5 Steps Before Choosing a Financial Adviser


Anyone can hang a shingle saying they’re a financial planner or adviser. So how do you know which one is right for you? It’s a question a lot of people are asking right now.

"People are having to rebuild…after the financial hurricane of 2008,” says Certified Financial Planner J. Harold Williams, of Linscomb & Williams in Houston, Texas. Now there are many more people are looking for financial planning expertise—often for the first time ever.

Here’s what to you need to know—and who to consult—before giving an advice-giver the thumbs up:

1. Figure out the fee structure.
Williams says the first questions you’ll want to ask a prospective planner have to do with the way they are compensated and whether their method of compensation poses potential conflicts of interest.

To get that information, you'll want to know how much of their current business is generated through:

  • A flat fee ($5,000 to $10,000 for performing a detailed financial analysis, for instance), versus
  • The share of assets under management (perhaps 1% of your portfolio, for instance), versus
  • A commission that depends on the amount of insurance, mutual fund shares or other products sold.

Under a strict registered investment adviser (RIA) structure like Linscomb & Williams, the adviser won’t sell insurance or mutual funds, and will instead refer clients to other companies that do. That’s why most of an RIA firm's revenue is usually fee-generated.

If this is not the case with one of your prospective advisers, make sure you’re clear on how they are getting paid, what kinds of middlemen or third-party administrators (TPAs) they’re using and whether they work for a company where the only choices are of their own, proprietary products.

2. Determine if he or she is pushing some products more than others.

Whether they call themselves “planners,” “wealth managers” or “financial advisors,” a true planning professional will be focused on helping you assess your financial capabilities and challenges, and on developing a plan designed to meet your goals. He or she should approach you by asking what you want out of the relationship, instead of trying to get you to purchase an annuity or the latest hot investment product. Remember, you want the focus to be on you and your goals for the future.

3. Ask if this planner will work with you directly.
Will you be working with the person you’re interviewing or with an associate who may be new to the business? “You have to be comfortable," says Jon Ten Haagen, a Certified Financial Planner with Ten Haagen Financial Group in Huntington, N.Y. Good chemistry is critical. A solid planner will be in close touch with clients at times of change or when markets are in free-fall.

4. Consider education and credentials.
Ask questions like “What qualifies you in this field? How long have you been offering financial planning advice to clients? How many clients do you have?” and “What are your educational qualifications?” says Todd Rustman, CFA, CFP and president and wealth manager at GR Capital Asset Management LLC in Newport Beach, Calif.

You can also expect a qualified financial planner to have one or more of the following professional designations:

• CFP (Certified Financial Planner);
• CFA (Certified Financial Analyst); and/or
• CWWP (Certified Wealth Preservation Planner)

5. Seek help from the FPA, FINRA and NAPFA.

Check in with organizations like the Financial Planning Association in Denver, Colo., which offers a financial planner search function.

Other sources of advisor contacts include FINRA (previously the NASD), a non-government regulator of securities firms doing business in the U.S. FINRA posts information and instructions for doing background checks on SEC-registered brokers and securities firms. For information on fee-only planners, contact the National Association of Personal Advisors. And good luck!




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