How to enlist a pro who will expertly guide your financial future.
When it comes to finding a professional who can give you financial advice and help you better manage your money, you want to choose wisely — after all, you’re essentially putting your hard-earned cash in someone else’s hands.
Selecting the right person, however, doesn’t have to be a daunting prospect. With this handy checklist, you can enlist a pro who will expertly guide your financial future and serve as a trusted resource for years to come.
First things first: It’s critical to know that not every “financial advisor” has the proper credentials to provide money advice. In fact, she may have just slapped a title before her name.
“’Financial advisor’ is a generic term or job title that does not require specific education or experience,” says certified financial planner T. Michelle Jones, vice president at Bryn Mawr Trust. You want to look for professionals with the designation of Certified Financial Planner™ — or CFP®.
This means that the person has passed a comprehensive exam that covers the major categories of financial planning — taxation, investments, insurance, and estate planning, among other topics. CFP® holders must also meet minimum professional experience requirements and earn ongoing continuing education credits.
“Think about it: Would you let someone operate on your heart if they weren’t a doctor?” Jones says. “My guess is no. Therefore, you should not put your financial future in the hands of someone who is not properly qualified.”
After credentials, find out if the person’s experience matches what you’re specifically looking for, adds Mark Schoenbeck, senior vice president of business consulting at Kestra Financial.
“For example, a 40-year-old corporate executive has very different financial needs than a retired 70-year-old teacher,” he explains. “Find an advisor that has expertise in your specific needs. Ideally, the majority of his or her other clients should be similar to you.”
He suggests asking a prospective advisor questions related to the advisor’s experience years in the industry, designations maintained, and services offered (planning, investments, insurance, and so on), as well as his or her ideal client demographic—retired, business owner, corporate professional — to make sure you, and your desires and goals are aligned.
You can also find additional information regarding an advisor’s work history, licenses — and if there are any negative disclosures — on the FINRA website.
Transparent about Fees and Commission
How you pay your advisor may be a critical factor to consider. Some are fee-only, some are commission-based and some are a combination thereof. Fee-only advisors can appear more credible, as they may have fewer conflicts of interest, however, the experts agree that transparency is what matters most.
“I think the more important question to ask is if someone acts on behalf of their clients as a fiduciary,” says Kathy Fish, president and founder of Fish and Associates Financial Services. “As CFP practitioners, we act as fiduciaries whether we are fee-only or fee-based. We put our clients’ interests ahead of our own as part of our code of ethics. Fee-based advisors derive most of their income from fees, but can offer insurance products when appropriate and meet the client’s objectives.”
To this end, she says any commission earned should always be disclosed — and must be appropriate to the client situation and needs.
Schoenbeck agrees. “When it’s all said and done, the client should understand exactly what advice they are receiving, how they are paying for it and why it is suitable for them,” he says.” I don’t inherently agree that one is better than the other — fee-only vs. fee-based.”
To that end, it isn’t a bad idea to ask how the advisor is getting paid. If they can’t answer or are shifty about it… run.
Attentive to Your Needs—and Listens More than She Talks
You also want to ensure that your initial discussion is based on your agenda, Fish says. You want to feel like the advisor you choose thoroughly understands the financial issues and goals you’d like to address and clearly places your interests above her own.
“If an advisor starts to make recommendations before knowing what you’re trying to accomplish, you need to continue to interview for other options,” she explains. “Statistics show that women in particular often describe planning relationships with an advisor as disrespectful and condescending. Make sure the advice you’re receiving is based on what you ask for.”
When you interview a potential advisor, pay attention to how she answers your questions and generally treats you during the meeting.
“The advisor should show a sincere interest in your goals and objectives and should help you to understand whether they are obtainable,” Jones says. “An advisor who takes the time to teach you about your finances is one who genuinely cares about your financial success.”
Jones also notes that you may want to reconsider hiring someone if he cannot provide a direct telephone number for you to reach him on, doesn’t explain his investment process or philosophy, or continually uses financial jargon you don’t understand.
It won’t take long for you to tell if an advisor isn’t a good fit: Ideally, she should ask you questions about your life and your financial situation more than she talks.
“In the search for an advisor, you should feel like you’re being heard,” Fish says. “You want to feel as though your concerns are being heard loud and clear and that you are given the space for open communication.”
Strong References—And Eager to Provide Them
While financial advisors can’t provide testimonials on their websites the way other companies can, you can ask to talk to other clients about their services.
“There is value in speaking to someone’s clients about the service they receive from the advisor, including the advisor’s responsiveness to requests, the firm’s staff interaction, overall communication and if they feel the advisor is helping them stay on track to achieve their goals,” Fish says. Try to speak with a new client as well as an older, more established one.
If an advisor refuses to provide references, seems hesitant to or tries to dissuade you from wanting to speak to his other clients, this may be a bad sign.
Schoenbeck says that a lot of advisors actually host events for this very purpose — they might hold a mixer for their current clients, and intentionally invite potential clients to join. “This allows the prospective client to experience the nature of that advisor’s clientele,” he says. It gives you a perfect opportunity to ask any questions you might have to a wide range of fellow attendees
Access to a Wide Range of Services
While financial needs certainly vary from person to person, you’re likely going to at least want the basics like retirement services, insurance, and personal banking. Jones recommends hiring an advisor who can provide these services, as well as one who has an expertise in trust and estate planning.
“He will be more likely to take a comprehensive approach and consider your total financial picture rather than simply looking at an individual financial need,” she says. “An advisor who can add value by helping you think of financial aspects that you would not have otherwise thought of will better help you to meet your goals and objectives.”
Schoenbeck also suggests asking for samples of what you might receive as a client, like an example of a financial plan, for instance, so you can understand what your experience may be like working with that advisor. Also, be sure to ask how often you can expect to hear from your advisor — will there be quarterly reviews? Annual reviews? Will these be in-person, or via phone?
The bottom line for finding a financial advisor is choosing someone you know that you can trust. In part, finding the right financial advisor is a gut decision — you want to have a good feeling about your advisor-client relationship.
However, that doesn’t mean your selection should be based on instinct alone. By quantitatively evaluating candidates using the above criteria, you’ll choose someone who can have confidence in, and who makes rational sense for your unique financial situation.