Key Questions To Ask In A Financial Planning Job Interview

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#OfficeHours with @MichaelKitces Video Transcript

Welcome, everyone! Welcome to Office Hours with Michael Kitces!

A few weeks ago, we did an "Office Hours" segment on what to do if you find yourself in a financial planning job that you want to leave. Maybe it wasn't a good personality fit with the advisor. Maybe you were supposed to be a succession plan, but the founder doesn't seem to ever actually want to retire. Or maybe you just joined a firm excited to do financial planning only to discover that, in reality, it's a sales job or an admin job or something else that unfortunately involves very little actual real financial planning.

Sadly, I actually find the last scenario is more common than the other two, because, unfortunately, we're still in a world where there's no limit on who holds themselves out as a financial advisor or saying they do financial planning. And so we have a lot of firms that say they do financial planning and hire people to be financial planners. When in reality, the firm is purely selling products, and they're just hiring people to bring in more clients to sell products to.

And, even worse, I find that for a lot of new financial advisors, when they're interviewing for the job, they don't ask questions about the job to try to figure this out. So they don't discover the problems until they show up to do the job and then realize it wasn't what they expected.

But the reality is, that a job interview should be two ways. The firm interviews the candidate, and the candidate interviews the firm. And I know for somebody that probably listens to this that are still just trying to find any financial planning job, it's really scary to ask questions to the other person in the interview because you're just trying to answer the questions to get the job. But when you just answer questions and you don't ask them, that's how you end up in the wrong job that isn't a real financial planning job that leads you to suddenly question a few months later, "Is it too soon to quit my crappy not-really-financial-planning job?" We sadly see this quite often amongst candidates who apply for financial planning jobs at New Planner Recruiting - where they're leaving "financial planning jobs" that were, sadly, not really about financial planning at all.

And so, in an effort to try to avoid some of these problems, I thought I would share some tips in this "Office Hours" about what questions that you as a prospective hire should be asking the firm before you take the job. Now, I'm assuming here that you're applying for some kind of paraplanner or planning associate kind of job. If you're an experienced advisor, you're already working with clients, the questions you need to ask when deciding what firm to join or affiliate with are very different. This is really about questions that you ask when you're searching for...call it a first financial planning job and particularly if you're trying to satisfy your CFP experience requirement.

Due Diligence For A CFP Experience Job [2:37]

First and foremost, if you want to find a good job, the starting point is actually doing your own due diligence on the firm itself. And I would say these three primary areas to check out is just basic due diligence.

Number one is to check out the firm's website and really go through it and read it. What do they do? How do they communicate their value? What is the bio and background of the founder and the key staff members? The other advisors? Now, the reality is that a lot of advisory firms, including some very good ones, still have some pretty old mediocre websites. This won't always provide a great perspective on the firm. But even if it's not a very new and modern website, that actually still says something about the nature of the firm and what you're getting into, perhaps an area you can offer to help them out with if you get the job.

But, also, as a footnote for advisory firm owners who are maybe listening in on the "Office Hours" today, this is yet another reason why you really, really need to update your website if you haven't. It's not just that an outdated website hurts your ability to get clients, or damages referrals who get referred to you and check out your website only to find out it looks old and leaves a bad first impression. But an old and outdated website hurts your ability to attract new talent too because they also see an old, outdated website and start to question the professionalism of the firm.

Number two in your due diligence, look up regulatory information about the advisor and their firm. You can search for their name on BrokerCheck. You can see if there are any infractions. If they're an RIA, you can look up their Form ADV, download a copy of Part II, which is basically the advisory brochure that explains what they do. Read it and actually understand what they do. It'll get you some perspective of the firm. And trust me, the people who are considering whether to hire you will likely be impressed that you actually did your due diligence and read their ADV and looked up what's going on with the firm, because most candidates don't.

