BiggerPockets Money Podcast - What to Know Before Hiring a Financial Advisor

Episode Date: August 18, 2026

How do you choose the right financial advisor? Mindy Jensen and Scott Trench explain what to look for when hiring a financial planner, including AUM vs. flat-fee vs. hourly compensation, CFP credentials, fiduciary status, advisor qualifications, questions to ask, and how to prepare for your first meeting. If you're considering working with a financial advisor, this episode will help you understand how advisors are compensated, identify potential conflicts of interest, prepare your financial information, and get more value from professional financial planning. To go beyond the podcast: Interested in a Flat Fee Financial Planner? Go to biggerpocketsmoney.com/fipro Get 50% Off Your First Year of Monarch by using code ‘Pockets’: https://www.monarch.com/pockets Follow BiggerPockets Money on Social: Facebook: https://www.facebook.com/groups/BPMoney Instagram: https://www.instagram.com/biggerpocketsmoney We believe financial independence is attainable for anyone no matter when or where you’re starting. Let’s get your financial house in order! Learn more about your ad choices. Visit megaphone.fm/adchoices

You've decided that it might be time to work with a financial advisor. But before you walk into that first conversation, there's some homework you can do that would make that conversation way more productive. Today, we are breaking down exactly what you should have ready before you talk to your financial advisor. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Minnie Jensen. And with me as always is my loves to give advice about advisors co-host, Scott Trench.

Thanks for that free only introduction. Mindy. That was wonderful. I'm excited to talk about this topic today. We're going to be bringing on a few financial planners in the future here on Bigger Pockets Money to continue to round out this topic. But I think it's important because I think a lot of Bigger Pockets Money listeners are DIY investors. And that's great. There's a lot of people who can manage their personal finances successfully. And hopefully this podcast and other podcasts and a lot of content online help people give better and better odds at doing that. But I also think that there's a population of people who either wants to hand off large parts of that and have other people manage their money. This is something

that I will, for example, do certainly around age 65 or 70 personally. I think that's a really wise move. And then there's also folks that maybe face a irreversible decision or high stakes moves or have big life changes coming up and they want a second eye for that. And so I think that's the first question you got to ask yourself when you're thinking about hiring a financial planner is, what do you really want here? Do you want a comprehensive financial planning engagement, which is expensive? You know, that can come with an AUM fee of up to 1% of assets under management. or it can come with a several thousand dollar annual engagement with a comprehensive financial planner. That's one route to go. The other is an hourly session, some kind of consulting on a situation where

maybe you bring your financial position to an advisor and ask for advice on a couple of high stakes decisions or one high stakes decision. That would be an hourly or advice only engagement there. And I think that's probably going to encompass the two types of services. Most bigger pockets money listeners are going to want. We don't really have much. for you if you're looking to shop whole life insurance from someone who calls themselves a financial planner. In fact, we have nothing for you if you are looking for a whole life because that's, it has its place, but for the most part, term life is better. So that's what we're going to talk about today, how to prepare for an engagement, whether it's comprehensive or hourly, and when aware

to use each of these services. Great, Scott. Where do you want to start? Okay. So the next question we have to talk about is how does a financial planner get paid, right? And there are basically three models that interlock or interweave in a given planners practice here. The first is assets under management. So, for example, if you had a million dollar portfolio in stocks and bonds, this person might manage that portfolio for you and would typically charge somewhere in the ballpark of 50 basis points to even up to 200 basis points depending on your portfolio size and the fees of that particular planner charges. Often it's kind of referred to as a 1% asset under management fee. So that fee would then charge basically cost you $10,000.

in that first year on a million dollar portfolio on average, right? And then that fee would be charged every year coming out of the portfolio. And this is probably the most common way I would suggest that financial planners in America make money today. I want to say that AUM is probably the least favorite of all of the ways to compensate your financial planner among the FI community. But I also want to say that a lot of people don't actually want to do. this. I know two people that I can think of off the top of my head. In fact, we've recorded an episode

with one of them about how an AUM advisor, as long as you understand exactly what it's going to cost you, can actually be the best choice for you in your specific situation. In both of my friend's situation, they don't want to figure it out. One has an incredibly complex financial situation involving a deceased father and RMDs and out-of-state real estate and a bunch of stuff. And she works full-time. She's like, I don't have time to do this. I just want to hand this over to somebody. I'm aware of what it's going to cost.

I want to hand this over to somebody who knows what they're doing, who can give me advice. So I think that the AUM model gets trashed a lot in the FI community. And if you understand the costs. that it's going to have and you still want to do it? Great, do it. Your personal finance journey is personal. And if that makes sense to you, then go nuts. I think if you don't know what you're talking about in personal finance, then you move into what I think is absolutely the worst of these business models, which is the commission-based advisor model, right? Where an advisor charges both an AUM fee in many cases and is very highly compensated if you purchase a whole life or permanent life

insurance product from them or an annuity product from them. I think that model is terrible. I think it's a massive conflict of interest. As you learn more about the financial planning ecosystem and you listen to podcasts, it's like bigger pockets money, you can very easily avoid the commission based salesperson. To your point, Mindy, I think that from there, the fees have become a major target of personal finance media, including us. We had a big debate with a fee only, AUM-based advisor, who represented actually nerd wallets financial planning practice. And I thought he had some good points there. I think we still, you and I, bias towards the flat fee or advice-only model. But I think we walked back a little bit of like, okay, there's a place for this. It's not all bad.

