This is the fourth in a series of articles about financial advisors.
This month we’ll look at how to go about actually locating a financial advisor.
1. Decide what you want from the advisor.
First, get clear about what it is you want the financial advisor to help you with. Are you just looking to make a small investment, perhaps as a first time investor? Or do you have concerns about retirement or questions about a larger investment portfolio, real estate, estate planning, etc.?
2. Ask your family and friends.
As a first step in locating a financial advisor, ask your family and friends for referrals. They probably have some experience with advisors in the area. Just keep in mind that few people are knowledgeable and experienced enough to really know if an advisor is good, so once you have a few names, screen the prospective advisors using the tips in last month’s article, “How To Choose A Financial Advisor”. Do not take it for granted that just because your relations or friends know the advisor from church, Rotary or golf that he/she is honest and competent.
3. If you’re a small investor, keep it simple.
If you’re looking for investment advice only, have a small amount of money to invest and don’t mind doing some homework, you may be best off by simply contacting a discount brokerage firm (Schwab, Ameritrade, ETrade, etc.) and putting your money into a good “balanced” fund. If the thought of doing your own investing makes you nervous, consider locating the nearest Edward Jones office. Edward Jones caters to the “mom and pop” segment of the market. Their brokers are not too sophisticated and they work on commission, but generally you’ll get decent, basic investing advice.
4. Search for a CERTIFIED FINANCIAL PLANNER ™ Professional.
For anyone looking for more than just basic investing advice, search for a CERTIFIED FINANCIAL PLANNER ™ Professional. Go to: http://www.letsmakeaplan.org/choose-a-cfp-professional/find-a-cfp-professional
This is a website sponsored by the Certified Financial Planner Board of Standards to help consumers. In addition to the search tool, there are many articles about financial planning on this site.
5. Verify that the advisor is “fee-only”.
Once you have a list from step #4 above, check each financial advisor’s website to see if they’re “fee-only”, which means the advisor accepts no commissions of any kind on the sale of investment products or insurance. (For more detail, see February’s article, “What Does A Financial Advisor Do?”)
If you can find a fee-only CERTIFIED FINANCIAL PLANNER ™ Professional, you will get a financial advisor who has met rigorous professional standards and who is also committed to eliminating the conflict of interest that comes with commissions.
Note that fee-only advisors have high minimums for investment management. This is because they don’t get the big commissions up front that other advisors do, so they have to manage more money to make up for that. However, fee-only advisors can do financial planning on an hourly or flat-rate basis for clients who don’t have enough money to meet their minimums. Once they’ve done a plan for you they may be able to recommend an easy do-it-yourself investment plan that you can follow until you have enough money to have them manage it for you.
6. Consider other ways to search.
You could simply do a web search for “fee-only CFP (your city and state)”
This will give you some local financial advisors. The only problem is that you’ll have to sort through a lot of sponsored ads. Please skip that junk and look only for company websites.
Another option is to go to the website for the National Association of Personal Financial Advisors (NAPFA). This is professional organization which requires its members to be fee-only CERTIFIED FINANCIAL PLANNER ™ Professionals. In my experience, NAPFA members tend to be dedicated to high-quality financial planning. See:
Just note that not all good financial advisors are NAPFA members. I’m not a member because of the high annual dues and the fact that there’s no NAPFA chapter near my small town.
7. Once you have narrowed your list, remember to check out the advisor.
In last month’s article, “How To Choose A Financial Advisor”, I covered eight things you should consider in choosing a financial advisor. Take a look at that list and vet each prospective advisor.
Good luck with your search. Remember, the time you spend finding the right financial advisor will be time well spent!