Number three, make sure you actually get a copy of the job description and read through it. What does it say you're going to be doing? If there is no job description, frankly, that's warning sign number one. But even if there is, it always stuns me the number of times that young advisors say they're unhappy with their jobs, and then I see some information about their job description, and what they're doing is exactly what it said they were going to be doing. Sometimes, job descriptions aren't clear about relative balance, and we'll come back to this a little bit more later. But, it might be that there's some financial planning things on there, some administrative tasks, and you were thinking it'll be 90% financial planning and 10% admin, but it turns out it's 90% admin and 10% financial planning. So the job description is not always the best evidence. But as a starting point, really read it. And if they don't have one, view that as a warning sign.

Best Interview Questions When Applying For A Financial Planning Job [5:18]

Once you have done your due diligence, it's time for part two, and part two is the interview itself. Again, as I mentioned earlier, I know when you're interviewing, your primary focus is to try to make sure you present yourself well so you get the job. But you need to ask questions to make sure you get the job you actually want. And so, in that context, I'm going to give 10 questions I recommend you ask when you're evaluating a prospective financial planning job opportunity, so that you can try to understand a little bit more of what you're getting into.

Question 1: "What financial planning software do you use?" [5:48]

Just ask. Are they using one of the major platforms, like MoneyGuidePro, eMoney Advisor, or NaviPlan? Are they using a newer solution, like Advizr or RightCapital? Or are they using their own homegrown financial planning tools in Excel that they built out over time? Almost any of those can be at least reasonable. Firms that built their own homegrown financial planning tools may be a little bit behind on the technology curve, but they're taking planning pretty seriously if they put that much energy and resources into creating it.

But if you hear a response like "Oh, those financial planning things don't matter. The software doesn't matter anyway, so we don't really use that stuff," well, I think that's a lot of the answer about how serious they really are about financial planning. And not to say that financial planning software projections are the be-all, end-all, but the number of firms that do really awesome, amazing, in-depth financial planning and completely throw the software out the door is very, very few and far in between. For most, if they're not using the tools, it's because they're not serious about the planning.

Question 2: "What proportion of your clients go through comprehensive financial planning with you?" [6:49]

Ask them that: "How many of your clients actually do financial planning with you?" Because the key here is to recognize there are a lot of firms that say they do financial planning, but the reality is that they only do it occasionally, maybe if a client asks. I mean, they put it on their website because it's a cool thing to say. But it's not part of their core value proposition. It's not what they focus on, which means you probably won't be doing much financial planning in your job because, apparently, there isn't much financial planning being done.

The reality is few firms actually get 100% of their clients to go all the way through the financial planning process. So don't expect a perfect number here. But you do want to hear like 90% of them go through or at least 75% of them go through. You start hearing, "Well, you know, about half of our clients do the financial planning." That starts to sound more like a firm that says, "We do the planning when someone asks," not "We're focused on doing the planning." And that becomes another warning sign that your opportunities in doing financial planning are going to be limited.

Question 3: "How often do you typically update your clients' financial plans?" [7:51]

The real question here is about whether the firm actually views financial planning as something they do on an ongoing basis or as a physical document they create, produce, and deliver once. But you can't really ask them, "Well, how seriously do you take financial planning?" But you can ask, "How often do you update your clients' financial plans?" If the firm doesn't really spend any time and effort on ongoing financial planning, it's probably not going to be a great opportunity for you to learn and do financial planning.

In practice, a lot of firms will say they do ongoing financial planning, but that may not be much more than, "We meet with our clients periodically, and they ask us some questions, and then we answer them." Part of why you ask about doing financial plan updates is because there's a little bit more work involved, and firms that are actually doing plan updates of some sort are much more likely to be serious about planning.

The caveat is that people's lives only change so much. Even a lot of very good firms aren't necessarily going to say, like, "Oh yeah, we do it every single year for every client," because sometimes the projections just don't change that much. Even lives don't' change that much. But do they say, "Well, we just do it as needed and we wait until they ask for it"? Or do they say, "We have a process to do it every few years," or maybe "We don't do full plan updates, but here's what we do for financial planning on an ongoing basis"? All this helps to give you some perspective about what financial planning really means to that firm.

