Answering the Zweig Questions

Daniel Yerger About the Firm, Financial Planning Leave a Comment

Jason Zweig is arguably one of the most effective watchdogs of the financial advice industry. With a 30 year career in following the finance industry, he’s contributed to some of the hardest hitting journalism, uncovering issues with misconduct both among advisors, associations, and regulators. Five years ago, Zweig published his list, “19 Questions to Ask Your Financial Advisor” in the Wall Street Journal. The list covers a lot of good questions to ask, though some of his recommended answers are based more in a perception of advisors than necessarily what advisors should answer. So today, I’m going to review the Zweig questions, comment on his recommended answers, and answer the questions myself as a Financial Planner.

1. Are you always a fiduciary, and will you state that in writing?

Zweig’s Recommended Answer to Listen for: Yes.

Dan’s Thoughts: This is a soft pitch question, and one that is potentially tricky. While you should absolutely accept no lesser a standard than that your financial planner be a fiduciary at all times, the problem can be in how that’s defined. For example, as a fee-only financial planner who is regulated as an Investment Adviser Representative and as a CFP® Professional, I have both a legal obligation enforced by the State and the SEC to act as a fiduciary, and I have an ethical professional obligation enforced by my association with the CFP Board to act as a fiduciary. In turn, a fee-based dual registered Broker and Investment Adviser Representative has a legal obligation to be a fiduciary only when rendering investment advice for a fee, and can “hat switch” to a looser “best interest” standard when acting as a broker. If that same adviser is a CFP® Professional, they can answer the question as “Yes” because of the CFP® Professional Ethics, but there’s no legal teeth behind that answer. Fundamentally, a better question would be: “Are you legally required to act as a fiduciary for me at all times? Will you put that in writing? Are there any exceptions or circumstances in which that would not be the case?”

Dan’s Answer: Yes, we are fiduciaries to you at all times that we are providing financial advice, financial planning, implementing your financial plan, and managing money on your behalf.

2. Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: This question gets messy. Years ago, CFP® Professionals used to be able to describe their compensation as “salaried,” rather than Commission-Only, Fee-Based, or Fee-Only. This led to consumers being tricked by salaried brokers into buying products that weren’t in their best interest. Yet, a completely honest answer from my associate planner, Samantha, would be “I’m paid a salary by MY Wealth Planners, but we’re not paid by any third parties in the form of fees, commissions, or revenue sharing.” The fundamental answer of “no” here is good, and you should never hire someone as a financial planner who says “yes” to this. It’s also noteworthy that you should be asking about the firm as well. For example, there are advisors who work on a pseudo-fee-only model within fee-based firms, where they themselves only do work for clients for fees. However, their firm, not them, may receive revenue sharing or fees from product providers to be “part of the catalog” the firm’s advisors are allowed to recommend. So it helps to expand the question to a required disclosure of both the firm and the advisor, as those fees often are used to directly increase the percentage of income the advisor receives as a recruitment and retention strategy. For example, the firm might only be able to afford to pay its advisors 80% of their revenue, but if they receive 20% of the fees clients pay to mutual fund companies for using their mutual funds, then they can pay their advisors 90% and make up the difference on the back end.

Dan’s Answer: No. We do not receive compensation from anyone other than our clients. We do not accept commissions, sales incentives, awards and rewards, or any form of compensation whatsoever from third parties. I personally teach an investment or retirement planning class once a semester at the University of Colorado Boulder for $6,200 on a contract basis.

3. Do you participate in any sales contests or award programs creating incentives to favor particular vendors?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: This is a lot like the second question, but it’s good to call it out selectively. I once knew a “fiduciary independent insurance broker” who outright asked me if any clients needed a life insurance policy, “Because if I sell 5 life policies for Auto Owners I’ll get to take a trip to Costa Rica.” Gross. Simply put, if someone is having tropical paradise (or a wine country trip, or a car, or anything else) dangled in front of them, you can bet it’s going to affect how they make recommendations.

