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The Long View
Pam Krueger: How to Find a Financial Advisor
00:52:05
The Wealthramp CEO discusses the value of fiduciary advice, evolving fee models, and the decreasing importance of geography when selecting an advisor.
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- [00:01]
A
At Jackson, we've created a digital retirement planning experience with you in mind. Visit Jackson.com to explore our easy to understand resources and user friendly tools that are designed to enable financial professionals and clients to plan a path to financial freedom. Jackson is short for Jackson Financial, Inc. Jackson National Life Insurance Company, Lansing, Michigan and Jackson National Life Insurance Company of New York, Purchase, New York. Please stay tuned for important disclosure information at the conclusion of this episode.
- [00:33]
B
Hi and welcome to the Long View. I'm Christine Benz, Director of Personal Finance and Retirement Planning for Morningstar. Our guest on the podcast today is Pam Kruger. Pam is the founder and CEO of wealthramp, which seeks to match consumers with financial advisors who fit their needs. Pam is also the creator and co host of MoneyTrack, seen on PBS and many other public media stations around the country. And she co hosts the the Friends Talk Money podcast with Terry Savage and Richard Eisenberg. In 2021, she received the Special Achievement Award from the national association of Personal Financial Advisors or napfa, for her work educating the public about the value of fee only financial advice. Pam, welcome to the Longview.
- [01:16]
C
Great to be here Christine. Thank you.
- [01:18]
B
Well, it's great to have you here. So we want to talk about your firm Wealth Ramp and especially how to find an advisor. But let's just start with a really general question. Why is finding a financial advisor so hard? It's honestly one of the main questions I get from people. Where do I look for an advisor? What should I look for? People are very confused. Why is that?
- [01:41]
C
Well, I know that we'll wind up touching on various aspects of the same question in different ways as we get into the conversation. But first and foremost, can you imagine there's more than there's somewhere between 400 and 500,000 almost a half million individuals in the United States who self identify as a financial advisor. So when you're an individual investor and you're looking for help and there's no organized way to find the advisor, who's going to be the right fit for you? The right size, the right expertise? The right way to collaborate, communicate how? How are you going to go about finding that one advisor who's really right for you? So that's the big problem.
- [02:26]
B
Definitely it's a struggle. And I've seen data that suggests that people, when they set out to find an advisor, one of the main things they search on is their own geography. Is that even a smart thing to start with given that so many advisors, especially in this post Covid period, are meeting with clients virtually versus in person.
- [02:47]
C
If I didn't know anything about this and I were an individual, logically, I probably would start because you have to start someplace. Where are you going to start if you don't start at a place that makes sense to you? So people do often start looking locally, and then it quickly becomes rabbit hole, rabbit hole, rabbit hole, one after the other. That takes you down all these different avenues. And it's then Alice in Wonderland.
- [03:19]
B
So do you think that a lack of uniformity in standards is part of the problem? You know, with doctors, it's so clear you want some sort of medical doctor who's been, you know, been through med school. If you need an attorney, you want someone who has a J.D. how about financial advisors? I think people really struggle with, well, what am I looking for? What's the gold standard in the way that it is there for these other professions? What's the issue there?
- [03:46]
C
Well, the issue is exactly that word profession. Because a doctor is a professional and the legal profession is a profession. It has a uniform set of education standards. It has experience standards and exams that have to be taken and passed. Financial services and financial advice is an industry. It's not a profession. Big difference. Means that it's very broad. It's all over the place. And you have everything from anybody who wants to call himself or herself an advisor all the way through highly qualified advisors who have years and years of experience and credentials and education all mixed together in this giant pot. And they want to look like, hey, we're a profession, we're not. Financial advice is an industry.
- [04:42]
B
So wealthramp was created. You created Wealth Ramp to address this pain point for consumers where they're attempting to sort among advisors. They don't know what they're looking for. So maybe you can talk about the genesis for wealth ramp and how the platform works. If I'm a consumer and I'm setting out to find an advisor, how does wealthramp aid me in that process?
