Choosing a Financial Advisor

Saturday, October 19, 2013, 1:00 AM | Leave Comment

Selecting the right financial advisor is essential to protecting your current assets, reaching your overall goals and for making decisions about your finances that will benefit you and your loved ones. Unlike a broker, an advisor`s job is to help you make the most beneficial decisions about how to invest and save and make your money grow.

You can use an advisor to help with your finances overall or guide you toward a specific goal, such as retirement. While there`s no one guaranteed way to find the right advisor, you can narrow down the field with a little research.

  • Go Certified

    Financial advisors don`t have to be certified or licensed, so anyone can offer the service, even if they`re inexperienced or untrained. However, the Certified Financial Planner Board of Standards, a professional accreditation organization, offers certification to those who can pass an exam. This covers many areas of personal finance and demonstrates commitment to continuing education in the field.

    Look for advisors who have the “CFP” designation that indicates they`re a certified financial planner who earned the CFPBS`s accreditation. While it`s not a guarantee of expertise, certification is certainly a good sign. You`ll also want a planner who is a fiduciary, as they have pledged to act in their clients` best interests and are held to a higher legal standard than those who are not.

  • Look at Pay Structure

    Financial planners charge for their services using various pay structures. Some are commission-based while others charge hourly or flat percentage fees. The rule of thumb is to avoid those working on commission. They may advise you to use products or investments that give them a bigger fee as opposed to what is best under your current circumstances.

    Fee-based planners are considered the safer bet but still carry potential downsides. For example, an advisor who is charging a percentage of your annual assets may not advise moves that involve shrinking your pool, even if that is what you should be doing at the time. Consider a planner who charges by the hour if you don`t have a lot of investments or assets and have simple needs.

  • Background Check

    Ask potential planners if they`re been investigated or disciplined by investment consumer groups or the local regulatory body and about any criminal convictions. Request a reference list of their current clients, particularly those who have needs similar to yours.

  • Look at the Pitch

    An overly sales-based pitch that includes claims of higher returns than everyone else is often a red flag. Your planner should be prepared to talk about the range of services offered, their experience and track record but should not oversell or make wild claims.

Anytime you`re going to someone for advice as important as Money Tips, you also need to consider your personal comfort level with that person. Interview your list of potential advisors in person so you can gauge how comfortable you are speaking to them. Eliminate any planners you`re not personally comfortable with from your list of potential candidates.

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