How to Choose a Financial Planner That’s Right for You

paper layout with financial information being discussed with a client

 

People seek a financial planner for various reasons. From remaining financially independent to enjoying their lives to making sure there’s enough money to retire to using money effectively on a daily basis and more.

Whether you’re looking for an investment advisor for the first time or you feel that your current advisor no longer meets your needs, this blog can help you ask the right questions to make an informed decision.

What are my choices?

Most people begin choosing a financial planner by asking for a referral from a trusted from or family member. Then, they head to the internet to learn more about these advisors before choosing a few to call.

You can find financial advisors in a variety of places—in a larger financial firm such as a brokerage house or a bank or in an independent advisory firm. In this article, we are going to focus more on selecting an independent financial advisor, but you can also use this article more broadly in selecting an advisor in general.

Why an independent financial advisor may be the right choice for you

There are several reasons why an independent financial advisor could be the right choice for you. The first reason is that they are independent. Independent advisors are able to help clients with complex financial assistance as they generally have affiliations with a variety of firms that assist with tax planning, estate planning, money management and more.

Secondly, independent advisors often charge small fees based on a percentage of your assets in your portfolio, so growing your portfolio benefits both of you.

Where do I start in finding the right financial planner?

You may have a specific advisor in mind or have a list of recommendations. Here are three steps you can follow:

1. Start with an initial screening

The internet is a great thing. You can search and review pertinent information before you even meet with a financial planner. Most financial planners are required to disclose details about their business publicly through filing a Form ADV.

Form ADV’s can be viewed on the SEC website for independent advisors that are federally registered.

Various items can be found in the Form ADV such as: type of business, assets under management, services offered, disciplinary history and affiliations with other financial service companies.

2. Know what your financial objectives are

Defining your investment and financial planning objectives can help you select the advisor that is right for you. Typically, financial advisors will want to know:

Your investment goals – define what you’re working toward achieving such as a comfortable retirement, better money management, planning for kids’ college, leaving a legacy, etc.

Risk tolerance – to determine how much fluctuation in value you can tolerate in exchange for the opportunity and possibility to earn above-average returns.

Timelines – an idea of when you will need to withdraw money from your investments.

Income needs – will you need income from your portfolio? If so, how much?

Taxes – does your tax bracket require a strategy with your investments?

Other holdings – do you have significant wealth connected to real estate or other assets?

Other – do you have complex planning needs, business succession planning, wealth transferring, philanthropic planning, etc?

3. Interview advisors

Next you will want to start preparing for interviews with advisors. Be sure to evaluate the advisor objectively asking consistent questions to you have the information you need to make a good comparison.

Make sure the advisor you’re working with welcomes your questions and provides answers that you understand. It’s important to ask, and keep asking, if you don’t understand something.

It’s also important to evaluate how many questions the advisor asks about you, your goals, your experience and your hopes and fears about your money.

Questions to ask a financial advisor

There are many questions you can ask when interviewing a financial advisor. We encourage you to generate some of your own, but here are some to help you get started:

What are your credentials? – there are several types of credentials from Certified Financial Planner (CFP) to a Chartered Financial Analyst (CFA) to a Personal Financial Specialist (PFS) to a Certified Investment Management Analyst (CIMA) and more.

Do you offer the services I need? – this goes back to defining your financial objectives. There’s a difference between money managers, financial planners, and wealth managers

How are you compensated? – there are various ways a financial advisor can be paid: fee-only, fee plus commission, commissions only and wrap fees. Knowing how your advisor is paid may help you evaluate the objectivity of the recommendations given.

How will we work together? Communication is important when choosing a financial advisor. Some people prefer frequent communication while others may require less – it’s all your preference.

Additionally, sharing why you’re looking for an advisor can be beneficial to give your advisor a better understanding of your priorities. You may find it helpful to jot down your questions, needs and goals as you research to find a financial advisor.

There are several other questions you can ask and it’s our hope that you’re comfortable asking them.

*This article is not intended to recommend or endorse any specific advisor. You must decide whether to hire an advisor, what authority you want to give the advisor and ultimately find an advisor that is right for you.

We’d love to hear from you! Share your thoughts in the comments below.