I am often asked by people who read this column: How do you find a financial adviser?
Many are afraid they don’t have enough money. Others honestly have no idea how or where to start. And lots of people are intimidated.
Think of it this way: A financial planner will work for you, not vice versa. And you need to look at it as a long-term relationship – someone who will spend years helping to guide your finances. You don’t have to be buddies, but you must have a trusting relationship.
Keep looking until you find someone you are comfortable with. It’s that important.
“This industry is totally word of mouth,” says Carla Dearing, chief executive of SUM180, an online financial planning service for women. “Talk to your tennis partners, your colleagues at work. Find the person affiliated with your bank.”
Your church is another resource, she says. Ministers often refer members of their churches to planners when they need financial guidance.
“Start with friends and relatives,” says Theodore R. Daniels, founder of the Society for Financial Education and Professional Development in Alexandria. “A lot of practices are based on referrals and relationships. But if you don’t have those, look to the CFP Board of Standards. They have a website where you can enter where you live, and they will let you know a list of financial advisers in your area.”
Patrick Donnelly, financial adviser for the Colony Group in Boston, says 80 percent of his clients come from referrals.
“But take the source into consideration,” he says. “If you are talking to your brother who is always asking to borrow money, he may not be the person to ask. You want references from people who have a level of credibility and success.”
To figure out which financial planner is the best fit for you, check references and do telephone interviews and sit-down meetings. Most offer a free consultation.
“It’s good to ask for references,” Daniels says.
You can check a financial planner’s professional background at the Financial Industry Regulatory Authority (Finra) or the Certified Financial Planner Board of Standards. You will be able to find history, regulatory actions, complaints and disciplinary actions.
“People want someone like them,” Dearing says. “They want someone their age, not a kid. They want someone who has had their life experiences. An example may be a woman coming at this because she had a divorce. She wants someone who has been through a divorce and knows the issues.”
You may not want to go to your dad’s financial planner. “He may be the best person for a retired person,” Donnelly says, “but not necessarily for a 30-something who is trying to accumulate money.”
“I’d recommend interviewing at least three candidates who are registered investment advisers who act as a fiduciary,” says Mitchell Katz, financial adviser at Capital Associates Wealth Management in Bethesda. “As part of the interview process, I would check their references and compliance record at BrokerCheck.org.”
Ask good questions, says Jimmy Lee, CEO of the Wealth Consulting Group in Las Vegas.
“Questions about their background, experience and investment philosophy are very important,” he says. “If it doesn’t make sense to you, that’s a good red flag.”
Also, your level of comfort with your adviser is critical. You want someone who listens, Dearing says.
“Do you feel respected and heard?” she says. “It is way more important to be heard in this instance than to know the full breadth of what your adviser knows.”
“When you engage a financial planner, the thought is that it will be long-term,” says Rianka Dorsainvil, adviser at the financial-planning firm Your Greatest Contribution. “You have to make sure there is a level of comfort so you can’t hold back. If you do, the planner can’t get an idea of your true picture. You have to have tough conversations.”
“A financial adviser lives through a lot of life events — your children going to college, marriage, divorce, death, starting a business,” Lee says. “How do they match up? Is it somebody you can have a lifetime relationship with?”
And then, there are fees. That’s a question you should ask early.
“Find out how the financial adviser is paid — based on a fee, by commission or a product he will sell, or a combination,” Daniels says.
Reid Aberdeen, a partner in Safeguard Investment Advisory Group, suggests you look specifically for a fee-based planner.
“You want to get rid of that conflict of interest,” he says. It’s important to understand where the advice is coming from. A fee-based planner, a fiduciary, is held to a higher standard. They don’t work on commission. They are not generating revenue by transitions.
“If you’re going to work with an adviser who is not fee-based and is working on commission, there is nothing wrong with that,” he says. “Just understand how much you are paying. Many people come in and sit down, and because they don’t see it on the statements, they assume they are not paying anything.”
Also, he says, ask how long they have been in business.
“Do you want someone who has just gotten their license to handle your money?” he says. “Most people will say no way. You can’t control the stock market or the economy. But a seasoned, experienced adviser has seen things that can help protect their clients.”