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Finding the Right Financial Adviser You Can Trust

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They say money makes the world go ’round. That well may be true, but you don’t have gravity and other universal constants to keep your financial world in a constant and reliable orbit.

Many people depend on their financial instincts, know-how and sometimes the advice of their friends and family members. Regardless, the reality is that absent your consistent administration and supervision your world of personal finance easily can spin out of control.

How? Because nothing ever stays the same, and at some point you must make money decisions. Some are easy. (Yes, put some money aside every two weeks for an emergency fund.) Some are much more difficult. Maybe now is now the time to look at a long-term health insurance policy?

Perhaps you’ve mastered some basic money skills that get you by on a daily basis, but more issues are coming – things like buying a home, starting a business, devising a long-term strategy for retirement or just trying to maximize the money and assets you already have.

When you’re confronted by these life circumstances you don’t know what to do, it may be time for you to seek the professional guidance of a financial adviser.

Navigating through certifications, credentials and costs can be daunting, but never fear. You don’t have to leap blindly into the cosmic abyss. There are tried and true approaches to help you choose a financial adviser.

You want one who fits your personality, someone with whom you can have an honest and open conversation. You want someone who has a full grasp of your particular situation, your budget needs and your long-term goals for yourself and your family. You also want to make sure your adviser is qualified, fully licensed and has the necessary credentials and recommendations.

This much is true, too: You have a variety of options at your disposal, and you should spend time understanding the options and the people you are considering.

Choosing from a Variety of Financial Advisers

First, know what kind of information you need. Not all financial advisers offer comprehensive advice. Some focus on retirement and estate planning, others provide help with filing taxes and investments.

Some financial advisers are accountants, while others sell insurance. The range is wide and the answers you seek will depend upon the questions you ask and to whom you ask them. Look for expertise in your prime areas of interest and choose an adviser who will put those interests first.

There are four main types of financial advisers among approximately 300,000 of these credentialed professionals in the United States:

  • Registered Representatives: Includes stockbrokers, investment advisers, and bank representatives who sell investment and insurance products. They generally hold Series 6 or 7 sales licenses.
  • Financial Planners: While anyone can claim to be a financial planner, most reputable ones have some sort of certification earned from a licensing board like a CFP (Certified Financial Planner), ChFC (Chartered Financial Consultant) or CPA/PFS (Certified Public Accountant/Personal Financial Specialist) earned from the American Institute of Certified Public Accountants.
  • Financial Advisers: This category includes Registered Investment Advisers (RIAs) and Investment Adviser Representatives (IARs), who are also financial fiduciaries, meaning that they are held to the highest ethical standards in the financial services industry.
  • Money Managers: These are financial advisers who generally make decisions for their investor clients without their advance approval.

Do some online research, too. These websites show listings of financial advisers who have been vetted, licensed or certified:

  • National Association of Personal Financial Advisers
  • Certified Financial Planner Board of Standards
  • Financial Planning Association
  • Garret Planning Network

Word of mouth also is a valuable reference. Seek out referrals from friends, family and co-workers.

Once you have an idea of which basic type of adviser best suits your needs, interview at least three prospects. Ask about the services they provide, credentials, relevant experience, interaction with clients, and investments or products they may promote.

Check the background and history of your top choice. Use the Financial Industry Regulatory Authority’s BrokerCheck to see if the financial adviser has been disciplined for unlawful or unethical behavior.

Understand How Financial Advisers Make Their Money

Another important factor when interviewing your potential financial adviser: Ask how much they charge and how they get paid.

There are three ways in which financial advisers charge their clients:

  • Fee-only: Paid solely for the advice they give. They do not earn commissions by selling any financial products like mutual funds or insurance policies. Some fee-only planners charge a percentage of a client’s assets, bill by the hour, charge a flat fee or earn an annual retainer. Many experts believe that a fee-only adviser is preferable because conflicts of interest are minimized or eliminated.
  • Commission-based: High commission from products they sell. They generally won’t charge for an office visit or consultation, but they may want to steer you into buying a particular product that doesn’t suit your needs.
  • Fee-based: Profit from a combination of fees and commissions on some of the products they sell.

Make sure you get a written and detailed account that shows services and compensations provided.

Let Trust and Comfort Guide Your Choice

A financial adviser is just that — someone whose professional experience can help you reach your financial goals.

Your relationship with your adviser must always be based on mutual respect, trust and ongoing interaction. Not only should you ask the right questions, you should expect that your adviser asks the right questions of you. Some of them could be difficult ones, like questions about your credit card debt and whether you are carrying too much overall debt to meet the goals you have.

Your adviser probably will not pull a credit report on you and other family members, but the adviser almost certainly will assess your debt and paint an accurate personal financial picture for you.

Make sure your financial adviser promises to respond to your changing needs and goals. Set up regular meetings that meet the schedules of both. You might want to speak monthly, quarterly or only once a year at tax time.

In the end, your personal comfort level is extremely important.

If you don’t understand or trust the advice, if you believe your adviser does not truly understand your situation or can’t devise an investment plan that fits your needs, keep shopping.

Remember: The movement of stars and planets are dominated by forces greater than you, but your finances are under your control. Seek the best advice possible, put everything into motion, and your own economic universe will achieve the balance and harmony you desire and deserve.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet.