You probably know by now that you're supposed to have a financial advisor, you may just not know how to differentiate the good ones from the bad ones. BrokerCheck is a good place to look for complaints against an advisor, but once that's all clear, where do you go next? We'd like to suggest the following as a checklist for helping you to find an advisor who can help you meet your financial goals and have a good time doing it.
They are fiduciaries - A fiduciary has a legal requirement to place his clients’ interest ahead of his own, whereas advisors held to a "suitability" standard do not. Ask your potential advisor if (s)he is held to a suitability standard or a fiduciary standard with the understanding that the former may have a financial incentive to sell you their own products.
They will keep you from being your own enemy - The research consistently shows that behavioral coaching is an advisor's biggest added value, although most clients assume it is the skillful selection of investments. Look for someone you like enough to listen to and trust enough to follow their advice. If they can keep you from making a handful of big errors over a lifetime, they will have earned their fee and more!
They charge an equitable fee - Fees are more negotiable than you might imagine, especially for larger accounts. Advisory fees vary by the type of services provided, but 1% of assets is a fairly standard rule of thumb. Good advisors know what they are worth and charge appropriately, but advisors charging exorbitant fees are doing their clients a disservice.
They have a niche - Some advisors specialize in working with small business owners, “women in transition” or those with values-based investment preferences. Whether you are soon to retire, have inherited some "sudden wealth" or are an entrepreneur with a great deal of value in her business, you can and should find an advisor who specializes in your particular needs.
They offer comprehensive services - Some financial professionals offer only planning or investment advice, while others offer a broad range of services. Ensure that what is offered is consistent with your needs.
They have the right credentials - Look for some combination of years of experience, appropriate certifications and post-graduate education. The CFP is more and more becoming the industry gold standard, but many competent advisors (especially those with many years of experience) may have foregone a credential they don't see as adding much new value to their business. Rather than looking for specific letters behind a name, ensure that they have a commitment to lifelong learning and self-improvement.
They can articulate their investment philosophy - A clear and concise investment philosophy is a sign of having given this deep thought. A corny sales pitch is a sign that you should run. People with a deep fluency in their discipline can explain what they do to a layperson. People with something to sell will try to convince you that it's over your head.
They communicate regularly - This should be driven by your needs and preferences. Expect roughly four times per year but be sure to communicate your own expectations about how best to connect and how often to engage.
They offer a unique client experience - You are paying good money for this service and should be treated accordingly. This should include everything from courteous support staff to regular meetings to an ability to ask appropriate questions about the process. Do not be afraid to ask for what you need to be happy and well informed.
They have a succession plan - Someone asking you to think about the long term should have done so as well. It is difficult for some business owners to confront the inevitability of their own departure but it is a sign of maturity to have done so.
Still think you could use some help finding an advisor? We're happy to talk you through it.
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