There are over 300,000 financial advisors in the United States. In San Diego alone, we have over 10,000!

We know you have a lot of choices when it comes to choosing a San Diego Financial Advisor. Which is why we have worked hard to create a firm that:

  1. Puts YOUR interests first.
  2. Eliminates commissions and hidden fees.
  3. Maintains the CERTIFIED FINANCIAL PLANNER™ designation.

The following article outlines three major reasons why we think Define Financial should be your trusted financial advisor.

Fiduciary-icon

FIDUCIARY


What is a Fiduciary Financial Advisor?

A fiduciary is someone who is tasked with putting your interests ahead of their own.

Why Should You Work with a Fiduciary?

If you are seeking the services of a financial advisor, you want the best information to help you achieve your financial goals – be it budgeting in retirement, savings for a child or grandchild’s education, or selling your business. A financial advisor working as a fiduciary will better help you accomplish your financial goals because they will only have your interests in mind. The fiduciary financial advisor will never ask themselves, “how can I generate the biggest sales commission from this client?” For the fiduciary, the questions on their mind will be:

  • What’s the most my client can spend in retirement?
  • How much should my client save in a 529 account?
  • Which financing option allows my client to sell their business for the most money?

Fiduciary vs. Suitability

A financial advisor can be held to one of two standards: fiduciary or suitability. While a financial advisor held to a fiduciary standard will give you truly the best financial advice they are qualified to give, an advisor held to a standard of suitability will give you information that can be compromised from a conflict-of-interest. For the client seeking a financial planner, choosing a financial advisor who acts as a fiduciary is the preferred option. Yet, many financial advisors are held to a looser standard of care: suitability.

A Story of Two Financial Advisors, One a Fiduciary

Sally Saver has made great progress towards creating an emergency fund for herself and her family. She has six months of mandatory living expenses saved as cash. This rainy day fund will protect her in the event she suffers from a:

  • short-term disability and is unable to work for a time
  • an unexpected lay-off or downsizing by her employer
  • an unforeseen medical expense
  • any other surprise expense waiting around the corner

With Sally maxing out her employer’s 401(k) contribution, and her emergency fund well-funded, she has extra money to invest. Not sure what to do with this extra cash, Sally seeks out some financial advice. Enter the financial advisors: the fiduciary, and the commissioned salesperson.

Upon hearing that Sally is flush with cash, the commissioned salesperson suggests that Sally purchase a bio-tech mutual fund. Though the commissioned salesperson does not receive any compensation from Sally directly, he will receive a commission from the mutual fund company.

Unfortunately for Sally, the bio-tech mutual fund is no gem. The particular fund has had lackluster investment returns compared to the rest of the stock market. Part of the reason for this poor investment performance is because of a large fee charged by the mutual fund company. This hefty mutual fund fee slowly erodes Sally’s wealth.  In short, this bio-tech mutual fund has:

  • poor investment performance
  • high fees
  • and unnecessary investment risk (of holding a concentrated investment – one that isn’t fully diversified)

Despite this, the recommendation made by commissioned salesperson is “suitable.” Why? Because the particular recommendation looks to satisfy Sally’s stated goal of investing.

The financial planner held to a fiduciary standard has a much different approach. The fee-only fiduciary recommends that Sally keep her extra money in a cash savings account? Why? Because by asking questions of his client, the financial planner learned that Sally has ambitions to buy a home in the next three years. Sally will need that cash to put towards her down payment.

This financial advisor has given Sally the best advice he can given everything that he knows about his client. The advice of the fiduciary is one that puts the interest of the client first. This may mean forgoing compensation in favor of what is best for the client.

A commissioned salesperson leads with sales. A fee-only financial advisor leads with questions.

A Fee-Only Financial Advisor, Acting as a Fiduciary

A fiduciary and fee-only financial advisor go together like peanut butter and jelly. The absence of any outside compensation frees up the financial advisor to truly be a fiduciary, dispensing the trust financial advice with only the client’s best interest in mind.

COMMISSION-FREE


 Working With A Fee-Only Financial Advisor

Commission-free financial advisors are often referred to as fee-only because these professionals charge a fee for providing financial advice. This is different from a commissioned salesperson, who earns money when they sell a financial product, such as life insurance or a mutual fund.

A fee-only financial advisor is best suited to help you achieve your financial goals, and not push whichever financial product-of-the-month that pays out the highest in sales commission.

By eliminating the sales incentive, the fee-only financial advisor gives you advice that is transparent – free of any conflict-of-interest that can come from the possibility to earn a commission. This works because the fee-only financial planner is compensated by you directly, and not by a third-party annuity, life insurance, or mutual fund company.

The Fee-Only Financial Advisor in Action

Evaluating your need for life insurance is one area where working with a fee-only financial advisor can pay dividends. With countless life insurance products available and the needs of every person truly unique, having a fiduciary help you means being able to successfully navigate the myriad life insurance options available to find the right product for you.

Working with a fee-only financial planner means having the entirety of your needs evaluated, so you will never pay too much for products or services that you do not need. A fee-only financial advisor is your personal financial advocate, coach and trusted resource.