Dan’s Answer: Absolutely not.

4. Will you itemize all your fees and expenses in writing?

Zweig’s Recommended Answer to Listen For: Yes.

Dan’s Thoughts: This is almost universally done in the form of “disclosures.” When you engage a fee-only financial planner, you often receive both a services agreement as a contract for services and payment, and also a “Form ADV Brochure” which is a long-form legal disclosure of the services, fees, and other considerations in engaging the financial planner. Hypothetically these are all clearly disclosed, but many form ADVs will list a “highest price” for services and then say that fees are negotiable. It also fails to explicitly state what kickbacks and sales incentives are made available to a financial planner if they engage in the bad behavior from questions 2 & 3. Thus, it helps to not only ask for fees and expenses in writing, but to ask the advisor to literally “show you the math” on the fees you’d pay when working with them, inclusive of both their fees as well as the expenses for investments or other products you might use.

Dan’s Answer: Absolutely. Our financial planning fee calculator is plainly shown on our website, and our fee for investment management is flatly stated as well and could be calculated by anyone for their investments with a simple 10-key calculator (assets managed * 0.01 = fee). We also provide a breakdown of the investment costs of the investment products we use for client portfolios, showing the amount both as a percentage and as a dollar amount. We provide this both up-front and provide it quarterly in a fiduciary monitoring report.

5. Are your fees negotiable?

Zweig’s Recommended Answer to Listen For: Yes.

Dan’s Thoughts: This I’m actually far less a fan of. Not because I don’t want clients to negotiate fees (it never hurts to ask!), but because it suggests that a financial planner is intrinsically a bad fit if they are firm on their pricing. Many firms have set their prices based on a service model, inclusive of considerations such as their experience, education, expertise, and the time they expect their engagements to take. When you assume a service provider is bad based on a firm response of “the price is the price,” you potentially turn off the opportunity to work with a planner who may in fact be the best fit for you.

Dan’s Answer: Yes. We have limited flexibility in our calculations of Net Worth to exclude assets that don’t need advice, i.e. “the family cabin we’re going to keep for the next 10 generations.” We don’t think it’s ethical to charge you for things we can’t provide value on. At the same time, we don’t offer alternative services or fees for people who want us to do business differently than the way we know is best for the clients we’re a good fit to serve. More on this in the next question.

6. Will you consider charging by the hour or retainer instead of an annual fee based on my assets?

Zweig’s Recommended Answer to Listen For: Yes.

Dan’s Thoughts: The question here and the recommended answer is a pointed stab at the “assets under management” model, in which advisors charge a percentage of a portfolio to manage it, potentially in addition to offering other services bundled in. There are plenty of issues with the “AUM” model, particularly given that it can result in a substantial amount of money depending on the amount of assets that are managed. Yet, an immediate assumption that a planner would serve you better via an hourly fee or retainer is specious. Hourly planning can be very effective for tight, limited engagements, but it has its own defects. An hourly planner might be a slow reader, writer, and thinker, and being the opposite has an inverse financial impact to them. There is also a very low correlation between “time spent” on a task and “value delivered.” If someone takes 20 hours to dig a ditch and charges by the hour, are they more valuable than the flat fee person who charges a fixed fee to use a backhoe to do it in 30 minutes? The same can even be applied to the retainer model (which as mentioned earlier, we offer); while we find the retainer model is a great fit for our financial planning clients and the nature of the long term advice relationship we offer, it can incentivize an unethical plan+ner into trying to minimize their time and effort for each client and to instead acquire as many clients as possible. Retainers can also end up being more expensive than an hourly or AUM planner, depending on how the fee level is set.

Dan’s Answer: We offer retainer-based pricing for financial planning because it best fits the nature of our service model. We don’t offer hourly planning because we don’t believe it’s in our client’s best interest.

7. Can you tell me about your conflicts of interest, orally and in writing?

Zweig’s Recommended Answer to Listen For: Yes, and no adviser should deny having any conflicts.

