Demystifying Financial Advisors, Ep #252

Did you know that anyone can say they’re a financial advisor? They may not be licensed or experienced. So how do you know who to trust?

In this episode of Best in Wealth, I’ll break down the three types of people who put “financial advisor” on their business cards, what the letters after a financial advisor’s name mean, and how a fee-only financial advisor is compensated for their services.

Knowing all of these things will help you determine what type of advisor is right for you to help you achieve a successful retirement.

Outline of This Episode

• [1:08] High expectations don’t leave room for satisfactory outcomes
• [6:17] The 3 types of people who put “financial advisor” on their business cards
• [19:14] How fee-only financial advisors charge for their services
• [22:34] What do the letters after a financial advisor’s name mean?
• [24:17] Work with someone you can build a connection with

The 3 types of financial advisors

Three different types of people typically put “financial advisor” on their business cards:

1. Insurance Sales Representative: They’re required to be licensed to discuss or sell insurance. Their main goal is to sell you life insurance (typically whole life insurance that can be invested and earn dividends and be used for retirement). Is someone who can only sell life insurance acting in your best interest all of the time? How could they be? They make a commission on the insurance product that they sell you.
2. Registered Representative/Broker-Dealer: They take an exam to be “registered” to sell securities, mutual funds, life insurance policies, etc. They’re paid by commission, much like insurance representatives. Or they’ll recommend a mutual fund where they get a percentage (annual 12B1 fees and more). They’re also not fiduciaries.
3. Investment Advisor Representative: They must take a securities exam that also covers laws required to act as a fiduciary. An investment advisor is prohibited from collecting commissions. The fees they collect come directly from the client. They can call themselves fee-only representatives.

I’m a fee-only Investment Advisor Representative. I don’t co-mingle with insurance sales representatives or registered representatives. It removes any conflict of interest. I’m not beholden to any company. I must act in the best interest of my clients. Most financial advisors are dually registered. They may have an insurance or broker license.

Listen to find out what questions you have to ask an advisor to find out if they’re strictly an Investment Advisor Representative.

How fee-only financial advisors charge for their services

There are four ways a fee-only advisor might get paid:

• Hourly: You hire a financial advisor to create a financial or retirement plan and you pay them for the hours it takes to do the job. It’s a short-term relationship.
• One-time planning: A one-time plan may cost you $5,000–$7,000, which you pay once. They deliver the plan and you write them a check. It’s a short-term relationship.
• Monthly retainers: The advisor might charge a couple hundred dollars a month, depending on the complexity of your plan. This may be great for someone who needs help with budgeting, college loans, setting up 529 plans, etc.
• Assets under management: This is when you’re charged an annual fee that’s typically a percentage of your assets under management. The money is taken directly out of your brokerage account(s), which the advisor is handling for you. This is how most fee-only financial advisors work.

Fortress Planning Group operates using the assets under management approach.

What do the letters after a financial advisor’s name mean?

There are three gold standards that actually matter:

1. CFP: This is short for “Certified Financial Planner,” which is what I am. A CFP must have a college degree to deliver holistic planning.
2. CFA: This is short for “Certified Financial Analyst,” which is a difficult designation to achieve. These are experts in investing.
3. CPA: This is short for “Certified Public Accountant,” who are experts in taxes.

There are hundreds of other designations. But if you’re looking for letters, look for one of these three. If you want someone who can help advise you on investments, taxes, retirement, insurance, etc. you want a CFP.

Connect With Scott Wellens

• Schedule a discovery call with Scott
• Send a message to Scott
• Visit Fortress Planning Group
• Connect with Scott on LinkedIn
• Follow Scott on Twitter
• Fortress Planning Group on Facebook

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Podcast Disclaimer:

The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.

About the author, Scott Wellens

Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.

Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.

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