Finding a financial planner is like finding a Starbucks. You don’t have to look very hard — they’re everywhere. You’re likely being solicited by one, two, or ten even as we speak. You are getting pitched on TV by Edward Jones and Charles Schwab, at your local bank or credit union, by your accountant or insurance agent, and maybe even by your friends and family (although if it is a friend soliciting you, I don’t know if I would continue using the term “friend”).
Despite the fact that they’re all over, who wants just “any” financial advisor? It’s the same thing with your Starbucks order — who wants just “any” beverage? Who leaves their order up to the barista?
You went there for a reason — quality, experience, and perhaps a personal touch. There is obviously a reason that everyone has their own drink order, just like there’s a reason that you went to Starbucks. In my case, for example, I went because “N” wants a chai tea latte light on the ice.
Just like your drink order, when it comes to financial planning, you want quality, a good experience, and personalized treatment. You don’t want just “any” advisor; you want the right advisor. You want the advisor who remembers you and already knows your “order” when you come to the front of the line.
Unfortunately, with so many advisors crowding the industry, it’s often hard to know what to look for and what makes a good advisor. Fortunately, I’m here to make that first step a bit easier. Here are my Top 8 tips for finding the right advisor.
Number 1 – Find someone who is a CERTIFIED FINANCIAL PLANNER™, (CFP®) professional
If you are looking for a litmus test of quality, look no further than three letters — CFP®. Don’t be fooled by the other designations. CFP® is the gold standard in the industry. Would you use an accountant who isn’t a CPA? Would you use an attorney who isn’t a JD? You should think of a financial advisor in the same terms. Never use a financial planner who isn’t a CERTIFIED FINANCIAL PLANNER™ professional.
Now, is this the sole factor determining whether your advisor is good? Certainly not, but having the CFP® professional designation should be seen as the required minimum standard. A gatekeeper qualification, if you will. Those three letters mean that this person has made a serious commitment to the business, has put in a substantial amount of time and effort, has the requisite three years of work experience, and is prepared to be a financial professional.
Number 2 – Someone who has a team-based, financial planning philosophy
I know many solo practitioners who do fantastic work for their clients. They are experienced, qualified, and provide untold value for those people who trust them with their money. However, my concern is this — what if that advisor goes on vacation? What if they choose to “slow down”, downgrading from 40 hours a week to 20? Is their work ethic going to remain the same at age 70 as it was at 60? Or worse, what if they retire completely? Who will be responsible for watching your accounts and your plan? Who is going to continue looking out for your best interests? Do you really want to be switching advisors in your 60s or 70s?
In a team-based financial planning firm, you won’t face these issues. If and when an advisor retires, a team member who is already familiar with the plan will be ready to take the lead.
Number 3 – Someone who discloses fees
Shocker, right? Shouldn’t this be expected? You wouldn’t shop in a store that didn’t post their prices. Could you imagine the madness of grocery shopping? It would be the ultimate episode of Supermarket Sweep.
Believe it or not, financial planners don’t work for free. They all get paid for what they do.
You also have the right to know those details, so ask your advisor. A good advisor will have a fee schedule that they can show you — don’t let them be vague! Make them specify the fees for which you will be responsible. Most advisors will know exactly what you are paying, and if they don’t know, do you truly believe that they understand what they are selling you? They owe it to their clients (you) to be honest and forthcoming with that information.
Number 4 – Someone who focuses on process and planning. Not product
Have you ever tried to get to a new destination without using a map? Not an easy thing to do. You can never plan efficiently if you don’t know where you are going, which means that we all need a map sometimes. We need to know where we’re heading before we decide how to get there.
Once you have decided on a financial plan, the rest of the pieces should fit easily into place. However, a reliable plan takes time to develop, so be patient.
When making these important decisions, do you feel like you are being pitched a product? Do you feel pressured into making a decision quickly? Do you feel like you’re not getting exactly what you want? Then go somewhere else!
Number 5 – Someone who actively coordinates your financial plan with your other advisors.
One of the most overlooked pieces of financial planning is coordination. At some point, your CPA, attorney, and insurance agent (among others) should be in contact to cross the T’s and dot the I’s. With so many moving parts involved in a financial plan, it’s critical that all your advisors are jointly discussing the benefits and drawbacks of various decisions.
Number 6 – Someone who has experience
Remember the last time you started something new? How comfortable were you right away? How long was the learning curve?
Fast-forward three, five, and ten years. Are you better at that particular skill now? Have things slowed down? Do you confidently feel like more of an expert?
The learning curve for financial advisors is five–seven years or more, in my opinion. My advice is to find an advisor with at least five years of specific experience in personal financial planning.
Number 7 – Someone who is securities licensed
If your advisor isn’t securities licensed, then you can immediately expect to be pitched life insurance and/or some variation of an annuity. A word to the wise, insurance agents are only compensated if they sell you something, so be prepared for the hard sell.
In no way am I taking a shot at insurance products, nor where/if they fit in a financial plan (full disclosure, I have used various insurance-based products in limited situations in the past). However, I’ve never seen a full financial plan using only insurance products. If your advisor is unable to utilize other options, then it will almost certainly be insurance/annuity across the board.
(Exception: If you find a CFP® professional who is non-securities licensed but charges you a flat or hourly fee and does not sell a product, then feel free to move forward comfortably.)
Number 8 – Someone you can fire
Do you have a friend or family member who is in the industry? Are they asking for your business? I wouldn’t be surprised. Are you thinking about using them? I would advise you to proceed with caution.
Whether the advisor is a family member, friend, or total stranger, you owe it to yourself to ask the same questions. Do they have the proper experience? Is this a career change? Is this person truly an expert? If you do decide to give them a shot, be sure to discuss both of your expectations up front. Consider how your relationship will be affected if things don’t work out, and clearly define an exit strategy.
At the end of the day, you need hire someone who you can fire. Things can get messy when there is bad blood between guests at Thanksgiving dinner.