Dan’s Thoughts: This is a great question, and the prescribed answer is right on. Even the cheapest of planners has conflicts of interest. There are some planners out there who effectively see it as their mission to take on a vow of poverty and to shame other planners into doing the same, but that does not absolve them of conflicts.

Dan’s Answer: Our primary conflict of interest is in our compensation model, which reflects your overall net worth and asset levels. It is ideal from our perspective that you have a high net worth and a growing net worth. This can put us at odds with you when you say that you want to make big donations and gifts, or otherwise want to spend money on experiences rather than things. We do our best to mitigate this by seeing ourselves as being in the role of “permission giver” when these types of requests come in, though we sometimes do have to advise clients that overspending could be a mistake.

8. Do you earn fees as adviser to a private fund or other investments that you may recommend to clients?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: It’s a good question, and one we referenced in Question 2 & 3. Fee-only financial planners should not have this issue, but some are sneaky. My general position on this is that revenue sharing between investment product and insurance product firms and advice firms should be illegal. It’s also a more controversial opinion of mine that proprietary investment and insurance products should also be illegal for financial planners to recommend. This creates some odd cases where a financial planner working for Vanguard couldn’t recommend Vanguard funds (many of which are great), but it simply belies the observation that advisors from big product companies almost universally recommend only their company’s products. This is often disclosed in the form ADV Brochure, but it’s still a problem, because no product company offers the best everything product.

Dan’s Answer: No, we do not own any investment or insurance products, nor do we receive revenue sharing, commissions, or even Christmas gifts from any of these companies.

9. Do you pay referral fees to generate new clients?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: I’ll say hesitantly that this is probably the right answer. The issue being highlighted here is the question of how you found this financial planner in the first place. Did you find them on google? Did you find them on a website that has advisor matching services? Did your CPA or Attorney recommend them? The further down the list of options we go, the higher the likelihood that a referral fee might have been paid, and thus it makes sense to raise the question as to whether this professional was referred to you because the referrer thinks they’re great for you, or because the referrer is getting 20% of the fees the planner generates from you.

Dan’s Answer: No. While we have great reciprocal relationships with a CPA, several attorneys, and other professionals, we do not pay referral fees of any kind. We do get the occasional lunch or have a beer with these people, but we’d continue to do so whether they ever made a referral to us again or not. We just like them.

10. Do you focus solely on investment management, or do you also advise on taxes, estates and retirement, budgeting and debt management, and insurance?

Zweig’s Recommended Answer to Listen For: Here the best answer depends on your needs as a client.

Dan’s Thoughts: It’s a good question and one I agree with the answer on to an extent. I’m perhaps a bit more “religious” in my beliefs about the need for comprehensive planning than single-issue planning, but understandably some people just want help with one specific thing.

Dan’s Answer: We provide comprehensive financial planning and investment management services. It’s easier to say that we “do everything except prepare your taxes, do your books, pay your bills, and write your legal documents” in the scope of financial advice. That means we advise on cash flow, debt management, insurance and risk management, investments, estate planning, tax planning, divorce, and just about all the other sub-topics of finance you can think of.

11. Do you earn fees for referring clients to specialists like estate attorneys or insurance agents?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: No disagreement here. You should know you’re being referred to a professional because your planner thinks they’re a good fit for you, not because they’re being paid. Your planner should never be paid by a third party regarding your finances.

Dan’s Answer: No.

