HOLLYWOOD, Fla. -- Call it the question advisors hate.
Financial planners who want to earn clients' trust -- particularly among next-gen investors -- must address their sensitivity over fees, advisors say. But that doesn't mean it's a conversation advisors enjoy.
"That focus [on fees] is largely indicative of scrutiny and distrust that emerged from the financial crisis and the Madoff scandal," said Steven Hurst, a financial planner at Sunstone Wealth Management. "I understand why investors focus on fees. But there are other more important questions that should be asked as well."
In particular, advisors said during conversations at Pershing's INSITE Conference on Tuesday, younger investors should be asking questions that will help them become better educated, and better able to scrutinize the financial advice they're getting.
"There's just generally too much information. Advisors need to help clients understand what's important and what's less important," says Michael Zmistowski, president of the Financial Planning Association of Tampa Bay.
Here are nine questions advisors say they wished clients would ask them:
- Are your fees retainer, fee-based, commission basis. or all three?
- How long have you been doing this?
- What licenses do you have?
- What are your designations?
- What's your level of educational experience?
- Do you practice continuing education? How often?
- Are you a thought leader in the profession? Do you speak on panels training advisors?
- Are you published? Do you write articles?
- How will you interact with me on social media platforms?
"Financial planning for many consumers is like shopping for a used car online," said Christine Brown of the Financial Planning Association of Tampa Bay. "Consumers are using online sources to do their research about advisors and products. Many advisors are still not at the point where they've informed consumers of exactly what they're getting and how -- but we're getting there." Thank Gen X and Gen Y clients for that, she adds.
Younger consumers feel empowered to walk away if they don't get the answers they want, Brown said -- and advisors must cater to that in order to not lose clients to do-it-yourself retail options such as Fidelity and ETrade.
For advisors, more in-depth conversations about compensation and fee-disclosure are all part of the process of establishing trust, says Hurst. But it's also part of the advisor's job to encourage clients and potential clients to broaden the scope of the conversation to become better informed, he says.