How to know when a financial advisor is “the one” for you

Jeff Bernier |
By Jeff Bernier

When you’re dating, choosing “the one”—that singular person who you’re not only attracted to, but who you want to spend the rest of your life with—is one of the most important decisions of your life. I know when I found Ashley, there was no question in my heart or my mind that she was the one person I wanted to have and to hold, to raise a family with, and to love and laugh with “until death do us part.”

Choosing a financial advisor may not be as life-critical as choosing a spouse, but it can have a pretty dramatic impact on your well-being, and not only from a financial perspective. Why? For anyone new to working with an advisor, it might surprise you that the advisor-client relationship is unusually personal. Unlike a simple business relationship, you’ll want (and need) to share some of the most intimate aspects of your life with your advisor. If your advisor is a good one, you’ll spend as much of your time talking about the things you hold close in your heart as you do about money. Those discussions are revealing, which means that working with an advisor whom you can speak with freely and whom you can trust with your emotions and your money is critical.

So where do you begin? Here is a step-by-step guide to help find “the one” you’ve been looking for:

  1. Understand how advisory fees work.
    There are many types of advisors. What sets each one apart is what they offer and how, importantly, they are paid for their services:

    Commission-based advisors. These include brokers, insurance agents, and registered representatives. Often employees of large financial services organizations, they sell financial products such as mutual funds, annuities, and insurance. Their menu of offerings is typically limited to what is offered by their employer, and like any salesman, they receive commissions on the products they sell. This commission structure begs the question: whose best interest are they serving, yours or theirs?

    Fee-only advisors. These independent advisors are paid only by their clients to provide comprehensive financial advice and guidance. Their compensation is fully transparent and may include flat fees, hourly fees, a percentage of the assets under management, or a combination of all three. Focused on each client’s financial “big picture,” they may offer a range of services, including estate planning, retirement planning, investments, tax planning (and sometimes preparation), insurance planning, and more. As fiduciaries, they are committed to always serving in the best interest of their clients.

    Fee-based advisors. A hybrid of sorts, these advisors are often affiliated with a broker-dealer. They may offer financial planning that is charged at an hourly rate, but like commission-based advisors, they may also hold a license to sell investments or insurance for a commission. That said, they do sell products, and they do receive commissions, so there remains a potentially dubious conflict of interest.
  2. Decide what kind of help you need.
    Depending on your age, your level of assets, and the complexity of your financial life, the kind of help you need will change throughout your lifetime. You’ll want to be sure the advisor you choose can serve you today and far into your future.

    Hourly consultations. If you need help with just one or two aspects of your financial life—such as buying a home, debt and cash flow management, selling a business, education funding, etc.—look for an advisor who offers project-based planning at an hourly rate. Some advisors will also offer a one-time financial plan designed to help keep you on track toward your long-term goals. This work is charged only on a fee-only basis.

    Comprehensive wealth management. As your finances become more complex, an advisor can help you plan all aspects of your finances to be sure everything is working together toward the best financial outcome for you. Covering everything from investing (asset management) and retirement planning, to estate planning, insurance analysis, and more, the focus is on long-term, holistic planning. Services are charged on a fee-only basis, plus a percentage of assets under management (AUM).

    Pure asset management. If your focus is only on investing, an advisor can help you manage your assets over the long term. While managed separately from other areas of your financial life, the assets you accrue can help support your long-term financial goals. The cost for this work is an annual percentage of assets under management (AUM).
  3. Select “the one”.
    Once you’ve determined what services you need and how you want to pay for those services, finding “the one” for you requires a close look at his or her education and experience, ethics, and relational fit.

    Education and experience. Consider how long the advisor has been in practice, and other experience such as being a business owner or working in a corporate environment. Credentials are also important because they indicate training in specific areas of financial planning. An advisor with a Certified Financial Planner (CFP), Certified Fund Specialist (CFS), Accredited Investment Fiduciary (AIF), or Chartered Financial Consultant (ChFC) designation has completed extensive coursework and training in these areas, and some designations, such as the CFP, require adherence to strict ethical standards as well as continuous education.

    Ethics. When you’re entrusting someone with your hard-earned money, taking the time to be sure they are ethical is critical. FINRA, the Financial Industry Regulatory Authority, requires all advisors to be listed on BrokerCheck. This online listing tells you if an advisor is legally registered to provide investment advice, and what products they are able to sell (stocks, bonds, mutual funds, etc.). BrokerCheck also gives you a snapshot of the advisor’s employment history, licensing information, and any regulatory actions, arbitrations, or complaints against them.

    Relational fit. No matter how perfect an advisor’s background, skills, and ethics may be, it’s important to trust your gut when it comes to your personal fit. Ask yourself: 1) Is this someone I want to be in a close relationship with for the next 20 to 30 years? Do they seem open and honest? Can I communicate easily with them? 2) Do they work with people like me—with my needs and level of assets, and who think like I do? 3) Do I believe the advisor can create enough value (both tangible and emotional) for the fees they charge? If you answer no to any of these questions, keep looking. If you answered with an enthusiastic yes!, yes!, yes!, trust your gut and know you’ve found “the one” for you.
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