With so many financial professionals competing for your business, deciding on the right one can seem impossible. Here are 5 things you should look for to pick the right financial advisor for your needs right now.
Your personal finances are too important to leave to chance. So when you're choosing a financial advisor, it's important to choose one who's not only competent, but also one with whom you feel a good rapport. This is likely a long-term relationship that will grow with you over the course of your lifetime if you pick wisely.
Here are five things to consider when selecting your financial advisor. Follow these and you're far more likely to select the advisor that is best suited for your personal needs and personality.
1. Transparency
No one likes to be hit with hidden fees or feel like they received misinformation. Complicated billing and hidden agendas can erode trust quickly and prevent it from ever returning. Always ask how much someone charges, how they charge, and if there are any conflicts of interest you need to be made aware of.
2. Authority
Financial advisors usually have a few letters after their names: CFP, CPA, ChFC and so on. Ask what type of certification your potential new advisor has, and understand what those credentials mean. Not all designations are created equal and so you want to know what level of authority your advisor has in certain financial areas. Some designations are harder to earn than others. A CFP (Certified Financial Planner), for example, requires significant study and candidates must pass a famously difficult exam in order to rightfully attach those CFP letters to their names.
3. Suitability
Each license, credential and certification designates a different specialty, so determine what you need and then choose someone with the right credentials.
There's also the level of suitability and ethical requirements each designation requires. Some financial professionals are bound to a fiduciary standard that requires them to act in your best interest like a Certified Financial Planner. Others, have lesser standards that allow for a certain amount of conflict of interest to exist in order to sell you financial products that a financial advisor earns a commission on.
The long and the short of it: determine the suitability requirements your financial advisor is bound to before making your final decision.
4. Experience
It's wise to ask a prospective advisor about his or her experience and past performance. While financial advisors are not allowed to advertise prior performance as indication of future performance, they can review performance with you in private.
There's no standard for how performance is reported, so just have an idea of what type of information you’re really looking for and why. Most financial advisors can provide you as much or as little detail as you need to get a better sense for their experience and performance. And don't be afraid to ask a financial advisor questions you don't understand what they're showing you.
5. Communication and Client Service
As in any relationship, communication is important and you’ll want to know you will have good communication with your potential financial advisor. Find out the level of client communication you can expect and the process that your prospective financial advisor will walk you through.
The level of client service varies greatly from advisor to advisor. Some send a report once and year and you won't hear from them otherwise. Others offer a more supportive experience with constant contact via email, texting, or phone.
Conclusion
Lastly, really consider if this is someone you could see working with long term. Do you like him or her? Personality fit is an important detail you won’t want to overlook since this is someone who will be working with you on the most intimate details of your financial life. Are you comfortable and do you see this as a positive relationship that will continue to grow over time? Only you (and your potential advisor) can answer that question.
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Tyle Landes is the founder of Tandem Financial Guidance, a fee-only financial planning firm in Kansas City, Missouri. Tyler and I became friends after meeting through the XY Planning Network, and I asked him to write some thoughts on picking a financial advisoras a guest topic for this site. |
Tyler Landes | Tandem Financial Guidance