How to Find a Financial Advisor That Fits Your Needs

As you acquire more assets and grow your wealth, your finances increase in complexity. On top of that, you’ll need to constantly monitor your progress towards your financial goals while simultaneously researching further investment options and keep up with other financial developments.

Even the most self-reliant personal finance warriors can’t always manage everything alone.

If that sounds at all like you, you might need a financial advisor.

But looking for a good financial advisor takes a lot of time.

Something most people don’t have.

Let’s talk about looking for and selecting a financial advisor. But first, let’s distinguish financial advisors from financial planners and financial representatives.

Financial Advisors vs. Financial Planners vs. Financial Representatives

Financial advisors, financial planners, and financial representatives are used fairly interchangeably, yet there are important differences between each one.

Financial Advisors

Financial advisor is a catch-all term for a professional that you pay to handle most of your money-related tasks.

Services financial advisors provide include:

• Investment advice
• Brokering investment purchases and sales
• Investment management
• Estate planning
• Tax planning
• Budgeting
• Financial goal-setting/planning (retirement, home-buying, etc.)

Within the “financial advisor” world are various subsets that provide specific services, financial planners being one of the most common.

Financial Planners

Financial planners are a subset of financial advisors. They help both individuals and business plan for long-term financial goals such as retirement for individuals or preparing to transfer ownership of a business to someone else for businesses.

Financial planners generally need a bachelor’s degree in finance, economics, mathematics, or business at the minimum to work in financial planning.

However, if your financial situation is more complex, you’ll want to find a Certified Financial Planner. Financial advisors aiming to earn the CFP designation must meet several requirements:

1. Education – At least a bachelor’s degree from a 4-year university with coursework in the major financial planning areas identified by the CFP board (tax planning, investment planning, professional conduct, etc).
2. Experience – 4,000 – 6,000 hours of experience in qualifying activities. This equates to about 2-3 years of full-time, 9-5 work.
3. Exam – Contains several realistic financial planning scenarios to test candidates. Regularly updated by industry professionals to stay relevant.
4. Ethics – Rigorous standards to only let the most ethical become CFPs. Financial planners who have been convicted of certain felonies (theft, embezzlement, certain violent crimes) or have had a previous license revoked are never allowed to become CFPs. They have another list of activities they use to bar other unethical individuals unless those individuals successfully petition their way in. Also, background checks.

As you can see, CFP’s are put through the wringer, so they tend to be the best planners for the job.

CFPs are known as fiduciaries, meaning they are legally AND ethically required to put your needs first, in case you needed more peace of mind.

Financial Representatives

Financial representatives are a hybrid of salespeople and financial advisors. In fact, some describe them as salespeople with a Series 6 license (lets you sell mutual funds, insurance, and variable annuities).

They do discuss your goals, but then they try to sell you financial products so they can earn a commission.

We won’t be discussing financial representatives further, but rather financial advisors that don’t sell you things, with a focus on financial planners.

How Do Financial Advisors Make Money?

Financial advisors can make money in several ways.

Commission-Only

Some advisors work on a commission basis. They’ll charge you some percentage up front per investment. For example, they might charge a 3% commissions on a $10,000 investment. They dock $300 from your investment capital and invest the rest.

Fees Only

Fee-only advisors can charge one of several fees:

• Flat fee – Choose which services you want, then pay per service. Not tied to your investments.
• Hourly fee – Pay by the hour. Best for those who only need infrequent financial advisor access. Not tied to your investments.
• Retainer – Pay a set fee on a regular basis for a set amount of services. Sometimes, you’re refunded the amount of the retainer you didn’t “use”. Retainer advisors tend to be self-employed. Can also be charged as a percentage of your investment.

Commission Plus Fees

Some fee-based advisors also charge commissions. These types of advisors tend to do more comprehensive work.

For example, you consult your advisor on retirement planning. They put together a retirement investing plan that works for you, charging by the hour. When the investment plan is complete, they then charge a commission on the investments in the plan.

