How do you go about selecting a financial advisor? In this industry, anyone can call himself or herself a financial advisor, financial planner, or wealth advisor. With that in mind, it is important to look for experience and credentials when selecting a financial advisor.
A Certified Financial Planner™ (CFP) is required to hold himself to a higher standard in terms of education, experience and ethics. To earn the CFP® designation, a candidate must have a BS degree with advanced financial curriculum that includes course work in retirement planning, investments, taxes, estates, and insurance. Candidates must also pass a two-day, 10-hour comprehensive exam. Currently, only 55 to 60 percent pass this test. More importantly, CFP® professionals hold themselves to a fiduciary standard meaning they are legally required to put the interests of their clients first.
In addition, a financial planner should be an unbiased, logical sounding board who provides guidance at every step - from planning a budget, setting short and long-term goals, managing debt, to the education of children, managing assets, tax planning, planning for retirement, estate planning, social security, and elder care planning. A financial plan is not something created and then put away on a shelf. Instead it should be revisited often based upon life circumstances and transitions - marriage, promotion, birth of children, children graduating and moving out on their own, job change, divorce, death, etc.
Finally, it is important to evaluate a financial advisor based on his or her experience working with others in similar circumstances. For example, a high-net worth client should ask if the advisor has experience in planning techniques geared to their situation. It's the same for a retiree or a small business owner.
Ask if the advisor works alone or has a team of experts in areas of planning, investment, and service. It is difficult for any one person to be an expert in multiple areas. Having a team allows multiple areas of expertise depending upon the complexities of the client's situation.
Tips for a Smooth Financial Meeting
Once you have selected an advisor, prepare for the appointment by keeping this pre-meeting checklist in mind.
- Organize your thoughts and set priorities. Think about your financial goals and time frame. Your advisor will be able to help you review these issues and match them to your tolerance for investment risk. Also discuss your top areas of financial concerns - what keeps you awake at night? It could be reducing debt, setting a specific retirement date, or taking that dream vacation.
- Gather the appropriate paperwork. You'll likely need to bring financial documents, such as investment account statements and tax returns, to your first meeting. Call in advance to ask what documents should be brought.
- Prepare questions for your advisor. It's important that you feel comfortable with your advisor and the services provided. Ask about the type and level of advice to be expected. Know and understand how the advisor is compensated. Is the advisor fee only? Is there a different charge for asset management vs. financial planning? Or are they combined? Talk about how often you should meet for a "checkup" or to rebalance your portfolio.
A trusted financial professional can be a valuable resource throughout your lifetime; someone you trust and who understands you and your particular situation. Someone who can hold you accountable, share in your successes and failures, and help you work through the complexities of life when they are presented.
For more than 27 years, Wayne Harris, CFP®, has helped individual and business clients plan their financial lives and live out those plans. Harris is a founding partner of Bridgeworth, LLC, one of the largest groups of CERTIFIED FINANCIAL PLANNER™ professionals in the Birmingham region. He serves as chair of the firm's Finance Committee and serves on the firm's Investment and Steering Committees.
