Military Finances 201: 10 Questions You Should Ask a Financial Planner before Hiring One!

By Joseph Brown, Ph.D., CFP®

Everyone seems to have one of these documents now and I have always found them very informative and a great tool to help evaluate financial planners on an apples-to-apples basis. After each question we will express our thoughts on what a good answer looks like and then provide you our answer to the question in italics.

1. How much will it cost me? How do you get paid?

This may seem like an easy question for them to answer – but it is often not. Ideally your advisor will answer with a number or at the very least a percentage and then translate that into an approximate number for you. Answers that tend to make me nervous are ones that are much less direct – i.e. “I get paid by my company.” or “You don’t pay me anything it is all taken care of.” They should then tell you the options of how to pay them. This should look like – we can deduct it from your investment account, or you can choose to pay us directly via check/credit card.

At C.L. Sheldon and Company we charge a flat fee per year for our Financial Planning. You will be billed quarterly for that, and you are able to pay it via ACH or check. If due to the complexity of your planning needs, usually tied to the size of your portfolio, you need a higher level of service we would place you in the wealth management level of service a higher annual fee. For a breakdown of what each level includes you can view it on our website at https://clsheldon.com/fees.

2. How will I know if the value I’m receiving is worth more than the fees I am paying?

A good answer here will focus on the fact that you are buying their expertise with hundreds of similar situations under our belts while you will only go through this process once. A good planner will know what the pitfalls are that are in front of you, and the opportunities that are there too, and help you avoid the pitfalls and take advantage of the opportunities. If a planner starts to talk about better returns than other planners, I would honestly avoid them. A better answer from them will be that they will help you take on the necessary risk to achieve your goals but not so much risk that you exceed your capacity. This ultimately is up to you and if at any time you don’t feel the advisor’s value is exceeding their fees – it is time to leave!

There are three types of clients who typically end up working with us. The first don’t have the time to figure out all the benefits, investments, and models on their own – they would rather spend their time doing things they enjoy! The second are just tired of trying to figure it all out. It is a lot and often happens faster than you think and need someone to help them through the process. The third wants the peace of mind that comes from knowing they have experts in their corner who will help them avoid major mistakes. At the end of the day, we strive to provide all three of these groups with a high SWAN – Sleep Well At Night – factor and ensure that they can maximize their lives! If at any time you are not feeling these things, please let us know so that we can meet your expectations.

3. What is your definition of a financial planner?

This answer will depend on what you are looking for. Ideally you want them to include all the services you think you need and maybe some you didn’t even know were a possibility. It can range from “if it has a $ in front of it we are here to help you navigate it” to “we do the investments.” There is not necessarily a right and a wrong answer here but more specifically there is the right answer for you. Ideally you will have put some time into thinking about what you want from your advisor and more specifically what you want the relationship to look like. Just be on the lookout for general terms like “comprehensive” because that can vary – sometimes it includes tax planning for example, other times it does not.

We believe that a financial planner is someone who helps you realize your values and goals and then align your money with those values and goals. You will experience a goals centric planning process with us where we help you maximize your life through an efficient use of the resources at your disposal. As such we are here to help you achieve YOUR goals and live out YOUR values. We do that through our process – first we take a fix on your current financial situation, then we help guide you through the process of determining where you want to go, and finally we help you figure out a plan, with checkpoints along the way, to achieve your goals. There is a detailed list of everything it includes on our website at https://clsheldon.com/fees.

4. Are you a Fiduciary? Will you sign a Fiduciary Oath?

Everyone throws around the term Fiduciary and often won’t give you a clear answer on this. Simply put a Fiduciary is bound to act in your best interest even when it is to their detriment. This is where signing the oath will get everyone who is trying to slide by “claiming” to be a fiduciary to say they can’t sign it. You see there are certain compensation models where they are obligated to act as a fiduciary to their company before you. A prime example of this is an insurance salesperson. They must act as a fiduciary to their company before you when selling insurance.

Yes, and Yes. In fact, we have a fiduciary oath that we sign as part of our regular process. Here are the five principles that are on it, and we are happy to provide you a copy ahead of time for you to review.

We will always put your best interests first.

We will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional.

We will not mislead you, and I will provide conspicuous, full, and fair disclosure of all important facts.