How do any of these differ from the financial representative model?

The fiduciary duty.

Selecting A Financial Advisor

What Are Your Goals?

Financial advisors primarily work with you to develop a plan for your goals and help you along the way towards those goals.

What are you looking to accomplish with your money? There are tons of long-term goals a financial advisors can help you with:

• Retirement
• Buying a house
• Buying a car
• Sending the kids to college
• Become debt-free

Understanding what you want to accomplish makes meeting with your financial advisor a lot smoother. It’s easier to track progress and identify when you’ve hit important milestones on the way to your goal.

Where Do You Stand Financially?

Financial advisors also make it easier to understand where you currently stand relative to your goals. It can be hard to admit that you’re floundering financially, but a financial advisor can identify your current financial woes so you can set a realistic time frame for your financial goals.

Questions to Ask Prospective Financial Advisors

Remember: you’re hiring a financial advisor.

What do companies do when they’re hiring employees?

That’s right: they interview them.

In a similar vein, you should “interview” each financial advisor you’re interested in by asking them a few questions. After all, You’ll be paying them a lot of your cash in the hopes that they make it back in spades.

Ask each financial advisor your interview the following questions:

• What are your credentials? – Almost anyone can call themselves a financial advisor. Certifications like the CFP or Chartered Financial Analyst (CFA) help distinguish serious, educated professionals from someone off the street.
• Are you a fiduciary? – Remember, fiduciaries are required to put you first. If they aren’t one, they might be prioritizing their profits over your own.
• How will you invest my money? – You want an advisor that will tailor investment recommendations as close to your current situation as possible.
• What’s your personal investing philosophy? – Helps you determine if they’re investing based on your needs or based on what they know best. It helps to find an advisor with a similar philosophy to your own.
• How do you get paid? – You want to understand exactly how much you’ll be paying, both to compare advisors and so you can budget accordingly.
• How often will we meet? – Twice a year is often enough to stay close, but distant enough to be effective. Also can determine if an hourly-based advisor is trying to wring you dry.

Seems like an interrogation, but they’re professionals. It’s quite fair to ask someone these types of questions if you’ll be paying them for services.

Hey, businesses do it, and you should too.

Where Can I Find a Financial Advisor?

Finding a financial advisor is easy if you want to go in blind, but you probably want to do some research first. Try some of these resources:

• National Association of Personal Financial Advisors – NAPFA’s site lets you browse financial advisors near you.
• The Garrett Planning Network – Good site for middle class folk looking for a financial advisor. Lets you search financial advisors by state by providing an interactive map of the US.
• The Accredited Financial Counselor site – Also good for the middle class and those that may be tighter on money.
• Family, friends, and colleagues – Start close to home. You’re more likely to find a financial advisor experienced with your demographic and financial situation by working your own network.
• Internet search – When all else fails, search “financials advisors near me” in any search engine and you’ll be bombarded with both ads and organic results for financial advisor. This might require more screening to ensure you find a qualified advisor.

Robo-Advisors

Investors are turning to robo-advisors to serve their financial management and advisory needs. Robo-advisors tend to be cheaper than real advisors, yet they still provide plenty of investment options, tools, and educational content.

And of course, you don’t need to travel anywhere to meet a robo-advisor. Just hop on your computer or phone, log in to your account, and manage your investments yourself.

The one downfall is the lack of human touch. Some robo-advisors offer access to real advisors, but it’s more limited. A bit more of the investment management and education falls on you.

Still, you will benefit from further understanding personal finance and investments.

Some of the best on the market include

• Betterment – One of the best overall robo-advisors, rightfully a leader in the market
• M1 Finance – Automatic rebalancing, “pie” investing based on portfolio weights
• TD Ameritrade – Investment options, tons of news and educational content
• Blooom – Focuses on retirement plans, helps the average person more than the wealthy

If your financial situation isn’t too complex, a robo-advisor could be a better route for you.