Guidelines for choosing a financial adviser

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In a Nutshell

The right financial adviser for you depends on your financial goals and personal situation. Once you’ve figured out those details, you can start researching, interviewing and then finally choosing the adviser to fit your needs.
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It doesn’t matter if you’re newlyweds creating your first budget or a retiree trying to make your money last — solid financial advice from a professional can be a big help in reaching your financial goals.

But you need to know what those goals are — and do some homework — if you want to choose the right financial adviser for you. As you begin searching for someone to trust with your finances, you’ll want to have some questions in mind.

  1. What are my financial goals?
  2. Can I get by with a robo-adviser?
  3. Which advisers specialize in what I need?
  4. How do I know I can trust an adviser?

What are my financial goals?

Before choosing a financial adviser, it’s important to think about what you want to achieve and the kind of help you want getting there.

Do you want to buy a house? Save for your kids’ education? Maybe you’re looking for a way to get out of debt or make money by investing. Or you could be thinking that it’s time to get serious about your golden years. Whatever your goals, there are advisers who can help you with different aspects of your financial life, including your savings, investments, insurance, taxes, retirement and estate planning, whereas others might have a more narrow focus.

Once you know your financial goals, you can start trying to match them with the right help.

Can I get by with a robo-adviser?

If you already have a budget that you’re sticking to — and if your money issues aren’t too complicated — you might not need a human financial adviser.

A robo-adviser is an online service that gives you automated investment advice based on information that you provide about yourself and your financial situation. You typically answer a list of questions about things like your how much risk you’re willing to take, your age, your income and your financial goals, and then the robo-adviser uses a built-in algorithm to set up a plan and investments for you.

Robo-advisers are typically a lower-cost alternative to human financial advisers, but they’re often limited in what they can do. If you require more hand-holding or have specialized needs like estate or tax planning, you might want to go the traditional route.

Which advisers specialize in what I need?

Whether someone you know recommends a particular adviser or you find one online, it’s important to do some research before reaching out to them. You’ll want to look closely at the range of services they provide and their backgrounds to ensure that they can offer what you need.

Starting your research

If the adviser you’re considering works for a firm, you can begin by going to that company’s website and looking at its list of services. If the website doesn’t offer enough information, consider reaching out to request a brochure. Do they offer services that match up with your goals and concerns?

You can also read the profiles of individual advisers on a firm’s website. Look for their education, past employment and certifications. Certifications can be important because anyone can call themselves a financial planner, but only some have the education or training required by certain certifications, which could be an indication that the planner is at least capable of offering financial advice.

Understanding credentials

Keep in mind that some certifications require more education, experience and knowledge than others. A Certified Financial Planner, for example, in particular is held to high ethical and continuing education standards. Also, CFPs must have a bachelor’s degree and complete extensive training to help them understand the complex financial landscape and help you address the issues you might be facing.

Some financial advisers might look like they have an alphabet soup of credentials after their name. You should be aware that there are many dozens of certifications that advisers can claim to have — and some of them might not mean much. One thing you can do to cut through the clutter is look for financial advisers with certifications that are accredited. That means those certifications are recognized by certain standard-setting institutions. Here are a few.

  • Accredited Financial Counselor (AFC)
  • Certified Financial Planner (CFP)
  • Certified Investment Management Analyst (CIMA)
  • Certified Retirement Counselor (CRC)
  • Certified Retirement Financial Advisor (CRFA)
  • Certified Senior Advisor (CSA)
  • Chartered Financial Analyst (CFA)
  • Master Registered Financial Consultant (MRFC)

Another thing you might want to look for is membership with the National Association of Personal Financial Advisors. To be a member of NAPFA, an adviser has to be a CFP and hold a bachelor’s degree (one of the CFP requirements). NAPFA members are “fee-only” advisers, meaning they get paid for their service to you, and not for selling you products.

Keep in mind that certifications, accreditations and memberships can be an indication of education or specialization, but they shouldn’t be all you go by to choose the right financial adviser for you. Make sure to do your research and talk to your adviser in person about how you’d like them to work for you.

How do I know I can trust an adviser?

Even if your financial adviser is not actively managing your money, they will have access to your sensitive financial information and will be giving you advice that could shape your financial future. You need to know that you can trust your financial adviser with both.

Before you meet with a potential adviser, there are ways to check if there’s some obvious reason to question their trustworthiness. Here are a few tips.

Do some sleuthing

The Financial Industry Regulatory Authority, which regulates investment broker-dealers, has a FINRA Disciplinary Actions Online search tool to see if the person or firm you’re considering has been in some kind of trouble recently.

You can also use BrokerCheck, another free tool from FINRA, to research the professional backgrounds of brokers and brokerage firms, as well as investment advisers. BrokerCheck includes info from both FINRA and the SEC (U.S. Securities and Exchange Commission). Note that investment adviers getting paid to give advice about investing in securities is required to register with the SEC or with state regulators. If you can’t tell whether or not the company is registered with the SEC or state regulator by its website or brochure, make sure to ask the question during your in-person interview or contact your state regulator to find out.

If an adviser claims to be a CFP, you can visit the website for the Certified Financial Planner Board of Standards to double-check and make sure they don’t have a disciplinary history with the board.

Meet your adviser — and ask the right questions

Once you’ve done the homework of investigating an adviser or firm and their qualifications, a good next step is setting up a meeting and asking some key questions.

NAPFA has a Financial Adviser Comparison Tool to help with this. It provides a list of in-depth questions that you can use along with an “answer key” to help evaluate the adviser’s responses. Be sure to take notes during your meeting — or send the questionnaire to the adviser and ask if they’ll fill it out for you. The questions can help dig up some important info, including …

  • How well an adviser can serve your particular needs
  • The adviser’s background, including education and compliance with industry regulations
  • How the adviser and firm are paid

Beware the free lunch

Be wary of any freebies the adviser offers you, like lunch or golf outings, and think twice before attending retirement and senior seminars advertised as a workshop or educational presentation. Some advisers may try to offer incentives in order to manipulate you into giving them your business, and some firms put on so-called “educational seminars” in order to sell people investments they don’t understand.

Learn more: How much does a financial adviser cost?

Bottom line

The right financial adviser for you is the person who offers the services you need, has the right background and training for your needs and, above all, is someone you trust. The decisions you make around how you manage your money can affect the rest of your life, so it’s important to do your research and stay informed.

About the author: Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. Her work has appeared on and in The Atlantic. Lauren holds a bachelor’s degree in political science from UC Sa… Read more.