What Type of Advice Do You Need?
There are lots of reasons why you might need help from a financial adviser. Are you looking to retire, for example? Are you readying yourself to buy a house? Do you need complete financial, retirement, tax, estate and education planning services?
For every reason, there’s a different type of advisor. So, be sure to check whether someone has experience in giving the type of advice you need. That might be tackling a specific financial goal such as divorce planning, or it might be giving you a macro view of your assets and money.
What Are Their Credentials?
Don’t confuse financial advisors with CPAs, who can help to lower your tax bill.
Or with CFS’s, who will try to sell you mutual funds.
Or with CFAs, who can analyze global stock performance but don’t do financial planning!
A good financial advisor will hold a CFP, or certified financial planner certification. This is the industry gold standard. It means that your advisor has passed a stringent exam administered by the Certified Financial Planner Board of Standards. These three little letters are a good sign that your advisor has the right skills and credibility. He definitely is not a“robo advisor” who uses algorithms to manage your investments!
The CFP Board also keeps disciplinary records. You can check those here.
How Do They Charge?
Be wary of financial advisors who receive a kickback whenever they recommend a stock or investment. These advisers could have an incentive to steer you toward products that are not in your best interest. He or she may not give the most unbiased advice.
A growing number of financial advisors charge a flat fee for key services. For example, you might pay $2,000 for creating a one-time financial roadmap. Others charge by the hour, like lawyers. These advisors don’t get a cut from funds or insurance companies. It’s a good sign that you can trust them.
If you’re looking for a long-term financial partner to invest and manage your money, then you can expect to pay a percentage of all the assets they manage for you. The more assets you have, the lower the fee. So, you don’t have to be a millionaire to afford this type of service. But it’s still wise to shop for competitive rates.
Are They a Fiduciary?
Check for the word “fiduciary” in the advisor’s code of ethics. This means that the advisor has pledged to act in the clients’ best interests at all times. For example, the advisor is barred from making trades that may produce higher commissions for the advisor.
Financial planners who are not fiduciaries conform to a lesser standard. They can sell you anything that is merely “suitable.” It does not have to be ideal.
Who Comes Recommended?
To start, ask friends and co-workers if they can recommend an advisor. If possible, you want to find an advisor with experience advising clients in the same stage of life as you. Your CPA, attorney, union or professional organization may also have worked with certain investment managers for long enough to have realized their value. See who they recommend.
You might find that some wealth management firms cater exclusively to a specific type of client, such as retirees or those with more than $250,000 to invest. Don’t take it personally! There’s a planner out there for everyone. Plus, you’ll get better outcomes from a planner who is used to working with people just like you.
For more leads, check the website of the National Association of Personal Financial Advisors (NAPFA). All the members in this network are fee-only. This means they receive no commissions, bonuses or “finder’s fees” as a result of recommending certain products.
The CFP website also has a search facility to help you find top CFPs in Kansas City, Missouri.
The Bottom Line
Financial advisors are like doctors — find a good one, and you have a better chance of staying in top financial health throughout your life. Look for a financial adviser who is a certified financial planner. Remember, CFAs are licensed and regulated and abide by a strict code of ethics.
After that, it’s a case of booking some face-to-face meetings local to you. Reputable firms will always offer a free consultation. Use this time to build rapport with someone you can trust.