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Many of us don’t have the time or expertise to navigate through the world of investing, but how do you find the right advisor for your financial goals? Learn what to look for to choose the advisor right for you and your family.
Most of us want to save and grow our money for some future financial goal, maybe to purchase a home or to prepare for retirement or even just to pamper ourselves with a dream vacation. But while we’re focused on a specific financial goal, we may be missing the bigger picture—and many of us don’t have the time or expertise to navigate through the world of investing.
It’s a good thing, then, that there are financial advisors out there who can help us with our financial planning, by taking a macro look at our finances, lifestyle and goals. But how do you choose the right financial advisor? Read on for what to look for when interviewing possible candidates.
Credentials
Several financial planning designations are available to, the most recognizable being a Certified Financial Planner (CFP). Obtaining this credential requires completion of specified course work and three years of work experience along with passing a two-day exam and keeping credentials current through continuing education.
Experience and services.
Your advisor should have several years of financial-related experience with steady employment in one financial firm. Also, find out what types of services the advisor officers, which can sometimes vary depending on expertise and licenses.
Payment structure.
Financial advisors can be compensated in a variety of ways. Some charge a flat fee, some charge by the hour, some charge a percentage of assets and some are paid on commission. And some charge using a combination of any of the above. Be sure you understand how your advisor will be compensated and then determine which structure works best for you.
References.
You have an open position to fill—that of a financial advisor for your family’s finances. And just as any employer checks a potential employee’s references, so should you. Ask for several references of the advisor and then contact those clients. Find out how their portfolio has performed over time, how often that advisor makes contact and whether or not they would recommend their advisor for your financial needs.
Regulatory records.
These can be found by contacting your state securities and insurance departments or through the Financial Industry Regulatory Authority (FINRA) and CFP® Board of Standards (if the advisor has a CFP designation) websites. Look for any complaints related to fraud or client disputes.
Verification.
Verify that any financial advisor you are considering if part of a larger financial institution. Run far, far away from any that ask you to mail or make your investment checks payable to the individual advisor—you should always make your checks out to the financial institution (such as Ameriprise Financial rather than, say, Bernie Madoff) and mail them directly to the company’s address. Check with the firm to make sure the advisor is in fact affiliated with them. Find out who audits the financial institution and ask whether the advisor will take the fiduciary oath, in which they pledge to always act in your best interests.
Find the right fit.
Now that you have the background information on several financial advisors, you need to choose the one that is the best fit for your goals and needs. Make sure the advisor you pick truly understands your financial and life goals. Ask questions that help you gain insight into how your relationship will work and how the advisor will help you meet these goals.
Remember that there are no guarantees; you and your financial advisor are essentially in a partnership together so communication is key. Be sure to get regular updates on what is happening with your investments and, likewise, inform your financial advisor of any changes to your financial plans, such as getting married or starting a family.
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