Choosing a Financial Advisor: 8 Helpful Tips

"Choosing a financial advisor," as used here, is a reference to deciding who will assist you in making decisions and carrying out transactions related to your finances. Choosing a financial advisor is important, because they are experts in the field.

They can save you time and ultimately money. However, you still need to study and be involved in the decisions related to your money. I strongly suggest that you interview at least three candidates.

You can gather prospects by asking your friends for referrals, ask your personnel office manager for referrals, ask another expert (e.g., banker, insurance agent, lawyer, tax preparer, etc.), or Google "great financial advisors in 'the name of your city.'"

Here are eight tips for choosing a financial advisor

1. Ask about educational credentials. A great credential to look for is that of certified financial planner (CFP). Check to insure that the person is properly registered with the Certified Financial Planner Board of Standards. Legitimate CFP’s have to pass a rigorous test.

2. Ask about relevant work experience. You are looking for those with at least five years of experience working with clients like yourself. If you want investment advice with a portfolio of less than $100,000 then you want to know how many clients the perspective advisor has worked with in this regard.

If you want advise on life insurance, health insurance, and disability insurance then you want to know how many clients have he/she advised in this regard. You want to know how many clients they service.

Too many clients may mean that there is no time for you. Too few clients may mean that the person has problems or is very new.

3. Ask for references. You are looking for clients who are similar to you. Make sure you call the references and talk with them about the services that the perspective advisor has rendered, their satisfaction, and the method of payment.

4. Ask about services provided. You want to know if the perspective advisor can help you with what you need. Don’t be surprised if the perspective advisor collaborates with others like insurance brokers, certified public accountants (CPA), lawyers, and others. Talk about how much personal time will be spent on your affairs and how much will be assigned to others.



5. Ask about payment method. Some advisors are paid a flat fee, others a commission, and some a combination of the two. Some are paid a salary from their company, which is funded by money received from the vendors they use.

A flat fee or hourly rate can be a better situation for you, so the advisor will not be tempted to persuade you to buy only those items he/she receives a commission for, whether it is to your advantage or not. Look for a “fiduciary” – the advisor pledges to act in the client’s best interest at all times.

6. Check out any licenses or registrations that the perspective advisor says he/she has. You want to make sure that the regulatory agencies have the person listed as being in good standing and that there are no complaints filed against him/her.

You want to know about any crimes that they have been accused of. If the prospect sells securities, check with the Central Registration Depository (CRD) to review his/her listed profile. You can Google them.

Ask them for their ADV Part II or the state equivalent of this form. This is a Securities Exchange Commission disclosure form for their registered investment advisors.

7. Ask about contracts. If you have to sign a contract, make sure you can get out of it with a 30 days or less notice. It is often helpful to put things in writing, so there is a clear recollection of what was agreed upon, if such a need arises.

8. Ask about how does the prospect stay abreast to current happenings in their field. They may take a course or two a year or read publications.

I hope these tips help you in choosing a financial advisor who will assist you in your efforts to be a profitable steward of your finances.

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