Finding the Right Financial Advisor For You

Determine Why You Need a Fiduciary Financial Advisor

Considering which life stage you’re at can narrow down your search for an advisor. 

Since every financial advisor could potentially offer different types of advice, it’s important to match your needs with the right advisor. You may need help establishing college funds for your kids or are looking at a nice retirement plan, or perhaps you’d like a comprehensive financial plan to get you on the right track. Regardless of where you’re at, assessing your needs in your current life stage can help inform your decision of a financial advisor. 

Research Different Types of Financial Advisors

Once you’ve decided where you need help with your financial planning, narrow down the field with an advisor catered to your needs. Financial advisors offer specialties in their areas of expertise in order to help you meet your financial goals. For example, you might need help with budgeting over retirement planning, so find a financial advisor with expertise in your area of need. 

Here are some examples of services offered by financial advisors:

• Investment advice
• Debt management
• Budgeting help
• Insurance coverage
• College planning
• Estate planning
• Tax planning
• Retirement planning

You also might need to know the difference between financial advisors bound by fiduciary duty and those not bound. Fiduciary duty means that they are legally required to work in your best financial interests. If you want to get the most out of your advisors, it may be prudent to verify their fiduciary status. Though technically anyone can offer financial advice, getting it from a highly knowledgeable source is key to your financial success. 

Vet a Financial Advisor 

Before you hire any financial advisor, look them up on an official database to find out more about their licenses and background. One option is to go to https://brokercheck.finra.org.This will give you all the basic information you need to start your research on the advisor or advisors you are interviewing. You’ll learn about the advisor’s investment licenses, their work history, complaints or judgements against them, and the states in which they are licensed to do business.

You should also gain an understanding of what licenses a financial advisor has, what those licenses mean, and the work your advisor can do with the licenses they have. Review the advisor’s credentials and use the following information to help you understand what you find out about them.

• Series 7 License: The Series 7 is considered the gold standard of financial advisor licenses. This license is administered by FINRA and enables the advisor to sell almost any type of investment product, including stocks, bonds, options, and futures. Advisors with this license are also authorized for  the sale of packaged securities. The only securities the Series 7 license does not permit are commodities, which require a Series 3 license, as well as separate real estate and life insurance licenses.
• Series 6 License: The Series 6 license enables financial advisors to sell packaged securities, such as mutual funds and variable annuities. A financial advisor with only a Series 6 may not sell individual stocks or bonds.
• Series 63 License: Most states require a Series 63 license for financial advisors to conduct business within their borders. This is an exam advisors must pass in addition to the Series 7 or Series 6. 
• Series 66 or 65 Advisory Licenses: States also require the Series 65 for financial advisors who are compensated with fees as opposed to commission. Like the Series 63, this exam is heavy on rules and regulations, as the rules differ greatly for advisors who do not get paid on commission. Notably, individuals who hold a professional designation like the CFA or CFP may be eligible to have their Series 65 requirement waived by FINRA.
• Life, Accident and Health License: This license allows the advisor to sell health insurance, disability insurance, life insurance and long-term care insurance. These insurance licenses are state licenses, and to do your homework thoroughly you should find out in what state(s) the advisor is licensed for Life, Accident and Health License. Then, you can also go to the insurance department for that state and verify their licenses.

Get to Know a Financial Advisor's Values and Philosophy

The advisor you choose needs to be a good fit for you; you’ll want a relationship that makes you feel comfortable and a plan that gives you confidence for the road ahead. So, it’s important to do your homework before you even have a “get to know us” appointment with a potential advisor. A good place to start is a simple Google search to check out the advisor and their firm. Check out their website and read a little about them before you meet with them. See if you can find an explanation of their values and philosophy as a company, and consider whether or not you agree with what you read. Between your research and that initial meeting, you’re trying to determine the answer to the question, “Are we a good fit?”

Pro-Tip: Write down a list of questions to ask the advisor in your initial meeting. 

For instance you might ask them, “What is your definition of a ‘good’ retirement plan?”  All advisors have certain procedures they like to follow to accomplish a given goal, so you should listen and ask yourself whether or not you like what you’re hearing and whether or not you actually understand what they are saying. You need to learn, and if the advisor is talking in terms that seem like a foreign language to you, this could be a sign you’re not a good fit. This will be a long-term relationship that will require trust and a common understanding of each other’s value of money, and you will need to be able to communicate easily with each other.

Knowing the philosophy your advisor embraces will give both of you a basis to either agree or disagree. Just because you disagree does not mean you can’t work together, but it gives you an opportunity to direct the advisor on your own philosophy. Communication is key; make sure you and the advisor are hearing and understanding each other.

Understanding a Financial Advisor's Plan For You

Ask to see a sample plan and have the advisor talk through the various aspects of the plan and demonstrate how to read it. A good place to start is looking at the plan’s retirement timeline showing how your money might grow and how long it is projected to last. Ask yourself some key questions as you go along.

• Does the plan make sense?
• Is it addressing all aspects of a comprehensive retirement plan, not just the investments?
• Does the plan address contingencies and adjustments in the event of death or disability?
• What hypothetical growth rate are they using to project the growth of your money? Is it realistic?
• What distribution rates are they using and how are they justifying that?  
• How are they stress-testing the risk-based portfolios? 
• Is inflation factored into plans and projections? 

It all needs to make sense, and you need to know the answer to these questions. That age-old saying applies here: If it sounds too good to be true, it probably is! These questions will help you weed out advisors who might over-promise and under-deliver. When the plan is delivered, you must be able to feel confident in understanding how it will work. You should know and understand it well enough to go home and teach it to someone else!

Tracking your plan is equally important as designing it, so be sure to find out what their practices are for tracking and maintaining your plan and keeping you informed. At the very least, you should meet yearly with your advisor for a refresh of your financial data and to talk over any changes in your goals and circumstances.

Beyond designing and tracking your plan, you’ll also want an advisor who will communicate with you on a consistent basis, especially when changes are warranted. Make sure your advisor will communicate with you throughout the year with newsletters, market commentary, and regarding regulatory changes that may affect your plan. It is also vital for you to have access to a portal where you can see all your investments in one place so you can track performance and changes. Make sure your advisor is someone you feel comfortable with, so you can pick up the phone and call and/or make an appointment whenever you have a question or concern, rather than just waiting to hear from them.

Know How a Financial Advisor is Compensated 

Before you set up the fact-finding appointment with your potential advisor, learn what it will cost to work with them and how they determine that cost. Financial advisors can be fee-only, fee-based on assets under management, or commissioned. Sometimes advisor fees will involve a combination of all these compensations. In addition to the advisor’s compensation, each investment or insurance product will have a cost associated with it. Full disclosure between your advisor and you is a must, and you must ask yourself if you see value in what you’ll be paying for.

Deciding on a Fiduciary Financial Advisor

Now that you’ve evaluated your options and have a good understanding of what you’re looking for in a financial advisor, it’s time to make a decision. You can either go with the adviser you initially met with or take your search further. There are a lot of resources available to help you find the right advisor, like the fiduciary advisor registry or the National Association of Personal Financial Advisors.

Whatever you decide, finding the right financial advisor can feel as if a weight has been lifted off your chest. Financial advisors aim to alleviate stress and put you on a path to financial success. Their goal is for there to be a relationship that makes you feel comfortable and a plan that gives you confidence down the road.

If you'd like more help figuring out whether hiring a financial advisor is right for you, read more about fiduciary financial advisors,here.