What are the things to consider when choosing a financial adviser? I don't have a lot to invest, but want to make sure the investments I do have are safe and positioned to grow. Also, I want to make make sure I'm on the right track to maximize my retirement income.
You want your advisor to be your fiduciary and act in your best interest. A Fee-Only Advisor does not sell products (securities or insurance) or take commissions so their advice can be more objective.
A good resource is the NAPFA website. For tips on what to look for and how to chose an advisor, see http://www.napfa.org/tips_tools/index.asp. You can also use the website to find a NAPFA advisor in your area.
Now is the time to find the services of a financial planner, so let’s look at ways to help you with the process. The first step is identifying that you need help with your financial situation. Once you have conquered that first step, the next step is to choose a financial planner. I have helped you by highlighting the following questions provided by the Certified Financial Planner board (www.CFP.net). These questions provide a great starting point for you to ask your prospective financial planner before you sign on the dotted line.
10 Questions to Ask When Choosing a Financial Planner
1. What experience do you have?
Ask about the financial planner’s philosophy and their previous work experience. They should be able to convey how this relates to their practice.
2. What are your qualifications?
Anyone can call themselves a financial planner, so be sure and ask what qualifies them to offer financial planning advice and whether they are recognized as a CERTIFIED FINANCIAL PLANNER™ professional or CFP® practitioner, a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Ask about continuing education and how they stay current on changes in the financial planning field.
3. What services do you offer?
Find out what services are offered and if they match your needs. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or Federal authorities.
4. What is your approach to financial planning?
Most financial planners have a typical type of client and financial situations they like to work with. Some planners offer comprehensive plans while others work on a project basis or hourly rate.
5. Will you be the only person working with me?
The financial planner may work with you themselves or have others in the office assist the planner. Ask who will be your main contact and who will be working with you.
6. How will I pay for your services?
Know the financial planner’s fee model before you engage in their services. The standard fee models are: 1). Fee-only – All fees are paid by the client, no commissions.
2). Commissions – Payments are based on the products sold to you. 3). Salary – The planner is paid from commissions you pay the company.
7. How much do you typically charge?
The cost will depend on your needs. The estimate could be an hourly rate, flat fee or percentage of commissions. Always ask for an estimate.
8. Could anyone besides me benefit from your recommendations?
Be sure and ask about conflicts of interests. Does the planner receive fees based on referrals or do they participate in company incentive programs.
9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
Check for disciplined actions for CFP® practitioner on the CFP website (www.CFP.net). Be sure they are registered with the state or SEC. The planner must be able to provide you with a disclosure form called Form ADV Part II or the state equivalent of that form.
10. Can I have it in writing?
Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.
Kimberly J. Howard, CFP® is the owner of KJH Financial Services, a Fee-Only practice located in Needham, MA. Please visit us at www.kjhfinancialservices.com or email Kim at firstname.lastname@example.org.
I asked my attorney for a reference for a good adviser to help me with estate planning. He knew of an excellent adviser who was well versed in all aspects of estate planning A CPA could also refer qualified tax advisers he has worked with. Not only will you get experienced, knowledgeable advisers, but by going with references from trusted professionals you will be building a team that works together for your best legal and financial interests.
Why should my independent financial adviser be a fiduciary?
fi•du•ci•ary - an independent financial adviser held to a Fiduciary Standard occupies a special trust and confidence when working with a client. As a fiduciary, the financial advisor is required to act with undivided loyalty to the client. This includes disclosure of how the financial advisor is to be compensated and any corresponding conflicts of interest.
A fiduciary is simply someone who represents your interests, even above their own interests. You can see why this is important when you must grant an advisor limited discretion to act on your behalf. You want to be certain that investment decisions made for you are not only suitable for you, but are truly in your first and best interest.
You’ve made a great decision – good for you for being proactive! Finding a professional to help you invest the money you have, no matter how little it may be, is wise, as is making sure you’re on the right track to maximizing your retirement income.
Planning ahead is always ideal, because it gives you more options in the long run, rather than waiting until a crisis situation (which is often too late) to make these important decisions. As money is still a very sensitive issue for most people, you’ll want to be completely comfortable with the financial adviser you choose, to establish the level of trust that working with someone on your finances requires.
The Wall Street Journal recommends choosing a professional who is certified (a CFP: certified financial planner) as they are licensed and regulated, and must complete continuing education classes on various aspects of financial planning.
Also, consider how the professional is paid: if the adviser is working on a commission-only basis rather than an hourly flat rate, he/she may be motivated to steer you in a particular direction that may benefit their bottom line but not have your best interest in mind.
Another good tip? Read the code of ethics for the planner you choose, looking for keywords like “fiduciary” and other language indicating that the planner is on the up and up. Ask local friends, family members, and colleagues whose opinions you respect and trust for recommendations on area CFPs.
Finally you can search for local trusted advisors in your area through Boomerater's financial advisor directory: http://www.boomerater.com/financial/find-a-financial-advisor
- submitted by Boomerater Staff
Post your reply
Do you have some thoughts to add or some advice to give?
Only registered Boomeraters can post replies. Log in to your account or Sign up now (it's free)
Looking for a financial advisor?
Search our extensive database of over 3,500 advisors from both independent and large firms.