How to Find Your Financial Advisor

understanding your options

There are many types of financial advisors that can support the goals of you and your family. But how can you evaluate different service providers? Explore this guide for understanding and evaluating your options.

Overview: Evaluating Financial Advisors

By understanding your needs and goals, you can understand what to look for in a financial advisor. This guide provides a multi-faceted view of how you can evaluate and engage potential service providers. We recommend considering the following:

Your Goals

Before interviewing providers, make a list of your goals and needs. This list will inform your due diligence and chats.

Services

Find an advisor whose skills, experience, and capabilities are a good match for your needs.

Credentials

The financial industry has no shortage of acronyms and designations. Learn about advisor specializations.

Fee Structures

Financial advisors can structure their fees in any number of ways, get familiar with the most common options.

Screening

Use this list of 20 questions to guide your conversations with prospective financial advice providers.

Identifying Your Goals

Before embarking on your search for a financial advisor, ask yourself what type of help you are looking for. Understanding your own needs is the first step in finding the right financial advisor for you. Start by asking yourself these questions:

Do you want help buying or selling securities?

Do you have specialized tax or estate planning needs?

Do you want to buy life, disability, or long-term care insurance?

Do you want the advisor to build and manage a long-term investment portfolio?

Do you want help developing a budget, debt management, savings plan, realistic retirement goals?

Do you want a comprehensive financial plan based on your life goals, such as buying a house or playing for college?

Types of Financial Advisors

Your goal should be to find an advisor whose skills, experience, and capabilities are a good match for your needs. Here is a list of the most common types of advisors you will encounter in your search:

Securities Brokers
Securities brokers provide assistance in buying or selling securities like stocks, bonds, or mutual funds. They may provide advice that is incidental to the securities transactions they assist with. They are paid a commission for their services.

Registered Investment Advisors (RIAs)
RIAs manage portfolios, develop financial plans, and may provide advice on tax or estate planning issues. They may be paid a percentage of assets under management, a flat-fee, or on an hourly basis.

Online Advice
Portfolio management services are available through “robo-advisors” that produce computer-generated portfolios based on information provided online. There are also “hybrid” advice services that provide investment management and/or financial planning through a combination of online and human interaction.

Insurance Brokers
Insurance brokers provide advice regarding various types of insurance products and are typically paid a commission based on the sale of those products.

Lawyers and Certified Public Accountant (CPAs)
Lawyers and accountants may provide specialized advice in areas such as tax and estate planning. They are typically paid on an hourly basis.

Keep in mind that these categories are not exclusive.  That is, an advisor may be registered as both a securities broker and an RIA and may also be a lawyer and/or CPA.

Different types of advisors are subject to different regulatory standards of behavior.  For example, RIAs and lawyers are required to act as fiduciaries to their clients.  This means they must put the interests of their clients ahead of their own. While other advisors are also subject to regulatory standards, those standards are not typically considered as rigorous as the fiduciary standard of behavior.

Advisor Credentials & Designations

There is a confusing array of credentials and designations issued to financial advisors.  Here is a guide to some of the most common designations:

CFP—Certified Financial Planner
The CFP designation is awarded by the CFP Board for expertise in comprehensive financial planning for who have undergone rigorous financial planning studies and thorough screening. CFPs as characterized as having the skills needed to navigate a diverse financial landscape by offering holistic guidance on investments, insurance, and retirement planning

ChFC—Chartered Financial Consultant
Overseen by the American College of Financial Services, the ChFC designation for professionals specializing in financial planning topics, such as insurance, estate planning, and retirement planning.

CFA—Chartered Financial Analyst
The CFA Institute awards the globally-recognized and prestigous CFA designation to investment management professionals. Candidates must pass 3 exams levels, a process which can take up to 5 years to complete.

CIMA—Certified Investment Management Analyst
The Investments & Wealth Institute awards the CIMA certification to professionals specializing in investment management. These professionals are well trained in asset allocation, portfolio construction, and investment risk management.

CLU—Chartered Life Underwriter
Also overseen by the American College of Financial Services, the CLU designation is for professionals specializing in life insurance and other insurance-related products, such as annuities.

CPA—Certified Public Accountant
This is a designation for an accounting professional who has met certain experience, exam, and educational requirements. These specialists can help with accouting, tax planning, and regulatory compliance.

Again, keep in mind, an advisor may have one or more of these designations. And a very knowledgeable and experienced advisor may have none of these designations. But these designations do indicate a level of commitment and study that should be considered.

Fee Structures for Financial Advice

There are a number of different ways that advisors get paid. Here is a guide to the most common fee structures:

Commissions
An advisor is paid a fee based on the sale of an investment product.

Percentage of Assets Under Management (AUM)
An advisor is paid a designated percentage of the client’s assets that are under the advisor’s management.

Flat Fee or Subscription Fees
An advisor is paid a flat fee that is charged on a periodic basis—typically either quarterly or monthly.

Hourly Fees
An advisor gets paid based on the time spent serving the client.

Some advisors call themselves “fee-only” advisors. That means they do not charge any commissions. A “fee-based” advisor may charge both fees and commissions.

Each fee structure has its pluses and minuses. The most important thing is that all fees and expenses are clearly and fully disclosed.

Questions You Might Ask an Advisor

To guage fit and alignment between your family, your financial goals, and an investment professional, here are some questions you might ask a prospective financial advisor:

  1. How long have you been a financial advisor?
  2. Could you give me a summary of your professional background and experience?
  3. What services do you provide? What information will you need from me to get started?
  4. Could you walk me through the process of how we will work together?
  5. Do you have a specialty? What types of clients do you typically work with?
  6. Are you required to act as a fiduciary in providing services to me?
  7. Do you have any professional designations or credentials? Do you have access to other professionals, such as CPAs or attorneys?
  8. How do you charge for your services? How are your fees structured?
  9. Do you have a minimum account size that you will accept?
  10. What would be the all-in cost of the services we are discussing?
  11. Could you briefly describe your investment philosophy?
  12. What types of investments do you focus on—individual stocks and bonds, mutual funds, exchange traded funds, other?
  13. Do you invest client assets in commissioned or proprietary products?
  14. Are there restrictions on the types of products you sell or is it open architecture?
  15. Have you or your firm been subject to any regulatory, legal, or disciplinary actions?
  16. Would you be my primary contact at the firm?
  17. How often would we meet or communicate?
  18. Who will have custody of my assets?
  19. How will we measure progress towards my goals?
  20. If something should happen to you, who will be your back-up?

What To Look For

Ultimately, you want to work with someone who is equipped to guide you in the areas where you need help and provide the services you need. But you are also building a long-term relationship with your advisor. Make sure you feel good about your interactions with this person and feel comfortable that they will look out for your best interests. Look for the following:

Relevant experience and competence in the areas where you need guidance.

Someone whose approach to investing and planning feels comfortable to you.

A person who seems genuinely interested in you and your issues.

A good listener who communicates clearly.

A person with whom you have good chemistry and rapport.

Someone who charges a reasonable fee for their services.

So what are the best ways to find potential service providers? Try the following:

  • Talk to your family and friends about who they use for financial and investing advice.
  • Using search engines and other advisor-client matching websites can help you find candidates that match your needs. Some website examples include XY Planning Network, ACP (Alliance of Comprehensive Planners), and NAPFA (The National Association of Personal Financial Advisors).
  • Research investment advisory firms that may meet your needs, then schedule interviews with a few financial advisors that work there.

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