Extra Credit No. 1: Four Mistakes People Make When Working With A Financial Advisor

Timing is everything

A quick exciting announcement before jumping into today’s post! Ally Jane Ayers and I will be chatting live next week about the Great Wealth Transfer and its impact on women as part of the Substack Market Forecast Summit. Join us live on Friday, January 31, at 2:30 p.m. ET. You’ll need the Substack app to join the conversation! Okay, now onto regularly scheduled programming!

Lindsey here! Hello, and welcome to Extra Credit, our new contributor series where we dive deep on a whole range of topics. In the future, this series will be for paid subscribers, but I wanted to offer everyone a chance to read the first one.

To kick things off, I asked my friend Ally Jane Ayers, founder of Money Changes Everything , to write about how you can effectively work with a financial advisor.

I get asked a lot about choosing and working with a financial advisor. For many, it can feel like an out-of-reach resource, reserved only for the very rich. But many advisors will work with clients for a flat fee on a project basis, offering advice on specific topics such as retirement planning or home buying.

It’s essential to do your research to find the right advisor for your needs. This is the person who’s managing your money; you want to make sure you trust them and they have your best interest in mind. Sure, it’s good to ask friends and family for recommendations, but think long and hard about whose advice you take. Your parents might have worked with your Uncle Stan for decades, but he might not be the best fit to help you accomplish your specific financial goals. (Especially, ahem, if he always talks down to you.)

Ahead, AJ shares her best advice on how to make sure you get the most out of working with a financial advisor. Have any additional tips or questions? Leave them in the comments!

Hi, financial advisor here! My firm Brooklyn Fi helps our clients with everything from filing their tax returns to investing their portfolios for long-term growth to preparing for their employer to IPO.

The relationships we have with our clients are deeply personal—and obviously trust is very important. As the owner of the firm, I talk to a fair number of potential clients in an initial meeting to discover if we are a good fit for them. Typically we’ll have a 20-minute phone call so I can learn about their financial pain points and goals, and they can ask questions about working with us, what it costs, how often they will meet with us, and more.

Often, this call is the only point of contact we have with potential clients before they sign up for our services. It continues to amaze me that an incredibly important decision—who you will hire to look after your money—can be made after a 20-minute phone call. But our clients are hardworking, successful people looking for a specific type of advisor, so in a way it makes sense that they like to move quickly once they’ve found us.

Through the years, we’ve learned a lot about setting expectations for new clients. Some relationships don’t work out—sometimes their expectations are way out of line with reality, and sometimes what seemed like a great fit in week one ends up not a great fit by week four.

Most of the time, it’s a great match when a new client comes on board. The client and advisor get to know each other through a series of meetings we call “the development phase.” We talk about goals, spending, investing, and of course, taxes—there’s so much to cover! During this phase, we’re setting the foundations for a long-term relationship. Because a financial plan isn’t just a one-and-done kind of thing—it evolves over time as a client’s priorities change.

While the payoff can be huge (we’re talking literal money), for some people, it can be a little overwhelming starting a relationship with a new financial planner—you have to share so much about your life with basically a perfect stranger. In my experience onboarding hundreds of clients to our team of financial advisors, I’ve noticed a few key missteps or misaligned expectations that can quickly spoil a new relationship.

Here are four mistakes I see on a regular basis, and how to avoid them.

A (good) financial advisor needs a lot of information from you. They need to know what investment options are available in your 401(k). They need all the details of your monthly spending habits. They need to review your tax returns for tax savings opportunities. They need access to your current portfolio to begin management, and so much more.

The biggest mistake I see is that clients quickly get overwhelmed with all the information and documents we request, and they just don’t do it. Weeks go by. Our team emails, texts, and calls; sometimes we just get radio silence. The relationship is essentially dead before we even get started.

We’ve honed our onboarding process so much over the years that I think it’s pretty user-friendly, but it’s still A LOT of information we’re asking for, and not all of it is easy to track down.

To avoid overwhelm and delays in getting started, I recommend you set aside two time blocks on your calendar to get the information together. I say two because sometimes it might take a few days for someone (like an employer’s payroll department) to get back to you.

Thinking about money is a pain point for so many, so hiring an advisor in the first place is such a huge step that some people just expect that the simple act of signing up will immediately fix all their issues. This is obviously not the case!