Question 4: "How does your firm generate revenue, and how much of it is recurring?" [9:15]

I think Jay made a comment about this on the Periscope earlier. The reality of financial planning is that if a firm is going to do deep, upfront, and ongoing financial planning (especially the ongoing part), they need ongoing revenue. Their revenue should purely be financial planning services (charging hourly, standalone project planning fees. etc.). Firms that generate most of their revenue from upfront product sales or commissions have a financial incentive to do the amount of work necessary to sell the product and move on. Unfortunately, they tend to focus less on deeper financial planning and ongoing financial planning. Firms that either charge for planning or have some kind of ongoing recurring revenue to support ongoing planning are better aligned and tend to do more planning work.

I do want to point out this is not about whether the firm is fee-only or not or even whether it's an RIA or not. There are plenty of firms doing good financial planning on an ongoing basis supported by ongoing revenue. But their ongoing revenue happens to be mutual fund trails, annuity trails, advisory accounts that are fee-based accounts while blended in with a broker-dealer and other sources. This isn't about fees versus commissions. But it is about financial planning fees or some kind of ongoing revenue model versus just commissions alone. The more levelized the compensation of the firm is, the more likely it is that they're going to reinvest in the relationship and do more financial planning, because they need to do something to provide ongoing services to keep their clients. That's the essence of a recurring revenue model.

Question 5: "How much has the firm grown over the past one in three years (in terms of revenue, staff, or AUM)?" [10:54]

If you want a financial planning job with upside, then you need to be at a firm that's growing with upside. Firms that aren't growing just don't have much incentive to invest in you as a team member. And if you do grow and improve, they won't know what to do with you, because there's nowhere to move up if they're not growing. So ask about growth, ideally, ask about revenue. Not all firms will share revenue, but if they're an RIA, then you can ask about AUM. Failing that, you can just ask about staff, "Have you been hiring anybody in the past year or the past three years?" because the firms that are growing and serving more clients need to hire more people, and that's a good proxy. But from your perspective, the more growth, the more opportunity for you.

Question 6:  "Where does your new client growth come from? Where do you get your clients?" [11:47]

If the firm is growing, it's not just a matter of whether it's growing, but whether it's growing sustainably. Do they really generate a steady flow of new business from referrals? That's good. Better yet, do they actually use some kind of systematic marketing process? Whatever it is, maybe they are doing seminars. Maybe they got a radio show. Maybe they figured out digital marketing. Maybe they got a niche, whatever it is. But do they have some kind of engine to sustain the growth? For some firms, their big growth here could be "We landed two really big clients," boosted revenue, allowed for some hiring, lifted the bottom line... but ultimately it's not sustainable, because whales don't fall on our lap every day. The more sustainable the growth and the more that the firm is a growth engine, the better the odds you're gonna have opportunities in the future.

Question 7: "Whose clients will I be working with?" [12:36]

This is an important question for several reasons. First, it just literally tells you who you're going to be working with. Is the person you're going to be working with some other advisor in the firm? But it also starts telling you about the staff structure. Will you support one advisor's clients? Several advisors? All the clients of the firm? You may even have a good follow-up to this, which is "How many clients would that be?" If the firm answers 50 or 100 or 150, then you're going to have a lot of clients to learn from. If the firm answers 250 or 300 or 500, they're probably not serious about financial planning, since too many clients for any one advisor and paraplanner to serve with any kind of in-depth planning relationships. And if the firm says, "Well, you'd be working with your clients, the ones you get," run away fast. It's not a financial planning job. It's a sales job to get clients.

Question 8: "Are there any times I would be involved with clients or prospects directly?" [13:25]

Here, again, the question hits at two issues. The first is how the firm really views your role. If you're really going to be engaging on financial planning issues and growing, the answer should be at least "some time with clients." It may not be a huge amount, especially in the first year, but ideally, some or at least a clear path to it, because firms that are serious about financial planning will want you in the meeting. You may not talk much, but you can take notes. You can follow up on financial planning issues that arise. And you can learn by watching the experienced financial advisor.

