In choosing a financial adviser who meets your needs, follow these simple steps: » Align your interests by working with a fee-only adviser, meaning one who does not accept commissions. You can find a fee-only adviser through the National Association of Personal Financial Advisors, at napfa.org. Some fee-only advisers, as well as some brokers, charge a percentage of your assets to manage your money. Others charge a fee to help you set up a financial plan or for periodic advice. You can locate an hourly adviser through the Garrett Planning Network, at garrettplanningnetwork.com.
» Learn the alphabet soup. A Certified Financial Planner (CFP) is a generalist who should be able to help you with your whole financial picture. The Chartered Financial Analyst (CFA) designation indicates particular expertise in investing. A Certified Public Accountant (CPA) is a tax whiz. And a Chartered Financial Consultant (ChFC) has extensive training in insurance and estate planning.
» Be picky. Most advisers will give you a complimentary introductory session before you make a formal arrangement. Take advantage of the opportunity. A good adviser should spend at least an hour learning about your full financial picture — including your goals, income needs, tax status and health, as well as the quality of your insurance coverage — before recommending any specific investments.
» Ask the tough questions. You want to get a complete picture of an adviser’s background, specific expertise, fees and investment philosophy. Feel free to ask for references to other clients.
» Avoid another Madoff. Convicted swindler Bernard Madoff held client funds in his own custody, which is how he was able to drain clients’ savings and fudge their account statements. Your adviser should use an independent custodian, which will take possession of your money and issue your account statements.
» Do a background check with regulators. An adviser’s Form ADV, which you can find at adviserinfo.sec.gov, will tell you if he has any skeletons. If your adviser is registered as a broker, you should check him out at finra.org/brokercheck. Finally, you can contact your state securities regulator and ask any professional organizations to which your adviser belongs if he has a disciplinary history.
Elizabeth Ody is senior associate editor at Kiplinger’s Personal Finance magazine.