12. What is your investment philosophy?

Zweig’s Recommended Answer to Listen For:

Dan’s Thoughts: It’s not blank because we forgot to put it there, Mr. Zweig actually doesn’t provide a recommended answer here. This is surprising to me because investment philosophy can be extraordinarily telling about a financial planner and their firm. A few major highlights to get from a conversation about investment philosophy:

  • Investment Products or Directly Held Stocks and Bonds? Investment products are appropriate for the vast majority of investors due to the nominal cost and substantial value they provide in terms of diversification and index tracking benefits. Directly held stocks and bonds really only make sense in the case that you have millions upon millions of dollars to achieve the requisite diversity that is called for when investing in individual stocks. Even then, it is incredibly hard to replicate large indexes with “small” amounts of money like a few million dollars (yes, small sounds funny next to Million, but that’s the scale we’re talking about.)
  • Active Management or Passive Management? The academic literature is in on this topic. Actively managed funds cost significantly more than their passive fund peers, and statistically almost never can outperform the market net of their costs over any substantial period of time. If you’re the gambling type with a short time horizon, an active fund could make sense to you, but if you’re investing for the long term, there is almost no evidence in support of active funds. A preference for active funds can also hint that the advisor’s firm has a revenue sharing agreement with the fund companies, which means that the advisor isn’t allowed to recommend low cost passive options because their company won’t make enough money on them.
  • ESG: Yes, no, maybe? ESG is a politically loaded term, but it fundamentally comes down to meaning that the investment has some issues other than financial issues in mind when it comes to choosing an investment. ESG is not a blanket term for “liberal” or “religious” or anything else it gets affiliated with. If the planner says “All our investments are ESG,” the smart question to ask is “how do you define and screen for that definition?” If the planner says “We don’t do ESG,” then that’s fine so long as you don’t have strong politics or ethical beliefs that could be impacted by how you invest.
  • Cryptocurrency? If a financial planner or advisor says they’ll give you advice around things like taxes and cryptocurrency that’s fine. If they put it in the portfolios they manage or have entirely crypto-based portfolios, you’re talking to someone who literally “makes up” the reasons they invest in things, and you should run away as fast as possible. There is zero empirical basis for the use of cryptocurrency in a portfolio, and crypto is a rare asset class that is based 100% on guesswork, rather than any sort of fundamental analysis that can be used to evaluate its merits or placement in a portfolio. Can you make money on Crypto? Certainly, and plenty of people have. Should a person who claims to thoroughly evaluate your portfolio and the assets they place in it be putting in a “guess which way it’s going” asset? Certainly not.

Dan’s Answer: We use passively managed investment products with an average portfolio cost of 0.04%-0.068% to mirror the market as closely as possible. We do not invest in individual stocks or bonds since it would be inappropriate for the vast majority of our clients, and instead choose to focus on the development and monitoring of  a dozen or so specific portfolio models so we can ensure thorough due diligence on those portfolios. We are happy to help clients who have ESG preferences achieve those preferences in their portfolios, but do not advocate one way or another for or against ESG.

13. Do you believe in technical analysis or market timing?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: There’s a joke in finance that technical analysis is “astrology for men.” The joke isn’t without its merits, as technical analysis can be summed up as attempting to predict the future by reading the tealeaves of market charts. It is wildly inconsistent, and for every correct prediction there are a dozen incorrect predictions. Market timing is simply the belief that you can jump in and out of the market by predicting when it’s appropriate to do so. While we have a crystal ball in the office, it doesn’t work, and neither does market timing.

Dan’s Answer: No.

14. Do you believe you can beat the market?

Zweig’s Recommended Answer to Listen For: No.

Dan’s Thoughts: As referenced in question 12, the idea that any portfolio manager will consistently beat the market is laughable. It is doubly laughable that a financial planner or advisor with client-facing responsibility will do so. If the full time multi-millionaire teams at aggressively managed active mutual funds and hedge funds fail to beat the market consistently when it’s their full time job to beat a single sub-section of the market, how is a financial planner going to do so when 50% of their time is spent with clients and not monitoring the market?

Dan’s Answer: No, and we would never claim to do so other than by the merits of asset allocation, in which we’re only ever beating “a part” of the market based on the market’s own conditions, not the market as a whole.

15. How often do you trade?

Zweig’s Recommended Answer to Listen For: As seldom as possible, ideally once or twice a year at most.

