Working with a financial advisor (consultant or planner) can not only be financially rewarding but it can save you time and extra work. However, if you choose the wrong advisor, it can be a nightmare — just ask Bernie Madoff’s clients. So the process of choosing an advisor should not be taken lightly.
However, before you look for an advisor, here are a couple things to keep in mind. First, working with an advisor does not relieve you of your responsibility to take charge and take control of your finances. You should consider an advisor your partner and make or at least share in all final decisions because you will have to live with the result. Second, since they will be your partner, decide the role you want them to play. Do you need intense financial planning for your goals? Do you need assistance choosing investments and implementing a financial plan? OR, do you just want a second opinion about your current portfolio and investment strategies? Once you decide the type of partner you are looking for, you can begin your search. Start by asking for referrals from friends and other professionals, and interview at least three advisors before you make a decision.
Three resources to find financial advisors in your area include:
— Certified Financial Planners
— Financial Planning Association
— National Association of Personal Financial Advisors
So what should you ask during the interviews? One good resource for questions is the Certified Financial Planners Board of Standards they suggest 10 questions to ask when choosing a financial planner. Here are three of their suggestions.
Q: What are your qualifications?
A: The term “financial planner†is used by many financial professionals. Ask the planner what qualifies him to offer financial planning advice. Look for a planner who has proven experience in financial planning topics such as insurance, tax planning, investments, estate planning or retirement planning.
What is your approach to financial planning?
Ask the financial planner about the type of clients and financial situations she typically likes to work with. Some planners prefer to develop one plan by bringing
How much do you typically charge?
While the amount you pay the planner will depend on your particular needs, the financial planner should be able to provide you with an estimate of possible costs based on the work to be performed. Such costs should include the planner’s hourly rates or flat fees or the percentage he would receive as commission on products you may purchase as part of the financial planning recommendations.
After the interviews, carefully review your notes and access not only how you feel about
each advisor, but how you believe they feel about you. Do they genuinely want you as a client? Did they speak plain English during the meeting or did they try to dazzle you with jargon? And, don’t forget to do your homework. If you received client referrals, call them, and check the current status of their licenses and/or credentials. (There are a number of credentials, ask the advisor for the Website associated with each credential and then look them up.)Patricia Stallworth, CFP® and CDFA, is the president of PS Worth, a financial education company, the author of Minding Your Money, and the host of the Minding Your Money Minuteâ„¢. Learn more by visiting MindingYourMoney.net.