- [05:05]
C
Well, first, the why of it, Christine. The why of it is I want to tell you right up front, I didn't even want to solve this pain point because I thought it was too big and too unwieldy, and how am I ever going to make sense out of chaos? But because I was co hosting and producing a national TV series called Money Track that was on 250 PBS stations, I had so many viewers that were coming to me and they were saying, pam, you're teaching us about how advisors operate and we need full transparency and we need to expect certain things, such as fiduciary we'll talk about that in a couple of minutes. I know and these ways of vetting advisors, but what their problem was is they didn't know where to begin again because it just takes you down these different rabbit holes that are not organized. So when I set about really solving this, I came at it and said, okay, if I'm going to do this and I'm going to create a service that actually matches an individual to maybe as many as three recommended advisors that really fit their particular preferences and their profiles, I have to do this really differently. I have to be very private. Which means that when people come to my website, Wealthramp and they fill out the necessary information that I need in order to ascertain where is your pain point, what do you really think you might want from an advisor? When I get that information and it comes in the form of a profile that you build on my website, takes about a minute and a half for the individual to go through. Once you've reached the point or I'm showing you the three advisors who have met my standards, I have rigorously vetted myself, then you can see those three advisors, you can see their SEC records, you can see their profiles and their backstories, but they can't see you. It's a one way mirror. So when an individual flows through the process, they can do so knowing that they can focus only on themselves. They can breathe, they don't have to worry they're not going to get a clown car of emails in their inbox or their phones can start ringing off the hook. Because the advisors in my network that I have curated are not salespeople and they can't even contact you because I won't share that information with our advisors until you, the individual, initiates contact with them. That protects you. That's very different.
- [07:47]
B
Pam, let's talk about that process of winnowing down the broad universe to the people who are in your network. How did you curate it? It sounds like it was a very painstaking process. Let's talk about kind of the steps you took to get to a group of advisors who you were comfortable having the platform recommend to people.
- [08:05]
C
It did take a long time because curating a network I knew I needed to have, I wanted to have at least a couple hundred different advisors from all over the country with different locations, different skill sets, different expertise that handle different clients who have different issues, different ages. So in order to get that constellation and make sure that they fit the definition truly of a fiduciary advisor and make sure they're fee only, which we'll talk about. And make sure that I interview each advisor so that I understand that they actually can deliver beyond the expectations that I would have if I were the client. Because I didn't go about this to simply help advisors gain new clients. I went about this in order to help the individual be able to concentrate and focus on themselves and what it is they want to solve or what they aspire to accomplish with an advisor and make it a lot easier for them to start that conversation flowing. So that's where it's really all about, making sure that each advisor is rigorously vetted. Because my name is on every single referral that I make to an individual.
- [09:29]
B
So let's follow up on a couple of those things. Just define fee only so that everyone's following along and maybe contrast that with what would be kind of a different model that's in play and why you would prefer the fee only model versus someone who's, say, selling commission products.
- [09:48]
C
Sure. The easiest way to think about fee only means the additional advisor. The advisor's fee is only from the client. That means that the advisor works only and directly for clients, not for a brokerage firm, not for an insurance company. So that puts you on the same side of the table. Now, just because you're on the same side of the table doesn't necessarily mean that a fiduciary fee only advisor is going to be highly qualified. But it does at least sort out the business model so that there's an advice model, and that's the fee only where the advisor's working only for you. And then there's the sales model, which is the old model that I grew up with when I was a broker, which is now called an advisor at a brokerage firm. And that's where I work for the brokerage firm. I don't work for the client. And that means that my first loyalty goes to my employer, who is the brokerage firm. And that brokerage firm expects me to recommend certain products, certain strategies that are going to be good for the brokerage firm. We hope it's going to be good for the client as well. But I didn't like the model because I felt that going to a sales model for advice was like going to a wine shop looking for a craft beer. If I want advice, I really need to go to an advisor who is registered with the SEC or state and is legally held to the fiduciary standard. And that's a big difference.
- [11:27]
B
Well, let's delve into that fiduciary standard. The term has arguably gotten a bit watered down. In fact, I've heard consumers say, I feel like it's useless. So can you discuss what it means to be a fiduciary and how you go about verifying that someone is truly a fiduciary theory?
- [11:46]
C
It's really simple. Anybody can do this. When an advisor is registered as an investment advisor, a registered investment advisor, and their information is stored in the database of the SEC or the state, they are regulated by the state or the sec, they are by definition legally bound to act in the individual investor's best interest in a fiduciary capacity. That's very different from saying that you're a fiduciary and you're not legally held to the standard. But maybe you hold yourself to that standard, or maybe it's an ethical standard, or maybe it's a mood you're in that day. You might wake up in the morning and say, boy, do I feel fiduciary today. But what does that have to do with the reality of being legally held to the fiduciary standard? There's only one type of advisor that's legally bound, and that's the registered investment advisor.
