Financial Savvy – Choosing a Financial Advisor

I am commonly asked to recommend particular financial advisors and, while I try not to do that as there are many highly reputable professionals in the area, I do have some advice on how to choose one. In general, the factors that you should consider in choosing a professional to help you with your personal finances are related to your own needs and the financial planner’s qualifications-education, experience, reputation, and certifications.

Before you begin to look for a financial planner/advisor, you should:

-Determine your general financial goals and specific needs. Not everyone can afford a financial planner and not everyone needs one. You may just need a financial professional to help you with a particular component of your plan, such as writing a will, or you may have much more complex issues to deal with.

-Do your homework to familiarize yourself with financial planning strategies and terminology. This will save time and will allow your advisor to focus on the plan rather than on educating you.

In selecting a financial advisor, you should:

-Consult your colleagues, friends, and family for names of advisors they trust and have received good service from.

-Interview several planners, asking them to outline their education, experience and specialties, the size and duration of their practices, how often they communicate with clients,  whether assistants handle client matters, and how they will be paid by you (whether through commissions, fees for specific services, or some combination).

-Make sure you feel comfortable discussing your finances with the individual you select.

-Ask for references, from not only the planner but also any other professionals with whom they work, such as insurance agents, lawyers, or accountants.

-Look for competence through education and/or certifications.

Financial advisors come from many different educational backgrounds, but a solid knowledge of law, finance, insurance, and tax is necessary to handle all the components of your financial plan.  Although there are many possible degrees and designations, the best known and most rigorous certification in financial planning is the Certified Financial Planner.  

Individuals who hold the CFPTM designation have passed a 10-hour, two-day exam covering all the topic areas considered necessary in the practice of financial planning, have three years work experience, and must adhere to a strict code of ethics. Two other financial planning designations offered by competing accrediting organizations are the Chartered Financial Consultant (ChFC) and the Accredited Financial Counselor (AFC).

-Check to see that they are in good standing with their certifying organization(s) and whether there are any complaints against them.

-Ask for a registration or disclosure document detailing method of compensation, conflicts of interest, business affiliations and personal qualifications.

Once you have decided on a particular planner, you should:

-Get everything in writing by requesting a written advisory contract or engagement letter to document the nature and scope of services the planner will provide, and how the planner will be compensated.

-Review your relationship on a regular basis.

All of this will no doubt take some time, but will be worth it in the end. The right  financial planner will be able to help you develop and implement a comprehensive plan to achieve your short-term and long-term financial goals.