What to Look for in Finding a Financial AdvisorNovember 21, 2017
Jacqueline Waldon, CPA
As you progress in your career and acquire more wealth, finding a financial advisor that you trust becomes more practical than attempting to manage your funds personally. Researching funds and financial strategies can be time consuming and procrastination can undermine your goals.
Find an Advisor that Suits Your Needs
First, you must determine what type of financial advisor would best suit your needs. A Certified Financial Planner (CFP) advises clients how to save and invest their funds and can offer assistance on a variety of financial matters. A Certified Public Accountant (CPA) specializes in providing tax planning and advice and is a good fit for business owners and high wealth individuals, while Chartered Financial Consultants (ChFC) focus on insurance and estate planning. Chartered Financial Analysts (CFAs) concentrate on investment advice.
You’ll want to find a financial advisor that has experience working with clients in the same phase of life as you. You can start by asking for recommendations from family, friends or business acquaintances that have similar financial situations as your own. An additional source for locating a financial advisor is online at the National Association of Personal Financial Advisors (NAPFA) or the Financial Planning Association websites. Advisors from NAPFA work by fee only and do not receive commissions from selling you investments.
Be Sure to Check Credentials
Once you’ve selected candidates, you will want to google them to view their credentials—then contact the board that administers their designations to ensure they are still valid and active. It’s important to select an advisor with credentials; it means they are licensed, regulated and are required to take classes to maintain their proficiency and keep abreast of current conditions. Most financial advisors offer an introductory meeting free of charge to discuss your goals, the services he or she will provide and associated fees. You will want to ask questions and get a sense that the advisor is someone you can trust, has the experience required to meet your needs, and is someone with whom you feel at ease.
Make Sure You’ve Covered All Your Bases
Questions to ask the prospective financial advisor include:
- What credentials does the advisor hold? You should select an individual that best meets your particular needs and vet them thoroughly as outlined above.
- What fees will be charged for establishing a plan and managing your holdings? Financial planners generally charge a flat fee, an hourly rate or a percentage fee based on the holdings they manage for you. Noncommission-based fees are often preferable as it eliminates conflicts of interest and ensures your advisor will act in your best interests.
- What other services does the advisor provide? You will want to see a sample of a financial plan and find out if the advisor handles any other areas of personal finance you may require in the future, such as choosing the right mortgage; college planning; insurance; and estate, tax and legacy planning.
- Will your funds be maintained in-house or with a third-party independent custodian? You will want your advisor to use an independent custodian who will take possession of your money. The custodian will provide regularly scheduled statements directly to you. This ensures the advisor is unable to falsify your statements to hide misappropriated funds.
- Is your financial advisor a fiduciary? You will want your advisor to be a fiduciary, which holds him to a higher standard to ensure he acts in your best interest.
- What is the advisor’s investment philosophy? Be sure the advisor’s philosophy is in line with yours. Does he trade stocks regularly or prefer actively managed funds? You’ll want someone to manage your portfolio based on your risk tolerance. Ask for references from other clients. If he’s promising high yields, walk away. While this may sound appealing, the advisor cannot guarantee an outcome and he may be willing to take more risk than you can tolerate.
- Will you work directly with this person or with a team? Often, the advisor will delegate your account to another individual to handle on a regular basis and then meet with you annually to review your portfolio and update your financial plan. For some, this is preferable because several people are available to answer questions at anytime. Others prefer the personal touch and want direct contact from the advisor on a more frequent basis.
- What questions has the financial advisor asked you? He should be asking you about your goals, risk tolerance, perspective on savings, future plans and specific needs such as buying a home or other large purchase; college tuition; and retirement, estate and legacy plans.
How BlumShapiro Can Help
BlumShapiro is the largest regional business advisory firm based in New England, with offices in Connecticut, Massachusetts and Rhode Island. The firm, with over 400 professionals and staff, offers a diversity of services which includes auditing, accounting, tax and business advisory services. In addition, BlumShapiro provides a variety of specialized consulting services such as succession and estate planning, business technology services, employee benefit plan audits and litigation support and valuation. The firm serves a wide range of privately held companies, government and non-profit organizations and provides non-audit services for publicly traded companies.