- [12:48]
B
So brokers are held to what's called a suitability standard. Can you talk about that and contrast that with the fiduciary standard that a registered investment advisor would be held to?
- [13:00]
C
Sure. When I worked for a brokerage firm when I was 24, then I was in management, managed 60 brokers when I was 28. My biggest concern was to make sure that we were distributing the products and recommending the products, recommending the investments, the funds that that client could call suitable for themselves. Or you could say, this is a good fit. You are a person who is 65. I can see where I can make the case where this annuity might be a great fit for you. It could be. It's suitable for you. That's very different from being held to the fiduciary standard legally, which says you have to make sure it's in their best financial interest, which means that requires a much deeper dive.
- [13:59]
B
So other services have kind of gone down this path of trying to match consumers with financial advisors. Can you talk about what you were trying to do differently at Wealth Ramp? You mentioned that, you know, in some cases, people would just get this barrage of emails from financial advisors seeking to form a relationship, but what were the things that you were trying to differentiate Wealth Ramp with?
- [14:23]
C
So right off the bat, Christine, I knew that if I was going to do this, I Had to do it differently. And that meant that I can't in any way share anyone's information, not only with my own advisors that are in this vetted network, but certainly not to share people's contact information with advisors outside my network who would by those names because they're considered to be leads. That's not a business model I wanted anything to do with, which meant that I'm limiting myself. It means the only way I'm going to get paid is from my own advisors in my network who I expect a referral fee when they've been working with a client for at least say three months. Not even at the point of meeting, but after three months of working with a client. So the other models that are out there are really helping advisors, especially those who are really trying to grow, gain new clients and so their business is oriented in that direction. I'm the opposite. I'm trying to protect the consumer from that and trying to work with the consumer to find the best advisor in the most private way they possibly can. So the way I go about doing what I'm doing with the privacy, I'm the one and only. I'm really proud of that.
- [15:47]
B
In terms of the actual payment that would flow through when the client has been working for the advisor for that three month period, who makes that payment, does that come out of client assets? Does the advisor pay that fee to you? How does that work?
- [16:01]
C
That is the fee that the advisor has to pay to me. I expect that they will self report. It usually does take about three months to work through so that I know the relationship has gelled, it's been formed already, and then I will get paid 25% of that fee. So for example, let's say somebody does a financial plan, an advisor does a full financial plan for a client. Let's say that the cost of that, the full fee is $3,500. So I expect that the advisor is going to pay me $875. That's my referral fee. That comes back to me. And at the same time that advisor has an agreement with me, we have a contract where they are not allowed to change or adjust the fee for the client based on the fact that they had to pay me. They have to look at this as a marketing expense for them. And I have to use the same vetting for integrity that I use for clients for myself because I don't have any way legally to see inside the accounts between you and your advisor once you have a relationship. So I have to expect that these Advisors are going to want to pay me and they actually do. They self report and they're actually really good about that. And the network itself, I don't have a lot of turnover, so I'm not adding and subtracting advisors all the time on a regular basis. I have a very stable network of 230 different registered advisory firms around the country.
- [17:38]
B
So I want to harness your expertise, Pam, to talk about what people should be looking for in an advisor, whether they use wealthramp or whether they want to do it themselves. So if I'm a consumer, it seems like a good starting point would be to kind of take a step back and think about where I need help. Do you think that is the starting point in the process to sort of survey what are my personal pain points in my financial affairs or where do I have my biggest questions? Should that be the starting point?
- [18:06]
C
Absolutely. In fact, when I asked the questions that I asked in the survey on wealth ramp, it took me a long time to figure out which questions to ask. Don't ask too many questions. Ask the right questions. What I'm trying to do in the survey is get you thinking and envisioning why do I want to work with an advisor? Is it that I have perhaps a child on the autism spectrum and I need help with a special needs trust? Is it that my spouse works for a startup and has a lot of really complicated stock options? Is it that I am really getting into retirement and I'm worried about withdrawals and a strategy around withdrawals, tax planning. So when people come and they fill out that survey, it takes about a minute and a half to fill out. It not only helps me to kind of whittle through and then screen and only show you the three advisors I think are like the ideal fit. But it helps you to figure out why you want an advisor in the first place.
