Hiring the best financial advisor to fit your needs is like hiring the right chief financial officer for a large company. You want someone with whom you can work for many years, and this will take more time than one might initially think because not all advisors are created equal in terms of qualifications or style. Because there’s no such thing as “one size fits all,” it may just require some patience while digging through an array of potential candidates before coming up with the perfect fit.
You need to find a financial advisor who specializes in your needs. Some advisors offer only investment management services while others provide little or no hard advice on finances, instead of focusing solely on investments and how much wealth you can accumulate over time for retirement income planning near the end of life. Before selecting an advisor, ask what they specialize in as well as the type of service(s) that are included with their offerings so there is less risk involved at such an important decision-making juncture.
There are three key types of service offered by financial advisors:
- Financial planning: can mean more than just the amount of money you have in investments. It also focuses on all aspects of your financial life, such as how much to save and what type of insurance is available for different situations.
- Investment advisory services: are focused on making sure that the best investments are chosen for your portfolio, and they work with you to develop a financial plan.
- Retirement income planning: is entails coordinating all the pieces of your retirement plan, such as Social Security, pensions, and investments so that they align towards a goal of providing an income for life.
Listed below are seven steps that can help you find the best financial advisor for your needs:
1. Seek Financial Advisors With Reputable Credentials
The credentials of advisors can be hard to distinguish. There are some who just want a credential and put little effort into their education or experiences because they know that it will only take them so far before people catch on. The ones you should look for have the CFP (Certified Financial Planner) designation, PFS (Personal Financial Specialist), or investment advisor with the CFA certificate.
If you are looking to find a reputable advisor, consider someone who is committed to upholding the ethics in their profession. If they have a membership with The National Association of Personal Financial Advisors, there are further qualifications that must be met before these advisors can maintain certification status.
2. Know How Financial Advisors Are Compensated
There are a few ways financial advisors charge for their services, but the most objective and unbiased ones will be fee-only. You’ll need to know all the possible types of compensation that may come from your potential advisors such as an asset-based service, hourly rate, or commissions.
3. Understand the Difference Between a Fee-Only Advisor and a Non-Fee-Only Advisor
Just like any other profession, advisors have different styles and approaches to compensation. For a long-term investment that you don’t want advice on after the sale, paying an advisor for commission maybe your best option. But if you are looking for ongoing financial guidance or help with managing investments already in place as part of your retirement plan, non-fee only advisors can offer unbiased recommendations based solely on their performance rates instead of needing commissions from products they sell—though some might not provide this service because it would cut into what they earn by selling more expensive funds.
4. Use Search Engines to Screen for Criteria
Online searches are a great way to find the right financial advisor for you. You can use search engines like Find-A-Financial Advisor or SmartAsset, which ask questions about what type of advice you’re looking for and input your ZIP code so they give you an overview of advisors in your area with specific credentials that fit those needs. However, not everyone is comfortable working virtually–some prefer meeting face-to-face. When deciding how important it is to meet someone in person rather than virtually, think about whether proximity matters if the walking distance from work isn’t enough; many firms offer remote advisory services as well!
5. Ask These Questions Before Hiring
The key to finding a good financial advisor is asking the right questions. The best advisors will have plenty of experience in their field, and be able to walk you through different retirement projections with ease. There are certain specific interview questions that can help weed out less-than-qualified candidates: how long they’ve been practicing; if they’re compensated by commission or flat fee; whether they allow you to ask follow-up questions on stuff not answered during your meeting, and so on…
Many advisors cannot hand out the names of other clients due to privacy regulations. Unfortunately, some financial advisers have no qualms about breaking these rules and giving away their client’s information without consent. Never let that happen!
Many people are unaware of how many unscrupulous financial consultants exist in this world- they will do anything for your business so long as you’re willing to pay them a hefty fee or give up your own personal info first. Some may even break the law by using testimonials if certain provisions haven’t been met (i.e., disclosing whether endorsers are compensated). Be careful; don’t be fooled by those who say “trust me.”
6. Verify Credentials, Check for Complaints
When hiring an advisor, it’s best to do some research before you get started. You can verify their credentials by checking out FINRA and the SEC as well as other membership organizations with which they are associated- such as the CFP Board. Additionally, Form ADV Part 2 lists any conflicts of interest that advisors may have so keep your eyes peeled for those when reading through this brochure!
Don’t just rule out a financial advisor because they have one complaint. It’s more common for someone who has been in business longer to receive at least one formal customer complaint than it is for someone with less experience–if the complaints are taken as an indication of poor service, you may want to find another professional rather than automatically dismissing them when there could be other explanations such as bad timing or miscommunication that led up to the incident.
7. Learn How to Spot Fraud Risks
Financial scams are easier to perpetrate when someone has custody of your assets. A third-party custodian will hold them for you, and as long they’re reputable like Schwab or Fidelity. That means the advisor can make trades on your behalf without actually having access to any money themselves! The only time there would be a problem is if something were reported missing by either party, but then it’s too late anyway because fraudsters never return what was taken from their victims in the first place.
Be wary of advisors or firms who have custody of your money, as this leaves them with access to all the assets under their care. Be especially careful when talking to an advisor for a company they also own outright, because it is not unheard-of for such individuals and companies that co-own investments together in some way end up having conflicts of interest. You should always be informed about any potential conflict before proceeding so you can make an educated decision on what’s best for you!
Also take extra precautions when talking to an advisor if they co-own other investments with you and/or recommend a different investment from them which has potential conflicts in interests (whether it be ownership structure, management fees). If these are not disclosed on Form ADV Part 1.
