Choosing a Financial Advisor

Do You Need a Financial Advisor?

A financial advisor is a person who provides individualized assistance for those who need help reaching their financial goals. A financial advisor typically has experience in one or more of the following areas:

• Retirement planning
• Investment planning
• Tax planning
• Estate planning
• Insurance planning
• Integrated planning

Contrary to popular belief, a financial advisor is not just a luxury for the very wealthy. You may want to consider professional financial planning advice if:

• You have questions about the best way to reach your financial goals and wish to seek advice that is tailored to your unique circumstances.
• When faced with important financial decisions, you tend to procrastinate because you feel like you don’t have the skills needed to make an informed decision.
• You feel like you’re just too busy to manage your money properly.

Choosing a Financial Advisor

Most financial advisors are listed in your local phone book, but you can also obtain a list of professionals in your area by contacting one of the following organizations:

• Financial Planning Association
• Society of Financial Service Professionals
• National Association of Personal Financial Advisors
• American Institute of Certified Public Accountants/Personal Financial Planning Division

The Right Financial Advisor also provides a listing of financial industry professionals by state.

Choosing a financial advisor doesn’t have to be a difficult process, but you should take the time to do your homework. It’s important to select a professional who you feel is trustworthy and understands your financial goals.

Use the following interview questions as the basis for your initial meeting:

• Where did you receive your training?
• What services do you offer?
• Will you be the only person working with me?
• How will I pay for your services?
• Will anyone besides me benefit from your recommendations? For example, do you have business relationships with companies that sell insurance policies, securities, or mutual funds?
• Have you previously been disciplined for unlawful or unethical actions in your professional career?
• Will you provide a written contract for our working relationship?
• Can I see a sample of a plan you've developed for a previous client?

Terms to Remember

When interviewing financial advisors, you may come across several unfamiliar terms. For example:

• Asset-Based Financial Advisor: This type of financial advisor bases his or her fees on a percentage of the client's assets under management. Do not confuse this arrangement with a fee-only financial advisor relationship.
• Certified Financial Planner: A financial advisor who is a CFP has fulfilled the requirements for financial planners conferred by the Certified Financial Planner Board of Standards. This means he or she meets education, examination, experience, and ethics requirements, and has paid an ongoing certification fee.
• Fee-Only Financial Advisor: A fee-only financial advisor is an industry professional who is compensated only by clients. He or she does not accept commissions or reimbursements from other sources, such as insurance and investment companies. A fee-only financial advisor's exclusive source of income is the hourly or fixed fees paid by his or her clients.
• Financial Industry Regulatory Authority (FINRA): In the United States, this self-regulatory organization (SRO) is responsible for regulatory oversight of all securities firms that do business with the public.
• National Association of Personal Financial Advisers (NAPFA): This professional group requires members to state that they will accept pay only from their customers to help prevent conflicts of interest.

Additional Information

To learn more about choosing a financial advisor, check out the following helpful links:

• What Kind of Advisor Should I Hire?
• How to Pick a Financial Professional
• Investment Advisors: What You Need to Know Before Choosing One
• Top 10 Reasons to Hire a Financial Advisor or Financial Coach

You may also wish to review LoveToKnow Save’s exclusive interview with financial advisor Louis Barajas.