Searching for a new financial adviser can be a daunting task—one which is easily delayed. To begin with, money is a deeply personal subject, making it uncomfortable for some people to broach the topic with a relative stranger. Over-complication and technical jargon add a layer of confusion. Finally, add the logistical challenges of coordinating schedules and meeting times, and you can see how this important “to-do” item slips down the list quickly.
Nevertheless, establishing a relationship with a trusted professional is a crucial step towards improved financial wellbeing. Not sure where to start? Here are some things you may consider to narrow your search.
Are you looking for someone strictly to manage investments? Consider seeking out a CFA (Chartered Financial Analyst) who specializes in investment analysis and portfolio management. A CFP (Certified Financial Planner), on the other hand, takes a wider view—integrating advice across the financial spectrum (tax, insurance, estate, retirement). There are plenty of other credentials in the sea, too. See some letters you don’t recognize? Take some time to research a credential to determine the underlying education, examination and ongoing diligence requirements.
Model of Compensation
Some advisers operate on commission, earning their fee only if/when a transaction is made. Others operate on a “fee only” basis, charging a flat fee or percentage of assets under management. Some combine the two for a “fee-based” model with a mix of commission and management fees. Be aware of these fee models and consider potential conflicts of interest or limitations in offerings presented by commission-based investment products.
The Fiduciary Standard
Not all financial professionals are bound to the same ethical standards—a topic that has been debated extensively in recent years. Do a quick search on “the fiduciary rule” and you’ll see what I mean. The bottom line? Look for an adviser who is a fiduciary. Such professionals are legally bound to act in the best interest of their clients. This is considered by many to be the highest ethical and legal standard of client care. A different (and arguably less stringent) standard of suitability is common in many areas of financial advice. Know the difference and search accordingly.
Personality & Style
Call or email the prospective adviser. Ask some questions (maybe about credentials or fee models). Try to get a sense for the style of communication, promptness of response and personality of the adviser. When working with a financial adviser, it is essential that you feel confident, comfortable and heard. If you get a bad vibe right out of the gate, continue your search.
Of course, there are countless other considerations that may come into play. Unique circumstances, niche offerings, geography and topic specialization can all play a role in establishing the right fit. After reflecting on the above, though, you may find the process easier to tackle. And, as I always say—your money, your future, your choice.
Scott Mazuzan is a certified financial planner for F.L. Putnam Investment Management Company, an independent firm that provides investment management and financial planning services. Follow his blog at flputnam.com/blog.