“5 Things to Look For When Hiring a Financial Advisor”, with Nick Kolbenschlag and Tyler Gallagher
What licenses do you have and how do I know which hat you’re wearing when advice is delivered? Financial Advisor has become an all-encompassing term in the financial advice world, so it’s difficult to distinguish who you are actually working with.
I had the pleasure of interviewing Nick Kolbenschlag. Nick is the Managing Partner of Charlotte, NC based Crown Wealth Group, a fully independent firm providing Personal CFO, single point of contact advice and execution to successful individuals, families and business owners. With 12 years of experience being a holistic advisor, planner and consultant, Nick has been recognized as an expert in his industry, most recently being featured in Business Insider and Advisors Magazine. Nick spends his free time traveling with his wife, Jessie, golfing and supporting the National MS Society. Learn more about Nick and Crown Wealth Group at www.crownwealthgroup.com
Thank you so much for doing this with us! Our readers would love to ‘get to know you’ a bit more. Can you tell us a story about what brought you to this specific career path?
When I was about 10 years old, I wanted to be a chef as I have a passion for cooking. My parents encouraged me to find a career that provided a better lifestyle as the food service industry can be tough and to make cooking my hobby. I decided at that moment that I would be a financial advisor, even though I didn’t know what that meant at the time, I was just drawn to the industry. The rest was history, I went to NC State University and majored in Finance and minored in Accounting. Even before I graduated, I was working at an independent advisory firm and in 2018, my brother Tyler and I launched our own independent firm, Crown Wealth Group.
Can you share a story about the most humorous mistake you made when you were first starting in the industry? Can you tell us what lesson or takeaway you learned from that?
Being that I was still in college when I first started in the industry, I had a habit of procrastinating on mundane projects. One of my first tasks was to take the firm paperless which meant I had to scan into our digital filing system every single piece of client paperwork and information. I had all summer to accomplish the goal, but I waited until the last week to start it and had to spend the entirety of a Friday, Saturday and Sunday at the office scanning papers while my friends enjoyed their weekends. Looking back on it, while that task was tedious, it was important as a file system that can quickly access information makes an advisory team more efficient. As our firm takes on new projects, we focus on the why first, which provides the motivation necessary when executing the how.
Are you working on any exciting new projects now? How do you think that will help people?
Our firm is actively targeting mergers and acquisitions of advisors who are nearing their retirement and need a succession plan for their business and clients. With our Personal CFO, single point of contact advice model, we offer additional service opportunities to the clients new to our firm. For the advisor, they are able to transition into the next phase of their life smoothly, while recognizing the full value of what they’ve built over the years. For us and our clients, we gain the valuable experience of these industry veterans and additional scale. It’s a win, win, win!
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Is there a takeaway or lesson that others can learn from that?
Even early on, I had an intense desire to learn everything there was to know about every aspect of the financial services spectrum; tax, legal, investing, insurance, etc. Coupled with the desire to truly improve a client’s life, trust from older clients came quickly. I knew that I had hit a “tipping point” when firm clients started coming to me for advice and not just operational activities. It was at that point that I moved away from managing operations and into the role of Personal CFO. Become a veracious reader and learner and be genuine in your reasons for working with clients and you can experience the same rewards that come with being a trusted expert.
What three pieces of advice would you give to your colleagues in the finance field to thrive and avoid burnout? Can you give a story or example?
Time management is huge. As a Personal CFO, I have many client responsibilities. Layered on top of that, as a business owner, I have marketing, accounting, compliance, budgeting, employee, etc. responsibilities. In order to juggle all of those important areas, I’ve learned to block off my calendar with every specific thing I need to do, every day. This allows me to review my day, before it starts and hit the ground running. Proper calendar set up is also important. My brain wants to do analytical work in the mornings, administrative work mid-day and strategic work in the afternoon. Knowing this, I schedule strategy meetings in the morning, as my brain is not focused and is thinking about the detailed client projects I still need to work on. Understanding how your internal clock and your team’s internal clocks work is important to building an effective schedule. Lastly, it’s important to build habits that focus on personal development and allow you to recharge, which will then allow you to peak at work. I get up earlier than most so I can stretch, workout, visualize my day, give thanks, and meditate. This allows me to open my mind, body and spirit before I get to work. I have a routine at night designed to gear down, acknowledge the wins for the day, and recharge.
Ok. Thank you for all of that. Let’s now move to the core focus of our interview. As an “finance insider”, you know much more about the finance industry than most consumers. If your loved one wanted to hire a financial advisor (not you :-)), which 5 things would you advise them to find out about before committing? Can you give an example or story for each?
1. Who do you work for and what do they expect of you?
a. Does the advisor own their own firm and subsequently work for the client, or is the advisor an employee of a large public company and therefor works for the shareholders of that company? If the latter, there will most likely be a number of potential conflicts of interest that are introduced into the advice delivery process. Most large banks and wirehouses influence advisor behavior through compensation plans. There are sales contests, quotas for certain products, and kick-backs from the company or its partners that might cause the advisor to deliver advice that is in their best interest or the best interest of the company, when ideally they should be delivering advice in the best interest of the client. An independent advisor does not have the pressures from above or outside control of their comp plan and can therefore eliminate all or most conflicts of interest in this area.
