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<\/a>According to the research firm Cerulli Associates, there are approximately 300,000 financial advisors in the United States. Finding the right advisor for you and your family is not always an easy process.<\/p>\n
If you have identified that you are in need of financial guidance, here is a list of things to consider when searching for a professional.<\/p>\n
Professional Designations. <\/b>There are plenty of good financial advisors that don\u2019t hold a professional designation, but if you are looking for an extra layer of comfort you might consider looking for one who does. The two most recognized and respected designations in the industry are the CFP\u00ae and the CFA\u00ae.<\/p>\n
\u2022 A CFP\u00ae \u2014 or CERTIFIED FINANCIAL PLANNER\u2122 \u2014 has completed extensive training in financial planning, estate planning, insurance, investment, taxes, employee benefits, and retirement planning.<\/p>\n
\u2022 The CFA\u00ae \u2014 or CHARTERED FINANCIAL ANALYST\u2122 \u2014 this credential provides extensive training in all financial fields as well but with an added emphasis on portfolio management and the analysis of financial products.<\/p>\n
Both designations require its certificate holders to meet certain industry experience requirements, pass the required exam(s), and adhere to the highest ethical standards in the industry.<\/p>\n
Compensation. <\/b>One of the first questions you should consider asking a financial advisor is how they are compensated. If they can\u2019t explain it to you in a way that a six year old can understand, it might be time to look for a new candidate.<\/p>\n
The two most common types of compensation methods are the commission model and fee-only model.<\/p>\n
\u2022 Commission-based advisors receive a commission when they buy or sell a financial product for a client.<\/p>\n
\u2022 Fee-only advisors have elected not to receive commissions of any form and instead charge a flat, transparent fee. This fee is typically billed as a percentage of the assets being managed, an annual fee, a monthly fee, or even an hourly fee.<\/p>\n
Financial advisors are required to disclose their compensation method so don\u2019t be afraid to ask.<\/p>\n
Fiduciary.<\/b> A financial advisor acting in a fiduciary capacity is required by law to put their clients\u2019 interests ahead of their own at all times. Seems like all financial professionals should be required to be held to a fiduciary standard, right? Unfortunately, that\u2019s not the case and you might be surprised to find out how many are not. It certainly wouldn\u2019t hurt to ask your current or potential advisor if they adhere to the fiduciary standard.<\/p>\n
Some other questions you might consider asking a financial advisor are:\u00a0 What is your investment philosophy?\u00a0 What is your process?\u00a0 How do you manage your own money?\u00a0 How often do you contact your clients?\u00a0 Will I be working with you or a junior associate?\u00a0 Do you have an investment minimum? Who is your ideal client?<\/p>\n
However, your due diligence process will only take you so far. Often times, trust and personality become the deciding factor. If you trust the person and get along with them, chances are you in for a successful, longterm relationship.<\/p>\n
For help in starting your financial advisor search, consider visiting letsmakeaplan.org<\/a>, fpa.net<\/a>, o brightscope.com<\/a>. These websites will allow you to search for a professional based on credentials and compensation methods.<\/p>\n