If you are like most people, you lack the financial savvy necessary to make the most of your money. This is where financial advisors come in. Their knowledge and experience can guide you in putting your money to good use, and meeting whatever financial goals you have set for yourself. They can also keep you on track with your goals, and urge you into action when you might otherwise procrastinate. There is certainly no shortage of professionals from which to choose, and not all are created equal. So, if you have decided it is time to invest your money, start planning more seriously for retirement or get your financial house in order, you are now tasked with finding the right person. Here are just a few tips to help you choose your advisor with confidence.
One of the first things to consider is the fee structure. Generally speaking, most financial experts caution against planners who work on commission, as there is always the possibility they are steering you towards certain products based on how much money they stand to make. Many planners offer a flat fee for their services, while others charge hourly much like a lawyer. Some collect fees by taking a percentage of the value of your assets—usually 1 percent—annually. If you are just starting out, and your needs are relatively simple, someone charging an hourly rate may be the best bet.
Licensing, Credentials and Certifications
You should always look for an advisor that is a certified financial planner (CFP.) These professionals have undergone extensive education and passed a board exam. There are Chartered Financial Consultants(ChFC) who studied the same core curriculum as a CFP but did not take the exam. If you are looking for someone to specifically manage your money, a registered investment advisor (RIA) may be a good choice.
A good place to look for CFPs is the National Association of Personal Financial Advisors (NAPFA). These planners are all fee-based, and the standards to be part of this organization or equal to or exceed the requirements for earning the CFP credential
The Garrett Planning Network is a great place to find planners who are willing to take on smaller projects at an hourly rate. Members are either CFPs or working towards becoming them. If you only have a few questions, someone here can help without charging too high a fee.
Beware of Braggarts
Very few people regularly beat the market, and beware of any planner making such bold claims. First off, that is not something anyone should be promising you. Secondly, in an effort to achieve such goals, he may be doing risky things with your money that you probably wouldn’t be comfortable with.
What is Their Niche?
While many planners service a range of clients, some planners tend to work with one type of client predominantly, whether it be small business owners, people nearing retirement age, people who have been recently divorced or newly married,etc… Ask if he specializes in any particular type of client. You may want to consider working with a planner who is very experienced in managing people with similar financial situations and goals.
Kelli Cooper is a freelance writer who blogs about all things money ; if you are looking for an advisor in Canada, she recommends learning more about Neil Lecky, who handles both business and personal clients.