2. How do you get paid?
a. Most advisors are afraid to talk about their fees or try to mask or hide them in their advice delivery. As a part of the interview process, a client should be asking their advisor exactly how they get paid and should even go a step further as to ask how the others in their plan get paid. For the advisor, are they being paid a commission for selling a product, a flat financial planning fee, an on-going investment management fee or some combination? What is that compensation being paid and who pays it? For example, on most variable annuity products, the advisor can receive as much as 7% upfront and the commission comes out of the client’s investment. It would be important to know that the $100,000 you think you are investing, is really going to be $93,000 by the time the money is deposited in your account and invested. Does the fee structure align the client’s interests? In the previous example, if the market tanked the next day, the advisor doesn’t lose anything, but the client does. If you were working with an advisor that charged a flat asset management fee of say 1%, $100,000 would have been invested and at the end of the month or quarter, the advisor would be paid. If the account increased in value, the dollar amount pulled is higher, if the account decreased in value, the dollar amount pulled would be lower. The interest of the advisor and the client are aligned.
3. What licenses do you have and how do I know which hat you’re wearing when advice is delivered?
a. Financial Advisor has become an all-encompassing term in the financial advice world, so it’s difficult to distinguish who you are actually working with. Some financial advisors only have the licenses that allow them to sell commissionable products or make trading commissions and are only held to a suitability standard. The suitability standard says that as long as the advice and product are suitable for the client’s situation, they can make the recommendation and collect the commission. Other advisors only have the license that allows them to charge flat fees for advice, whether it be a financial planning fee or an investment management fee. These advisors are held to a fiduciary standard that says the advice they deliver must be in the best interest of the client and the best option available. To make this even more confusing, some advisors have both sets of licenses. How is a client supposed to know if the advice they are receiving is just checking a ‘suitable’ box or is actually the best option for their situation? The client should ask the advisor which hat (license) they are using and what standard they are holding themselves to each time advice is delivered.
4. What areas do you advise on and more importantly execute upon?
a. Most advisors hold themselves out there as holistic advice givers or planners but when it comes to delivering and executing advice, they only sell insurance/investment products or manage investment portfolios. An ideal financial plan should include advice on cash flow (budgeting, tax strategy), debt management, major purchase planning, goal planning and management (retirement, college education, beach house, etc.), risk management through insurance (life, health, disability, home, auto, etc.) and asset protection strategies and finally wealth transfer (succession or exit planning for business owners and estate planning). Is your advisor experienced and knowledgeable enough to either create this advice on their own or resourceful enough to bring together a number of experts to build one congruent plan? Beyond being able to create the plan, does the advisor take the accountability to coordinate and execute the advice? Financial planning is great, but the process is broken when an advisor only signs up to manage the assets and leaves the rest of the actions in the hands of the client. They are busy people and often not financial experts, so most of that plan will never be executed.
5. How many clients are you responsible for advising and servicing?
a.Most do not think to ask this question, but it’s an important one. I’ve met many peers at big banks who have hundreds of clients and hundreds of millions of dollars that they are tasked with managing and servicing. There are only so many hours in a day so customizing a plan and giving attention and care to each client is not possible. Instead, everyone gets the same canned advice and it’s all about quantity for the advisor. If you can find an advisor with a more boutique approach, the opportunity for higher quality, truly customized advice is possible. This person can become a trusted advisor and make a big impact on your life vs. just being your “stock broker” or “money manager”.
I think most people think that financial advisors are for very wealthy people. This is likely not actually true. Can you explain who would most benefit from hiring a financial advisor and why? Can you give an example?
Everyone would benefit from hiring a financial advisor, it’s never too early or too late. Because of our Personal CFO model, which advises on every aspect of a client’s financial life, we have recently noticed many people early in their careers engaging us to help them make the right decisions from the start. They recognize that if they avoid the common mistakes people make, they will be ahead of the game in a very short period of time. Recently, the son of a client got his first job out of college and he asked to sit down with us to build a budget, start saving into his 401k, set a debt payment plan and make a decision on a new car. By working with a professional we were able to educate him and set him up for success. As someone in their early twenties, he will build the habits now that lead to financial independence.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
This might not be the typical answer, but I’m grateful for my younger brother Tyler. He has worked next to me, every day for the past 6 years. Any time I need help, he steps up and visa versa. Having someone you can completely trust to have your back has proven invaluable as we have taken risks to get were we are today. Going out on your own can be scary, but it was much easier with family by my side!
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
This question is a great one as our firm is on a quest to change the way the financial services industry works. For too long, the big banks and national wirehouses have been charging high, and often hidden fees, commissions and are riddled with conflicts of interest. Clients deserve objective advice that’s always in their best interest. They also deserve advice on more areas than investments and insurance as they also need to need be thinking about taxes, debt management, risk management, estate planning, the list goes on and on. Advisory firms should be striving to be a client’s quarterback to all things financial, and that’s exactly what we do at Crown Wealth Group. We are bringing true balance and peace to a clients life and wealth.
How can our readers follow you on social media?
Thank you so much for joining us. This was very inspirational.