Signing up for a gym membership does not immediately result in chiseled abs. Putting together a financial plan and then seeing results takes time. We need documents from the client first, and then we need time to analyze them, and then we need to meet and chat about the plan in order to decide the next steps together. This isn’t a process that should be rushed, but we often feel that clients get impatient once that contract is signed.

Of course, there are REAL deadlines mostly imposed by the IRS (and Congress who makes the laws that the IRS enforces), and we always do our best to meet them (more on that later). Advisors have a very real sense of what is urgent and what takes time. Admittedly, the financial services industry doesn’t always communicate timelines in general, but we’re getting better.

It takes time to build lasting relationships, so keep that in mind when searching for an advisor to help with your particular situation. If you need help with something by the end of this year, start searching early in the year.

Our busiest time of the year is the end of the year, which also happens to be the holidays, when people typically take time off. Tax season (roughly from February 15 to April 15) is a close second. Of course, that’s when people think most about their money, so that’s exactly when they reach out to us.

If I’m being honest, it’s a pain point for me as a business owner—how can we handle these seasonal influxes of new business, still take good care of our current clients, and deal with all the urgency around year-end and tax season deadlines? We’ve gotten a lot better at it over the years, for sure, but it’s hard, and I don’t think potential clients understand our workload. (And why would they if it’s not their industry?)

At year-end, there’s so much to do—estimate your tax bill so you can make sure you have the funds to pay it, look for tax arbitrage opportunities in investment accounts (this should be happening throughout the year, but a tax projection can inform larger sales), make retirement contributions to IRAs or 401(k)s, make charitable contributions, make contributions to 529 plans, and more! Typically, we plan for all of these to-dos throughout the year, but if you’re a new client signing up in November, you’re going to be expedited quickly through the most important ones. As a result, it often feels like there are things we could have done better if we’d started earlier in the year. We often just run out of time.

In my opinion, the best time to start a financial advisory relationship is May or June. It’s after tax season, and you’ve filed your return, but it’s still early enough in the year that your advisor’s recommendations can be implemented. This is especially important when we’re talking about buying and selling stocks.

Our firm works with many clients who are paid in salary and equity. The more time we have to come up with and execute a plan in a certain tax year, the better the outcomes. Many clients have come on board at the 11th hour, about one week before their company is set to go public. Sure, I can help you then, but I really wish you’d come on board six months ago—my advice would have been different and might have resulted in a lot more money in your pocket.

And we always joke that you should not email your accountant on April 10. They will be sleep-deprived and extremely stressed about hitting the April 15 IRS deadline. You may get a curt reply or no reply at all! Accountants are truly lovely people outside of tax deadline season.

Even when we have a good relationship with the client, we find that sometimes they treat us like mom and dad and try to hide big money decisions from us.

Believe me, I don’t expect to have full authority over a client’s financial situation. They are grownups responsible for their own decisions. But it’s still bizarre to me that a client may be paying us thousands of dollars a year for our services, yet they don’t ask us for advice on major life divisions like a home purchase or a new job offer.

It’s not unusual for us to get an email along the lines of: “I knew you’d say the house was too expensive, so I didn’t tell you; now I need you to wire me $400,000 for the down payment. We need to move quickly since all contingencies are waived.”

And yes, the client is right, the house is more than the budget we planned for, and it will cause financial stress in their already-strained marriage—not that I’d say the second part out loud. Clearly, the client got caught up in the adrenaline rush of finding a “dream home” and made a decision that doesn’t really work with the financial goals they laid out with us.

I never make anyone feel bad, of course, so we just adjust the plan, encourage our clients to make adjustments in other aspects of their lives, and everyone moves on. A 20-minute phone call ahead of the decision would have avoided a lot of pain. If you’re paying someone for advice, ask for their advice. Even if you know you won’t like the answer.

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In the end, finding the right financial advisor can be a true game-changer in your life. Imagine having someone you trust to help you make important life decisions at every turn. Imagine having someone you can reach out to whenever you get a confusing email from your company about a salary or benefits change. Imagine having someone to call when something really bad happens (life is hard—it will). Imagine feeling at peace knowing that all of the money stuff and insurance is handled when someone close to you dies. That’s really why a financial advisor relationship can truly change your life.

Hopefully, this guide has been helpful so when you do find the right one, you can build a deeper relationship from the start.

Thank you, AJ! I really can’t recommend AJ’s newsletter enough! You should subscribe!