You've just received notice that you're the benefactor of a sizable estate, but with this awesome gift comes the awesome responsibility of managing that money properly. What should you do? Where should you turn? From whom should you seek advice? It's not hard to be overwhelmed when you're looking to find unbiased financial advice to help you deal with estate issues. There are stockbrokers, insurance agents, attorneys, CPAs, fee-based advisors, and many more with credentials behind their names that few can decipher. You may need help with your money, but first, you may need help finding the right person to help you. Read on for some tips on finding a good advisor.
Examining the Criteria
The search for a financial planner or investment advisor will be simpler if you have at least some idea of what you are looking for. The following four characteristics and questions can help you develop a personalized set of criteria:
- Credentials - What specialty do you need? A CFP®, CLU®, etc.?
- Ethics - Does the planner have any kind of disciplinary history?
- Experience - How long has the planner been in business?
- Personality - Do you feel comfortable talking with the planner? Do this person instill a feeling of trust in you?
Let's take a look at these characteristics in more detail.
Financial planners who earn professional credentials display a tangible commitment to their profession and their practice that often allows them to provide a higher level of service than they could otherwise. However, there are also competent and established financial planners who hold no designations of any kind and are highly successful and respected in their fields. Knowing what the letters behind a planner's name stand for and which credentials will be most relevant to your situation will be helpful when screening possible candidates. (For more information on this topic, see Financial Designations Aren't All Created Equal and The Alphabet Soup Of Financial Certifications.)
The disciplinary history of anyone who practices as a financial planner is open for public inspection. The Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) enforce all disciplinary actions related to securities transactions and investment advice; they also maintain files on each and every securities licensed professional and registered investment adviser in the U.S. An online inquiry will quickly reveal whether the planner in question has committed any regulatory infractions that required disciplinary action. The state insurance commissioner will also readily provide you with information pertaining to any insurance-related violations or complaints about the planner.
In addition, the registered representative (such as Investment Advisor Representatives), will be registered with the state's securities administrator, under the Uniform Securities Act. if the planner has earned any type of professional credential, the board of directors of that credential will maintain a disciplinary file on the person as well. Most credential boards have higher standards of ethics than the regulatory agencies, so there may be instances in which a planner is disciplined by the credential board, but not by the regulatory agencies.
One thing to keep in mind, however, is that an isolated complaint or infraction does not necessarily mean that the planner is dishonest or incompetent. Any charge brought against a broker or planner will go on the person's record, regardless of whether the planner is in the right. But if the record shows a long-term pattern of violations, customer complaints or charges of a serious nature, then you should probably find someone else. (To find out more ways to distinguish between a good advisor and a bad one, see What Is A Registered Investment Advisor? and Do You Need A Financial Advisor?)
Financial planning is a complex profession, and most planners generally need at least five years of experience under their belts before they are qualified to handle many issues. While there are no hard-and-fast requirements about how much experience a financial planner should have, the more experience one has the better, particularly if a complex or specialized issue is being addressed. But experience should also be looked at in a broader scope as well; a newly minted financial planner or broker with 20 years of related financial experience is obviously not in the same category as a 22-year old college graduate who is trying to build his or her first book of business with a major wire house.
This is perhaps the most important piece of the puzzle. A planner that meets all of the previous criteria should still be discounted if his or her personality does not mesh with yours; it is imperative that you feel a connection with whoever handles your money on a personal level. Your planner should ideally be someone who can empathize with your personal situation, at least on some level. There are planners who are in business simply to make money, and there are planners who genuinely care about their clients' welfare. Planners that make no effort to learn what is going on in your life are not going to be able to manage your money as well as those who thoroughly understand your situation. (Find out more in Find The Right Financial Advisor.)
One good indicator of how interested a planner is in you and your situation can be measured by how often he or she meets with you to discuss your financial progress. Planners that meet with clients on a quarterly basis will obviously be more attuned to what is going on in their clients' lives than planners who only see their clients on an annual or as-needed basis. Of course, some clients will need more personalized attention than others, depending upon the complexity and delicacy of their situations. But if your planner shows little interest in maintaining any kind of regular face-to-face contact with you, or is very difficult to reach either in person or by phone, then you may want to consider giving your business to a planner who is more approachable. Finally, be certain that your planner is putting your needs and objectives ahead of his or her own. If your planner does nothing but try to sell you certain investments or products, consider taking your business elsewhere.
Knowing what you're looking for in a planner will make your search easier. Find a planner who has experience dealing with clients in your situation, and who is willing to meet with you in person on a reasonable basis. Be prepared to spend at least a few weeks searching for a planner that you feel is right for you. Plan to talk to at least five different planners with differing areas of expertise, such as a fee-based CFP® practitioner, a CPA, a stock broker, an insurance agent and perhaps a bank trust officer. Knowing the differences in their professional philosophies will give you a much greater understanding of which approach will be most beneficial for you.