Engaging a Personal Financial Advisor

Financial Advisor

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January 9, 2016

Engaging a personal financial advisor are not only for the rich and those on high incomes. Personal financial advice on planning and investments from a disinterested and professionally-skilled third party is something most people would benefit from. Even if your means and assets are modest at the current time, just one session could clarify your financial plans and put you on the path to a more affluent position.

The real question is how to find the advisor who may be the best fit for you and your needs and for that there are a number of possible avenues. One route is to go to a professional body and search for qualified professionals in your area. One such is the Certified Financial Planner Board (www.cfp.net) which is an independent professional regulatory organization. Another is the Financial Planning Association. Also, ask around family, friends and colleagues for a referral; ideally, that referral will come from someone in a similar financial situation to yourself so you know the recommended advisor has relevant expertise.

What you also need is an awareness of the different types of advisor out there:

  • Certified financial planners can advise on taxes, investments, retirement, insurance, and estate planning, as can chartered financial consultants
  • Chartered financial analysts tend to focus on analysis of securities.
  • Registered investment advisors deal mainly in investments and should be certified by the Securities and Exchange Commission
  • Registered representatives have the same expertise but get their certification from the National Association of Securities Dealers.

Different advisors make their money in different ways and it may be that the mode of payment will be an influencing factor on your choice. Someone who earns on a commission-only basis will be the least costly to you but can be seen as less than objective in their advice. There less room for bias with an advisor who is paid by the hour but then the upfront cost to you is usually greater. And of course, there are those who operate hybrid payment structures.

When choosing your advisor, bear in mind the following points:

  • Not all planners are Planners.
    The title financial planner can be self-applied and of itself does not guarantee qualifications or expertise. Look for credentials that come from meeting certain standards, passing certain training or having certain experience.
    As mentioned above, not all advisors offer all financial services. Planning, taxes, investments, insurance and so on can all be very separate. Know what you need advice on and search accordingly.
  • Give yourself a choice.
    Interview at least three candidates as if for a job – they don’t only need the right expertise, there also has a to be a level of personal compatibility.
  • Check your preferred candidate’s credentials.
    This is easy to do via the professional association of which they are a member. If they’re not a member of a professional association, ask yourself why not.
  • Ask for references from past clients and then contact them.
  • Find out what the advisor is selling and what they make on a sale.
    If they only push one or two products, be wary of getting biased advice.

The best advice is to know yourself and what you need advice on. Be crystal-clear on your financial position and goals – your assets and liabilities, how you feel about risk, your preferred investments (or investments that you won’t make) before you even speak to a financial advisor. That way you are less likely to be swayed by a persuasive sales pitch and more likely to get the advisor (and the advice) you need.

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