Dan’s Thoughts: “Trade” is a bit of a loose term. If the idea here is that you should avoid day trading, we agree, but saying you should only trade once or twice a year is a bit more of a blanket statement than is practical.

Dan’s Answer: In the three years we’ve managed our current model portfolio set, we’re proud to have only made two changes to the portfolio models themselves, and to have conducted tax loss harvesting on those rare occasions the market takes a dip big enough to warrant taking advantage of it. We perform regular rebalancing on an as-needed basis for clients.

16. How do you report investment performance?

Zweig’s Recommended Answer to Listen For: After all expenses, compared to an average of highly similar assets that includes dividends or interest income, over the short and long term.

Dan’s Thoughts: This question gets into the technical weeds a bit, but we don’t agree with the recommended answer. Your portfolio’s performance should always be shown to you next of cost, and with comparison that includes the total performance of the assets themselves, not just the face value. The inverse of this is often used to mirror the poor performance of index-based insurance products, wherein the S&P 500 or another index look like bad investments because the dividends, interest, and reinvested values are stripped out of the fund performance.

Dan’s Answer: We report performance in 4 mediums on a regular basis:

  1. Daily performance reporting showing Month-to-Date, Quarter-to-Date, Year-to-Date, 1 Year, 3 Year, 5 Year, 10 Year, and Since-Inception data as appropriate.
  2. Monthly performance reports, showing an aggregate roundup of all cash flows, management expenses, income, interest, dividends, growth, and losses, with summary calculations shown after fees.
  3. Monthly market update webinars, in which all clients can hear directly from us about the state of the market and how portfolios are performing, with an additional Q&A.
  4. Quarterly fiduciary monitoring reports, which show you both the 12 month trailing performance of each investment compared to its peer group (large cap growth funds compared to large cap growth funds, for example,) the total costs of the portfolio including fund fees and our advisory fees, and the various fiduciary scoring metrics that we use to evaluate funds on a going basis.

17. Which professional credentials do you have, and what are their requirements?

Zweig’s Recommended Answer to Listen For: (Among the best are CFA [Chartered Financial Analyst], CPA [Certified Public Accountant] and CFP, which all require rigorous study, continuing education and adherence to high ethical standards. Many other financial certifications are marketing tools masquerading as fancy diplomas on an adviser’s wall.)

Dan’s Thoughts: I have mixed feelings on this one. I’m clearly an advocate for the CFP® Certification, but I question the relevance of both the CFA and the CPA for selecting a financial planner. The CFA is a powerful tool for market and portfolio analysis, along with company valuation and other metrics. It is also clearly most at home inside of an investment fund company, not for individual portfolio construction. Essentially, it’s like having a surgeon put on band aids; the skillset is overkill for the task. The CPA is a bit more related, but the CPA is only about 1/4th related to taxes, and the rest of the material covered by the CPA is more business relevant or auditing relevant than personal finance relevant. In each case, I’d suggest an individual client is better served by a CIMA (Certified Investment Management Analyst) who is trained to analyze investment products and construct portfolios from them or an AIF (Accredited Investment Fiduciary) who knows how to compare investments to ensure that a portfolio is constructed of consistently high quality choices. In the case of the tax planning, a CPA with ample tax experience is great, or an alternative is an EA (Enrolled Agent) whose specialization is only in the preparation of taxes.

Dan’s Answer:

CFP (Certified Financial Planner)®:  The CERTIFIED FINANCIAL PLANNER™, CFP® and federally registered CFP (with flame design) marks (collectively, the “CFP® marks”) are professional certification marks granted in the United States by Certified Financial Planner Board of Standards, Inc. (“CFP Board”).

The CFP® certification is a voluntary certification; no federal or state law or regulation requires financial planners to hold CFP® certification. It is recognized in the United States and a number of other countries for its (1) high standard of professional education; (2) stringent code of conduct and standards of practice; and (3) ethical requirements that govern professional engagements with Clients. Currently, more than 71,000 individuals have obtained CFP® certification in the United States.

