Steps for Finding the Best Financial Advisors
1. Ethics — will they act as your fiduciary?
2. Clean record — do they have any problems on their regulatory record?
3. Credentials — do they have the education and knowledge to serve you properly?
Education is important, but a general financial or accounting degree doesn’t necessarily mean someone has up-to-date knowledge about personal finance. So what does? There are several high-quality credentials that can help you find professionals who have invested in industry-specific education and passed exams evidencing their knowledge. Some of the highest quality financial advisor credentials also have experience and continuing education requirements, too.
Here are good ones to look for:
The US Securities & Exchange Commission maintains a website that allows you to look up each credential you see and find out what it took to earn it. That can help you determine what’s helpful to you, or whether the credential is more marketing than anything else. You can find and explore that resource here.
4. Experience — how many years/decades have they been helping people plan their financial futures?
5. Comfort level — will you feel comfortable working with this firm?
6. Philosophy — what’s their investing and money philosophy?
7. Communication — how will they stay in touch with you?
8. Services included — will you outgrow this firm?
Can the firm help you with tax planning and tax-efficient investing?
How about estate planning and charitable giving planning?
Can they help you find cost-effective insurance policies?
How about college funding?
Is the firm able to help with employee benefits and retirement plans?
While you may not need all of these financial services today, hiring a firm that provides a wider scope may save you time and headaches in the future.
What’s in a name?
Frequently Asked Questions
A financial advisor is a broad term that is generally used to refer to most any professional advising you on your finances, up to and including certified financial planners (CFPs).
A financial planner is also a financial advisor but specializes in creating comprehensive plans for their clients to match their specific goals. Certified financial planners, on the other hand, have to be certified by the Certified Financial Planner Board of Standards, Inc., which is why you’ll often see a registered mark after their designation (CFP®).
To become certified, they have to complete what the board calls the four Es: education, examination, experience, and ethics. These planners are certified to advise on everything from taxes to insurance to estate planning, and are required to complete ongoing continued education requirements.
A fiduciary is any person or firm who acts on behalf of another individual or firm to manage their assets. Fiduciary financial advisors provide their client the highest quality of care while maintaining ‘good faith’, meaning they wouldn’t act in favor of anyone else’s interests, including their own. The best way to be certain that a financial advisor is a fiduciary is to simply ask.
One of the hallmarks of a CFP is that they have fiduciary responsibility when working on financial planning, which means they have to act in their clients’ best interest.
Financial advisors strategize financial planning and help you make the right decision about your investments. They weigh the pros and cons, and are abreast with the latest industry updates regarding tax issues and investment vehicles. These valuable insights guide you to make investments that meet your financial requirements and goals such as buying a house, education, having a baby or securing your retirement.
Among these benefits are guidance on developing an overall investment strategy, asset allocation, minimizing taxes, rebalancing, and how to structure/time withdrawals from your retirement accounts. Each of these services can incrementally boost your returns—sometimes steadily, sometimes sporadically.
But the single biggest way a financial advisor can add value is through something called behavioral coaching.
As every good poker player knows, scared money don’t make money. The best financial advisors are able to keep your fears and emotions in check by providing steady, fact-based advice and reassurance when the markets get wobbly or crazy.
A financial advisor can help you manage your finances especially when you don’t have the time to do it yourself or when there are major changes in your life, such as getting married or having a baby. Even if you’ve managed your investment on your own, the best financial planners can vet your plan and assess it from a different perspective, to add surety to your decisions.
The three main reasons are:
1. You feel “lost” in planning for your financial future and you need a roadmap.
2. You just don’t want to deal. When it comes to money, you’re not the DIY type, and you just want a professional to take care of it.
3. You like managing your money, but realize that your financial plan would benefit from an impartial and unemotional third-party opinion.