How to Find the Right Financial Advisor - Free Download
It’s no secret that the financial services industry is very confusing! Many people wonder when is the right time to work with an advisor, which ones they can trust, and who is the right match for them?
We want to help you avoid the costly and time consuming mistake of hiring the wrong type of financial advisor. Below are 5 steps that will guide you to make the right choice:
Know When You Need to Hire a Financial Advisor
The time to start thinking about working with a professional is when you’re making decisions that will impact your financial future. Typically these occur at inflections points, when you become busy with life and don’t have much free time to devote to your finances. It can also occur when your personal situation becomes more complex, and you can’t get reliable information from accessible sources like the internet.
Know the Different Types of Advisors and Which One Fits Your Budget
Advisors typically fall into three categories:
Securities Brokers are licensed representatives of broker dealers and are compensated by commissions received for selling products to clients.
Financial Planners are focused on all aspects related to the client’s financial life including, cash flow, budgeting, insurance, retirement, investments, and estate planning.
Investment Advisors specialize in creating strategies for investment portfolios, focus on the risk and return profile, and select securities that will fulfill a client’s desired time horizon and liquidity needs.
It’s important to understand that advisors can be both licensed brokers and financial planners, or financial planners and investment advisors, or even all three. Be sure to ask the advisor you are interviewing what services they provide and how they are compensated.
Once you know what type of advice you need, determine the budget amount that you’re comfortable devoting to financial advice. There are many options out there today for all levels of service and budgets.
If you’re just starting out, you may prefer to work with a discount brokerage, a local bank branch, or an RIA (Registered Investment Advisor).
If you have a more moderate budget, you may be comfortable with a retail brokerage, investment bank, or RIA.
If you have an ample budget and want services for more complex needs, then a private wealth group may be the right fit. These can include trust companies, investment banks, and RIAs.
Gather Names of Advisors
A great place to get referrals for potential advisors is to ask family, friends, colleagues, and other trusted sources such as a CPA or an attorney. There are also many good advisor search engines available such as NAPFA, XY Planning Network, Financial Planning Association, Garrett, Fee-Only, and Zoe Financial. You may also prefer an advisor that works with people like yourself. For example, some advisors specialize in working with female entrepreneurs while others focus on certain doctors such as dermatologists.
Do Your Research
We strongly advise not to skip this step! Once you’ve narrowed down the list of possible advisors, it’s important to perform basic due diligence. Advisors typically have profiles on websites such as Broker Check, IAPD, CFP®, and CFA Institute. These sites provide details of any disclosures related to the advisor, the credentials they hold, and how they are registered. If you are seeking a financial planner, consider a CERTIFIED FINANCIAL PLANNER™ and confirm they have the CFP® credential. If an investment advisor fits your needs, verify that they are a Charter Financial Analyst and have the CFA credential.
To complete your research, be sure to check the advisor’s website. Does it speak to you and do you feel a connection to their process and approach? By now, you will have gathered a decent amount of information, and it’s best to jot it down.
Schedule Introductory Calls With Advisors
Call two or three advisors on your list that you’d like to speak with. Come prepared to these meetings with a list of questions to ask them. We’ve compiled 10 Important Questions (download below) that you can start with. In addition to these questions, ensure the advisor understands your expectations and the type of relationship you are looking for. Ask them what their communication style is and determine whether it matches with yours. Is this person someone you enjoy speaking with and could be comfortable having a long term relationship with?
The bottom line is to avoid wasting valuable time and money with an advisor that’s a mismatch. Following these 5 steps can help identify the right financial advisor, and deliver the relationship you want.
If you have questions that were not answered above, please reach out to us. We host Money Mondays every month to chat with anyone who has general financial questions about working with an advisor.
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