How to Find a Financial Advisor You Can Trust
Managing your finances effectively often starts with having a solid plan. That’s why many people turn to financial professionals for guidance in reaching their money goals. These professionals—whether called financial advisors, wealth managers, or financial planners—can offer valuable insight.
However, finding the right professional who aligns with your needs and budget can be challenging. Here’s how to begin your search.
Understanding What is a Fiduciary
A key term to know when selecting a financial professional is fiduciary. Registered investment advisors have a fiduciary responsibility requiring them to act in your best interests ahead of their own.
Registered Representatives follow FINRA’s Regulation Best Interest (Reg BI) rule. This means they must recommend products that are in a client’s best interest. This requires broker dealers and their registered representatives to also act in the client’s best interest when making recommendations or investment strategies.
Fee-Only vs. Fee-Based: Know the Difference
The way financial professionals are paid matters. Clients pay a Fee-only advisor for their knowledge and advice. Their compensation is transparent and not tied to investments.
Fee-based advisors earn fees from clients on investments or referrals. This can sometimes create conflicts of interest. Understanding these distinctions can help you choose the right type of advisor for your situation.
Leverage Your Network and Online Tools
A good way to find a financial advisor is to ask people you trust. Talk to friends, family, or colleagues for recommendations. Even if your network isn’t heavily involved in finance, they may have worked with an advisor or know someone who has.
Online resources can also be valuable. Some employers provide financial planning consultations as part of their benefits package, which can be a good starting point. Additionally, organizations like the CFP Board, the Financial Planning Association (FPA), and the National Association of Personal Financial Advisors (NAPFA) allow you to search for professionals based on criteria such as credentials, specialties, and demographics.
Understanding Financial Credentials
Financial professionals hold different certifications, each indicating their level of knowledge and focus. The following are more common:
● CFP® (Certified Financial Planner) – Must meet rigorous education, ethics, and experience requirements, and act as a fiduciary.
● ChFC (Chartered Financial Consultant) – Similar to a CFP® but without the comprehensive final exam.
● RIA (Registered Investment Advisor) – A person or company that manages money and offers financial planning. They are registered with the SEC or state regulators.
● CFA® (Chartered Financial Analyst) – Specializes in investment management and financial analysis, often working for firms rather than individual clients.
● CPA (Certified Public Accountant) – Primarily focuses on tax-related financial matters but may also provide financial planning services.
Before hiring any advisor, check their professional background using resources like FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure database.
Understanding Advisor Fee Structures
Advisors charge for their services in several ways:
● Percentage of Assets Under Management (AUM) – A common model where fees are based on the percentage of investments managed, typically around 1% for portfolios up to $1 million.
● Hourly Rate – Some advisors charge an hourly fee based on their experience.
● Flat Fee – A one-time fee for creating a financial plan or providing specific advice. The fee can vary depending on the extent of the financial plan or services needed.
● Subscription Model – A recurring fee, often charged monthly or quarterly, for ongoing financial guidance.
Understanding how an advisor charges can help you determine whether their pricing structure aligns with your financial situation.
Compare Multiple Advisors Before Deciding
Your financial needs will dictate what type of advisor is best for you. Are you looking for investment management, comprehensive financial planning, or occasional guidance? Before committing, it’s wise to meet with at least three advisors to compare their approach, communication style, and fees. Look for someone who understands your financial priorities and aligns with your values.
Considering Automated Solutions
If your financial situation is straightforward, a robo-advisor may be a cost-effective alternative to a human advisor. These digital platforms use algorithms to create and manage investment portfolios based on your risk tolerance and goals. Some investors also opt for target-date funds, which automatically adjust asset allocations over time.
While professional financial advice comes at a cost, studies suggest that professional guidance can enhance long-term financial outcomes. Whether you choose an advisor or a digital solution, making informed decisions about your financial future is typically a worthwhile investment.
Sources:
https://www.fidelity.com/learning-center/smart-money/how-to-find-a-financial-advisor
Disclosures:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