You can find some folks there. And there's some quality planners out there that charge an AUM-based B model. That's not our preference. It's not something that we will promote heavily. But we're We're going to back off calling that a bad model, I think, here at Bigger Pockets Money, just not the one we prefer. I think that's the way we'll phrase that. And this is supported by what you guys, the Bigger Pockets Money audience, say you feel about financial planning, right? When you are looking for a financial planner, 88% of you say that you want a flat fee or

advice-only planner. Love that. I think that's a great bias. 6% of you said that you're fine with AUM fees in the fee-only space. And I think that's also wonderful. and then 3% said you're fine with both AUM fees and commissions. That's where I'll all disagree, but I'll support your decision. If you know what you're talking about, you understand that conflict and you still choose

to go with an advisor who charges that, that's your choice. We won't judge you. We'll have a different position. And 3% of you had an other opinion on the topic, which I don't know what other choice you really have in the space here in a broad level. But one of the big, I think, criticisms from some of the advisors in the CFP or financial planning world is that it's hard to find very quality advisors. in the flat fee or advice-only space.

And I think that that may have been true four or five, six years ago, and it's just not true anymore. There's a ballooning marketplace of quality financial planners that charge hourly or provide comprehensive flat-fee services for folks. People think it's hard to find these folks.

It's not hard to find these folks. We are creating a place to make that much easier to find various networks or individual folks who have financial planning practices that charge flat fee or hourly advice-only engagements with folks like BiggerPockets Money listeners,

and you can find those anytime at biggerpocketsmoney.com slash F-I-P-P-R-O. Okay, next up, Mindy, do I need a CFP for one of these financial planning engagements? I would say for your first foray into financial advising, yeah, I'd go with a CFP. Do some of our people not have a CFP? I would say that the certified financial planner, it's kind of like banned or one of these other things where that describes in a lot of people's minds the concept of a financial planner, but it is not required. And I think that several of the people that we've had that provide financial planning services here on the Bigger Pockets Money Podcasts are not actually certified financial

planners. And I've talked to many people I have a very high opinion of in the financial planning space that have not gotten their CFP designation. This is a lot of work. It's a test there. And I also think that the CFP, inside of the financial independence world, you know, among people, for example, who might listen to Bigger Pockets Money has actually got a branding problem among the population who really understands personal finance and has an inclination to do DIY services. In fact, 64% of you, Bigger Pockets Money listeners, said, yes, I am skeptical of the CFP designation until I learn their fee model. Only 12 of you said I trust a CFP designation implicitly because it clears a high bar. And 17% of you said you completely ignore the certified financial planner moniker as a

designation when you're looking for a financial planner. And I think you guys are right. I think that's perfect. It's exactly how you should feel about this in terms of evaluating a CFP. It says, great, they passed a test and met certain standards. But you can certainly meet CFPs who I would have a pretty poor opinion of because they sell whole life insurance or permanent life insurance products as a primary revenue driver for their business. I think that conflict of interest, even if you're great as a planner, it creates a huge problem in a planning engagement. So I don't think the CFP designation matters significantly for me at all when I am looking at for a financial planner in the space.

I would be perfectly happy and willing to get great advice from somebody who has been doing it for five, 10, 15 years and never bothered to get the designation. And I'd also be perfectly happy to get advice from somebody who does have the designation. It just, it's really what's your experience and can you help someone like me? and the designation means literally nothing to me personally. You know how the change in seasons hits and suddenly you just want to declutter the garage, clean out the closets, and get everything all organized? That same feeling hits me with my finances every spring.

I used to have accounts scattered everywhere, making it hard to stay on track with my money goals. Let Monarch do your financial spring cleaning for you. One dashboard that gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One thing that really surprised me was pulling up the cash flow of you and seeing what percentage of my income was quietly going to lifestyle creep. Dining out and subscriptions I barely notice. It motivated me to make some quick adjustments.

Get your first year of Monarch for half off, just 50 bucks, with the promo code Pockets. Use the code Pockets at Monarch.com to get your first year half off at just $50. That's 50% off your first year at Monarch.com with the code P-O-C-E-T-S. When I was CEO of Bigger Pockets, Upwork was the number one place that we went to hire freelancers to power our business. One of the biggest growth hacks is realizing that you don't have to do it all yourself. Upwork made it easy to bring in the right freelancer when we needed them so that we could stay focused on what we do best. Upwork is a one-stop platform to find, hire, and pay expert freelancers across web and software development, data and analytics, marketing, business operations, and more. It's free to sign up and posting a job is easy.

Thousands of growing businesses already trust Upwork to hire flexible, high-quality, freelance talent for everything from one-off projects to ongoing support. Visit Upwork.com right now and post your job for free. That's Upwork.com to connect with top talent ready to help your business grow. That's UPWRK.com. Upwork.com. I'm skeptical of a lot of financial products. But life insurance isn't one of them. At least not term life. For the vast majority of you listening, term life is simply the right answer. And the smartest way to buy it isn't one big policy. It's a ladder. Your need for coverage isn't flat. It declines over time. You've got a 30-year mortgage, a couple of young kids, maybe a spouse mid-care. In 15 years, the mortgage is going to be smaller and the kids are almost launched. So instead of buying one giant 30-year policy you'll overpay for, you stack a few, say a 10-year, a 20-year and a 30-year layer. So your total coverage steps down as your actual obligation.

