How Do You Find a Financial Advisor? (Part 2)
Find out the best places to find financial advisors, tips to research their backgrounds, and how to prepare to meet with them for the first time.
Laura Adams, MBA
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How Do You Find a Financial Advisor? (Part 2)
[Podcast episode 320]
Sometimes we need professional help to accomplish our financial dreams. Working with someone you trust can be the best way to flesh out your goals and create a solid financial plan.
In Part 1 of this 2-part series I gave an overview of 3 common types of advisors and how they can help improve your financial health. In part 2, you’ll learn the best places to find these advisors, tips to research their backgrounds, and how to prepare to meet with them for the first time.
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No matter if you’re looking for a new financial advisor, a house cleaner, or a hair stylist, ask people you know for recommendations. There’s no substitute for getting referrals from friends or family who will give you straight information.
But what if you don’t know many people or your contacts have never used a financial advisor? Fortunately, there are some great websites that make it easy to find an advisor.
How to Find a Certified Financial Planner (CFP)
The first type of advisor that we covered in part one is a Certified Financial Planner or CFP. Find one in your area at CFP.net or letsmakeaplan.org. Both sites are run by the CFP Board, which is a non-profit organization that sets and enforces the standards for CFP certification.
You can search for a CFP by zip code, city, or state. You can even narrow down results by the language an advisor speaks, his or her specialties (such as divorce issues or debt management), the minimum amount of money you must have to invest, and how the planner charges clients.
Though being a CFP comes with instant credibility, never hire one without making sure his or her certification is up-to-date. Additionally, at letsmakeaplan.org you can see if an advisor has been in disciplinary trouble with the CFP board or declared bankruptcy in the past 10 years.
Before choosing an advisor, interview several by asking questions about how they work and what they do to help clients. For instance, find out exactly how they’re paid. An advisor could earn commissions on products you buy (such as an investment fund or life insurance), bill an hourly rate, charge a flat rate, or receive a combination of these types of income.
A growing number of planners are fee-only, which means that they don’t earn commissions. They might charge a flat fee, such as $750 to analyze your situation and create a customized financial plan. A benefit of using a fee-only advisor is that they don’t have an incentive to steer you toward particular high-commission products.
The National Association of Personal Financial Advisors (NAPFA) at napfa.org has a database of fee-only advisors. These professionals might be a CFP or hold other types of credible financial designations, such as Chartered Financial Consultant (ChFC) or Certified Public Accountant (CPA).
Though there’s no rule that you have to work with a planner in your area, having a face-to-face meeting with him or her is the best way to know how well you might work together. If you can’t meet in person, consider meeting using a Skype video call.
See also: 3 Money Rules You Should Never Break
How to Find a Registered Investment Advisor (RIA)
If you’re looking for investment advice, a Registered Investment Advisor or RIA has a fiduciary duty to act in your best interests, while a stockbroker does not. Though you can find an RIA in a variety of financial firms and institutions, a good place to search for one is adviserinfo.sec.gov.
An RIA must disclose details about their services and fees by filing a Form ADV with the Securities and Exchange Commission (SEC) or their state securities agency, depending on the amount of assets they manage.
Many aspects of personal finance are complex and may require too much of your time to master.
Advisors are required to give you a copy of their Form ADV before you hire them—so, be wary of any who don’t. But you can also request a copy from the SEC (at adviserinfo.sec.gov) or from your state’s regulator to review before meeting with an RIA. You can get your state’s information at the North American Securities Administrators Association website at nasaa.org.
Once you’ve investigated the registration and record of an RIA, make sure their firm is a member of the Securities Investor Protection Corporation (SIPC). This organization provides customers up to $500,000 of coverage for cash and securities if your investment firm goes out of business or engages in fraud. But remember that the SIPC doesn’t insure against losses due to a decline in the market value of your investments.
Use my same advice as choosing a financial planner: Interview several RIAs by asking questions about how they work and what they do to help clients. Most RIAs charge a percentage of your total assets under management, in the range of 1% to 4%.
See also: Is There Insurance for Your Investments?
Once you begin to accumulate assets, like cash, investments, and real estate, you need to have a plan for what will happen to them after your death. Since a big part of estate planning involves creating legal documents, it’s best to work with an estate attorney.
How to Find an Estate Planner
There are many websites that match consumers with attorneys, but a good place to start is nolo.com. You can search for the type of lawyer you need by zip code. It’s important to work with an attorney licensed in your state, since laws vary widely depending on where you live.
See also: Do You Have the Right Emergency Documents?
How to Prepare to Meet With a Financial Advisor
Let’s say you’ve done all your due diligence and you’re ready to meet with an advisor for the first time. Yes, you’ll need to get organized. Ask what documents you should send the advisor or have on hand during your meeting. Some advisors may ask for tax returns, investment statements, or pay stubs, for instance.
You should be prepared to answer questions about your ongoing expenses, current investments, and financial goals. If you don’t know all the answers, that’s okay because it’s just part of the planning process. Take notes during the meeting and never be afraid to ask questions, no matter how silly you think they might be.
Should You Hire a Financial Advisor?
Don’t get me wrong, you should never ignore your finances and turn everything over to an advisor. No matter who advises you, stay involved and be sure that you know the basics.When it comes to managing your money you can do it yourself. In fact, I wrote an award-winning guide to personal finance called Money Girl’s Smart Moves to Grow Rich that shows you how to get the job done. However, many aspects of finance are complex and may require too much of your time to completely master.
Using a financial advisor to enhance your own money management skills can save you time, help you make more money, and keep you disciplined about following a sound financial strategy.
Betterment LLC is an SEC Registered Investment Advisor. Brokerage services are offered by Betterment Securities, an SEC registered broker-dealer and member FINRA/SIPC.
Investments are not FDIC Insured. No Bank Guarantee. May Lose Value.
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.
Before investing, consider your investment objectives and Betterment’s charges and expenses.
Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Betterment and Betterment Securities are not registered.
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.