Hiring the best financial advisor to fit your needs is like hiring the right chief financial officer for a large company. You want someone with whom you can work for many years, and this will take more time than one might initially think because not all advisors are created equal in terms of qualifications or style. Because there’s no such thing as “one size fits all,” it may just require some patience while digging through an array of potential candidates before coming up with the perfect fit.
You need to find a financial advisor who specializes in your needs. Some advisors offer only investment management services while others provide little or no hard advice on finances, instead of focusing solely on investments and how much wealth you can accumulate over time for retirement income planning near the end of life. Before selecting an advisor, ask what they specialize in as well as the type of service(s) that are included with their offerings so there is less risk involved at such an important decision-making juncture.
There are three key types of service offered by financial advisors:
- Financial planning: can mean more than just the amount of money you have in investments. It also focuses on all aspects of your financial life, such as how much to save and what type of insurance is available for different situations.
- Investment advisory services: are focused on making sure that the best investments are chosen for your portfolio, and they work with you to develop a financial plan.
- Retirement income planning: is entails coordinating all the pieces of your retirement plan, such as Social Security, pensions, and investments so that they align towards a goal of providing an income for life.
Listed below are seven steps that can help you find the best financial advisor for your needs:
1. Seek Financial Advisors With Reputable Credentials
The credentials of advisors can be hard to distinguish. There are some who just want a credential and put little effort into their education or experiences because they know that it will only take them so far before people catch on. The ones you should look for have the CFP (Certified Financial Planner) designation, PFS (Personal Financial Specialist), or investment advisor with the CFA certificate.
If you are looking to find a reputable advisor, consider someone who is committed to upholding the ethics in their profession. If they have a membership with The National Association of Personal Financial Advisors, there are further qualifications that must be met before these advisors can maintain certification status.
2. Know How Financial Advisors Are Compensated
There are a few ways financial advisors charge for their services, but the most objective and unbiased ones will be fee-only. You’ll need to know all the possible types of compensation that may come from your potential advisors such as an asset-based service, hourly rate, or commissions.
3. Understand the Difference Between a Fee-Only Advisor and a Non-Fee-Only Advisor
Just like any other profession, advisors have different styles and approaches to compensation. For a long-term investment that you don’t want advice on after the sale, paying an advisor for commission maybe your best option. But if you are looking for ongoing financial guidance or help with managing investments already in place as part of your retirement plan, non-fee only advisors can offer unbiased recommendations based solely on their performance rates instead of needing commissions from products they sell—though some might not provide this service because it would cut into what they earn by selling more expensive funds.
4. Use Search Engines to Screen for Criteria
Online searches are a great way to find the right financial advisor for you. You can use search engines like Find-A-Financial Advisor or SmartAsset, which ask questions about what type of advice you’re looking for and input your ZIP code so they give you an overview of advisors in your area with specific credentials that fit those needs. However, not everyone is comfortable working virtually–some prefer meeting face-to-face. When deciding how important it is to meet someone in person rather than virtually, think about whether proximity matters if the walking distance from work isn’t enough; many firms offer remote advisory services as well!
5. Ask These Questions Before Hiring
The key to finding a good financial advisor is asking the right questions. The best advisors will have plenty of experience in their field, and be able to walk you through different retirement projections with ease. There are certain specific interview questions that can help weed out less-than-qualified candidates: how long they’ve been practicing; if they’re compensated by commission or flat fee; whether they allow you to ask follow-up questions on stuff not answered during your meeting, and so on…
Many advisors cannot hand out the names of other clients due to privacy regulations. Unfortunately, some financial advisers have no qualms about breaking these rules and giving away their client’s information without consent. Never let that happen!
Many people are unaware of how many unscrupulous financial consultants exist in this world- they will do anything for your business so long as you’re willing to pay them a hefty fee or give up your own personal info first. Some may even break the law by using testimonials if certain provisions haven’t been met (i.e., disclosing whether endorsers are compensated). Be careful; don’t be fooled by those who say “trust me.”
6. Verify Credentials, Check for Complaints
When hiring an advisor, it’s best to do some research before you get started. You can verify their credentials by checking out FINRA and the SEC as well as other membership organizations with which they are associated- such as the CFP Board. Additionally, Form ADV Part 2 lists any conflicts of interest that advisors may have so keep your eyes peeled for those when reading through this brochure!
Don’t just rule out a financial advisor because they have one complaint. It’s more common for someone who has been in business longer to receive at least one formal customer complaint than it is for someone with less experience–if the complaints are taken as an indication of poor service, you may want to find another professional rather than automatically dismissing them when there could be other explanations such as bad timing or miscommunication that led up to the incident.
7. Learn How to Spot Fraud Risks
Financial scams are easier to perpetrate when someone has custody of your assets. A third-party custodian will hold them for you, and as long they’re reputable like Schwab or Fidelity. That means the advisor can make trades on your behalf without actually having access to any money themselves! The only time there would be a problem is if something were reported missing by either party, but then it’s too late anyway because fraudsters never return what was taken from their victims in the first place.
Be wary of advisors or firms who have custody of your money, as this leaves them with access to all the assets under their care. Be especially careful when talking to an advisor for a company they also own outright, because it is not unheard-of for such individuals and companies that co-own investments together in some way end up having conflicts of interest. You should always be informed about any potential conflict before proceeding so you can make an educated decision on what’s best for you!
Also take extra precautions when talking to an advisor if they co-own other investments with you and/or recommend a different investment from them which has potential conflicts in interests (whether it be ownership structure, management fees). If these are not disclosed on Form ADV Part 1.