- [19:14]
B
One issue that I often run into when I talk to consumers about finding an advisor is that many are convinced that all they need help with is portfolio management, that they need this person to consult on their portfolio, but they don't need help with anything else. I'm curious, is it just me who's running into that or do you find that a lot in talking to consumers about what their perceived needs are in financial advice?
- [19:37]
C
Well, it's funny, I mean, sometimes the conversations will start where someone comes to wealth ramp and they will put their front and center need around. You know, I'm not sure if I should be positioning my portfolio differently now because going into the new year and there's already been, you know, 50s and P high, record highs, et cetera. They might start out that way, Christine, but very quickly it becomes a discussion that's much more holistic because they start to talk about, oh yeah, and then there's taxes. I'm kind of concerned about taxes. Oh, yeah, and by the way, raw conversion. My wife is going to retire. She's got a 403 considering her pension and this and that. Better look at cash flows. So all of a sudden, what started out as an investment piece of the pie question very quickly becomes it's not just about investing, it's about the whole picture and bringing all the disparate pieces together.
- [20:35]
B
At the top of the conversation, you mentioned that the financial advisor space is a little bit of a wild west. You have people with serious credentials proffering advice as well as people with very little experience. So maybe you can talk about the broad universe of financial advisors. What are the legitimate subcategories of serious financial advisors? And maybe you can describe what they do.
- [21:01]
C
Okay, well, remember, you're asking me and I'm going to have an opinion. So that's good. I think that what I did so far back in my career at the age of 28 was I had a fork in the road. I hit a fork in the road in my career and I had to decide, I had to pick a lane. Do I want to be in the sales and selling products and selling product, making recommendations for products, or do I want to be in wealth management and advice that includes tax planning and real financial planning, Deep, deep dive financial planning. And my decision was really clear. I wanted to go the registered investment advisor fiduciary route. And that was my fork in the road. So I think that every individual can start with that fork in the road. You can start there yourself. Because 90% of financial advisors are on the sales side, meaning they're not independent, they're not registered investment advisors who are working independently. They are tied to brokerage firms or insurance companies. So that leaves about 60,000 on this fork over here. On the fiduciary side now you've got a much smaller problem to solve. Instead of $500,000, you're down to $60,000. But still, just because they're fiduciary and just because their business model is fee only and they work for you, it still doesn't make them highly qualified. It doesn't make them exceptional. And that's where the screening comes in. And that's what's so hard. That's why it took me two years to curate this network of registered investment advisors. Because I don't want to settle for mediocre or pretty good. I want to make sure they're highly qualified.
- [22:53]
B
So would there be a financial planner, a CFP who is not an ria, and if so, for whom? Would that be a legitimate avenue?
- [23:06]
C
CFPs can be anywhere. So you're going to find CFP certified financial planning professionals at brokerage firms. You're going to find them everywhere. And you're going to find them at registered investment advisory firms as well. Because the CFP is a designation doesn't mean you're fiduciary. It means ethically, you take an ethical oath of fiduciary standard. You know, in fiduciary behavior, if you will, when you're an advisor who has gone through the CFP program and gone through successfully. But CFPs are everywhere. And so again, it comes down to you have to pick a lane. Do you want the sales model, the sales business model that's non fiduciary, that sits with suitability standard, or do you want a fiduciary advisor? Because I'll tell you, the biggest distinction that you ought to be thinking about, which is what anybody should be thinking about, is that, you know, sometimes things go wrong, right? No, never. But there's misunderstandings between an advisor, or let's say that there's something that's misrepresented, the client didn't get it, the client's not happy, the client sustains some kind of a loss and then wants to come back and complain back to the advisor. Under the suitability model, the burden of proof that you were financially harmed is on you, the client. You have to show that the brokerage firm advisor or broker actually misled you. Fiduciary side, totally different. It's the other way around. Fiduciary side says the burden of proof is on the advisor to be able to show or prove that he or she did not harm you financially. So the fiduciary has a lot more to lose, there's a lot more at stake. And that's why the fiduciary, the only advisor model, attracts a different type of individual advisor. One is more on the sales side and there's nothing wrong with that at all. It's just not the same as on the advice side. And I've had a lot of people say to me, but Pam, I know so many great brokers and so do I, some of my best friends are really great senior planners, brokers, and they do a great job for their clients. And they're not fiduciaries. But I don't have a problem with the individual, I have a problem with the business model. The business model to me is not the right fit when you're looking for advice.