step down. You only pay for what you actually need when you need it. Ethos is a platform that helps you find life insurance 100% online. You can get a quote in seconds and apply in minutes. There's no medical exam. You just answer a few health questions online. You can get up to $3 million in coverage. Some policies are as low as $30 a month. That makes building a ladder genuinely fast. Get your free quote at ethos.com slash BP money. That's eth-h-os.com slash BP money. Application times may vary and rates may vary. Well, so how do I know that they're qualified to do this if they don't have a designation after? Like a CPA is a certified public accountant. You can get your taxes done by somebody who is not a CPA, but I would not look for in-depth tax advice from somebody who isn't a CPA. How do I know

that a financial planner is qualified to give me advice? Neither of us are CFPs, Scott. Neither of us are CFPs. And, you know, I think that passing the CFP exam is quite a bit of work. You actually have to study pretty hard. It's not just do you understand the core concepts of financial planning. It's, did you study for this test? And do you know how to answer these questions in there? So there's a real, that's a real wall to getting a CFP, which is why it is popular among financial planning professionals to get that license. But in order to give it financial advice and charge fees, you really only need a series 65 license or a series 66 license, which are most of much less demanding to get than a CFP.

So, and many people, of course, right, if they're on the way to CFP, you have to have several thousand hours on the job in order to qualify for the CFP standard. So many such people who are working towards a CFP have these licenses and are giving financial advice in some capacity along the way to becoming a CFP. So how do you know that somebody has a Series 66 or a Series 65 and isn't just some schmuck on the internet? The financial planner will certainly have that available. on their website and some of the documentation they provide you up front, so on and so forth.

It's like if you're using a real estate agent, Mindy, how do I know you're a licensed broker in Colorado? You must register with the state and get a license in order to provide for-profit financial advice. You just said, Mindy, you're a licensed agent. You have to register with the state. You must get a license to provide financial advice. I'm not providing financial advice. That's right. Yeah. If you wanted to say, hey, pay me $250 an hour and I'll give you some advice on what to do with your money, you would have to get a series 65, for example, license here, or a series 66 in order to do that in basically every state in the country, and you have to register that with your state, right? So, Mindy, you and I are both real estate agents. Very

similar process. You take a test, you get insurance, you meet several other requirements, and then you register with the state, and they give you a license. And the license number, something you would post on your website. So that, that's all that it is there. And I think that like a real estate agent, the people who have Series 65 or Series 66 can run the gamut. You can have a real estate agent like you who's been doing it for a very long time, really has a good pulse in the local market knows what they're talking about. And someone else who just got their license yesterday, you're both licensed. How do you determine which realtor to use? That's an interview process and beginning to use your judgment and the skill of hiring in order to get quality advice.

I could not agree more. Mindy, are you a realtor? I am not. So that's like CFP, right? That's not perfect, but it's a reasonable proxy here, right? So the realtor designation is another step you could take as a real estate agent to call yourself a realtor and you would meet additional requirements, pay additional dues. Is there a test to become a realtor? No. To be a realtor, you have to become a member of NAR, the National Association of

realtors, pay a membership fee, which I want to say is $650 a year, but don't quote me. And you have to take one class on ethics. So that's, it's not. It's not. a perfect parallel. I'm not implying that it's a perfect parallel, but it's, you know, at least directionally helpful to think about like, you can be a real estate agent without being a realtor. And you can be a financial planner without being a CFP. There are additional requirements past getting your license that you must meet to become a realtor and to become a CFP. It sounds like at least in the Bigger Pockets Money audience, people do not take either for granted that you are necessarily, like being a realtor does not mean.

mean you are a great agent. And being a CFP does not mean you are a great financial planner. It does mean that you met certain other requirements there. So that's, that's, I think, the parallel here. So, okay, so we talked about who do you hire, you know, a financial planner that's licensed, maybe or maybe not has their CFP. We talked about the compensation models and the clear bias and preference that most people listening to this podcast have for a flat fee or hourly engagement, although that we've backed off of the hard no for the AOM fees. They can work and apply in some situations and we won't we won't judge it if that's what you choose now what do you bring to get the most out of an engagement shoebox full of receipts i think it's funny you mentioned that

actually because i talked to a guy the other day asking him some questions about the shout out to will stiner thank you for help with part of the prep for this episode we'd love to talk you about more this more in detail at some point he was kind of like yeah like honestly you can just have a folder in google drive for example that has a bunch of your statements and just give that to some financial planners nowadays. They'll upload it to the AI, and the systems nowadays can intake a lot of those documents and get you a pretty reasonable picture of the portfolio and situation with something like that. So that was surprising to me that the technology has progressed to allow that.

That's interesting, but that you say that. But yes, that is one thing. If you have all your documents in a folder, that's a good start. That's a reasonable place to start is getting organized with everything in one big folder, even if it is just a big dump. Scott, one of the things that you can bring is your personal. financial statement or similar, like your Monarch Money account. If you have a Monarch money account like you and I do, opening that up and sharing that with your financial planner will give them a holistic look at your entire financial picture.