To attain the right to use the CFP® marks, an individual must satisfactorily fulfill the following requirements:

  • Education: Complete an advanced college-level course of study addressing the financial planning subject areas that CFP Board’s studies have determined as necessary for the competent and professional delivery of financial planning services, and attain a Bachelor’s Degree from a regionally accredited United States college or university (or its equivalent from a foreign university). CFP Board’s financial planning subject areas include insurance planning and risk management, employee benefits planning, investment planning, income tax planning, retirement planning, and estate planning;
  • Examination: Pass the comprehensive CFP® Certification Examination. The examination includes case studies and Client scenarios designed to test one’s ability to correctly diagnose financial planning issues and apply one’s knowledge of financial planning to real-world circumstances;
  • Experience: Complete at least three years of full-time financial planning-related experience (or the equivalent, measured as 2,000 hours per year);
  • Ethics: Agree to be bound by CFP Board’s Standards of Professional Conduct, a set of documents outlining the ethical and practice standards for CFP® professionals. Individuals who become certified must complete the following ongoing education and ethics requirements in order to maintain the right to continue to use the CFP® marks:
  • Continuing Education: Complete 30 hours of continuing education hours every two years, including two hours on the Code of Ethics and other parts of the Standards of Professional Conduct, to maintain competence and keep up with developments in the financial planning field;
  • Ethics: Renew an agreement to be bound by the Standards of Professional Conduct. The Standards prominently require that CFP® professionals provide financial planning services at a fiduciary standard of care. This means CFP® professionals must provide financial planning services in the best interests of their Clients.

CFP® professionals who fail to comply with the above standards and requirements may be subject to CFP Board’s enforcement process, which could result in suspension or permanent revocation of their CFP® certification.

Chartered Financial Consultant (ChFC): This designation is issued by The American College and is granted to individuals who have at least three years of full-time business experience within the five years preceding the awarding of the designation. The candidate is required to take seven mandatory courses which include the following disciplines: financial, insurance, retirement and estate planning; income taxation, investments and application of financial planning; as well as two elective courses involving the application of the aforementioned disciplines. Each course has a final proctored exam and once issued, the individual is required to submit 30 hours of continuing education every two years.
Accredited Investment Fiduciary (AIF®): The AIF® designation certifies that the recipient has specialized knowledge of fiduciary standards of care and their application to the investment management process. The certification is administered by the Center for Fiduciary Studies, LLC (a Fiduciary360 company). AIF® designation requirements are:

  • Complete a training program;
  • Pass a comprehensive, closed-book final examination under the supervision of a proctor;-
  • Agree to abide by the AIF® Code of Ethics
  • Complete six hours of continuing education credits every year;
  • Renew, on an annual basis, affirmation of the AIF® Code of Ethics

Certified Divorce Financial Analyst (CDFA®): The Certified Divorce Financial Analyst® (CDFA®) designation is issued by The Institute for Divorce Financial Analysts (IDFA™), which is a national organization dedicated to the certification, education, and promotion of the use of financial professionals in the divorce arena. Founded in 1993, IDFA™ provides specialized training to accounting, financial, and legal professionals in the field of pre-divorce financial planning. Over the years, IDFA™ has certified more than 5,000 professionals in the U.S. and Canada as Certified Divorce Financial Analysts® (CDFAs®). The CDFA® designation is available to individuals who have a minimum of three years experience as a financial professional, accountant, or matrimonial lawyer. To acquire the designation, a candidate must successfully pass all exams and be in good standing with their broker dealer (if applicable) and the FINRA/SEC or other licensing or regulatory agency. To earn the designation, the participant must complete a series of self-study course modules and pass an examination for each module. The American module topics are:

  • Financial and legal issues of divorce
  • Advanced financial issues of divorce
  • Tax issues of divorce
  • Working as a CDFA: case studies

Continuing Education (CE): To retain the Certified Divorce Financial Analyst® designation, a CDFA® must obtain fifteen divorce-related hours of Continuing Education (CE) every two years, remain in good standing with the IDFA™, and keep his/her dues current. To learn more about the CDFA® designation, visit: http://www. institutedfa.com.