We will avoid conflicts of interest.

We will fully disclose and fairly manage, in your favor, any unavoidable conflicts.

5. How have you helped other people in similar situations?

This is important to ask because much like hiring a doctor you want someone who specializes in your situation. Someone may be the best heart surgeon around, but you would never go and ask them to do brain surgery on you! Well, the same is true with financial planners. There are generalists, and there are specialists. By picking someone who specializes in your situation they will have a deep understanding of what is involved in helping you achieve your goals and all the opportunities and pitfalls you will encounter.

At C. L. Sheldon and Company, we specialize in working with senior military members and military retirees. All our financial planning staff have firsthand military experience either as a member or the spouse of a member. People begin to look working with us a few years before they transition out of the military and then continue to work with us through their next “career” and into “retirement”. What that next career and retirement looks like for each household is different and doesn’t always fit the traditional model – but then again when we chose to stand up and join the military, we knew that we were not the “average” person. We tend to find that the households we work with appreciate our knowledge and experience around military culture and military benefits.

6. Are you following the exact advice and using the same advice in your own life?

The short answer here should be yes! Ultimately you want an advisor that believes in the products, investments, and process enough that they are following it – as appropriate – for their situation. For instance, if someone said buy, XXXX, you should ask if they bought XXXX or why not? You should expect them to say they are using the same general investment strategy, but maybe not the same allocations because they are probably at a different stage then you.

Yes, at C. L. Sheldon we walk the talk. We have all served, or are spouses of service members, and have lived many of the experiences you are now going through or will go through. We understand your commitments and the unique opportunities that you have. With that in mind we also believe in our investment, insurance, estate planning, and survivor benefit plan recommendations and follow them ourselves.

7. Do You Require a Specific Minimum Investment?

So, this question is important because if they do and you don’t meet it – it is better to know that up front then continue the process.

No C. L. Sheldon does not have a specific minimum investment. We do require that you move your accounts to our custodian Shareholders Service Group (SSG), apart from your TSP and any employer 401(k)/403(b) accounts. You might ask why – well we have found that to provide the level of service you deserve we need to be able to see the balances and track the trades in your accounts. This is most easily done by having your accounts held at SSG. At no time do we have direct access to your funds, and we will never be able to make a trade without your permission.

8. What Is Your Investment Philosophy?

This will help you determine if it is an investment philosophy that aligns with you personally and that you are comfortable with.

We believe in controlling the things we can control, such as expenses and taxes. As such, we build broadly diversified portfolios and strategically rebalance them as appropriate to help you reach your goals. We don’t try to beat the market, but instead we align risk and return combined with behavior change to design a portfolio that accounts for your comfort with fluctuating markets and sets you up so that your money helps serve you.

9. Should I roll out my TSP now?

The TSP has some phenomenal funds and more importantly some that are unique (G Fund and F Fund) and hard to reproduce on the outside. The problem with the TSP is that you cannot pay an advisor directly out of that account and its options outside of the C, S, I, G and F funds are expensive. An advisor who charges Assets Under Management may want you to roll the funds out to be able to fund their fee.

The answer right now is – No. There are some good reasons to leave the money in the TSP and some good reasons to roll it out. Until we get further into our relationship this answer is hard to know. So, for right now we would have you leave the money in the TSP until we can fully develop a plan with you and then decide on the best way to put those assets to work for you.

10. What happens if I decide to stop working with you?

This is an important and difficult question. You are talking about transferring your financial accounts to the custodian of the planner. You are also going to have a lot of information contained in the tools and secure virtual “vaults” of this person. At the end of the day if there is an acrimonious parting of ways you could suddenly loose access to some of those tools or information.

Pay close attention here, the things you want to hear is that they will help you transfer your accounts to your chosen new custodian, they will ensure that you have electronic copies of all your files, and how they will handle the bill for the last billing cycle.

First, we will be sorry to see you go. At C. L. Sheldon everyone we care about every household we work with. We hope that we will be parting ways as friends. We will ensure that you have adequate time to download all the files that you need and provide you with whatever assistance we can to assist with transferring your accounts to your chosen new custodian. Our fees are charged quarterly in arrears so we will calculate your last bill from when you notified us that you wished to stop working with us and send you the last bill. We hope you will remain in touch and all the best in your future adventures.

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