Have you been thinking about hiring a financial advisor? Before rushing into a decision, do your research on the four C’s.
Most financial advisors have credentials after their name. Google these credentials to find out if they’re nationally recognized or if the credentials are firm specific.
What you’re looking for is this a real certification or “fluff” to create alphabet soup. How many hours did the person need to study for the certification and is there continuing education requirements?
For example, the CFP® certification is granted by Certified Financial Planner Board of Standards, Inc. (CFP Board) and is recognized internationally. To attain the certification, the candidate must complete required educational classes, pass the lengthy comprehensive exam, possess valid personal financial planning experience, and adhere to the code of ethics. This certification also requires continuing education.
Some people have a knack for judging someone’s character. On the other hand, some people are good about hiding their true character. When interviewing financial advisors, focus on finding someone you trust.
Learn why someone is in the business. Discuss their investment policy. Find out about their personal life. Find out if they give back to the community. Ask questions that will help you determine if you can trust them. It’s hard to find someone who is perfect. But you can find someone who is honest.
Unless you go to a nonprofit financial planning organization, the financial advisor you talk to is for-profit – meaning they generate revenue for their firm and receive compensation. You’ll hear terminology such as “fee only” and “fee based” advisors.
Fee only advisors are compensated by charging a flat fee. If you work with them, there is also a fee from the company who holds your money. Fee based advisors receive compensation from the investment products you purchase.
At one time, it was perceived fee based did not hold clients’ interest first. Due to regulations and code of ethics from the CFP Board, most firms focus on the clients’ needs first. Many firms have a combined fee only and fee based model.
During my experience in the industry, I’ve met financial advisors in both segments which I would be comfortable referring clients. I’ve also met financial advisors in both segments which I would not refer clients. The key is to understand how they are compensated and if their compensation plan impacts what they advise you to do with your money.
For a successful relationship, communication is key. Find out if you will be communicating with the financial advisor directly or will be working with their assistant or junior team member. Understand their response rate – do they respond to emails/calls within one business day or will it take a week for them to respond to you? How will they communicate market changes? How often will they review your portfolio?
When you talk, does your financial advisor listen. Do they connect with your concerns, your needs, your wants? Money is personal and you need someone who hears what you are saying. You don’t want someone who pushes their own agenda.
Before hiring a financial advisor, spend time researching the four C’s. It’s a lot of paperwork and hassle to transfer money to someone and then have to move it elsewhere. Don’t rush your interview process. And more importantly, don’t let someone rush you into a decision. It’s your money and you need it to achieve the lifestyle you envision. Take your time but don’t procrastinate on a decision.
ABOUT THE AUTHOR:
Niv Persaud, CFP®, CDFA™, CRPC®, is the Founder of Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include spending plan, financial plan, divorce financial review, life strategy, and professional progression. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me’.”