How do I find the right financial advisor for me?
How do I find the right financial advisor for me? I've been personally referred, looked online with web searches, but none of this is helping me find a qualified financial advisor that is right for me. What can I do to find the right advisor?
This is a great question. Referrals are a good way to potentially get additional information on someone, but the other person's situation may be totally different. A web search can give you information, but it also may leave numerous holes/questions. The "right" advisor and you need to "fit" and understand that both of you are part of a team to help you ultimately reach your goals.
I would potentially start with the Comphrehensive Financial Advisor Diagnostic created by the National Association of Personal Financial Advisors (NAPFA). The questions are well thought out and designed to help you get more than just the basic information on the person and firm you will use plus it comes with an answer key for you to understand more about the questions and answers.
I hope this helps to find the right person for you.
Looking for an advisor that specializes in your demographic or specific service you're looking for is a great way to start in addition to asking friends and family for a referral. However, when finding a someone that will really suit you, I think it comes down to finding a specialist. NAPFA.org or XYplanning network both have advisor portals that allow you to designate what exactly you're looking for. For example, an advisor that specializes in retirement planning and estate planning will be more adept at performing those services than an advisor that primarily works with younger individuals, such as myself and vice versa.
Secondly, look for an advisor that limits their conflicts of interest and is held to a fiduciary standard.
Best of luck,
First you must ask yourself what you are looking for. Are you simply looking for a passive investing strategy (not recommending), because if so, with some research you can do on your own without paying an advisor. I will now get hate mail from many investment advisors.
But I would look for an advisor who is a Fiduciary and only acts in your best interest, not someone who is simply regulated under the “Suitablity” doctrine. If they are a broker and have their Series 6 (mutual funds & variable annuities) or Series 7 (mutual funds, variable annuities, and individual securities) then it is suitibility and there is a conflict of interest. Doesn’t mean they can’t do a good job for you, just that there is an inherent conflict of interest and you always have to be on guard for those conflicts. Life is too short in my opinion.
Personally, I would want an advisor free of conflicts of interest who only gets paid directly by his/her clients. No fee sharing, proprietary funds, or even funds their company has a “relationship” with. So while the “advisor” may be charging you on a fee based arrangement, his/her company may still benefit from the funds or investments in which you are placed.
This occurs at not only any “full service” brokerage, but at the “discount” brokerages as well. Another term for Brokerage is custodians, so don’t let the fiduciary sounding appeal fool you. If you are working with someone that represents and works for the brokerage firm, there is a conflict of interest.
You want a fee-based only Registered Investment Advisor, or RIA, who has their Series 65 (or 66) but NOT dually registered. So you can have your brokers liscense, Series 6 or 7, and have your Series 65 as well. There is a conflict of interest under this scenario. That is why I would be looking for a fee-based only advisor who only represents you period.
You also want someone who is actively managing and involved in the investment decision making process, not simply a salesperson. So when I call them up, they can tell me immediately why & when (down to the time stamp) they purchased an investment and what their thinking was. You want strategy, not products.
They will normally place your assets at a discount custodian but do not work for them or get investment advice from them. They may get research or ideas from the broker/dealer, but they are independent. This way you have separation of duties between the custody and advice. There are checks and balances.
Now in full disclosure, I am a fee-based only RIA and have been since the late 90s. I dropped my Series 7 soon after these Fee Based RIA Liscense were available. Thus I am biased but I believe it is a better business model to align the clients interest with the advisor.
If you also need “financial planning” regarding estate, retirement, education, corporate, tax, etc…, there are good fee-based only RIAs that can do that too along with the investment management.
I think this is plenty for you to ask the right questions when interviewing the next advisor.
Hope this helps and best of luck, Dan Stewart CFA®
Three things should be non-negotiable, before you start to filter through how you feel about the advisor:
- CFP® designation
- Fee-ONLY compensation (not commission-based, fee-based or fee + commission)
- A fiduciary (ask them outright if they are a fiduciary. If the answer is no, wrap it up and leave)
Do not even consider interviewing an advisor who does not fill ALL THREE of these criteria. The CFP Board website is a good place to start looking.
You probably want to find someone who is both competent and cares about you and your goals. Unbiased reviews can help. Consider making a brief list of qualities you want in an advisor, then search or interview your candidates so you are comfortable with moving forward. As a head start, you may want an advisor who has the following qualities:
- Heart of a teacher (willing to provide free general education)
- Independent (free from quotas or restricted solutions)
- Fee-based (not tied to incentives or commissions)
Consider some additional thoughts at: https://www.investopedia.com/advisor-network/articles/why-invest-financial-advisor