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Money can be messy sometimes — or just overly complicated. A trustworthy financial adviser could set individuals on the path to retirement, help get others out of debt or navigate tricky situations.
Retirement Tip of the Week: If you find yourself in a complicated financial situation, or you’re just feeling stuck as you try to plan and save for retirement, consider reaching out to a financial professional for some advice.
There are many types of financial advisers with a variety of different titles, licenses and certifications. And even beyond the letters after their names, these professionals may specialize in certain areas, such as taxes or estate planning. Individuals might have other concerns or wishes for the financial adviser they work with too, including an adviser with specific clientele (such as divorcees, engineers or LGTBQ folks) or a location (be it a nearby city or telecommunication).
One of the more prominently known designations for financial advisers who do financial planning is the Certified Financial Planner. In order to be a Certified Financial Planner, or CFP, individuals must have specific experience tied to financial planning as well as pass an education component and exam in six core areas: general financial planning (including education funding), insurance, investments, taxes, retirement and estate planning.
Some advisers may be Chartered Financial Consultants, or ChFC, another financial planning-centric designation. Many advisers are also Registered Investment Advisers (also known as RIAs), which register with the Securities & Exchange Commission and state regulators.
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Prospective clients should ask a few key questions before conducting business with any adviser, regardless of their certifications. These questions include:
- How are you compensated? Advisers may answer this question by saying they’re “fee-only” or “fee-based,” important terms for the novice client to understand. “Fee-only” advisers are paid solely with the fees they charge their clients, whereas “fee-based” is usually used when an adviser may charge a fee as well as earn money through commissions. Commissions aren’t necessarily a bad thing, but it’s best that they are completely disclosed so clients can understand if they’re paying more for this service than they’d get comparably elsewhere.
- What other professionals do you work with? It’s hard to have a grasp on every core component of financial planning, such as investments or insurance. Some advisers may have a team of professionals they lean on for these areas, or they may provide the client with recommendations instead.
- Are you a fiduciary? Will you act in my best interest? Some advisers are held to a fiduciary standard, which means they are required to act in their clients’ best interest. Certified financial planners and registered investment advisers are held to a fiduciary standard. Another key phrase used in the financial services industry is “suitability standard,” which other investment advisers and broker-dealers are held to — this standard suggests that professionals must provide advice that is suitable to the client, but could also be beneficial to the adviser in terms of compensation or commission.
- How often will we or can we be in touch? Not every client wants to chat with their financial adviser every month or even quarter, and the frequency of these communications will likely depend on the type of advice the adviser is providing. Still, it’s good to know you can talk to this person with some regularity, or when the market makes major shifts from volatility.
- How do you conduct investment research, or what are some strategies you implement? There are many ways to invest a portfolio. Clients going into this relationship with an understanding of how their money will be divided and invested will help them feel more comfortable — especially if it’s a nest egg they intend to use in their old age.
- What type of clients do you typically work with? Although they may not limit their clientele to a specific group of people, some professionals may specialize in certain niches, as well as general financial planning for younger generations or retirement planning for teachers. They may also have certifications for their niche. For example, some financial advisers are Certified Divorce Financial Analysts.
One of the most important tasks prospective clients should take is to research the financial adviser they intend to engage. To find a financial planner, individuals can use search tools on the Financial Planning Association’s website or the National Association of Personal Financial Advisors website, which are reputable financial planning organizations that financial advisers can join as members.
But beyond that, individuals should check the credentials of the adviser they are considering working with on sites such as the SEC’s Investment Adviser Public Disclosure and, if the professional is an investment adviser or broker, Finra’s BrokerCheck. These sites disclose basic information about the professional, as well as if the adviser has had any charges against them or if their licenses are up to date.
These sites are important for all professionals — whether they were found on a Google search or recommended by a family friend. Recommendations and word-of-mouth are helpful ways to find advisers, but they shouldn’t be taken at face value.
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