The 5 Years Before You Retire: Retirement Planning When You Need It the Most | Chapter 4: Find the Right Financial Planner - Part 2
Here are Birken’s Interview Questions for Prospective Financial Advisers, and our answers
What is your background and experience?
Tim started Brockmann Financial nearly 30 years ago and has been serving clients through asset accumulation (growing investments) over that time. I’ve been in the industry and working with Tim for 5 years, and now serve as the managing partner of Brockmann Financial as well as the primary advisor for our clients. This includes leading our expansion into financial planning with a focus on retirement income planning.
Please explain what licenses and certifications you hold.
I hold the FINRA Series 7, Series 66, and also am licensed for Life, Variable Life, and Variable Annuities. If you ask those in our industry, most will tell you that these are more or less hoops to jump through in order to be able to legally offer financial advice, and alone the education/exam prep for these are a fairly low bar to be entrusted with someone’s life savings and financial future.
The designation I hold that is not required legally (in a good way - meaning this is purely for improving expertise to serve clients better) is commonly accepted as the standard of excellence in financial advice, the CERTIFIED FINANCIAL PLANNER®. There are many letters that someone can have after their name, some are more or less bought, while others require years of experience and demonstration of deep knowledge. The CFP® designation is the latter.
How are you compensated?
We transparently list how (and how much) we are compensated on our website here. We charge a percentage of financial assets starting at 1.2% per year, with the caveat listed on our website that this is “for clients with $500,000 or more in assets and who have all their available investments managed through our office.” We have a few legacy clients under $500,000, and others who might have a special investment outside our office. For these clients, we set up a custom fee that attempts to be the equivalent of what we have above. For a client with a portfolio of $500,000, the annual fee is $6,000. For a client with a portfolio of $1,000,000, the annual fee is $11,000. For a client with a portfolio of $3,000,000, the annual fee is $27,000.
If you review the list that Birken offered in this chapter (detailed in last week’s post), we fall under the “fee-based” column. Although our primary compensation structure above would fall under the “fee-only” column, we have a broker-dealer that also allows us to earn commissions. For example, many of our clients have “buffered annuities”, otherwise known as RILAs (registered index-linked annuities). On these we earn a “commission” of 1% per year, which is roughly the same as our fee above, but because it is legally considered a “commission” and not a “fee”, it runs through a different regulatory body. Again, more hoops and red tape that we’d avoid if we could, but in the end still allows us to offer the best advice to our clients that we can.
What is your investment philosophy? What strategies do you use?
We have and continue to primarily hire American Funds as the investment manager for our clients. In our managed accounts, we have complete freedom to use whomever we think is best, and our compensation does not change based on who we choose to hire or not hire.
Some clients are surprised to hear that neither Tim nor I spend our time analyzing stocks or financial markets. Frankly, this would be a bad thing for our clients. Imagine if you went to purchase a car and the representative you were working with was also the person who designed and built the engines. Shouldn’t they be focused on making their engines better and safer, not determining what towing capacity is best suited for your family’s needs or what color paint job is available to order? The truth is, those who are exceptional at portfolio construction and market analysis do not meet with clients. They are two very different skill sets (and often personalities, social skills, etc.), and anybody who regularly sits down with someone who is making the decisions about the individual stocks to purchase should quickly look to move their money elsewhere.
Beyond this, the investments we help our clients select are specific to their income needs. It does not matter if you are 55 or 95, if you have $500,000 or $3,000,000. Your goals are to provide sustainable income in a tax efficient manner, and potentially leave a legacy (if your goals are to outperform the market without any specific expense intended at the end of that performance, we would not be working together). Because of this, how you are invested is a factor of your income. A rule of thumb we start the conversation with is to have 5 years worth of portfolio in “safer” investments, such as government bonds and money market funds, while allowing the rest to invest in profitable companies a.k.a. stocks.
Describe your ideal client.
I’ll steal from our website again: We primarily work with those who are in or within five years of retirement, and have at least $500,000 saved. We serve at the center of our clients' financial lives, coordinating their investment, insurance, tax, and estate plans. We are not mere "money managers", and work best with clients who are looking for more than someone to just direct their investments.
Maybe more important is telling you who we do not work well with. We do not work well with people who watch a lot of market news and contact us to invest in certain sectors or stocks because they think it’s the right time. See above, your investments are a factor of your income goals, not the latest pundit’s (often wrong) predictions.
We also do not work well with someone who does not allow us to coordinate their overall financial plans, including tax, insurance, and legal. I am not a CPA nor an attorney, and do not personally prepare tax returns or estate documents (though we have both of those offered through strategic partners). The work of financial planning by definition considers how all these categories interact, and those who are reluctant to provide us will complete tax returns annually or all estate documents will prevent us from doing our best work.
What is your area of expertise?
While historically Brockmann Financial has served anyone looking to invest, we have been shifting these last few years to a focus in retirement planning. This was largely due to the fact that most of our clients had grown into the place financially (and biologically 🙂) where they needed coordinated support across multiple financial categories with the goal of ensuring they have a successful retirement on their terms. Beyond this, we aim not to be generalists who are “okay” at everything, but specialists who excel at serving a particular need (see ideal client above).
Can you show me some sample portfolios?
Yes! Happily, American Funds (and parent company Capital Group) has a better website than ours, and lists their model portfolios that serve as the starting point for our clients. See their mutual fund models here (for retirement accounts), and their ETF models here (for non-retirement accounts).
Please tell me what you see as my financial goals and objectives.
Our clients simply need to check their One Page Plan documents that serve as the centerpiece of our planning meetings and relationship. If they don’t already list your goals, you can be sure that it will be on the list at our next meeting!
Let us know
How many financial advisors have you had, and have you asked them these questions?
What other questions would you want to ask a potential advisor before working with them?
Until next time, happy reading!