If you've been using Monarch for a long time, it'll give them past information about your spending habits, your recurring spending, your investments, their performance. Lots of different things. things that you can share with your financial planner that will give them a little more context into your financial mind? I think if you have an app like Monarch or one of these other ones, you know, Monarch is our favorite one, the one that we use. We have a relationship with Monarch. We should disclose. If you use the code Pockets, P-O-C-E-T-S, you will get 50% off your first year and show some love to Bigger Pockets money. So please do that if you decide to sign up for Monarch. That's a great proxy for this. So if you don't have a super complicated position with lots of

private business interests or real estate or pensions coming up or those types of things. Monarch is the tool, I think, because you plug on all your information, it categorizes and tracks all of the expenses. And if you do the reasonable amount of work necessary to maintain Monarch, make sure that the accounts continue to stay linked and you've categorized the few expenses that the AI does not appropriately categorize for you automatically, you can have a great representation of your financial position to bring to a financial planner. And many financial planners these days are capable of interacting with an interface like Monarch or at least downloading or accessing it and helping you get that first consultation going. So that's a great place to start.

If you have more complicated financial interests, for example, you have a real estate portfolio that has various different mortgages that have different equity balances that need estimates for rent and expenses and cash flow and those types of things. Now I think that the next level of tool is going to be what's called a personal financial statement. Monarch can handle this, but I think that begins to get a little beyond the greatest functionality, at least in 2026, for Monarch here. So I certainly put my properties into Monarch and track them there, but I also build my own spreadsheet for that. And if you want to find that spreadsheet, you can go to biggerpocketsmoney.com slash resources, and you can look at the personal financial statement that we have there, which has a real

estate schedule that allows you to list the address, asset value, mortgage balance, interest rate, rent, expenses, mortgage payment, and non-mortgage payment expenses are separated there, cash flow. And then I also have what I think is very useful, which is the pain in the rear score on a scale of one to three. Is the property easy, a one, or is it a real pain that continually bugs you as a three? And I also have a secondary toggle for, is this property have great prospects, or do I really not think it's going to go anywhere over the next five, 10, 10, 20 years? And you can do that on scale one to three as well. And I think that simple presentation is what I would think is one of the most helpful things you could bring to a primary call with a financial planner. Of course,

there's more to it from there. But in order to get like a very quick overview of your financial situation, how you feel about your properties and how you estimate they're performing, I think that's really helpful. And then the personal financial statement we have also provides a schedule for other debts and provides a schedule for those kind of miscellaneous other assets that are common in the bigger pockets money world, like that private business you invested in that your friend runs and you're not sure if it's liquid or has equity or whatever. The private equity fund, the debt fund, the pension that's come and do in year 15 at this amount, but you're not so sure about the state's solvency and how much you're going to get.

We have all that in there as a very simple schedule, and that I'll give the CFP and idea of how you think about your financial plan. So I think that the personal financial statement is a great place to go and to organize your finances and get a picture, especially if you're trying to understand what to do in the context of big money moves. And Monarch is a great supplement to or replacement of that if your position is a little simpler. Yes, Scott, I don't think you should even reach out to a financial planner until you have this information ready to go, your personal financial statement, or you've set up Monarch and

attached all of your accounts to that. So you can give them a general idea of where your money is. And if you have not created these yet, please go to biggerpocketsmoney.com slash pfs. That's PFS, that's PFS personal financial statement to download a copy of what Scott was talking about, or go to monarch.com and sign up for an account. But just one slight pushback I'll have for you, Mindy, is if you don't have any of this stuff in your situation is a mess, that does not necessarily mean not to go to a financial planner and try to get all this done ahead of time. That just means I would bias you towards the comprehensive financial planning services

because a big part of what comprehensive financial planning is is getting this stuff all organized and accounted for. So if you're truly overwhelmed by this task, that's a great place to go for comprehensive financial planning. And you might get frustrated if you're paying an hourly fee at a high rate to organize your financial life before even getting to the advice part on the hourly side. So just choose the right tool. If you're organized and you can do all this stuff yourself and you've got it all, that's maybe a great case for that hourly side of the engagement. And if you're not organized and really need help getting started and getting this all flowing in the right direction, that's probably a good case for the comprehensive financial planning. I'll allow it. Okay, Scott, after we've got a holistic

look at our finances or a big stack of all that information, if you're going to go with a financial planner who does it for you, what else do you need? You need goals. How many times has someone come on the Bigger Pockets Money podcast for a finance Friday? And they've asked us some version of, what should I do with my money or my portfolio or whatever? And the answer is, well, if you want to have Tuesday afternoon off in your 40s, you're going to make this decision, and it's going to come at the cost of maximum net worth at age 65. Or if you're 25, you want maximum net worth at age 45, that's going to come out the cost of Tuesday afternoon at age 33. Those tradeoffs are very real. There's not a lot of free lunches in personal finance here, especially as you get more in the

intermediate to advanced world. Now you're making decisions about what you value. If you can come with some kind of description of what you want that's reasonably certain. You're going to be avoiding a therapy session with your financial planner, which you may not really be wanting as the primary output of the engagement. Hey, Scott. Is there a way that our listeners could go and find a step-by-step walkthrough of how to determine what your goals are? Yeah, great, great leading question.

Yes, you can also go to bigger pocketsmody.com slash resources, and you can download our second most popular artifact there, which is the goal setting workbook here. And it's just like a seven page PDF, but it will help you draft a vision for your life. And it just shows an example of what my wife, Virginia, and I want for our life, right? We want a house in this location. We want this for our kids. We want this level of fitness. We want to spend our weekdays doing this, our weekends doing this.

