Finding the right financial advisor is a little like finding your soulmate—you won’t necessarily meet them on your first date, but that doesn’t mean he or she doesn’t exist. For some, the process can be intimidating and a little bit frustrating, so today I’m going to share some tips that will hopefully help you meet Mr or Mrs Right … Financial Advisor that is!
Financial advisor has become a bit of catch-all title for anyone who is licensed to sell investments. To distinguish themselves, many financial advisors have additional designations or credentials, so I am going to review the most common ones you will see.
The CFP® is one of the most respected financial planning designations and requires extensive training and experience requirements. A CFP® must follow a strict code of ethics and pass a lengthy examination (10 hour exam over two days with a 50% pass rate). These individuals understand the always evolving financial world and can provide a broad range of financial advice.
Frequently held by those in the insurance industry who specialize in some aspects of financial planning by meeting additional education requirements in estates, taxes and portfolio management.
A Chartered Retirement Planning Counselor has pursued additional education on a variety of retirement principles and topics to help guide their clients through the retirement process from start to finish.
There are over 100 designations available, so this is just a small sampling of some of the designations your financial advisor may have. These alone do not make them better financial advisors but may be indicative of a desire to increase skill sets and better serve their clients.
The complimentary consultation is a bit like a first date. Both you and the financial advisor are trying to determine whether you are a good fit for one another and can have a happy, long-term relationship. While every financial advisor will conduct this meeting a bit differently, these four areas should be covered.
In other words, what brought you here today. For most people, there is some sort of catalyst that led them to meet with a financial advisor. Share with them whatever that concern may be. You want to make sure they listen well and can help you address this concern.
PLEASE NOTE: Remember, this is a free consultation. Do not expect to receive specific, tailored advice to your individual situation at this point. The financial advisor doesn’t know your financial situation well enough to give you more than general advice. What you should expect is that your prospective financial advisor listens carefully and asks good questions, so they fully understand your concerns. Ultimately, you should feel they have the skills and knowledge to address your specific situation.
They should ask about your financial goals because knowing what matters most to you determines how we create your financial plan and investment strategy. Investments may also be discussed at this time, but a discussion around your goals should come first.
Up to this point, you have probably been doing the majority of the talking with the advisor asking lots of questions to get a better grasp of your situation and needs. Now this is the time for them to shine. They should explain who they are, the services they offer, how they work with their clients, what you as a client can expect from them, who is on their team and how you will work with them, etc.
I intentionally kept this separate because it is such an important point and can make or break your relationship. Your advisor must be upfront and transparent with how they get paid. There should be no question in your mind. If you have questions or concerns, share them now. He or she should willingly and patiently answer your questions.
Most of these questions should be addressed by the financial advisor when they discuss how we can work together. But if they are not, then be sure to ask them before the meeting ends.
What Are Your Qualifications? Experience? Expertise?
You want to make sure the financial advisor has relevant experience to your situation and have the skills and knowledge to provide you with the information and guidance you need. They should share any designations they have and how they benefit you.
What Is Your Approach to Financial Planning? Your Investment Philosophy?
Do they take more of a holistic approach where financial planning and investments work hand-in hand? Or do they favor one over the other? If so, does that meet your needs? Ask them to walk you through how they choose which investments to recommend and why.
Have you ever been disciplined by a professional or regulatory governing body?
They should be forthcoming with you. You should also do your due diligence and check for disciplinary actions on FINRA’s broker check.
How Are You Compensated?
Hopefully, they tell you before you have to ask them. Again, make sure they are very clear on how they get paid and you are comfortable with how they are compensated.
Did He or She Seem Interested in Me?
This is the question you have to ask yourself after the meeting. Who did the most talking? You should have done the majority. They should have asked plenty of questions to understand your needs better and seemed interested and able to help you create the life you want for yourself. They should not have been offended by your questions, particularly around compensation. They should not be condescending or make your feel bad for past or current money mistakes. They shoot straight (i.e. not be a yes-man) yet still treat you respectfully.
I hope these tips will help you as you interview financial advisors. The right one is out there and can be a huge asset when it comes to creating the life you want for yourself and your family. I know from being both the financial advisor and client.
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SHANNON RYAN, CFP®
I love this, it's kind of like a cheat sheet...I'm definitely bookmarking this to use the questions when we decided on a financial advisor.
I never knew there were different types of financial advisors. I always thought it was kind of a "one size fits all" but I learned something new here as well :)
Thanks for putting this post together! Happy Hump Day to ya!
I would like to make a move to handling my own investments and working with a fee only advisor. I would hope the payback would be worth it. I'm just a little nervous about taking that on myself.