How Do I Find a Financial Advisor?

Answer...

Once you make the decision to look for a financial planner or advisor, you have several important decisions to make. The first is how to go about starting the process.

First, make sure you understand the categories, and how you will pay for services. Second, understand the qualifications and credentials of professionals. And finally, make sure you take the same amount of time to make this decision as any other major personal decision.

Here are some categories:

Investment Advisor - may provide you with specific advice regarding investments you should make.

Financial Planner - may provide you with more general suggestions about your financial affairs, which may and usually does include investment advice, insurance, estate and retirement planning, and tax planning.

The next step is to define the way planners charge for their services:

Fee-Only- This financial planner is either salaried or charges a certain amount to develop a financial plan and does not sell products of a broker or another party for a commission, such as stocks or real estate partnerships.

These planners may charge either an annual fee based on a percentage of assets and investment activity, a flat fee based upon service provided or an hourly fee of $100-$250 or more. The type of fees offered is disclosed in the ADV Part II form that all investment advisers are obligated to provide to new clients and offer to existing ones.

Fee/Commission- Many financial planners obtain at least some of their income from commissions earned on the products they sell for third parties to implement the plans they create for their clients. Any commission or remuneration derived from the sale of an investment product should be disclosed.

Commission- Some financial planners charge their clients no fee at all, but do get commissions on the investment products they sell. Commission costs may not be obvious to the client on some products. The client should always ask about the total costs involved including commissions on all products.

There are advantages and disadvantages to each of these types. You must decide what type of financial professional is best for you. The next step is to gain a clearer understanding of the credentials and qualifications of individuals that provide financial planning services.

Here are a few that you definitely need to be familiar with before starting to make your inquiries:

Chartered Financial Analyst (CFA) - courses and testing covering investment valuation and management, asset valuation, and portfolio management. Association for Investment Management and Research (AIMR) grants the designation. CFA is typically an investment professional such as a portfolio manager. 5 Boar’s Head Lane, P.O. Box 3668, Charlottesville, VA 22903, 804-980-3668, http://www.aimr.org.

Certified Financial Planner ™(CFP®) - courses and comprehensive examination cover 175 topics including six broad areas of planning. Include Insurance, Investment, Income Tax, Retirement, Estate, and Fundamentals of Financial Planning. Also has an experience requirement. Certified Financial Planner Board of Standards (CFP Board) grants the use of the designation. 1700 Broadway, Suite 2100, Denver, CO 80290-2101, 888-237-6275, http://www.cfp-board.org.

Chartered Financial Consultant (ChFC) - courses and testing covering Fundamentals of Financial Planning, Income Taxation, Insurance, Investments and Estate, with emphasis on general financial planning. Designation granted by The American College, 270 S. Bryn Mawr Ave., PA 19010, 610-526-1000, http://www.amercoll.edu/pages/Curriculum/Designations/default.htm. 

Certified Public Accountant; Personal Financial Specialist (CPA/PFS) - courses and testing that covers income, estate and retirement planning, and general financial planning concepts. Designation granted by the American Institute of Certified Public Accountants (AICPA) Personal Financial Planning (PFP) Division, 1211 Avenue of the Americas, New York, New York, 800-862-4272, http://www.aicpa.org.

Now you are ready to begin the process of finding and hiring a financial planner. Here are the steps:

1. Get a list of names of financial planners from friends and family, but don’t assume they will be right for you.

2. Get a list of names from organizations that refer planners. Here are two that you can access on-line or by telephone.

Financial Planning Association (FPA) - This is the new combined membership organization that is the result of the merger between the Institute of Certified Financial Planners (ICFP) and the International Association of Financial Planning (IAFP). They are in the process of reworking their referral system but you can get names of the financial planners in your area by either calling 800-322-4237 or http://www.fpanet.org.

National Association of Personal Financial Advisors (NAPFA) - This is the only fee-only membership organization for financial advisors. You can get a complete list of fee-only planners in your area that are members by calling 888-FEE-ONLY or going to http://www.napfa.org.

Now that you have your list of prospective financial advisors you can call to get additional information on each of the candidates. It may help to narrow down your choices to go through some of the basic questions in the telephone interview before you schedule an initial meeting.

Many advisors may deal only with clients in certain situations such as teachers or retirees. Others may have a minimum assets requirement. Make sure you ask about these to make sure there is a fit before you waste your time going further. Review the information package that you receive from each of the planners to determine if they meet your basic criteria.

Next, schedule a meeting to talk face-to-face with your prospective planners. Many planners are very qualified but you may not be comfortable with his or her style. It is critical that you have a high comfort level because you will be working with this individual for a long time.

Here are some sample questions to ask:

1. What are your qualifications?
2. What specific services do you offer?
3. Do you have other clients who are in situations similar to mine?
4. Will you be the person working with me?
5. How will I pay for your services and what is the range of fees?
6. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? (These questions were taken from "10 Questions to Ask When Choosing a Financial Planner" which can be found at http://www.cfp-board.org.)

You may also want to check your candidates to see if there have been complaints filed against them. Here are a few government organizations you can check out.

The U.S. Securities and Exchange Commission (SEC) - Any investment advisors or financial advisors that give investment advice and have assets under management of over $25,000,000 are required to register with the SEC. 800-732-0330 or http://www.sec.gov

North American Securities Administrators Association, Inc. (NASAA) - This is the organization for the State Securities Administrators and can provide the name of the contact person in your state. Investment advisors or financial advisors who give investment advice and who have less than $25,000,000 of assets under management are required to register in the state in which they are doing business. http://www.nasdr.com/2100.htm, ombuds@nasd.com.

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