We want this level of community in our lives. And then we want our financial position to support that at this time with this amount. And that provides a level of clarity because now I can make decisions that are grounded in that. You can disagree with my decisions. But I think you'll find it very hard to argue that my decisions are not. not coherent in pursuit of the stated goal that I have and I have written down with my wife. And I think that's really important because once you have a clear goal and you understand the tradeoffs, ideally you're not binary. Like some people are way too binary about this. I want to literally

die with zero. Bad goal. I want to die with maximum net worth. Bad goal. Right. There's a balance here. Even if you want to go 98% of the way towards diagonal zero, 2%, with just a little buffer, that's great. Be realistic about these tradeoffs and don't go to these crazy extremes. in the space. And that will help the discussion with your financial planner if they understand your biases. They may suggest you change those biases at some point. There may still be an element of therapy. But I think it's kind of unproductive when someone comes in and they don't really know what they want or they have conflicting goals with their spouse that haven't really been discussed. Yeah. I think hand in hand with the goals is a short to the point summary of what you think you need

help with and what actions you are considering. Because Scott, what you might consider might be very different than from what I might consider. And that doesn't make either of us right or wrong. That just gives the advisor a little bit of insight into what we're thinking and a bit of our risk tolerance. I think that like common threads that probably come up in the bigger pockets money community in particular, the most common challenge that we get is some version of we are close to our five number or approaching it. You know, we're somewhere along that journey, you know, three, five, ten years out. And one spouse wants to stop working, either to stay home with the kids or just retire early

or because they want to start a business. And we're just not quite comfortable for whatever reason with that dynamic. Maybe because the other spouse's income will be slightly below the amount we need to spend for our lives. Maybe the other spouse's income will not allow us to continue to save. And what we won't be able to go anywhere close to as far down the retirement. stack, maybe because we'll actually be burning cash for a little bit and we're betting on that business coming up.

Like, that's a great way to frame a problem, a central problem to a financial planner, I think, so they can give you an opinion about what the tradeoffs really are and what to do about that and how to either reduce the risk of a decision like that or, you know, delay or defer it or prove it and say, actually, we're fine in this situation to some degree. But having that central problem labeled and understood about why there may be tension or anxiety, even if both are aligned in that situation, that's like a great way to frame those goals. Yeah. The more questions you can anticipate that they are asking and have an answer for them, the better your conversation is going to go. Another thing, Scott, that I want to point out is

having an investor policy statement. You could find an advisor who says, oh, you want a maximum growth? Let's put you in Bitcoin. But your investor policy statement says, I do not want to be in anything alternative. If you don't provide this to your advisor, they have no idea what your mindset is. So this goes along with the goals. It goes along with the short to the point summary of what you think you need help with. It goes along with all of these other, your personal financial statement and all these other things. What is your investor policy statement? Now, this doesn't have to be a set in stone thing. This can be something you're like, well, I think this is what my investor policy statement is, and combined with all the other information you're giving your advisor,

perhaps your advisor says, you know what, I think we need to adjust your investor policy statement. All of these documents are fluid, except your tax returns. All of everything can be maneuvered, but it's like that series of gears where this one moves and then this one moves. And if this one moves, then this one moves. And if this one moves, then this one moves. So that's just all interconnected, but knowing where your mindset is is going to be so helpful for your advisor to give you the best advice for you specifically in your specific situation. And guess what? We have a document for that too. Now, it is like the least downloaded document on our resources page, but that's because it's brand new. You can go to biggerpocketsmoney.com

slash resources and scroll all the way down or you can go to biggerpocketsmoney.com slash IPS. That's investor policy statement, IPS, and download that it's a set of instructions that gives you some guidance for how to set up your own investor policy statement if you've never done it. Probably arguably the best investor policy statement out there in the world is going to be the bogleheads one where I think that ours can be more helpful if you're not a boglehead and have other assets, right?

Like, I have real estate. That changes how I construct the rest of my portfolio and how I think about bonds, for example, right? And Bogelhead doesn't have as much of a framework around that. And you're going to have to develop that yourself to some degree, depending on what else you have. There's examples out there that work for totally passive investors, but many people listening to Bigger Puckets Money are not truly totally passive investors and have things like real estate, private equity, debt funds, alternative assets and businesses or pensions. And those things and how they intersect with your portfolio matter, right? That may change the way you think about your bond allocation or how you think about the way you want to involve factor tilts in your portfolio if that's something that you're interested in. So you may need that if you have something that deviates from true Boglehead philosophy.

But if you don't, then I think the Boglehead philosophy is one of the greatest investor policy statements out there. You can Google that and find that in various corners of the internet. We talked about how one of the big challenges for Bigger Pockets Money listeners is often the one spouse wanting to step down. Another big challenge is liquidity, right? And we've talked about this as the deferral dilemma, no longer the middle class trap, the deferral dilemma where I've put a very large percentage of my wealth, pre-tax or tax-deferred. And that is starting to conflict with some of the things I want in the next few, five to seven years, before I hit true and lasting financial independence.

