The best financial advisors make financial planning and investment management their life's work. They care deeply and meaningfully about helping you achieve your financial goals and cultivate lifelong relationships based on service.
Financial advisors can help you plan and invest to retire comfortably, to put your kids through college and, perhaps, leave a legacy for your family. A problem, and the current challenge for the general public, is that anyone these days may call themselves a financial advisor, financial planner, wealth manager, money manager, investment guru, retirement expert and so on.
Unfortunately, this can muddy the waters.
So, in this environment, how do you differentiate between an elite financial advisor who can help you plan and invest to achieve your life's financial goals versus the fleeting charm of a financial salesperson who may just want to sell you a high-fee, high-commission investment product only to then disappear?
Referrals. First, start with your personal network for referrals and vet multiple financial advisors to find a good fit for your specific financial situation. Referrals are a great starting point because it often means that the people you trust, who may also be in a similar financial position or career field, are both happy with the service from their advisor and willing to make an introduction. To broaden your search, you can also visit the Financial Planning Association's "planner search" tool to find local certified financial planner professionals.
Credentials and experience. Next, evaluate your advisor's credentials and experience. The certified financial planner certification is generally considered the gold standard in the financial planning industry. Per the Certified Financial Planner Board of Standards, CFP professionals are held to strict ethical standards to ensure financial planning recommendations are in your best interest. CFPs must pass a rigorous examination as well as fulfill years of financial planning experience and ongoing continuing education requirements. Additionally, visit FINRA's Broker Check, a free online tool that allows you to vet your advisor's employment history, certifications and licenses as well as view potential red flags including regulatory actions, violations or customer complaints.
Actionable guidance. You should receive recommendations from your advisor based on your unique financial situation, risk tolerance, time horizon and specific goals and objectives. Prior to the implementation of any recommendations, you should expect to discuss why an investment option or suggested course of action may be right for you and how it will fit into your overall plan.
While those are the pros, your advisor should also spend time reviewing the cons, which may include potential fees, expenses, tax implications and a probability framework for downside risk. To make educated, informed decisions, you want clear and actionable guidance -- not information. Diligent financial advisors offer customized guidance based on your comprehensive financial picture.
Relationships. Financial planning and investment management is not characterized by a one-time transaction -- it's an ongoing dynamic process. To create a truly actionable plan, you and your advisor should hope to cultivate a professional long-term relationship that's based on service, has a defined structure and is deeply personal.
Trust must be earned. To that end, accountability and responsiveness are paramount. A proactive advisor may have your appointments booked a year in advance, with each meeting agenda outlined ahead of time with plenty of room set aside for you to ask questions and to talk about you. Ultimately, this relationship is about your family, your business, your progress, your investment portfolio and achieving your goals, so be prepared to maximize your time together.
Fiduciary standard. In today's online world, we do more research and sift through countless reviews and mounds of information before we will buy something as simple as a toaster. We want the best toaster and we expend extraordinary amounts of time and energy ensuring that we get it. By comparison, how much time have you spent vetting a financial advisor to find someone who you can trust implicitly? Someone who you know to be smart, accountable and who provides exceptional service, all while looking out for your best interest?
While there are many dedicated advisors caring for their clients, the best advisors adhere to the fiduciary standard of care. They disclose potential conflicts of interest and always put your best interest ahead of their own. The term fiduciary is derived from the Latin word for trust.
Transparency (fees). Your advisor's compensation structure should be simple and transparent. It costs "X" to prepare a written financial plan. The fee is "Y" as a percentage based on your assets under management or "Z" as a flat fee for services rendered. In a word, the cost for your financial advisor's services should be transparent, and the value-add in working with an advisor, specific for your situation, needs to be articulated. Just as interest compounds over time, so do fees, so ensure your fees are reasonable.
Coordination. Your financial life extends beyond the scope of your financial advisor and there is likely overlap between your financial planning, tax planning and estate planning strategies. Consequently, there should be ongoing dialogue between your financial advisor and your CPA, estate planning attorney, mortgage broker, insurance agent and perhaps your residential or commercial real estate advisors in order to provide a truly holistic planning experience. Your financial advisor may serve as your financial "quarterback" so-to-speak, working in concert with a network of professionals to deliver comprehensive planning services as appropriate for your unique financial circumstances.
Technology. To enhance your client experience, a cutting-edge financial advisor may leverage advancements in technology. Many advisors now offer access to your own personalized financial planning portal where you can oversee your entire financial picture in one place via your computer, tablet or smartphone. Accessing your written financial plan, monitoring your investment portfolio, analyzing your savings and spending rates, evaluating your risk profile as well as providing a probability framework for achieving your goals are now standard offerings for the tech savvy advisor.
Ultimately, you should work with a financial advisor who cares deeply about cultivating a lifelong relationship that is based on service and helping you and your family achieve your goals. At the start of our very first financial planning meeting, a longtime client perhaps said it best when she shared, "On our journey together, I am relying on your experience and expertise to help educate and guide me. I want to know that you're going to take care of me like I was a member of your family and keep me on track to meet my goals."
Are you smart, accountable and most importantly, can I trust you?
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