How To Choose An Advisor

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How to Choose a Fee-Only Financial Planner

Do you need help with your wealth management? Do you want to make the right investments and create a plan that will lead you to financial freedom? You might be wondering where to start when it comes to choosing a financial planner. Well, you're in the right place!

Many financial advisors are out there offering investment advice, but it's important to choose one wisely. Making the right decisions now will determine your future success in meeting your personal finance goals. We'll show you how to find personal financial advisors who will grow your money, increase your investments, and help keep you on track for retirement.

There are many different factors you should consider, and these can vary depending on your specific goals. Here are some of the questions you may want to ask yourself before making your choice:

Check financial advisors' credentials

This one is essential. A good personal financial planner should have qualifications, expertise, and professional experience in financial planning and investment management to deliver sound financial strategies.

Financial advisors must have:

  • An education in finance, pyschology, or business, and
  • Relevant professional certifications and designations

It also helps, when choosing your financial planner, that they:

  • Specialize in the kind of problems you are facing, and
  • Have experience working with clients just like you

Educational qualifications of personal financial advisors

A University degree or equivalent academic training and certification is a positive indicator that your financial advisor has the right expertise. Educational requirements include at least a bachelor's degree from an accredited educational institution in any major such as finance, marketing, mathematical sciences, or business management. A Master's in Business Administration (MBA) can also be advantageous.

Certifications and designations for financial planners

Additional credentials from the Certified Financial Planner board (and memberships in organizations such as The National Association of Personal Financial Advisors (NAPFA)) can give you further confidence that your advisor is plugged into the world of finance and economics.

These credentials often include ongoing certification requirements. They signify your personal financial advisor has undergone rigorous professional assessments and passed qualifying exams of their knowledge.

Valuable professional designations to look for include:

  • Accredited Financial Counsellor (AFC®)
  • Certified Financial Planner™ professional (CFP®)
  • NAPFA Registered Financial Advisor
  • Retirement Income Certified Professional (RICP)

You'll find every advisor at Phoenix Fee-Only is a Certified Financial PlannerTM professional. You can research the credentials of your Fee-Only financial planners here, at The Certified Financial Planner Board (CFP board).

Financial planner specializations

Another question to consider is: Does my financial advisor understand and specialize in the kind of finance or investment management services that I'm interested in pursuing? Financial professionals can generally provide comprehensive advice on a range of financial services. However, we all have different backgrounds and focuses. Some might have more expertise and experience in specific areas of the financial planning process.

There is a wide range of financial planning services available, for example:

  • Income planning
  • Retirement planning
  • Estate planning
  • Tax planning
  • Employee benefits
  • Student loan management
  • Cash flow management
  • Mutual funds
  • Investments and wealth management
  • Mortgages
  • Insurance
  • Personal loans

For example, if you want to help plan for a child's education while saving for retirement at the same time, your Fee-Only financial planner should be able to work with you on these two goals simultaneously. Additionally, many financial planners seek to cater to specific client profiles in order to give the best advice possible. Profiles might be grouped by:

  • Certain professions (military personnel, doctors, etc., who may have different financial planning needs).
  • Clients' income brackets or net worth (different taxation advice).
  • Their goals, stage in their career, or specific life events (first home, starting up a new business, preparing for retirement, etc.)
  • Entrepreneurs or business owners (business formation, employee benefits).

Your financial planner should have expertise in the area of finance in which you need help. Look for a Fee-Only advisor who's well placed to offer advice in your particular field of interest. You should always ask what type of services they provide or if they can offer specialized advice. They may recommend someone else who is even better equipped to advance your best interests, often within the same financial planning firm or financial planning association.

Phoenix Fee-Only has a diverse range of experts available to our clients (and no referral fees apply). If you need assistance with one of the areas listed above, please let us know, and we will be happy to connect you with the unique advisor who can help you best.

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Do they have experience working with clients like me?

When you're searching for a financial advisor, it's more likely that they'll be able to give good advice and answer all of your concerns if they've had a successful past performance with people who are just like you. Requesting references or testimonials from their previous clients can be a great way to get insight into your potential advisor's professionalism and capabilities. Ask yourself: "Am I comfortable working with them over time?" and "Do other clients have good things to say about their experience - both past & present?" If you don't trust their guidance, you're less likely to do anything to enhance your financial situation.

There's also no harm in consulting with another family member or close friend about their experiences. You could discover that one of your relatives or close friends has knowledge in the same area you're working in and can suggest a financial planner. Also, State securities regulators like FINRA BrokerCheck and can provide you with a wealth of accurate background information on potential financial advisors. You can also check their qualifications and see whether they are properly registered and free of negative ratings.

What are their fee structures, and how will this impact your bottom line?

We discuss this in more detail here ("Why Fee-Only Financial Planners"), but here's the summary: there are different types of financial planners, based on their fee structure and how they charge clients. Some types of financial professionals can be more ethical than others, with fewer inherent conflicts of interest. Some are not actually working for you but represent the interests of third parties.

We'll give a brief overview of two types of fee structures here: fee-only and commission. We advise all our readers to work with a fee-only financial planner whenever possible.

The dangers of commission-based financial advisors

A commission-based payment structure is typical of most stockbrokers, insurance agents, and bank or credit union representatives. In this fee structure, a financial advisor gets commission for selling more financial products to you. It might be stocks through a brokerage firm, whole life insurance products, or investment products from the advisor's company. These products don't even need to benefit your wealth management: they only need to pass a very low bar called a 'suitability rule.' That leaves those advisors free to aggressively push products they profit from, without regard for what is best for the client's financial future. Any opinions expressed are not necessarily honest, and they have no ongoing legal or fiduciary responsibility to you.

Commission-based may seem cheaper in the short term. However, they recoup their discounted planning fees by convincing you to purchase these financial products with high commissions and high expenses. This can be particularly detrimental to clients depending on their net worth, risk tolerance, liquidity needs, and time horizon to secure their financial future.