That's a great problem to bring to a financial planner so that they can walk through the tax math. And in some cases, there's a huge opportunity cost and you can't justify stopping or slowing the deferral. And in some cases, the opportunity cost is very small, and they may be willing to allow you to dial those back. And in some cases, you may be over contributing to the deferred accounts and you may be actually creating a tax bomb for yourself like what Mindy has and having to start doing Roth conversions. Once you're starting to talk about Roth conversions while you're still earning income, you know you've gone too far in the tax deferred account. So that's a great question to bring to the financial planner as well, if that's something that you need help with. And the answer is going to depend.

and for the population of wealthy, high savings rate individuals in high income tax brackets that often listen to bigger pockets money, for example, there could be cases where there's an opportunity to scale that back in some cases. So that's a great tradeoff to bring to a financial planner. Another great one to bring is I had somebody recently bring a wonderful portfolio that was basically close to being finished. Same deal here. They had a couple rental properties. They had a liquid portfolio that was, you know, big third in the 401k tax deferred. So, small third and small third in the Roth in the after tax. And the question was, you know, I'm thinking next year when my spouse stops working, I might want to do a big Roth conversion. I said,

perfect. That's a great, great plan. I love it. What I would do is towards the end of next year, bring this to a flat fee or a fee only hourly in this particular case, financial planner, you know, when you have a good idea about what your income is going to look like, so maybe like November of 2027 in this particular case, and ask them how big of a Roth conversion should we be thinking about doing towards the end of the year and get their help executing that. So that would be a great case, for example, for an hourly advisor for that particular person. So those are some of the great ways to use these advisors in select situations, depending on your goals and challenges, and how strong you feel you are managing your money. Okay, so Scott, we talked about finding an

advisor and interviewing advisors. Let's talk about some questions to ask these advisors. My number one is what experience do you have in working with clients like me? Here's my net worth. I'm on the path to financial independence. Here's my goals. Like very succinctly give them this information. If they've never heard of financial independence, if they have never worked with anybody on the path to financial independence, that's not really the financial advisor for you.

my opinion. I think a lot of these calls with a good hourly or even comprehensive financial planner, they're going to give you some information up front about how they think about the situation in there. And there should be reasonable information or directional lean in some cases about what they're going to look for, what questions they're going to ask at the very least in the first, you know, free call, the intro call in a lot of these situations, not all of them, but in a lot of them. And I think you should interview at least three if this is the first time you're going to be talking about folks. And I might even consider doing that across several different fee models here. But if you just go with the very first person you talk to, how are you going to

know that that's good? You have no idea. You don't even have one or two or three, you know, comparisons in your toolkit in terms of how to hire this person or see what the options are. So I think that's really important. It's going to empower you greatly if you talk to three, even if you really like the first one that you talk to and eventually end up hiring them. It'll just empower you to know there's other options out there. And this is somebody you can hire and somebody you can fire when you need to for any reason or no reason at all. That's the first thing. yeah, what experience do you have and working with clients like me? How are you compensated? Right? And I think that question matters, even if they offer an hourly or flat fee model,

if they also offer AUM services or also sell commissions. And their model is flexible depending on what you want. I still think that's a big flag because who's going to get the better attention long term? Where's that bias going to go? Where's the revenue for this business going to come over a long period of time. Is it going to come from you paying $250 an hour for a few hours a year or is it going to come from the person that they're going to generate a $40,000 or $50,000 commission from by buying the whole life insurance policy, the permanent life insurance product or the annuity? That's a major conflict of interest. I want to know if they make any money in these other models, including the one that I'm

looking for in the hourly or comprehensive flat fee. I'll go you one further, Scott. I want you to ask, do you recommend any products, where you are paid a commission for recommending that product. There are advice-only advisors out there who will say, these are the things I think you should do. Let's look at you, Scott. Outside of your financial situation, you are a young couple with two young children.

Should something happen to one of you, let's say that you both earn the same income, which covers about 50% of your spending and investing, and one of you passes away, you're going to have a problem. So I have no issue with an advisor saying, I think you need life insurance. I have an issue with an advisor saying, you need this specific policy, and also they make $20,000 off of selling you that specific policy. Is that really what I need?

Or did they really need that $20,000? One of the big things I have is, let's say that you're tempted to buy that permanent life insurance product. It's going to cost you several thousand dollars a month for the rest of your life and premiums here. And you know the person's going to get a big commission, but they've sold you. They really feel strongly about it. They clearly believe in the product or seem to. That's a great use to call up one of these hourly financial planners and just say, before I commit to this very large permanent life insurance product, could you let me know what you think as an unbiased, you know, source on this that with no skin in the game other than the $500 I'm paying you to

review my decision here? That could save you a lot of money. And $500 in the context of a lot of of these permanent life insurance products to get a second opinion from somebody who's not selling it is potentially one of the best investments you can make in your life. If they approve it and they say you're one of the rare cases that you need it, that tells you a lot if you get a second opinion that says that. I think it'll be rare, but it will not be a never situation. Another question is exactly how much will I pay? If they can't answer this, thank you next. I think that's right. I think there should be an hourly cost. That's clear. Or I think a cost for the engagement or an annual recurring cost in there. The next question you want to ask is,

are you going to manage my assets for me or am I going to manage them and you're going to be providing advice only? So that's this term advice only and comprehensive financial planning and where they diverge, right? Because a flat fee advisor or even an hourly advisor in some cases can manage your money for you. They can manage your accounts, do Roth conversions on your behalf, distribute funds, that kind of stuff from the portfolio, make investment decisions. Or they can be advice only where they never touch your money. They only tell you actions to take that you will be on the hook for taking downstream from that. So that's a question. Many planners will offer both. Some will be only one or only the other. Scott, this next one is a big one. Are you a fiduciary?

