As you make money either as an employee or self-employed contractor, you want to become more financially responsible – but where to start to find the right advisor that will work best for you and your family?
Before embarking on this journey of finding the right advisor, let's first talk about working with a fiduciary. Advisors who are fiduciaries are legally obligated to put their client's best interests first rather than simply finding “suitable” investments. This is the first thing you should look for. Advisors who have earned the CFP designation are all fiduciaries.
Next is an explanation of how advisors typically get compensated. There are three main ways an advisor gets paid. Below are the definitions from The People’s Guide to Finding the Right Financial Advisor:
Commission-only: Financial commissions are paid by mutual funds, insurance companies, and brokerage to the registered representative who sells their products
Fee-only: Fee-only advisors are paid directly and only by their clients. They receive no commissions and aren’t paid via marketing dollars. Their fees can be hourly, a retainer, or a percentage of assets under management.
Fee-based: This hybrid approach allows advisors to choose how they get paid. They can charge fees or a percentage of assets under management for some of the funds they manage but also accept commissions for other products, such as insurance policies.
Now that you understand what a fiduciary is and how advisors get paid, it’s important to know that financial advisors tend to specialize. Think about the aspects of your life, as there are advisors who specialize in your profession or lifestyle, such as lawyers, small businesses, tech employees, retirees, pre-retirees, and many other niches.
Once you figure out what type of advisor you are looking for, or need some inspiration, there are organizations that you should go to search for an advisor that will fit the compensation you are looking for and the niche you are looking for. Some of the most reputable sites to use are NAPFA, XY Planning Network, Letsmakeaplan.org, or any other organizations whose members adhere to a fiduciary standard.
After you find the type of advisor that might fit your lifestyle, you will need to interview the advisor to make sure they will be a fit for your financial situation. Here are some questions to ask from the book, The People’s Guide to Finding the Right Financial Advisor:
What experience do you have, especially with people in my circumstances?
What products and services do you offer?
Can you only recommend a limited number of products or services to me? If so, why?
What makes you different from all the other advisors?
These are just some examples you can ask, and you can find many other questions in the book. Also, ask the advisor to share their client contract and other documents of interest so you can compare them to other advisors you might be interviewing.
In conclusion, looking for an advisor that will fit your financial or lifestyle need will take some time, but it will be worth it when you have someone to ask specific questions about your situation and get that expert advice you were looking for. This will ensure that at the end of the financial planning process, you will get a plan you can act on and have someone in your corner when life throws you financial curve balls.
Comments