What is the Modern Financial Advisor?

Many people either had a poor experience with a Financial Advisor or have never had enough money to work with an Advisor that would take them seriously. Not only that, the common perception of a financial advisor is that they only manage investments. This may be true for majority of the traditional advisors, but there's a new wave of advisors that are entering the market and offering more planning services for the same cost to you.

Additionally, "Financial Advisor" is more of a vague marketing term and can be commonly confused with sales reps at large insurance companies. And unfortunately, while there are great insurance reps at these companies, many of them impersonate the "Financial Advisor" persona with hidden motives to sell products.

So, what is the "Modern Financial Advisor"? I believe it's completely different than what you may think and hopefully with an open mind this post can guide you on what to look for in an advisor. We will be covering the following:

• Modern vs Traditional Financial Advisor

• How to identify the Modern Financial Advisor

• When are you ready to work with a Modern Financial Advisor?

Modern vs Traditional Financial Advisor

Many of you may currently work with or have friends and family that work with a Financial Advisor. Odds are, if their advisor has been in business for more than 20 years, there's a good chance the only service they provide is investment management.

While there's absolutely nothing wrong with this, most people don't really understand what they are paying for compared to what else is out there. So, let's talk about what a relationship with a Modern Advisor looks like.

First, it's more than quarterly investment reports. Instead, it's like having a personal CFO and financial coach rather than someone that you never hear from and feel guilty to reach out to. Rather than describing to you what the Modern Advisor offers, instead I'll guide you through some things we've done for clients in the past 30 days as a "Modern Advisor":

• One client called us the day after his daughter was in a car accident. She needed a new car fast, and he wanted to know whether to lease, finance, or pay cash based on everything else going on in his finances. We got him an answer that day.
  

• Another client wanted to put down a deposit on an investment property, so we ran the numbers on the potential cap rate on renting out the property. Based on analysis, it was a good investment, and our team will be able to wire the deposit directly for the down payment. Client didn't lift a finger.
  

• We reviewed a new client's tax plan and caught underpayment penalties as they were not putting away enough in their quarterly taxes. We ran the projections and helped them come up with a plan to not owe penalties but not give too much to the IRS throughout the year.
  

• A new client of ours was in their first year of retirement and had low taxable income and cash pile built up. We identified an opportunity to realize $70,000 in long-term capital gains before year end at the 0% capital gains bracket. This will allow for the entire $70,000 to be tax-free when beforehand they were doing nothing at all.
  

• We worked with a business owner's CPA to decide whether switching from a sole proprietorship to an S Corp made sense, and to figure out the ideal employer contribution to their solo 401(k).
  

• We guided a family through the life insurance process by determining how much coverage they actually needed and for how long, while navigating health concerns that had gotten them declined elsewhere.
  

• We coordinated estate planning for a client, bringing in an attorney team to set up irrevocable trusts that will create meaningful estate tax savings.
  

• We built a "reverse budget" for a young, high-earning couple who suddenly had more extra cash flow than they'd ever had. Instead of tracking every dollar, their savings goals get paid first and the rest is theirs to enjoy guilt-free.
  

• For a new client that had never run a retirement projection analysis, we ran the numbers and helped them determine how much they could spend per month, spend in travel per year, and give to family/charity and still have an 85%+ chance of success based on different investment returns.

For most with a Traditional Advisor, this may be shocking the amount of service we provide to our clients. For us, we're your "Personal CFO" and our goal is to allow you to Enjoy More and Worry Less.

How to Identify the Modern Financial Advisor?

While there's many ways to identify if you're working with a Modern Financial Advisor, here are a few that I think will quickly identify who they are:

• "How Do You Get Paid?": How an advisor gets paid doesn't automatically make them good or bad, but their answer will typically help you identify if they aren't a good fit for you. Here's some ways Advisors get paid.

