Trusting someone to manage your life savings is a giant leap of faith. Before you work with someone who won’t make your financial success a priority, you must find out everything you can about their experience, qualifications, fees, and more.
It’s also vital to know your own goals. Are you looking for a specialized tax professional, wealth management, retirement planning expertise, or investment and stock market wizardry? Do you want highly personalized advice and more of a holistic approach?
Protect your hard-earned assets and make the most informed decisions with these five crucial questions for your financial planner.
What qualifications do you have?
While any individual can hang a sign or build a website proclaiming they’re a money manager without any real oversight or regulation, you deserve a skilled advisor with plenty of experience and in-depth knowledge. The best way to ensure someone is qualified is to review their qualifications.
There are several different credentials for people who have earned a certification in this area through education, exams, and experience. Here are the most common ones to look for:
Certified Financial Planner (CFP) – This designation requires 4,000-6,000 hours of dedicated training and ongoing education after certification through the Certified Financial Planner Board of Standards, Inc. Some specialize in taxes or estate planning, and all are bound by fiduciary duty.
- What does fiduciary mean? Simply put your CFP has two key responsibilities — care and loyalty — and an obligation to put your financial interests first. If they breach this duty, you could be entitled to damages.
Chartered Financial Analyst (CFA) – A globally-recognized post-graduate certification, this is awarded by the CFA Institute and is considered one of the hardest to obtain in the financial industry due to its rigorous standards. While most CFAs focus on the corporate side, some take on individual clients.
Chartered Financial Consultant (ChFC) – While lesser known than the above two, it’s still a sign that you’re dealing with a pro. Advisors with this designation must participate in an annual recertification program and follow the American College Code of Ethics and Procedures.
Certified Public Accountant (CPA)/ Personal Finance Specialist – Becoming a CPA requires a bachelor’s degree in finance or accounting. In addition, 150 hours of study, successful completion of the famously difficult Uniform CPA Examination, a state license to practice, and at least two years of experience as an accountant.
Do you have references?
Glowing reviews and word-of-mouth references are invaluable when selecting someone to trust with the money you’ve worked so hard to save. It’s relatively easy to go online and see if there’s a record of their credentials or customer complaints.
A reputable advisor is subject to oversight from a regulatory body, such as FINRA — a non-governmental organization that has a broker check feature on its website where you can view registration information, licensing, arbitrations, and more.
If their firm is registered with the Securities and Exchange Commission, they offer a handy investment advisor public disclosure tool to help you spot imposters and unqualified amateurs.
What’s your fee structure?
You want a fiduciary advisor who works on a fee-only basis. Some financial managers receive a commission from selling certain products which might not be in the best interest of your financial goals.
Ask about 12b‑1 fees, an operational cost of certain mutual funds that are typically kicked back to the broker. They also don’t improve the fund’s performance, and can negatively impact the performance of your investment.
How much can you expect to pay a compassionate, experienced fiduciary advisor who can help you manage your funds and plan for the future? That depends on several factors, such as:
- Your location
- The size of your assets
- Their experience
- Your specific planning needs
Some consultants work on a sliding scale to make financial planning more accessible for those in lower income brackets or retirees. Generally speaking, the more wealth you have that needs to be nurtured and directed, the more you can expect to pay for the perfect money manager.
Will you put everything in writing?
A financial planner who’s on the up and up won’t hesitate to sign a client agreement that details their compensation, services, and fiduciary obligations.
One that won’t, or who only gives vague and unclear answers, should be avoided. Your advisor should be more than willing to ditch the industry jargon and explain everything in understandable terms. You’re paying for their expertise, not for condescension or confusion, and you’re entitled to know exactly what’s happening with your assets.
What’s your investment philosophy?
The right financial strategy for your current situation and future goals is as unique as your fingerprint. Your income level, age, family size, region, and values all play an essential role in how you should plan and allocate.
Many people these days want to put their money where their beliefs are, such as in environmental, social, and governance organizations. Sustainability and green initiatives are critical to making the world a better place and can result in high-performing investments and genuinely good work in the real world.
Also known as impact investing, clients interested in this type of strategy need a financial planner who is knowledgeable about these options and will help them select the most appropriate allocations.
Look for passion and wisdom
Choosing a financial advisor is a massive decision and shouldn’t be taken lightly. Asking these fundamental questions before committing to anything will save you from wasting your valuable time and money.
Robo-advisors and large brokerage firms don’t put your interests first. If you’re ready to explore a more customized approach, reach out to me today! I’m dedicated to leveraging my expertise to benefit families and individuals and make intelligent financial planning accessible to all.