By Sheryl Nance-Nash
It’s no small matter entrusting someone to give you guidance on your finances. You work hard for your money. You need someone in your corner who knows how to make your money work hard for you. Finding a financial advisor you can trust to do just that requires some research and work upfront. Here are seven keys for finding an ideal fit.
Ideally, your family and friends have worked with someone to whom they can refer you. Get a recommendation from family or friends with a financial picture similar to your own. If they have no leads, you’ll have to start from scratch. You might ask your lawyer or accountant for a recommendation, as they may travel in the same circles. There are professional associations like the National Association of Personal Financial Advisors, that have membership directories that you can comb through to begin a search.
Once you’ve got a list of a handful of names, play detective. There are a couple of questions you should ask a potential advisor about their background and methods. “First, ask if they have run into any disciplinary issues in the past, or if they have any other marks on their record,” says Jacob Dayan, CEO of Financepal.com.
While the vast majority of financial advisors are ethical, a recent study found that 7%, or one in 13, have misconduct records.
Next, ask if they are a fiduciary. Why? “An SEC-registered financial advisor is a fiduciary and is legally obligated to act in your best interest,” says Dayan.
Don’t have to rely on what they tell you. You can investigate a financial advisor’s history on BrokerCheck. Ask for referrals of happy clients, and follow up by calling them.
“I’m a certified financial planner and was shocked that only 25% of financial advisors have this designation,” says Tess Zigo, a CFP with Emerge Wealth Strategies. The CFP designation is a gold seal of approval of sorts. Financial planners with these credentials are held to certain educational, ethical and other standards. “The reality is the industry does a poor job differentiating a true holistic financial planner from an insurance or securities salesperson,” Zigo says.
Hone your interviewing skills. Set up an appointment to meet potential candidates. “Go for an initial consultation. It’s [usually] free. Think of it as sort of speed dating to find your match. Ask them about their experience with people in your demographic, their investment style, any personal biases and more. You must feel comfortable with the person you choose to guide your family with financial goals,” says Zigo.
A professional advisor may ask you to bring copies of your investment statements, tax returns and other background information, says Sandy Yong, author of The Money Master. However, don’t feel pressure to share more than you want to up front. While you’re both there to ask questions and make sure you’re a fit, at this stage you shouldn’t feel too much pressure to share everything.
They should also be clear about how they charge for their services, whether they charge an hourly rate for advice, or they earn a percentage from your portfolio.
Ask for references from clients. Get a sense of who they are. “Ask them what motivated them to become a financial advisor. If they got in the field for anything other than to make a difference in their clients’ lives, they don’t belong in the field and don’t care enough,” says Zigo.
If it sounds too good to be true, run. “So many investors are scammed by the likes of Bernie Madoff. If someone promises you 10% returns with no risk, guess what, you will likely never see your principal again,” says Zigo.
What do you want to hear? Two thumbs up if you’re told, “that your portfolio, under their watch is unlikely to beat the overall market, because of the management costs involved, but that their added value comes from the other services they can provide,” says Stanley Teitelbaum, PhD., a clinical psychologist and financial therapist.
Find out what services the advisor offers. Beyond investment advice, a good advisor can help you with various financial goals, such as preparing for retirement, paying down debt, or saving for your children’s college education.
Is the advisor going to be accessible? Do you like how they prefer to communicate? Do they only want to meet once a year? Can you email them with questions? How responsive to telephone calls are they? Are they a one-trick pony? “Are they comprehensive in nature? For example, will they help you get organized, do they understand how wills and trusts work, and will assist you in developing a plan to protect your assets?” asks Lynn Toomey, co-founder of Your Retirement Solved.
They could have all the right credentials and awesome experience. But in the end, if the personality strikes you as prickly, or the vibe is just off, even if you can’t put your finger on it, trust the inkling, walk away and keep searching.
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