Job interviews can be one of the most nerve-racking experiences anyone faces. It is like playing 20 questions with someone you barely know. Obviously, the point is to get to know them thoroughly and find out if they will be a good fit for a company. The same process goes into hiring a CERTIFIED FINANCIAL PLANNER™. Each prospective client we talk with typically brings a myriad of questions for us to answer. Being a CERTIFIED FINANCIAL PLANNER™ in Knoxville, TN doesn’t mean I just get interviewed by local individuals. I actually have clients all over the country, and one question that is almost always asked is this:
“Justin, would you invest your money the way you are going to invest mine?”
While that seems to be a fair question on the surface, it really is not. Here’s why.
I completely understand where the inquiry is coming from. They want to know if I, in fact, take my own advice when it comes to investing. Am I using investments, planning strategies, or a product mix that will offer me a better return than what I will provide them? They want to know if I’m doing what’s in their best interest or am I looking out for my interest above theirs. It is absolutely a valid question. There are financial advisors and gurus out there that working to increase their bottom line, not that of their clients.
Many times my answer throws them into a world of shock and dismay. Because my reply is more often than not—“No!!” I do not invest a client’s money precisely the same way as I invest my own. The interviewing prospective client is typically looking at me now with a curious, bewildered, and somewhat surprised look. Down home, we would say they have the same look as “a calf looking at a new Cowgate”. (For the record, I’m not saying the prospective client bears any resemblance to a cow. ☺)
Each and every individual must decide their own personal goals and vision for their financial future. When this particular question came up in a recent interview, I merely explained it this way.
First of all, this client was twice my age. There is no reason his portfolio should look remotely similar to mine. Where I am putting my money at age 39, is not where I should be investing it at age 70. That is the time when you typically start pulling back the risk of the portfolio. At that point, you may want to balance your portfolio to follow a more conservative pattern. You begin to focus on investing more in fixed income and low-risk securities. As you near retirement age, you want to protect your gains and utilize them as income; not run the risk of losing it all just before you get out the game.
Next, I explained that we were in two different tax brackets. The tax ramifications of investing the same way would harm this client, whereas it would benefit me. Investing goes beyond just making capital gains when you are working with a CFP® that is acting as a comprehensive wealth manager and a fiduciary. In that instance, they are looking at your investments and measuring how they stack up to where you are financially in other areas.
However, I did sum it up this way. While I might not proportion your money in the exact same manner or even use identical investments, I will use the same type of investments. I plan on putting your money in exchange-traded funds, stocks, bonds, and mutual funds. Each of these types of investments is vital to maintaining a healthy portfolio. Yet, there are so many other factors to consider when choosing which ETFs or stocks or bonds best fit your risk tolerance.
What you are ultimately looking for is an advisor working in your best interest—a fiduciary. You want to employ someone that will help you attain your goals in the long run. However, asking this particular question is more of a loaded question than a helpful one. I’m not saying to stop asking this question. I think it’s a very valid question to ask. But if the adviser answers “yes” to the question, dig deeper to find out if it’s just a clever sales pitch. Choose a planner that is honest and trustworthy. Allow them to get to know you, along with your hopes and dreams for the future.
For more questions to ask a prospective planner, check out this post.