- [25:52]
B
That'S helpful. So to go back to that financial planner example, if there's a financial planner who has no interest in managing people's portfolios, where they just want to give maybe some guidance on the portfolio, but mainly do tax planning and other aspects of financial planning, do they have to register as an ria and would they find themselves potentially under the wealth ramp umbrella? Would they be on your platform?
- [26:17]
C
I prefer, Christine, to work with advisors who are capable and do offer both because of course, and we'll talk about fee models and how they get paid. They don't have to be assets under management, you don't have to have your assets managed. But I prefer that the advisor is qualified to do that and does have the experience doing that because so many things are all connected together. So for me it's almost like saying the left hand is over here and the right hand is over here and the two shall never meet. In other words, the financial planning and the investment side. And to me, I don't believe that. I believe that over the course of time in a person's life, your investments are going to definitely need to be in sync with your cash flow and your tax planning and all of that. So I prefer that the advisors are qualified to both offer wealth management and offer standalone services as well.
- [27:13]
A
At Jackson, we've created a digital retirement planning experience with you in mind. Visit Jackson.com to explore our easy to understand resources and user friendly tools that are designed to enable financial professionals and clients to plan a path to financial freedom. Jackson is short for Jackson Financial Incorporated, Jackson National Life Insurance Co. Lansing, Michigan and Jackson National Life Inside Insurance Co. Of New York Purchase, New York.
- [27:39]
B
Let's talk about the designation. So you mentioned Certified Financial Planner. It sounds like most of the people on Wealthramp are probably CFPs. Should people definitely look for that CFP designation and what other designations carry heft? Because I think you often see these advisors with this Alphabet soup of designations after their names. People don't know which ones to put weight on. Which should they really give credence to?
- [28:08]
C
Yeah, you make it a great point because credentials are credentials and they're important. But you know, once you get beyond the first few important credentials, you're lost in a world of Alphabet soup and they become almost meaningless. But for example, the CFP is important so for me, every advisor on Wealth Ramp is either a CFP or they've accomplished a body of work that goes way beyond cfp, so they don't have to take the CFP exam. So if they're a cpa, CFA and they've been doing financial planning, then if I have someone with 20 years experience and they've been doing all of that and they never sat for their cfp, I mean, who cares? That to me is, like, meaningless, because what matters is what are you capable of providing? What can you demonstrate that you can do with your expertise and, you know, be able to actually show me that you can do with your planning and your investments? So cfp, yes, it's a. What I call and consider kind of a baseline. And then cfa. I like a cfa. CFA is a chartered financial analyst. Now, a lot of financial analysts, Charter Financial analysts, CFAs are working for institutional. You know, they're working for pension funds, and they're managing billions and billions of dollars. But there are a lot of advisors, especially in my network, that are CFAs as well. And CPA is another one that's important. Or EA is also important to taxes. That's an enrolled agent or a certified public accountant. So those are disciplines, and those are specializations that go beyond just basic. And so those are the credentials that matter the most. Now, if you have a specialization, such as, let's say you're a cdfa, which means you help people who are going through a divorce, that's a good credential, but I still would not require it. If you can demonstrate to me that you've had the experience working with a client who's gone through a divorce, and you understand all the ins and outs. And I'm not talking about after a divorce. I'm talking about, like someone who's getting separated and going through a divorce, that's a specialization. So there are credentials that are specializations, but essentially the big ones are cfp, cpa, cfa.
- [30:41]
B
So if someone is interviewing an advisor, what are the key questions to ask? I'm pretty sure you'd say fiduciary. You'd want to ask about those designations. You'd want to ask about the specialty areas. What other things should consumers be asking as they interview advisors?
- [30:56]
C
I think that once you've gotten to the point where you have pretty much vetted the advisor, you've actually looked through their adv, which is their SEC records. It's just an word to describe their SEC records that are all completely public record. And you look through, because that's where you're going to see. It's not marketing, it's what they report to the sec. It's their fees. It's talking about their approach, their investment strategy. And it gives you a wealth of information about that advisory firm and that advisor. So now let's say that you've got it whittled down. Now you're about to have your first conversation with an advisor who's already been screened and already been vetted. I think that there are two really important, very helpful questions. Number one is ask the advisor. Please describe for me who are your most difficult clients? Who are you helping, and what kinds of problems are you helping them solve, and what kinds of aspirations are you helping them accomplish? And then number two, after they've been able to sort of paint you a picture of who they're helping and how, then the next question follows on. Okay, so tell me about your fees. How do you charge your fees? Is it all assets under management? Is it retainer? Is it hourly? Do I have flexibility with that? Describe that for me as well with the fees. And then that allows you to walk away and start to put the picture together of the value proposition. Not only what am I paying, what am I getting?
