How to Find a Financial Advisor Who is Right for You
Hiring financial advisors is not something most people do every day. With the uncertainty of any unfamiliar task comes questions. Should I hire a financial advisor? How do I know when to hire a financial advisor? I don’t even know how to hire a financial advisor!
When learning how to do financial planning for families, many people figure out the basics required to manage their money. They pay their monthly bills, try to keep their expenses below their income and know they should be saving for unexpected emergencies and retirement. Yet, without professional guidance, there can be a tremendous amount of untapped potential for moving beyond the basics and experiencing real financial growth and security.
WHAT TO KNOW BEFORE MEETING WITH A FINANCIAL ADVISOR
A financial advisor can help you assess every aspect of your financial life and create a plan designed to make the most of your money. However, not all financial advisors are equally qualified. You might even wonder: Should I hire a financial planner or an advisor? What’s the difference?
Matching your unique situation with a suitable financial professional is going to require a little homework. It’s helpful to know what questions to ask a financial advisor to narrow down your search. Where do you begin? There are questions to ask a financial advisor in the first meeting, questions to ask a financial advisor before investing and questions to ask your financial advisor about retirement. Your job is to gather enough information to determine if an advisor is the right match for you.
20 QUESTIONS TO ASK BEFORE HIRING A FINANCIAL ADVISOR
- What does your title mean? There are many titles to describe financial professionals. You’ll find financial advisors, financial planners, investment advisors, portfolio managers, wealth managers and a multitude of others. To confuse things further, all financial planners are financial advisors, but not all financial advisors are financial planners. It is best to directly ask for a clear explanation of what the advisor’s title means.
- What is your experience? Advisors can provide information about their education, where it was obtained, their licenses and certifications, how long they have been working in the field, and how long they have been with their current firm.
- Are you a member of any professional organizations? From the National Association of Personal Financial Advisors (NAPFA) to the Association of Divorce Financial Planners to the Certified Financial Planner Board of Standards, there are professional organizations that require specific qualifications to become a member. For example, for a financial professional to be able to carry the CFP® designation after their name indicating their qualification as a Certified Financial Planner, they must meet rigorous education requirements, pass an exam, acquire thousands of hours of professional experience, submit to a background check and sign a declaration to uphold professional ethics.
- Are you a fiduciary? A fiduciary is legally obligated to provide objective information to you regarding financial products such as investments and insurance. They are governed by the Securities and Exchange Commission (SEC). It is important to note that not all financial advisors are fiduciaries, which means if you choose to work with someone who is not, you may receive advice that is not conflict-free.
- How are you paid? This is closely related to whether a firm operates as a fiduciary. A fee-only firm is paid only by you, the client. Fee-only firms may not accept commissions on products they recommend to you, such as mutual funds or insurance. A fee-only firm may charge you an annual flat rate, an hourly rate, or a rate that’s calculated as a percentage of the assets they manage for you. Stockbrokers, Registered Representatives (RRs) and banks operate under what is called a suitability standard. They earn commissions on the products they sell or recommend to you, which while suitable for your needs, may not always be the best product available for you.
- Do you have any complaints against you? It can be helpful to do some research on any advisor you plan to meet with. The SEC’s Investment Adviser Public Disclosure and FINRA’s Broker Check will verify licensure and complaints. If you discover that an advisor you are interested in has registered complaints, you can discuss any issues further and learn how they may have been resolved.
- How often can I expect to hear from you? You should be able to count on your financial advisor keeping you up to date on any important developments that could have an impact on your investments and financial plan. How will this information be relayed to you? Will the advisor call you? Will they email you? Do they have scheduled communications with a newsletter or monthly updates?
- How will I be able to access my information? You will likely be interested in keeping an eye on your investments. Will your advisor set up online access for you to monitor your accounts 24/7?
- Will you optimize my portfolio for tax purposes? An advisor who is experienced in tax strategies will look at multiple options that can save you money.
- Do you have an area that you specialize in? There are advisors who focus on women’s financial planning, ESG (Environmental, Social and Governance) investing, working with family owned businesses or senior executives of large corporations with complex compensation programs. Some firms do not work with many young families and others specialize in helping them. With some research, you can find the right fit for you.
- What services do you provide? You might be searching for an advisor that can help you create a financial plan, establish retirement and college savings accounts, recommend insurance and manage a stock portfolio. It’s a good idea to ask exactly what an advisor’s services will entail so that you both have clear expectations.
- Do you practice continuing education? The economy, the stock market and tax laws are constantly changing. An advisor who continues to learn and remains updated on changes will be prepared to help with the most current information available.
- If I decide to work with your firm, will you be my dedicated contact person? If you have a question or concern, who can you call?
- Do you work with other members of your firm as a team? Is your financial advisor the only person in their firm who will help manage your finances? Or is there a team of planners working together to make educated suggestions?
- How much time will you spend with me? After your initial meeting, will you meet every few months? Once a year?
- Will you customize a financial plan specific to my needs? Some advisors take a one-size-fits-all approach, using similar financial plans and investment portfolios for most of their clients. Other advisors will take the time to create a plan specific to your needs.
- Will you coordinate my personal finances with my business finances? Business owners need seamless coordination of their personal and business finances. Financial advisors should explain how they can facilitate this.
- How will you help me transition into retirement? Regardless if you’ve got another 30 years to work or if you are ready to retire next year, it’s important to understand how a financial advisor can help you to prepare for this life change.
- Do you require a minimum investment? Check with your advisor to see what their requirements are.
- Why should I work with you? You may hear very different answers from various financial advisors, but this question can offer you a glimpse into what an advisor feels are their strongest qualities.
You may think of more questions to ask your financial advisor. The more you can learn about a financial advisor, the more confident you can be in selecting a financial professional who is right for you.
Our mission is to help our clients protect, preserve, and enhance their wealth. We achieve this by combining our investment management expertise with our financial planning services. Our co-management approach offers customization of portfolios and client involvement. As a fee only advisor, we do not sell any products and therefore, provide unbiased advice. Our clients always come first.