When searching for a financial advisor, remember: I come first! Or rather, you do!
Your needs, not those of the advisor, should be the first priority when starting a new relationship with a financial planner. If you’re looking for a new professional guide, lean on that phrase: I COME FIRST! Believe it or not, it works as an acronym for the 10 most important things to be thinking about during your search.
I = INTERVIEW
Be sure to interview at least two, preferably three advisors, even if your first contact with an advisor has you convinced that he or she is “The One.” By talking to several, you will learn how each of them work, and will appreciate the differences between them. (It is customary for these interviews to be complimentary.)
C = CREDENTIALS
Find out what the prospective advisor “brings to the table” in terms of training and experience. There are many advisory designations and certifications. Some are primarily for marketing purposes. Others, such as the Certified Financial PlannerTM certification, carry some real heft in terms of the requirements to earn the credential.
O = ORGANIZATIONS
Ask potential advisors what organization regulates them. Brokers, for example, are supervised by FINRA (Financial Industry Regulatory Authority), whereas investment advisors are often under the eye of the When you’ve identified the governing organization, reach out in order to check on the advisor’s professional standing.
M = MINIMUMS
If you are looking for investment advice, be aware that some advisors take clients based on the size of the client’s investment portfolio. Ask about this up front. If you don't meet one advisor’s minimum, don’t be discouraged. Keep looking for those advisors offering advice on a different basis, such as hourly or for a given type of financial plan.
E = ENGAGEMENT
Find out what services the advisor typically provides — tax prep, retirement planning, investment management — and what to expect from your relationship with that advisor. Will you be working with her exclusively, or with a team? Will you meet in person or by Skype or phone? Will the advisor contact you if there are significant changes in the economic or tax environment?
F = FIDUCIARY
A financial fiduciary is a professional who puts a client’s interests ahead of his own when providing advice, and makes full disclosure of any potential or existing conflicts of interest that could influence the basis of his advice. Unfortunately, there are many financial practitioners who are not held to this standard. The simplest, most direct way to find out if your advisor will be acting in this manner is to ask directly: “Are you a fiduciary?” And get it in writing.
I = INCOME
All financial advisors work for a living, but it is important that you understand how they are compensated. Know when, how, and by whom yours is paid. Do they receive income based on the sale of an investment? Based on the assets under management? Based on a set fee for his advice or time? There are many ways advisors make their income, so be sure to understand how your advisor works.
R = REFERENCES
When interviewing an advisor, ask if you might speak to some of the advisor’s clients. Be aware, however, that few, if any, advisors will give you the names of unsatisfied clients. Further, maintaining the confidentiality of clients is an important practice, so the advisor may be unwilling to ask his or her clients for permission for you to contact them.
S = SPECIALTY
Financial expertise covers a wide array of topic areas: cash flow and debt management, risk management, tax, education, investment, retirement and estate planning, to name some of the most common. Discuss with a potential advisor which areas he or she may specialize in, and whether referrals are given to outside professionals for advice in areas where the advisor is not expert.
T = TYPES OF CLIENTS
Some advisors focus on particular types of clients: divorced, retired, professional women, doctors and attorneys. Sometimes the focus is defined by levels of wealth, such as middle income, affluent, or mega-affluent. Find an advisor for whom you are the “norm” — right in their sweet spot of practice. You do not want to be the advisor’s biggest client, nor his smallest, nor do you want to have a life situation or profession with which the advisor is unfamiliar.
Yes, there is a lot to think about when choosing an advisor, and there are many different styles of practice and business models. Nevertheless, keep the focus on yourself, remembering that you and your financial needs COME FIRST.