shit anymore.

They’ve either gotten too many clients or you’re just a small fish in the big pond, and they’re just going to make their money off you until you move it somewhere else, and they’re totally okay with that.

So when you do get that moment that you’re a small fish in a big pond or you’re not getting that attention that maybe you had at the beginning and you just don’t get anymore, or maybe you never had it and now you want it, and they’re not coming

through for you, that’s when you go interview those two to three other advisors. Because like I said, there are plenty of advisors out there that would love to work with you and absolutely provide you the service that you deserve.

And I think you kind of full circled it there as far as the intro interviews, is letting the advisor know what your goals are. Because that’s another thing you can monitor. Is like, hey, when I met with you, I said I wanted to accomplish X, Y, and Z.

We’ve only accomplished X. So to your point, have they really helped you achieve what you set out to do?

Yeah, and I think, I mean, that’s sales in general. Like there’s so many promises and so many things that sound great in the first meeting or second meeting. Then you sign the dotted line, you become a client, move your money over to them.

And the first year comes and goes, second year comes and goes, and it’s dropped. Like, the amount of advisors out there that are selling financial planning and tax planning that are falling absolutely short on all of those deliverables is shocking.

Yeah. I tell every client who comes on, either with me or with another advisors, give it a year, see what that first year cycle is like. See if they follow through with what they told you they would do in the first year.

Because every advisor should map out, hey, we’re gonna have this meeting, that meeting. We’re gonna talk about this. We’re gonna get you set up in this.

Map out that first year, see how it goes. And if they don’t come through in that first year, I don’t think they’re gonna come through in the second year. This has been a really good conversation, man.

I think that’s an absolute fun one to dive into. And, you know, any last words from you?

No, I just hopefully at the end of this, and you listen through, you hear that hot buzzword fiduciary, and you have a better understanding what that truly entails. But if you’re in that range of like, maybe it’s time to consult an advisor.

Use this podcast to help you guide through that decision. And, no, Sean, I think you always do a great job, man. So I’m always happy to be here.

Awesome, man.

Well, I appreciate it. Have a good week. We’ll see you next week, man.

You got it, brother.

See you.