18. After inflation, taxes and fees, what is a reasonable estimated return on my portfolio over the long term?

Zweig’s Recommended Answer to Listen For: If I told you anything over 3%-4% annually I’d either be naïve or deceptive.

Dan’s Thoughts: This is another case where the generalization is too sweeping. For example, if a young client was invested in a 100% equities portfolio for a period of 20 years in a Roth IRA, they’d likely achieve annual returns somewhere between 8%-10%, with a 1% decrease down to 7%-9% a year after fees and expenses. This would be inclusive of taxes (since there are none in a Roth IRA) and of all expenses and fees. The idea Mr. Zweig is trying to highlight is that for a pre-tax or non-qualified portfolio where taxes are a concern, the same portfolio would probably yield closer to a 5% return after taxes, and a more diversified portfolio with a lower risk mix of stocks and bonds would likely drop down into the 3%-4% range. Inflation ends up being the trickiest part of these estimations, because while it’s been under 3% for most of the past decade, today it’s over 8%. In that light, just about every honest answer to this question today would be “a negative real return, but better than leaving it in cash at the moment.” Not ideal, if we’re being honest, but this is where sweeping generalizations between 3%-4% become problematic. There’s a bit too much nuance underneath the question to simply have a rule of thumb.

Dan’s Answer: Our client portfolios long term average target between a 5%-9% return before taxes, fees, and inflation. Net of fees, those portfolios would return 4%-8%, and then net of taxes anywhere from 2%-7%. Net of inflation, as described above, is the real kicker. Assuming inflation comes down to a more reasonable level, I would amend the 2%-7% numbers above to 0%-4%, essentially preserving value or eking out small gains over time, but while inflation stays incredibly high, real returns are problematic to calculate and can give the false impression that investing will lose money when it still has better potential to combat inflation than cash, even if it isn’t winning against inflation in a time period like today’s inflation environment.

19. Who manages your money?

Zweig’s Recommended Answer to Listen For: I do, and I invest in the same assets I recommend to clients.

Dan’s Thoughts: I agree with this for the most part; a common thing that confuses me is that many financial planners openly state that they aren’t comfortable managing money or don’t feel competent to do so; some will even cover that up by saying that everyone only needs two or three investment products and nothing else, which is charming but not supported by the reality of the complexity of human needs and thus, investment needs. However, it would be fair I think of any financial planner to say “I don’t manage my money, I outsource it to a competent third party and recommend that my clients do the same.” Even some of the smartest people in finance outsource investment management; one well known callout is Dr. Craig LeMoine, the director of the financial planning program for the University of Illinois, who posts regular updates about how he has a portion of his money invested with a robo-advisor. Dr. LeMoine is absolutely more qualified to manage his own money than whoever is doing it at the robo-advisor, but he’s chosen to pay for the convenience of having someone else do it.

Dan’s Answer: I utilize the same Qualified Aggressive Growth portfolio that we use for our younger and more aggressive clients. This means I achieve the best returns in the good times and the worst returns in the bad times of the marketplace. At 32, I’m comfortable with that level of risk and am confident in the long-term outcome, but that doesn’t make it suitable for other people with less risk tolerance and shorter time horizons.

Overall Thoughts on the Questions

The Zweig questions are, overall, good ones. Many of them have fairly firm and applicable answers you can apply and know whether it’s a clear red flag or not. Some are more subjective. My biggest piece of guidance is to ensure two things: That you are absolutely comfortable with and trusting of the person you’re going to entrust with your financial future with; and that you are absolutely clear on how they are paid, and that they are fundamentally only being paid by you and other clients, rather than receiving payments from third parties that can color their advice, or that their firm receives the same.

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