The Registered Dietician and the Weight-Loss Pill Salesman

Most people have goals outside of their finances – such as a commitment to spending time with their family and friends, traveling, hobbies, and maintaining their health and fitness. This last goal lends itself well to explaining the value of working with a fee-only financial advisor.

If you are seeking a healthy lifestyle, you may choose to meet with a registered dietician. Alternatively, you might end up meeting with a salesperson for weight-loss supplements. When choosing the latter, the advice dispensed by the weight-loss pill salesmen is predictable: consume weight-loss pills. The weight loss pills may or may not work for you. The pills may have side effects. But, at the very least, the weight salesperson will earn a little bit of money selling the pills.

When choosing the latter, the advice dispensed by the weight-loss pill salesmen is predictable: consume weight-loss pills. The weight loss pills may or may not work for you. The pills may have side effects. But, at the very least, the weight salesperson will earn a little bit of money selling the pills.

The advice dispensed from a registered dietician would be wholly different. With you best interest in mind (and no products to sell), the registered dietician would firstly evaluate your condition before producing any advice. This could mean measuring your body mass index, evaluating your exercise and eating habits, and discussing your sleep patterns. The registered dietician uses their skill set and knowledge base to find the best solution to help you accomplish your goals.

The same goes for the fee-only financial planner. Without any products to sell, the fee-only financial planner uses all their tools at their disposal to help you accomplish your financial goals.

certified financial planner san diego

CFP® PROFESSIONAL


 Why Do I Need a CFP® Professional?

Choosing a CERTIFIED FINANCIAL PLANNERTM means selecting an advisor who has passed a rigorous entry process, requiring of:

  • education
  • examination
  • experience
  • ethics

In addition, a CFP® professional is required to maintain and update their knowledge through ongoing continuing education requirements, much like an attorney, Certified Public Accountant (CPA) or Chartered Financial Analyst (CFA). This ongoing requirement ensures that the CERTIFIED FINANCIAL PLANNERTM you are working with is most up-to-date in their area of expertise: financial planning.

The CFP® Planning Process

To help ensure that the client receives the best financial planning experience, the CERTIFIED FINANCIAL PLANNERTM follows a six-step process.

Establishing the Relationship:

In the first step of the financial planning process, the CFP® and client come together to discuss what will be covered in the financial plan. Sometimes financial planning engagements can be limited to investment management, such as an exclusive review of a 401(k) allocation. Other times, a review of the total of a client’s insurance needs can be performed – to determine whether a client sufficient (or excess) life insurance, disability insurance, liability coverage or the right type of medical insurance for themselves and their family. More inclusive financial plans can include retirement planning – to determine if a client is on course for retirement or if their budgeting in retirement is sustainable. A CFP® Professional can also produce a comprehensive financial plan, which includes all of the above, as well as reviewing a client’s options for charitable giving and/or business retirement solutions. Some areas that can be covered in a comprehensive financial plan include:

  • Investment Management
  • Charitable Giving Services
  • Financial Planning
  • Business Retirement Solutions
  • Retirement Planning
  • Insurance Services

Gathering Data:

In the second step of the financial plan, the client provides the CFP® Professional with all their financial information. This can include an employer’s 401(k) menu of mutual funds, or statements of all their insurance policies. In addition to the hard data, the CERTIFIED FINANCIAL PLANNERTM also discusses the client’s life goals and values – to determine what matters most to them.

Analyzing Client Data:

Once the CERTIFIED FINANCIAL PLANNERTM professional has all of the client’s relevant information in hand, the analysis begins. Financial planning software, or even simple Excel spreadsheets, can be used to determine if the client has enough money saved for retirement, or if the client has enough life insurance coverage, if the client’s portfolio is well diversified and appropriately allocated given their risk tolerance and timeline to retirement.

Recommendations:

In this step, the CFP® Professional presents their findings to the clients. This includes receiving the client’s current financial situation, but also showing how the client can achieve their goals. Possible recommendations presented by the CERTIFIED FINANCIAL PLANNERTM could include:

  • Implementing a more diversified, lower-cost, tax-efficient investment portfolio
  • Opting for less expensive term life insurance over permanent life insurance
  • Charitable giving strategies to meet one’s philanthropic goals
  • Tax strategies to mitigate and estate tax and probate expenses

Implementation:

In this step of the financial planning process, the client and the CFP® Professional come together to decide not only what recommendation the client will take on, but who will be responsible for putting those recommendations into place. This may mean that the fee-only CFP® works with other financial professionals to:

  • find a lower-cost term life insurance policy for the client
  • rebalance the client’s portfolio to create a low-cost, diversified, tax-efficient solution
  • help the client open a donor-advised fund so that they can meet their charitable gifting goals.

It could also mean that the client creates a new saving goal for themselves, increasing their annual savings into IRA and/or their 401(k) accounts.

Monitoring:

For the final step of the financial planning process, the CERTIFIED FINANCIAL PLANNERTM and the client determine who will follow up on which portions of the financial issues addressed in the client’s financial plan. In the example of retirement planning, a CFP® professional can be tasked with measuring the client’s progress saving for retirement.