By Solid Serenity Legal Solutions
Finding the right financial advisor for your needs and life goals can be difficult. The variance of titles and letters and lack of a clearly recognized standard by which to judge potential advisors can make the task of finding your trusted advisor even harder.
Without any standard to police who can call themselves a “financial advisor” anyone can, and sometimes do, give themselves the title of financial advisor regardless of their level of qualifications for the job. With the understanding there are a wide range of abilities in potential advisors, it is important to know what questions to ask to find the advisor that is the right fit for you.
(1) Are You a Fiduciary?
Is your advisor required, by law, to put your needs first? Or are they working to get a commission without the requirement they work in your best interests?
This question can be difficult to figure out if you have worked with an advisor for a while, much less when first looking for one. Many financial advisors can appear to be fiduciaries, but that is not always the case. Advisors are not required to be fiduciaries. It is important to get written assurances from your advisor in regards to their fiduciary status.
(2) What Are the Costs?
How does the financial advisor charge for their services? Do they charge by fee or by commission?
While it is possible for an advisor to be paid on commission and put the investor’s interests first, commission-based fees can lead to a conflict of interest and end in the advisor putting their needs above yours. When it comes to commissions, sometimes the more the advisor gets paid, the more the client suffers.
(3) What is Your Expertise?
How much experience do they have in financial advising? What kind of education do they have to qualify them for this position? This is the question that has the widest range of possible answers.
The answers may vary from having a master’s or even PhD in a relevant field, to having a CFA (Chartered Financial Analyst) or CFP (Certified Financial Planner) credentials, to not having anything at all to qualify them for being an advisor. Different licenses or tests taken can have differing values in determining who you should work with but typically those who have gone through the CFA and CFP processes have put in the work to know how best to serve your needs as have those with graduate degrees in finance-related fields.
(4) Do You Have a Record of Misconduct?
Does your potential financial advisor have a history of misconduct such as customer complaints, fines, suspensions, or other red flags? Luckily, for a lot of clients in the market for a financial advisor, information as to if the advisor received complaints or discipline is public.
Doing your research as to the history of misconduct for potential advisors is a necessary step in determining who to choose. Unfortunately, while credentials such as CFA or CFP can help differentiate between candidates levels of expertise, it does not work as well when looking to differentiate between candidates based on their misconduct. So, you will need to research expertise and record of misconduct separately.
To determine how to check records for misconduct, first ask the potential advisor what agency oversees them. The answer should be SEC (Security Exchange Commission) or FINRA (Financial Industry Regulatory Authority). For FINRA, you can use the Broker Check on their web site at https://brokercheck.finra.org/. For SEC, use the Investment Advisor search on their site https://www.adviserinfo.sec.gov/IAPD/Default.aspx.
Finding the right advisor to help you plan your financial future is just part of the battle. You also need to set a firm foundation for your finances to grow with estate planning. Call our office to set up your meeting to talk about your plan today!