And a fiduciary means a person or organization that manages money or property for someone else and is legally required to put that person's best interests ahead of their own. As a real estate agent, I'm a fiduciary. If I am hiring somebody to give me advice about my money, I want them to be a fiduciary. Yeah, I think that's right. And not all financial advisors are fiduciaries. And the standard for some financial planners is that they only have to recommend products that are suitable for you, even if those products pay them higher commissions than alternatives. That's something to note about this industry and asking if they are a fiduciary. is a great way to start that. And I think that even inside of the fiduciary world, I believe that

incentives matter. And this is my small beef that's receding, right? I've walked it back. I'm not saying that AUM financial planners are all bad. I was saying that for a while and I've walked that back. I no longer feel that way after talking to many very high quality planners who charge AUM fees. but I have to believe that if a decision to pay off the mortgage, for example, or stay invested, is going to cost the planner 40% of the portfolio, that that's going to influence their decision to some degree. They can be a fiduciary and that incentive can provide a powerful reason to believe that one course of action is better than the other, right? And that's just, that's a challenge in there, right? And there's no free lunch here.

So a financial planner that charges you a recurring fee for every year, a flat fee, will want to provide value to keep the relationship going. So there's no perfect incentive model in any of this. An hourly person may want to do more hours, and a flat fee person may want to get the job done quicker. There's no perfect incentive model. Just know that that may have some impact in some of the recommendations folks have, even if they are fiduciary.

If you've been putting off life insurance, I get it. The old process was miserable. phone calls with an agent, a nurse coming to your house for a blood draw, then waiting weeks to find out what you'd pay for. That friction is exactly why so many people who should have coverage don't. Here's what I believe. Most BP money listeners need term life, and the right move is to build a ladder. A few term policies of different lengths stacked together, so your coverage steps down as your mortgage shrinks and your kids get closer to being financially independent, or you get closer dating your financial independence number.

The thing that makes that practical now is ethos, a platform that helps you find life insurance, all 100% online. Same day coverage, no medical exam. You just answer a few health questions online. Up to $3 million in coverage, some policies as low as $30 a month. So building a two or three-layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote at ethos.com slash BP money. That is ethyos.com slash BP money. Application times may vary and rates may vary. When I was CEO of Bigger Pockets, Upwork was the number one place that we went to hire freelancers to power our business. One of the biggest growth hacks is realizing that you don't have to do it all yourself. Upwork made it easy to bring in the right

freelancer when we needed them so that we could stay focused on what we do best. Upwork is a one-stop platform to find, hire, and pay expert freelancers across web and software development, data and analytics, marketing, business operations, and more. It's free to sign up and posting a job is easy. Thousands of growing businesses already trust Upwork to hire flexible, high-quality, freelance talent for everything from one-off projects to ongoing support. Visit Upwork.com right now and post your job for free. That's Upwork.com to connect with top talent ready to help your business grow. That's UPWR-K.com. Upwork.com.

When spring hits, some people suddenly just want to declutter the garage, clean out the closets, and clean out the closets, and get everything all organized. Whether or not that hits you, Monarch will do your financial spring cleaning for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. One of my favorite parts is the Sankey diagram. Every month, I open it up and literally watch the flow of money. It shows exactly where every dollar is going from income to all of my spending categories. It makes it so much easier to spot what's working and what needs tweaking. Get your first year of Monarch for half off just $50 with the promo code Pockets.

Use the code Pockets at Monarch.com to get your first year half off at just 50 bucks. That's 50% off your first year at Monarch.com with the code P-O-C-K-E-T-S. Another question I want people to ask is, who will I actually work with? I would hate for somebody to interview the person who answered the phone, have a great rapport with them. think that that's the person they're going to be working with and then arrive at their meeting and be like, who are you? Know who it is that is going to be giving you advice before you sign up that appointment. I think that that also brings up another question around should I work with an individual solo practitioner, or should I go with a firm that has a rotation of professionals on staff?

And I think that's a big challenge here. And I'll say I don't have the right answer to that. I don't think that question will be permanently resolved ever across any industry here, because I think you can always theoretically get better quality at lower price directly from a solo practitioner. And that in practice, that can be very hard. In practice, I will say in my experience working with solo practitioners, I've had a great, wonderful experience in year one, for example.

And then if they're very good in many cases, by year five, this person is now fully booked. And I no longer have that power dynamic with the professional where they're going to pick up the phone and respond to my email with my annoying question that I need answered. That can be a challenge. A firm may be more expensive, but I would argue often have less risk of that dynamic occurring over long periods of time, but not no risk. And there could be, I get handed from this guy I used to work with to a new person or partner in the firm as that person moves on and takes their book of business with them.

So I don't think there's a perfect answer in this world. And I think you'd be foolish to attempt to get to perfect. I think you just understand there's tradeoffs between these two models in there. And you may want to interview a couple of solo practitioners and a firm or two in your search for a financial planner. Other questions that I think you should ask are, does your firm handle tax advice? Do you provide estate planning guidance and do you provide insurance advice? These are great questions to ask, especially if you're looking for estate planning advice, tax advice and insurance advice.

You don't want to sign up with somebody and ask them a tax question and have them say, oh, we don't do that. Okay, it's great that you don't do that. I wish I would have known ahead of time because that's kind of a big concern. And it's totally fine if people don't provide certain levels of those items. And there's a big fight apparently in the Reddit universe between the lawyers who think the financial planners should not be involved in the estate planning and the financial planners who think, of course, they should.

