Experience, ethics and education make a big difference when it comes to picking your financial advisor.
(This is the fifth article in our “7 Steps to Financial Security” series.)
In my book 18 Common Sense Rules for Enjoying a Successful Retirement, I teach the following principles regarding the decision-making process for choosing your advisory team.
Whether you’re planning for retirement or already living successfully in retirement, you need to be sure you have excellent support. Whether you work with a single advisor or with a group of specialists, experience can make a huge difference. Work with professionals who take the time and money to continuously invest in their businesses and education. You may pick some of these specialists yourself, or your financial advisor may refer you to the folks he trusts the most.
There are a lot of impressive sounding credentials for financial advisors these days. For example, words like “Certified Senior Advisor” may sound good, but you need to be cautious. What was done to earn the designation? Watch out for advisors who may be overstating their credentials.
If you are looking for qualified financial advice, look for a “CERTIFIED FINANCIAL PLANNER” (CFP®) or a “Certified Public Accountant” (CPA) who specializes in financial planning. Look for someone with a “JD,” a law degree, who specializes in estate planning. Other important qualifications for those from the insurance industry include individuals who are a “Chartered Financial Consultant” (ChFC) or a “Chartered Life Underwriter” (CLU).
The point I am trying to make is that there are fields of study that have taken years of hard work and discipline to achieve. At the same time, there are designations that can be obtained by attending a weekend seminar and writing a check. The easy-to-obtain certifications sound as impressive as the real deal, but be wary of the pretenders.
Tested and Successful
Let me ask you an important question. If your mechanic couldn’t make it into the shop because his car broke down, would you want him to work on your car?
There are a lot of advisors giving advice who don’t have their own financial plan, and who haven’t created wealth for themselves. In the financial planning world, people can be trained for 30 days and then turned loose on the public to sell something. Do you really want to be someone’s guinea pig?
Find an advisor who has actually been successful with their own money and with their clients’ money.
What To Ask
Have the courage to ask important questions of the individual you’re interviewing to manage your money. The Certified Financial Planning Board suggests that you ask these questions:
- What experience do you have?
- What are your qualifications? What designations or certifications do you have?
- What services do you offer?
- How long have you been offering financial planning advice to clients?
- What are your educational qualifications? How many hours of new training do you undertake each year?
- What is your approach to financial planning?
- How much do you typically charge? How will I pay for your services?
- Do you have any conflicts of interest? Is any of your compensation based on selling products? Do you pay anyone a referral fee for sending business to you? Do you have a business affiliation with any company whose products or services you are recommending?
- Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?
- Will you put all your answers and your services in writing?