If a comprehensive financial plan is what you desire, here are a handful of questions from CFP Jordan Curnutt to ask a potential financial adviser to help you avoid a mismatch of expectation versus reality.

Not sure what a “financial adviser” is? You’re not alone, it can mean many things and that often requires you to look closely at the service provided by the professional you are interviewing.

Some of the financial advisers you come across may, in reality, more closely resemble an insurance agent, stockbroker or investment adviser.

Please note: None of these professions is in any way a bad thing. Especially if all you are looking for is the product that they are selling.

But many times, real estate agents are seeking comprehensive financial advice beyond an individual product. They want help with things like cash flow planning, selecting the right retirement plan for their small businesses, tax planning and personal financial plan projections, to name a few goals.

So, if a comprehensive financial plan is what you desire, here are a handful of questions to ask a potential financial adviser to help you avoid a mismatch of expectation versus reality.

1. What licenses and designations do you have?

Similar to becoming a real estate agent, the entry barrier to becoming a “financial adviser” is pretty low. In most states, you simply pass a small exam that typically takes only a few short months to study for — and boom. 

You get registered with the state and are legally eligible to give financial advice. Conversely, to sell an insurance product, you must be licensed for that style of product (life insurance, annuities, long-term care insurance and so on).

So, a good question to start with is, “What are you actually licensed to do?” If they are only licensed to sell an insurance product, that probably isn’t a good fit for an agent seeking comprehensive financial planning.

And a great follow-up question would be, “Have you continued your education with any designations?”

Although we all have to start somewhere, the most successful financial advisers don’t stop with their insurance or securities license.

A great signal for knowing that the adviser can deliver solid financial advice is if they have the certified financial planner (CFP) designation.

Although not required for the job of “financial adviser,” the CFP designation is the gold standard in the financial planning world and requires that advisers do the following:

  • Attain a bachelor’s degree
  • Pass CFP courses on financial planning, tax planning, estate planning, risk management, retirement planning and investments
  • Pass a six-hour exam
  • Fulfill an experience requirement
  • Commit to the CFP Code of Ethics, which includes a Fiduciary Duty, among other commitments that are in your best interest

Whew, that was a lot.

So, while having the CFP designation certainly can’t guarantee a quality adviser, it ensures, at a minimum that the CFP professional has taken the time to go above and beyond in building their skill set to best serve their clients.

2. Do you work with many real estate agents?

Let’s be honest — your personal finances aren’t normal. As a real estate agent, you lack the built-in benefits that come with the corporate job your neighbors have.

Couple that with the fact that your variable income is dependent upon seasonality within the year and the real estate market cycle over longer time periods, and your situation quickly becomes very different from the average Joe on a guaranteed salary. As a result, the advice you receive from your financial adviser needs to be different.

And don’t even get me started on taxes! (OK, more on them later.)

Here are a few topics that your financial adviser needs to be approaching with you differently:

  • How you manage your cash and emergency fund
  • The type of retirement accounts you implement
  • How you approach investment real estate
  • The source of your insurance coverages to mitigate risk
  • Estate planning and legal documents for your business

Quite frankly, the canned financial advice that applies to most won’t cut it because your situation is just too different.

3. What is the cadence of our interactions?

Due to the variable nature of your finances, real estate agents tend to be better served with a more hands-on financial planning process that checks in at least quarterly or semiannually.

If the answer to this question is a simple annual review of your investment returns, this might not be the right fit for you.

4. What technology will I have available through your firm?

One of the biggest benefits of partnering with a financial adviser is the ability to outsource many of your financial planning tasks.

Imagine running your business without e-signatures. Although the tech is a great time-saver for you as the agent, in this fast-paced market we are in, it’s a massive advantage for your clients.

Same concept with your financial adviser. The best financial advisers will have powerful technology to allow you to view live data on all your financial accounts in one place, model various scenarios for your financial plan in minutes and keep tabs on your investment portfolio in real-time.

Financial advisers who haven’t embraced today’s technology tools are quite simply operating at a competitive disadvantage for their clients.

So, if Microsoft Excel is their software of choice, it might be a good cue to find a new adviser that can make their tech work for you.

5. Do you need to see a copy of my tax return?

The answer you are looking for here is, “Absolutely. In fact, we will want to review your return each tax year.”

Now, your financial adviser is not your CPA. And successful real estate agents certainly need both on their financial team. Notice the word team. Taxes are too big of a line item on your annual expenses for your financial adviser and CPA not to be on the same page.

Too many times, phenomenal tax planning was completed by a financial adviser, only to go unreported by the CPA, undoing all the value the financial adviser created.

And it wasn’t the CPA’s fault! How should they know if no one told them? Your financial adviser must be in good communication with your CPA.

Some examples of tax planning items both professionals will need to coordinate include:

  • Backdoor Roth IRA contributions
  • Making an S-Corp election for your business
  • Selecting the right retirement plan for your business, especially if you are an S-Corp
  • Timing the sale of investment properties between tax years
  • Tax-loss harvesting in high-income years

6. Can we talk about my rentals?

It isn’t unusual for agents to pick up an investment property or seven over their years in the industry. And when you start to look at an agent’s net worth, it can quickly become apparent that their real estate assets outweigh their retirement assets by a landslide.

So, why is your financial adviser spending all this time talking about your portfolio when the reality is your real estate investments move the needle in your financial plan?

Now, let me be clear — your financial adviser’s job isn’t to find you the perfect flip or rental property. That’s your world. But the adviser can provide value by modeling how each investment property impacts the overall trajectory of your financial plan.

Questions on retirement income, amortization schedules, cash flow analysis and taxes are all areas a financial adviser well-versed in investment real estate can help guide your decisions.

7. What is your investment strategy for my retirement portfolio?

I deliberately left the retirement portfolio to last on this list of questions.

Not because it is the least important. Rather, in most cases, it is the minimum value threshold that a real estate agent looks for in partnering with a financial adviser.

But just because it’s assumed this is a service the financial adviser will provide doesn’t mean it should go without discussion.

Ensuring the selection of investment strategy is in line with your personal risk tolerance is one of the most important choices you will make with your adviser.

For example, more often than not, a seasoned agent who is approaching retirement will be better served by an investment portfolio that does not carry the risks that they were once willing to accept when they very first started saving as they entered the business.

You do not want to get surprised by an overly risky portfolio during the next bear market, and verifying your adviser’s investment philosophy is in line with your risk tolerance is the best way to achieve this.

So, if you are on the hunt for the right “financial adviser” for you, be sure to ask these questions to ensure you do not end up expecting one level of service and receiving another.

Jordan Curnutt, CFP, is a Certified Financial Planner professional for top-producing real estate professionals who want to strategically manage their wealth, optimize variable income, build a balanced net worth, and mitigate what is likely their biggest personal expense, taxes. Reach out to Jordan on Facebook, Instagram and LinkedIn.

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