I don't see how your financial planner can't be involved in your estate planning piece to some degree in there and how there's not a discussion that goes on there. I think it just depends on the planner and the lawyer and how people want to engage in all that. I do think that if you try to get everything all perfect, you can get yourself into the middle of some very expensive phone calls where you have your estate planning person on one, the tax person on the call and then the hourly financial planner. And you're like, wow, that joke just cost me 40 bucks for the intro. How was your weekend? 40 bucks? What kind of discount guys are you using? That was the three minutes that we spent on how was your weekend? You know, Saturday good? You know, they had a barbecue? No, now we didn't even get to the advice. It's like a thousand dollars an hour going. across these three guys. That could be a problem. You don't want to get into that situation. You know, there's tradeoffs. That's the word. There's tradeoffs in all of this. What do you need? How informed can you get? How prepared can you get? How can you make the most your time with these professionals? Hopefully, this episode has helped you think through that and some

of those tradeoffs and help you make you a little bit better of a decision for yourself when it comes time to hire a financial planner in particular. Scott, do you have any other questions you want to suggest to our audience before we wrap up? Yes and no. I don't frame this as a question, but I think it's what should you get? Like what is the output of a good engagement with a financial planner, in my opinion? And I think it's four things. One, the financial planner should accurately represent your financial position and the core problems and challenges and opportunities that you face. Diagnosis. Second, this person should give you a clear directional path of where you're want to go. We're going to invest in index funds. We're going to pay off our rental mortgages.

We're going to move through this tax-advantaged order of operations instead of this one. The third is there should be a specific set of actions to take that actually address your problem. We're going to make these changes to your financial position or none. You were doing it completely correct. And this was a confirmatory. Our diagnosis, our guiding principles are exactly what you came in with. That's fine. But they should be stated in some way that's right. So a diagnosis, a set of guiding principles, what you're going to do, and a set of specific actions that actually resolve the problem you came in to the engagement with. And then last, I think in a financial planning context, there is a checklist of best practices. What am I going to do with my insurance policies?

Do I have disability, life insurance, home insurance, auto, umbrella? Do I have all those knocked out? And I actually have checked to the box that those are complete. Do I have an up-to-day estate plan? Or my beneficiaries listed on all my investment accounts? There should be a checklist of best practices that they provide that are tailored or tweaked to your situation. They're not just boilerplate from every single financial plan. It's like, no, your position's here. You're worth $3 million. You probably don't need a $5 million life insurance policy if your five numbers,

$4 million. Maybe we'll get a $1 million term policy, for example. So there should be some element of a checklist that is relevant to your situation. And I think if you don't get an output like that, the engagement has largely failed. There's many ways to provide a good output in that context, but I think it should contain those ingredients where you're at, what you ought to do at a high level, specifically what you're going to do right now, and to check the box list of best practices to complete. I love that, Scott.

I don't have anything to add to that in the words of Charlie Munger, RIP. So maybe you can turn that into last question of saying, what is the output of this engagement going to look like for me? And some variation of an answer that addresses those points or, you know, a reasonable variant of that is good from your financial planner, I think. All right. our dear listeners, we threw out a lot of links today. They can all be found at biggerpocketsmoney.com slash resources. If you haven't hopped on over to our website, we have a new website, biggerpocketsmoney.com. We have a blog. We have a ton of resources. We have a newsletter that you can sign up that goes out every Wednesday. We have a ton of stuff for you to help you on your journey to financial independence. Scott, what do we charge for this?

We are free only. Only. But we also, we should disclose, we should disclose here. Hey, we have financial planners on biggerpocketsmoney.com that we think are FI-friendly. They are found at biggerpocketsmoney.com slash phi-pro. FI-Pro. They are, I think, at this moment, all flat fee or hourly, or at least offer those options as primary considerations.

I think there's some AUM folks that you can find in some of the marketplaces that we've partnered with here. But we do partner with that, and we will. That's our conflict here. We believe that this is the right way to get financial planning advice, and we are saying that here. We also may make money if you use some of the financial planners that you find at pickerpocketsmoney.com slash 5Pro. We recommend you to interview a few folks potentially at that URL or elsewhere on the internet as part of your search for a financial planner. But you should know our conflict of interest here.

We would like you to use those guys when the time comes and it's right in your situation. And we think it's the right approach. But we also have a financial incentive to recommend that. I think that's fair. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Indy Jensen saying see you soon, Loon. When the change in season hits, some people suddenly just want to declutter the garage,

clean out the closets, and get everything all organized, and that's great. If that's you, or if it's not you, either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. Another feature I love about Monarch is the weekly AI recap. It catches spending spikes before they become problems and flags big net worth shifts or upcoming expenses. It's like having a quick personal check-in every week, so nothing sneaks up on me. Get your first year of Monarch for half off, just 50 bucks with the promo code Pockets.

Use the code Pockets at Monarch.com to get your first year half off at just $50. That's 50% off your first year at Monarch.com with the code Pockets, P-O-C-E-T-S. When you're ready to start your business, Northwest registered agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one, a business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest registered agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the U.S. with over 1,500 corporate guides. These are real people who know your local laws and can help you in your business every step of the way. With Northwest, your business is set up to stand on its own from day one.

That means your home address, personal email, and phone number, stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit Northwest Registeredagent.com slash money free and start using free resources to build something amazing. Get more with Northwest Registered Agent at Northwest Registered Agent. com slash money free.