But if the firm says you'll never be involved in meetings, that's a warning sign it may be more of an admin job. And if the firm says you'll be involved in the meetings for your clients, because, you know, you get them and you get to meet with them, then, once again, run away. It's not a financial planning job. It's a sales job to get clients!

Question 9: "Can you describe what I would be doing in a typical week in the firm?" [14:18]

For most jobs, it's hard to describe a typical day because there's a lot of variability. But whoever is interviewing you should be able to describe at least a typical week. How much time will you spend on administrative duties? How much are internal meetings? And internal meetings may actually a good sign because growing firms have to create infrastructure, including internal meetings...I know not everybody loves doing meetings, but it's actually a good sign of a growing firm...how much you spend doing financial plans, how much you spend in client meetings, and, again, if the firm says any of your time is "Well, this is the time where you go and get your own clients, and then you can do your financial planning for them," once again, not a financial planning job. That's a sales job to get clients.

Question 10: "Do you think it's important for me to get or have CFP marks?" [15:03]

This is a very good question to get at the core culture of the firm and its beliefs around financial planning, because firms that are serious about financial planning are generally pretty serious about the CFP marks. If it's a CPA firm, they may say the PFS credential instead. But a firm that says, "All those designations don't really matter. You don't need them to get clients," what they're really saying is "We're more about sales and getting new clients than really doing financial planning." And now you can kind of guess what your job is going to be, because if the firm is really serious about financial planning, then they want their people to get designations, like the CFP certification. Otherwise, they're giving advice without any training. That's a lawsuit waiting to happen for you as a firm owner.

This doesn't necessarily mean they'll say, "Oh yeah, we love the CFP, and we'll pay 100% for it!" You shouldn't necessarily expect that. They may want you to have some skin in the game. They may say that they still expect you to come to the table with some dollars or some time or some effort. But the question is whether they think it matters at all? Financial planning-centric firms think the CFP matters. Sales-oriented firms, and generally the ones you want to avoid for your first financial planning job, usually don't care about designation or credentials because they're just trying to get clients.

Of course, the reality is there's no perfect answer to all these questions. Most advisory firms are small businesses. And the reality is, somebody will give you slightly better answers to some questions than others... maybe about the depth of planning. But, you should at least find these questions helpful to figure out what the job is really about and whether the firm is really serious about planning, or if this is really just a sales job to get you to try and get clients for the firm. They don't even care if you succeed or not, because if you get a few clients and fail, then they keep the clients if you leave, so it's just growth for them. Hopefully, questions like these will help you avoid falling in that trap.

It's important to note as well, I did not suggest that you have to find a fee-only RIA to do this. I know it's a popular thing to do right now. I know a lot of you coming out of financial programs hear this. Good financial planning doesn't only happen in RIAs. In fact, we have some fee-only RIAs that are really just purely investment-focused and will do no financial planning whatsoever. So be wary of getting caught in labels about product channel or compensation models. What matters is whether they're getting paid for planning or they have a recurring revenue model that supports their reinvestment into planning. That's what drives a planning focus. And with these 10 questions, you get a much better sense of how serious the firm really is about financial planning and your opportunity there, regardless of whether it's an RIA or a broker-dealer.

Now, the last tip I'd give, as we wrap up here, is to recognize that even if the job doesn't go well, it may not be...or I should say even if the job does go well...it still may not be where you stay for the long run. And that's okay. Don't pick a job that you know is a bad fit, but you don't have to find the one true job or the one true firm through your first job out of the gate. Because the truth is, you may not even know which parts of the profession you really like or which roles you like in the firm until you do it for a few years. Don't worry about finding the perfect job. Find a job, do it for a few years, then reassess where your career is and where you are in the industry. But when you try to find a job, at least try to find a real financial planning job. And, hopefully, these interview questions will help.

Thanks for joining us today. This is "Office Hours with Michael Kitces," normally 1 p.m. East Coast times on Tuesdays, but I was a little tied up today. Thank you for joining us, everyone, and have a great day!

So what do you think? What questions have you asked in an interview? What questions do you think a candidate should ask? What are some other good ways to learn about a firm before you take a job? Please share your thoughts in the comments below!