- [32:39]
B
So let's go back to those fee models, because saying fee only is. It's a very broad umbrella that encompasses a lot of different ways of charging clients. So maybe you can describe, Pam, the different sub types of fee only. And you mentioned a few right there.
- [32:57]
C
Sure. So remember, there are a lot of different subcategories and ways that advisors can get paid, but none of them are commissions. So none of these advisors sell insurance on commission. None of these advisors get paid anything for selling anything. So when they're fee only and they're paid only by the client, the client can look at first and foremost the scope of the work they need. So let's say that you sit down and you decide with your financial advisor. Hey, I really don't think I need you to manage my portfolio, especially not right now. I'm still working. Maybe in a few years when I retire. But I want to start off with you where you're going to look at my investments. You're going to look at my 401k. I want to make sure I'm not overpaying for funds in my 401k legacy funds that I didn't even know were. I've been dragging along, you know, 1%, 2% a year in fees. I need you to look at everything. But really what I need you to focus on is I'VE got a daughter that's going to be starting college. I've got a mom who needs to figure out, you know, I need to figure out how I'm going to be able to help her financially. We have real estate properties, you know, we have rental properties and I need to pull all these pieces together. So that's the scope of the work. Once the scope of the work is discussed, then the fee discussion is going to be around time and complexity. It's always going to come down to time and complexity, whether you pay it one way or the other. So one way that you can pay for that type of service without having your portfolio managed is simply on a retainer fee for ongoing dynamic financial planning driving forward into the future where you're collaborating with the advisor and they're helping you with all those pieces on a constant basis. So you decide together the scope of the work and then you discuss with the advisor very openly and very transparently what that fee amounts to for that time. Or let's say that you change your mind, Christine, and you say, you know what, I think it's time I might want my advisor to do the rebalancing. I don't want to take care of this portfolio anymore. I don't want to weed and feed and deadhead the garden all the time. So therefore you might opt to say, how about if I just pay you a percentage of the assets you're managing? You discuss that with this type of advisor and you're going to look again at the scope of the work. But here's the spoiler alert. Whether it's hourly, a retainer, or whether it is based on assets under management, all fees are going to be established based on time and complexity. And they're all going to come out to be roughly in the same zone. And that's going to be somewhere landing dollar wise at the equivalent of 1% of the assets that you're being advised on. You don't have to pay it that way, but I'm trying to help you get there in terms of what's that fee going to look like. So it's a $500,000 portfolio. Let's say it's probably going to be, let's say it might be as much as 1% per year, the equivalent of $5,000. But it doesn't have to be. And in many cases, I'll tell you guys, in many cases it's less than 1%. In most cases less than 1%.
- [36:24]
B
So just to home in on that retainer, can you describe how that would work how I would pay that advisor. So I understand hourly, that's very clear. I understand aum, but how does the retainer fee work?
- [36:34]
C
Sure, you sit down and you discuss where you are this year and let's say that we have a lot to do this year because there's just a lot of pieces that need to be pulled together. You're married, your husband's just about to retire, you've got things that are changing and moving. You're selling some real estate. So maybe that first year you're going to decide on the scope again. The scope of the work drives how much time and complexity. And then that's just going to be like if you're paying for any other service, you come up with what is going to amount to probably the estimated time that it's going to take to solve all these things and accomplish these goals that you together collaborating that you say you want to get done by the end of next year. And then you set the fee for the year and then the following year you revisit it and then the following year you revisit it. But it's an ongoing. It doesn't have to be an ongoing though. It could be a one time deep dive. So there are times when somebody has a big decision to make and that big decision is right in front of them. And it might be something like, oh my gosh, I'm thinking about retiring at the end of 25 and I don't know if I really can. I can't think about anything else but that one thing. I don't want to see an advisor for everything. I just want that one question answered. I don't want to run out of money in retirement. So you can elect to work with a fee only financial advisor who will sit down and do that one time deep dive evaluation and look and analyze everything and come back and say, here's the plan. But this is not for the next five years. This is showing you a snapshot in time of what you look like today and what's going to help make the decision for that retirement date. Beyond that, life is going to change, circumstances are going to change that you can't control. Some can control. So it's either dynamic financial planning that you pay on a retainer ongoing, or it's one time. Because I have one problem and I need one answer.
