1. Trawl for referrals. Start by getting recommendations from friends, family and reliable Internet sources. If you’re getting referrals from friends, it makes sense to rely on those who are in a similar stage of life, with similar financial needs, Forbes suggests. Money Talks News founder Stacy Johnson notes that your accountant or lawyer may be another good source for referrals, depending on their familiarity with your circumstances.
Check out registries with professional associations like the National Association of Personal Financial Advisors or Garrett Planning Network to locate advisers in your area who have received training and agreed to the organizations’ ethical standards, says Marketwatch.com.
Also, knowing some financial advisers may be distracted by sales quotas and time prospecting for new clients, you want to make sure that your financial adviser won’t sign you up and then file you away, warns personalcapital.com.
Once you think you have some potential candidates, ask them these questions:
2. What are you going to do for me? Beware the salesman, Ameriprise Vice President Pierce Hardman tells MTN.
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“I think one of the most important things is for the financial adviser to listen to the potential client,” Hardman says. “All too frequently they talk themselves up a bit and blather on about what they can sell you, when in reality it is all about what you need — not what they can sell you.”
Shomari Hearn, a vice president at Palisades Hudson Financial Group, describes his philosophy with clients.
“I’m going to approach it from a holistic approach. I’m going to look at your overall situation,” Hearn says. “Not only looking at your investment portfolio, but taxes, estate planning, retirement planning.”
3. How are you paid? ‘Fee-only’ vs ‘fee-based.’ Your potential adviser should outline products that meet your needs. You should avoid advisers who have a financial incentive to focus on the offerings of particular firms or on specific investments. These are known as fee-based or commission-based advisers.
Stacy recommends a fee-only adviser to eliminate conflicts of interest. Fee-only advisers charge you a rate, usually based on the assets you put under management.
Here’s a cautionary tale that illustrates what can go wrong with an adviser motivated by commissions: How to Find an Awful Financial Adviser.
In any case, make sure you are clear about what you are getting.
“No matter how they get paid, ask them, so you know,” says Stacy.
4. Credentials, disciplinary history. If you want someone to manage your money, then look for a registered and educated investment adviser, according to Forbes.
The Financial Industry Regulatory Authority allows you to check out the advisers through Brokercheck, Ameriprise’s Hardman says. FINRA oversees the people and firms that sell stocks, bonds, mutual funds and other securities.
You type in your current or prospective broker’s name to see employment history, certifications and licenses — as well as regulatory actions, violations or complaints. You also can get information about your broker’s firm, according to Brokercheck.
The U.S. Commodity Futures Trading Commission, which investigates suspected fraud, can clue you in on advisers who have had disciplinary actions. Disciplinary History is a searchable repository of the agency’s active investigations and past violations. Look for CFTC SmartCheck.
Run this search to find out if your financial professional has a disciplinary history with the CFTC. The AARP also offers a questionnaire to help you weed out the bad players.
5. How will I know how I am doing? It’s important to be clear about communication with your financial adviser.
You need to set a schedule, laying out how often you will meet to evaluate and review your portfolio and whether this will be done in person or remotely. The adviser should be ready to help you measure your progress over time with regular meetings and check-ins as well as access to your account online.
Proper communication is the key to a successful relationship that can last through many market cycles: It is important to work with an adviser who talks to you, not through you, according to Right Financial Advisor.
Bottom line: Always remember that your adviser should be working for you, not the other way around.
Do you have hints or tips for getting the most value from a financial adviser? Share them with other Money Talks News readers.