  • Fee-Based: The advisor charges you a fee to use their services. This is the most rapidly developing service and if you see this it's typically a great sign. The only catch in this model is that it is not completely void of commission-based services. Typically, while the advising side is paid as a fee, this model may also include getting paid commission from Insurance products like Life Insurance or Annuities. If you want an advisor that is completely void of commissions, you need to find a "Fee-Only" advisor. My firm would be considered "Fee-Based".

  • Commission on Investments Only: If they charge you commission on investments this is a pretty archaic model. It also would immediately identify them as an investment manager only which is fine but once again, the Modern Financial Advisor offers far more than just investment management.

  • Commission on Insurance Products Only: Here you're working with a sales rep at an insurance carrier who is incentivized to place their company's products. There are genuinely good people doing this work. But the conflict of interest is real, and it can push planning in a direction that's better for the advisor than for you.
    

  If the advisor you're meeting with cannot clearly explain how they get paid and their minimums, then that is a sign you need to get out. More than likely they don't believe the value they provide outweighs the cost of their services. An advisor confident in their value will tell you clearly.
  

• "Who Do you Specifically Work With?": If they can name their typical client clearly, this is a great sign. While some advisors work with a broad set of clients and they do a great job, if you are somebody with a specific need, then you likely need a specific provider. It's kind of like going to see a general practitioner for your heart surgery. While they could be incredibly talented, it's not the right fit. The exception here is finding a team that has multiple specialists. This will help make sure your needs are taken care of.
  

• If they pitch a product in the first meeting: This is one of the first signs that you need to continue to look around. Don't get me wrong, there's situations where products early in the conversation can make sense. For example, if you're a single income family with young children it's pretty rare for Life Insurance to not be an immediate priority. That said, if someone is mentioning product in the first meeting when it should be more of a get to know you and introduce our firm, then it's probably not a good fit.

When are You Ready to Work with a Financial Advisor?

Life will begin to speed up and no matter how much you would like to manage your own finances, your growth will outpace your capacity.

First sign of needing to work with an Advisor is if you do not have the proper time to put towards enhancing your finances. Notice I said enhancing not maintaining. To maintain your financial lifestyle, it's not incredibly hard (generally). But to make it better than it is today, that takes consistent time, and education to create the right plan that makes your financial life bigger, better, and more secure.

Next sign is that your finances have become complex enough to where you feel like you aren't making the right decisions. In today's world of artificial intelligence, it's easy to get an answer to your problem whether it's truly correct or not. But to really understand your situation and navigate the multiple "Correct" choices and which one specifically will provide the best outcome is incredibly hard. And that's the issue, there isn't always one way to solve a problem in financial planning. Typically you're better off working with a team that has seen 100s of people like you and know how to implement the correct solutions.

Last sign is when your wealth gets vast enough to the point that if you make a bad decision it has a dramatic effect. For example, if you're managing a portfolio of $100,000 and have a negative 10% return. That's a loss of $10,000 versus if you have a $1,000,000 that's a loss of $100,000. As your wealth scales, the more your advisor can save you from a potential pitfall.

Final Thoughts

It's becoming harder than ever to choose the right financial advisor for your family. The noise of marketing and AI gives people the false impression of what a good advisor looks like or if they can manage their own finances.

When you start looking for an advisory team, I highly suggest you use this post to guide you through what to look for and when you will be ready to make that decision. This will be one of the most important choices you make in your lifetime and the last thing you need is to be paired with a team that doesn't have your best interest.

Additionally, AI has had great advancement in allowing people to learn their own personal finance. Personally, I'm a huge fan of this development but am also realistic enough to accept AI makes many mistakes. Additionally, AI can help teach you something but there's a difference between knowing a topic, understanding a topic, and executing. For most they never actually execute which is the biggest mistake of all. If you feel stuck or just curious what working with an advisory team could look like, feel free to submit your information to my contact page and my team would be happy to reach out and schedule a meeting: CONTACT | Chace Cooper

Our goal is simple: help you Enjoy More and Worry Less.