Every Saturday morning I sit down at the kitchen table with the Wall Street Journal and a cup of coffee (Yes, I still get print newspapers delivered). The first section that I flip to is B1...Jason Zweig's "The Intelligent Investor" column. I favor Zweig's writing not only because he's one of those rare talents that can take a complex topic and eloquently simplify it, but also because he's been a long-time champion for public investors versus Wall Street interests. In other words, he's more Vanguard than Goldman Sachs.
His most recent column was particularly appealing to me. He listed 19 questions that consumers should ask any financial professional they are considering hiring. His questions are simple, succinct, and extremely relevant to the public's interest.
In the column, Zweig suggested that people print his questions and take them to their first meeting with a prospective planner. In the spirit of transparency, I thought it'd be a good idea to save you the paper and answer them in a quick blog post.
1. Are you always a fiduciary, and will you state that in writing?
Yes. I'm proud to work as a fiduciary in every situation with clients and have signed the XY Planning Network and NAPFA's Fiduciary Pledges.
2. Does anybody else ever pay you to advise me, and if so, do you earn more to recommend certain products or services?
No. Plimsoll is 100% independent and only receives compensation directly from clients. No product sales. No commissions. Just objective advice.
3. Do you participate in any sales contests or award programs creating incentives to favor particular vendors?
No, much to my wife's dismay.
4. Will you itemize all your fees and expenses in writing?
Yes. Clients know exactly how much they pay and receive a detailed invoice every time a payment is made.
5. Are your fees negotiable?
6. Will you consider charging by the hour or retainer instead of an annual fee based on my assets?
Yes. Plimsoll does not have to manage a client's assets to work with them. We are very structured in the services we provide, but have built in flexibility for the payment of those services.
We offer ongoing financial planning, which can be paid monthly. We also offer blocks of hourly work, which are designed to address one or two urgent issues.
7. Can you tell me about your conflicts of interest, orally and in writing?
Yes. By establishing Plimsoll as a fee-only firm, I've tried to reduce as many conflicts of interest as possible. However, I believe it's impossible to be entirely conflict free and operate a profitable business. Jason Zweig would agree.
Here's one example. We do provide Investment Management services, which are paid as a percentage of the assets we manage. This could result in a conflict of interest in situations where we are debating taking money out of an account we manage to fund another goal. In this type of situation, I acknowledge the conflict and make sure the client understands both sides, and then I act as a fiduciary to the client and make the recommendation that's in his or her best interest.
8. Do you earn fees as adviser to a private fund or other investments that you may recommend to clients?
9. Do you pay referral fees to generate new clients?
10. Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance?
Plimsoll is a planning-centric firm. Investments are an important piece of the financial planning puzzle, but they are not the only component. We provide comprehensive, holistic financial planning, which includes all the topics in question and many more.
11. Do you earn fees for referring clients to specialists like estate attorneys or insurance agents?
No. We have built relationships with professionals in these areas of practice, but only for the purpose of serving our clients in the most thorough manner. We don't receive any money or incentive for referring clients to these professionals. We are also happy to partner with a client's existing CPA, insurance agent, or Estate Attorney.
12. What is your investment philosophy?
Controlling the things that we can actually control is at the core of our investing strategy. We aim to keep costs low, be tax efficient, stay diversified, and capture market returns. Managing expectations and investor behavior is another key component of our investing philosophy. You can have the best portfolio in the world, but it doesn't matter if you bail on it at the wrong time.
13. Do you believe in technical analysis or market timing?
14. Do you believe you can beat the market?
15. How often do you trade?
As infrequently as possible. As Morgan Housel says, "There are no points awarded for difficulty."
16. How do you report investment performance?
Reports are illustrated net of fees and compared to a broad range of market indices.
17. Which professional credentials do you have, and what are their requirements?
I'm a CERTIFIED FINANCIAL PLANNER™. Here's some background information on what that means.
18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?
It would be foolish to try to estimate this without knowing more information about your personal situation. However, when considering long-term estimated returns for the purpose of building a financial plan, we tend to err on the conservative side.
19. Who manages your money?
I do. I use the same investments and investing philosophy that I recommend to clients.