- [38:41]
B
So the aum, the assets under management model seems to be the most common in the fee only space. Is that right?
- [38:49]
C
It is, it is. It kind of bugs me.
- [38:52]
B
Well, why does it bug you?
- [38:54]
C
I'M a little bit of a pain in the neck to advisors because again, I love these advisors that I've curated in this network. But I even tell them, christine, you know I love you, you guys are game changers. You're exceptional, but I like the client more than you. So it's really important that they understand that. Two thirds of the people who come to Wealth Ramp are asking me, pam, I don't want to pay on an asset under management basis. Can I pay on a retainer? Can I pay some other way? And the answer is yes, because I make sure that in my network I have diversity within the fee only sphere for how they can pay those fees. I do not want all advisors to be, oh no, it's AUM or hit the highway. No, there have to be choices. You know what? A lot more advisors who told me that they would never deviate from AUM are doing exactly that.
- [39:54]
B
Well, a related issue is that many AUM advisors have an asset threshold that rules out younger people many times that they don't have that critical mass in their portfolios. But they need advice too. So it seems to me that that's a really good reason to offer diversity in terms of fee models.
- [40:15]
C
That's a really great point because when you have someone who comes to us, we have a great partnership with Tiffany, Alice, and she's younger. And so the people who come to Wealth Ramp to come to me are not looking for or the older advisor who is going to charge 1% or they're not at retirement, they are starting out. They may not even be able to afford an advisor. But we have advisors that are working with young people to help them. We even have coaches, credentialed coaches who are available to talk to people who just want to figure out how to get out of debt. So I want to make it affordable for anybody at any point along the way to find the advice they need and not feel shut out because, oh, I don't have a half a million dollars or I don't have a million dollars. So it's really important. Sure, we have lots of clients with 1 million, 5 million and a few with 10 and above, but we have a lot of people that come to me who have $150,000 or $200,000 and they're trying to figure out when can I buy a house? And they need a different type of advisor for that and one they can afford.
- [41:33]
B
I'd like to talk about what goes into the AUM calculation. A colleague mentioned to me just yesterday that he had heard about some Advisors actually including real estate holdings in aum. So not just the investment portfolio, but real estate holdings. Have you heard of that? Where advisors are interpreting assets in a very expansive way like that?
- [41:55]
C
Gosh, I've heard it all. I mean, you and I, we've been around this so long, we've seen it all. The advisors that I vet and that I care about, I need to understand how they're charging and I need to understand why. Why, if you're not giving advice on these real estate assets and you're not actually helping them manage these real estate assets, then why would you ever be including them? And really, is that the smartest way? So I have an advisor in particular I can think of right off the top of my head who does a lot real estate. He doesn't even charge an asset under management fee because of that reason. He charges a retainer fee because again, he has to look at the scope of the work and figure out what am I doing? What are we trying to accomplish here? What's the plan, what's the best way to do that, and what's the best way for them to pay me to do that. But yeah, advisors can come up with all kinds of creative ways to start to broaden out what gets included the assets under management fee, so that, you know, it kind of helps them, I guess, in that sense, beef up the fee.
- [43:01]
B
Yeah, it seems like, you know, I do know advisors who do the opposite where they consult on 401 assets that they do not oversee and don't charge a fee on those 401k assets or cash assets. I've talked to many advisors who don't charge a fee on those. So it seems like it goes both ways. Right? You have advisors who are really going out of their way to be quite fair in terms of the fees that they're charging and then others who maybe are interpreting it very broadly.
- [43:30]
C
Well, like I said, you know, just because you're fee only and you're fiduciary doesn't mean that you're highly qualified. Doesn't necessarily mean that the two things go hand in hand. So I'll leave it that advisors can do whatever they want with their fees, but not on my watch.
- [43:46]
B
I want to talk about when you're looking for an advisor's track record and you're trying to figure out whether they've ever run afoul of any laws, regulations, where do I do that? Due diligence. If I'm wanting to do my homework.
