Trusting your finances to a stranger is difficult. But whether it’s for income taxes, estate planning or basic family finances, most people will benefit from the advice of a financial adviser. Here is how to select someone who’s trustworthy and knowledgeable to help you with your specific financial needs.
Know what you want. List and prioritize your financial needs and goals—retirement, college planning or investing. This will help you define your needs and narrow the selection of planners to those areas of expertise. And the more specific your goals, the less time (and money) you’ll spend working with your planner.
Seek referrals. Referrals from family, friends or professional associates, such as a banker or lawyer, often are a good source of finding trustworthy and reliable financial counselors. You also can get listings from the National Association of Personal Financial Advisors (www.napfa.org), the Financial Planning Association (www.fpanet.org), the American Institute of Certified Public Accountants (www.aicpa.org) or the National Association of Enrolled Agents (www.naea.org) by mail or on the Internet.
Set up an interview. Once you have a list of potential advisers, reduce the list to two or three, and make appointments for in-person interviews. The first hour should be free. Prepare in advance a summary of your financial situation so the planner can get a good sense of how to help you. During the interview, be sure to ask the following questions:
• How long has the financial planner been doing business in the town? A professional with at least five years of experience in the area will have established a good or bad reputation.
• Who are the main clients this planner serves? Are they people like you, with similar needs and income levels? Get the names of three clients you can call for references, and ask them the pros and the cons of their planner.
• What is the planner’s investment philosophy—conservative, aggressive, mixed? Make sure it’s consistent with yours.
Request to see the ADV Form. Every investment adviser who manages funds is required by law to file this form with the Securities and Exchange Commission or state security agency. In the form, you will find how the adviser gets paid (avoid advisers who work on commission); information on other incentives the adviser is entitled to; educational and business background, including special certifications such as Certified Public Accountant (CPA) or Certified Financial Planner or Chartered Financial Analyst (CFP or CFA); and investment methodology. If the individual provider or the firm does not have the ADV Form, ask that they still provide you with the information contained in the ADV.
Select the right planner for you. You’ve done your research, now you need to choose. Besides meeting your objective criteria, you’ll want to select a planner with a disposition you can work with and someone you trust.
These steps may take some time and effort, but the safety of your financial health is worth it. For a little investment of time, you will be rewarded handsomely—by finding the right person to help you achieve your financial objectives.