After watching the gyrations of the stock market and the trickling outrages of the Bernie Madoff saga, maybe you’re thinking under the mattress is the best place for your money. Hey, you can do bad all by yourself. But don’t give in to skepticism. Especially in confusing times, an adviser who earns your trust can help you earn a profit.
A certified financial planner can fill those shoes. Folks with the CFP designation must successfully complete the CFP Board’s comprehensive examination, which tests knowledge on a number of planning topics. They must abide by the CFP Board’s Code of Ethics, obtain 30 hours of continuing education every two years, and meet other requirements.
But plenty of people can pass those posts without being stand-up individuals. You need someone who makes you feel more secure.
How do you find that person? Ideally, a family member or friend has a perfect match. If not, talk to your attorney, accountant or tax planner for leads. You can also go to professional associations such as the Financial Planning Association, the Certified Financial Planner Board of Standards or sites like Wiser Advisor.
But mostly, trust your gut and do your due diligence. Picky, picky, picky should be the protocol. So, assuming you’ve gathered a few names, get ready to hold a beauty contest of sorts. You want to put all potential planners under the bright lights.
Ask what licenses they have, how long have they been in business and what is their area of specialty? Review their bios – where have they worked and what have they done? Most urgently, do they show an interest in you?
“Do you fit their sweet spots? You want to be an important client , you want to get the attention you need,” says Susan Bruno, a CPA and personal financial specialist with Beacon Wealth Consulting. Ask for referrals to a couple of clients who are similar to you in age, income and circumstances. If they can’t offer up anyone, that could be a clue that you’re not a typical client, which is not ideal.
Find out how the adviser spends her time. If she mostly does estate planning and that’s not tops on your list, think again. Find out too, whether he or she is a fiduciary, meaning that law obliges him or her to place your interests ahead of theirs at all times. If an adviser likes to place heavy bets on emerging markets but you prefer to bulk up on muni bonds, will an advisor put that fiduciary duty in writing?
Of much importance, you want to know how an advisor makes money. If it’s by commission, know that a profit agenda may lurk behind anything she sells. Fee-only advisors may have the fewest conflicts of interest and charge hourly, a flat fee or retainer. They may also include a performance fee based on how well your account performs. Get this straight up front. Know what’s included and what’s not.
Ignorance is not bliss and can be expensive. You should always know where your money and securities are. Most reputable advisors will use an unaffiliated custodian for the safe keeping of your assets. This simple check and balance could have saved the Madoff investors millions by bringing the problem to the forefront earlier,” says Rick Kahler, co-author of Wired for Wealth .
It helps too if you are clear about your financial goals. What do you hope to accomplish? Otherwise, how can they help you get there? ”Interview them based on your priorities,” suggests Julie Murphy Casserly, author of The Emotion Behind Money.
Be open about your expectations. Make it plain what you need. Discuss how the advisor would like to communicate, and how often. Will you get to deal directly with him or her, or a junior staffer?
Contact your state regulator to unearth complaints or disciplinary actions An ADV form (the registration form that must be filed by investment advisors) and/or a U4 (the registration form used by persons who work with brokers) can provide additional information.
Seems like a lot of work, right? It should be. Good help can be hard to find, but it’s not impossible. And if you’re really lucky, it can be profitable.