Choosing the right financial advisor doesn’t need to be complicated. In fact, I’d argue that it should be a straightforward process that enables you to make an objective decision.
Whether you are currently working with a financial advisor and considering a switch or you have never worked with one before, there are a series of things you can do to choose the right financial advisor for you and your financial needs.
1. Ask Around
It is never a bad idea to find out who other people are using and what their experience has been. Chances are if someone you know and trust is using a financial advisor they love, you may want to consider using them, too.
2. Do Some Research
But don’t take other people’s word for it. What works for one couple or family may not work for you. Your financial life is unique and your financial goals and needs are specific to you. Be sure to look into a financial advisor you are considering working with by Googling their name and firm, checking their standing with the SEC, FINRA and BBB.
3. Use Financial Advisor Directories
Going a step further, you can use financial advisor directories through the Financial Planning Association (FPA) or the National Association of Personal Financial Advisors (NAPFA) to look into credentials and specialties.
4. Make a List
Whether you’re buying a house or selecting a doctor, you have specific criteria you’re looking for. Selecting a financial advisor is no different and so it’s a good idea to make a list, mentally or otherwise, of what type of experience and expertise you are looking for.
5. Make a Second List
Then make a second more subjective list of things that you would ideally like from working with a financial advisor. While your first list will likely include the type of financial advisor, areas of expertise, designations, and compensation structure – your second list may include things like personality type, office environment, and any perks that come from a financial advisor relationship.
6. Meet with Potential Financial Advisor
In person meetings are highly recommended, but even a video conference is OK. As long as you are able to meet face-to-face so you can really gauge someone’s communication style and trustworthiness. Knowing if you have the type of rapport that will be comfortable for you is best discovered through in person encounters.
7. Ask How They Are Compensated
How will your financial advisor be paid? This may influence how you feel about their recommendations.
8. Compare Fees and Services
After speaking with several financial advisors, consider building yourself a matrix of sorts to objectively assess your options, how much each one will cost and what services will be provided. Comparing your options is a wise exercise. Even if you “feel” one advisor is better than the others, allow yourself this practical exercise so you can weigh all options logically.
9. Work with Them on a Project First
Before transferring tens of thousands of dollars’ worth of assets over to your financial advisor to manage, maybe consider a project to start just to see what it is like working together. Plenty of financial advisors work with you on a financial plan first and this allows you to experience the process first.
10. Wait 2 Weeks
This may sound strange, but wait a couple of weeks after you meet with a potential financial advisor. The reason for this is to see how they follow-up with you and if they follow-up with you. You want a financial advisor who is interested in working with you and who has a strong follow-up process. This is a foretelling of what the client experience may be like.
No matter what, make sure you feel comfortable with your advisor, and he or she communicates with you in a way that works for your personality and your life. Following these ten steps will help you make the right decision for you.
Scott Frank, a fellow outdoor enthusiast himself (surfing), is the founder of Stone Steps Financial, a fee-only financial planning firm located in Encinitas, California. Scott started Stone Steps to help young professionals and families understand their financial lives and position themselves to reach their fullest potential.
Scott and I became friends after meeting through the XY Planning Network and I asked him to write some thoughts on what to look for when hiring a financial advisor as a guest topic for The Northwoods Blog.