Anyone who has ever set out to hire a financial advisor knows what a difficult task it can be.
There are hundreds of thousands of individuals in the U.S. claiming to be some flavor of “financial advisor,” but the qualifications of this diverse group vary widely—and the difference is not always apparent at first glance.
Proper financial planning has the power to transform your life by reducing worry and establishing a workable path to your goals and dreams, but you need the right person to be your partner in this process. So what are you to do when the complexity of your financial life finally drives you to seek some professional financial help?
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First, be prepared to invest the time and energy necessary to find the best fit. Then, consider the following three steps, and you’ll vastly improve the odds of finding someone who can truly deliver sound advice and workable solutions.
1. Research. Get some clarity about what kind of advice you’re seeking. Do you just want to tune up your portfolio, or would you also like help with other financial issues?
By taking the time to think about it, you may also realize that you could use help figuring out how to finance your kids’ college educations, plan for a comfortable retirement or determine if you have the right types and amounts of insurance coverage.
Nearly every financial decision you make is linked to more than one area of your financial life. For example, you can’t really think about how to invest without also considering why you’re investing, including the time horizon associated with your goals, your current and projected tax status, the type of benefits you have in place and the unique risks that your family may face.
For most people, the broader perspective offered by the financial-planning approach—with its emphasis on integrated decision-making—is what’s called for. Thinking in advance about all of the issues that you’ve wondered about, or that are keeping you up at night, will also prepare you for Step 3 in the selection process.
2. Focus. Narrow your choices by considering financial advisors with the appropriate credentials. There are many types of credentials to choose from, some requiring significant education and experience and others available to anyone who can write a check. So be careful.
For instance, if you’re seeking help with a broad range of financial issues, ranging from how to invest or fine-tune your tax planning to choosing the right amount of life or disability insurance or ensuring that your estate plan matches your desires, I would say that your best bet is to find a certified financial planner.
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A good way to find a CFP professional is at PlannerSearch.org, which is maintained by the Financial Planning Association, a national membership organization for CFP professionals.
3. Interview. This is arguably the most important step of the selection process. It involves interviewing two to three candidates so you can find the best fit for you.
You’ll want to determine three things during the interview process:
- Can the financial planner address your particular issues?
- Does the financial planner work with people like you?
- Do you feel comfortable interacting with this person?
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This is the time to take all that deep thinking you did in Step 1 and share it with each of your candidates, asking them if they feel they can address those questions and concerns, and how they would go about doing so.
Every good financial planner will have a systematic process for serving client needs, and he or she should be able to share it with you in a clear and concise manner.
Most planners start with a “discovery” process in which they delve into your personal history, preferences and values. This ultimately helps them to develop recommendations that are best suited to your, and your family’s, unique circumstances.
You should ask your prospective advisor about the steps in this process, including what will be expected of you and what you can expect in return. Prospective advisors should also be able to clearly explain how they get paid and what conflicts of interest may arise while they’re working with you.
Next, you should ask if the financial planner serves other clients whose circumstances are like yours. As a general rule, you don’t want to be an outlier for your advisor but someone whose circumstances are familiar and for whom he or she is well prepared to deliver relevant advice.
“Financial planning, involving some of the most important issues in your life, is a deeply personal service and requires a solid, trusting relationship.”
Finally, give yourself permission to consider whether or not you feel comfortable interacting with this person. It’s perfectly all right to “go with your gut” here, since this will be someone who will best serve you if you’re comfortable enough to be completely open with him or her.
Financial planning, involving some of the most important issues in your life, is a deeply personal service and requires a solid, trusting relationship. So take the proper time to find an advisor you are comfortable with and one you feel will help you achieve your financial goals.
—By Dave Yeske, special to CNBC.com. A certified financial planner,Yeske is managing director at wealth management firm Yeske Buie and holds an appointment as Distinguished Adjunct Professor in Golden Gate University’s Ageno School of Business.