- [44:00]
C
On that, the very first stop is broker check. I think it's brokercheck.com and that's FINRA. And that's where you're going to go to the database and you're going to look up the individual's name. And right there, boom, right in front of you, you're going to be able to see if there are any disclosures. Disclosures are complaints. And you click through and you read it and you see it. So that's where people can start to learn about a broker or an advisor's background. Then you'll either be referred to the SEC's website if they are a registered investment advisor. And then, Christine is probably worth noting that it's really confusing because remember we talked about the fork in the road, the big fork in the road? Yes. Well, there are advisors who straddle the fork and they actually do both. They're hybrids, so they're not fee only. They get paid by the client, but they also get paid a commission for selling insurance or other products. And so they're both registered as an advisor and working in some capacity in sales. So those are the ones that are tricky. Now I avoid them because fee only to me is fee only. But you will hear the term, this is what I hate about this business. These terms are so similar. You will hear the term fee based, fee based, not fee only. Fee only means no, no, no commissions, period. Case closed.
- [45:35]
B
So you mentioned that brokers are regulated by finra and that's where I can check the, you know, do the broker check thing to check up on regulatory infractions. But would I find RIAS issues in there or do I have to look somewhere else for that? For the registered investment advisors, any issues that they've had, broker check is the.
- [45:56]
C
First place because that's going to tell you if that broker is a hybrid. In other words, if they're walking down the middle of the road and getting commissions. So that name of that registered investment advisor is going to show up on broker check even if they're not a broker, even if they're not with a brokerage firm, if they're an advisor registered, their name pops up. So let's say that your name pops up, Christine Benzion. There it is. Boom. But there's no connection to finra because you're not regulated by finra, because you're not a broker, then it will lead you automatically to the SEC's website. That's where I'm going to read your back records there on that SEC's website.
- [46:34]
B
How do you see financial advice evolving in the years ahead? What are kind of the main areas of innovation that you hope to see, what are the main struggles that you'd like to see addressed? What are you expecting to see there?
- [46:48]
C
Well, I first and foremost want to say that I, as soon as I saw this brand new thing called the Internet that kind of came along and broke the old model of sales as advice, that was step one. And now everything that evolves out of that is empowering the consumer to understand how financial advisors operate and helping advisors by creating these amazing software tools and planning software that is so, it's just so good at what it does that it allows the advisor to have better conversations with the client and build that relationship. So it becomes, it's never going to be transactional if you're really looking for a collaboration, but it becomes even more of a high quality collaboration when these tools and these, the advent of all of these great software platforms, all of these technological advancements that have helped advisors help their clients better has benefited the client. Client might not even know that. The individual might not even realize that. And on the individual side of it, my goodness, now you have the power. You can just go and you can learn about Fiona, you can learn about fees, everything is transparent, it's findable, you can learn it and you have all this power in your hands to become a really educated consumer. And I have to say that yes, I'm in the business of helping people find the right financial advisor. But I am not the person who's ever said, oh, everybody needs an advisor. I'm the person who says when you decide that you want to work with an advisor, I've got you. This is where I can be helpful. And it starts with education and really narrowing down the best possible fit so that we eliminate awkward conversations. So when you come in, you come to me and you have $500,000, you're not going to be meeting with an advisor who has a million dollar or 2 million, 3 million dollar minimum. I want to screen away all the noise and help you focus on the conversations that you're going to have with the advisor. So I think what. In a nutshell, that was a really long answer. In a nutshell, I guess what I'm trying to say is it's more relationship now and much less transactional. And that's what technology has helped us do.
- [49:19]
B
Do you have an advisor? And if so, maybe you can talk about how you found him or her.
- [49:26]
C
No, but I know where I'm going to go. No, I don't have an advisor right now, Christine, because I'm not close to retirement yet. And I think that when I get to that point where I'm getting closer to retirement, my life is going to change. And when my life changes, like most people, most people are motivated to get an advisor and to get advice. When something changes in their lives and they want that pair of fresh eyes, that's when I'm going to seek an advisor. So out of 230 advisors in my network, I can think of about 140 of them that would be like a perfect fit for me. So I'm not going to make that decision until I get closer to the time. But there will be a time and I know exactly what I want.
- [50:08]
B
Well, Pam, this has been a super helpful conversation on a topic that I think does really confuse consumers. So thank you so much for being with us today, really appreciate all of of your insights.
- [50:22]
C
Thank you for having me. It's been just a pleasure.
- [50:25]
B
Thanks so much Pam. Thank you for joining us on the Long View. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts, you can follow me on social media at Christine or ristine Benz on LinkedIn. George Cassidy is our engineer for the podcast and Carrie Gretchik produces the Show Notes each week. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.
- [51:10]
A
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