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How to Pick the Right Financial Advisor

Many of us don’t have the time, knowledge and emotional intolerance to play financial advisor, but thankfully there are professionals who can help create a savings and investing plan.

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Many consumers automatically discount hiring someone to help manage their wealth because they’re afraid it’s too costly or they don’t meet a certain earnings threshold, but there are experts available to help people of all income levels.

 “There are so many financial advisors that you don’t have to settle…. you don’t have to have a huge net worth [to work with one],” says Marcia Miller, president of Wealth Planning Services.

When evaluating potential money managers, experts advise verifying candidate’s education, experience and ethic requirements and that they have passed a series of examinations administered by the Certified Financial Planner Board of Standards.

You want to find a certified financial planner (CFP) with a broad-based knowledge of the financial industry, recommends Susan Fulton, founder of FBB Capital Partners. “If you are a CFP you’ve taken a course in investments, insurance, estate law and taxes.” 

The National Association of Personal Financial Advisors or NAPFA suggests individuals either go with three choices: 1) a CFP 1) a personal financial specialist who is granted to certified public accounts that meet certain requirements or 3) a chartered financial consultant.

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Before you hire anyone, check their status with the Financial Industry Regulatory Authority and the Securities and Exchange Commission to make sure the person doesn’t have any sanctions or violations. A simple Google search is also recommended to read reviews of the professional and the company.  

Recommendations from family members, friends and co-workers can also provide  good leads of people to work with, but still make sure to do your homework and check their credentials.  NAPFA and the Certified Financial Planner Board of Standards offer a list of financial advisors on their websites to help start your search.

According to Miller, many financial planners specialize in different stages of life whether its retirement planning or creating an investment and savings plan right out of college. Knowing a professional’s specialization can help narrow your search.

Experts also advise interviewing two or three financial planners before making a selection. While credentials and experience are very important, you also want to work with someone you like, trust and can understand. You also want someone who is accessible and ideally has other co-workers that can assist you when he or she is unavailable.

“You don’t want a sole practioner because there’s not enough people working in the firm,” says Fulton. “Ideally you want them to have the ability to explore your situation with other professionals.”

How the financial planner makes his or her money also matters. Miller recommends asking during the interview process if an advisor is fee-based or if they make money on commissions.

According to NAPFA, a fee-only advisor charges you for advice and for the ongoing management of your finances, while a fee-based advisor charges a fee but can also get payment for products they sell or recommend.  If the advisor gets a commission, then he or she makes money from the products they sell. 

NAPFA explains that a commission-based advisor earn income through commissions, or retrocessions paid by an employer and/or third party.

“If they are skirting around how they are compensated that would be a red flag,” says Miller.

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