When you’re looking for a great financial advisor, you want to choose someone who can give you sound advice when it comes to your money, home, retirement, and wealth. You also want someone who can answer your questions and help you set reasonable financial goals for your life.
If you’ve never worked with a financial advisor before, the task of choosing someone who fits all of your needs can be overwhelming. The financial industry is full of advisors who can help you with planning and making sound financial decisions. But, not all of them may have your best interests in mind. It’s important to weed out the ones who may not be best suited for you.
Here are 7 tips to find a great financial advisor in your local area with experience who can help you with everything from retirement planning to investment advice.
Why do I Need a Financial Advisor?
You may need a good financial advisor for several reasons. Some people seek the help of a financial or investment advisor after they’ve received a hefty inheritance. They may need help making a financial plan that allows them to get the most out of their money. They may also want help investing their new wealth.
Many new parents seek financial advice from an advisor to ensure their families are taken care of in case tragedy strikes. Others want to set up college accounts for their children as they get older.
“In truth, there is no bad time to speak with a financial adviser. However, sooner is always better with life’s unexpected twists and turns. A lot of people think that there’s a specific set of requirements they have to meet before they think it’s ‘worth’ talking to someone about their financial future but waiting may cost them in the long run. The decisions you make now will have the biggest impact on your future, so don’t miss out on taking the first steps today.” -Brian Tillotson, Certified Private Wealth Advisor at Virtus Wealth Management
The advice of a great financial advisor can also come in handy when it comes to retirement planning. They can help when it comes to money management as well as changes to risk tolerance in regard to investments. Whatever the case may be, seeking the advice and help of a financial advisor can help you pursue your financial goals and make your financial plans.
Once you’ve decided to work with a financial planner or advisor, here are seven things you’ll want to consider before choosing one.
1. Decide What Part of Your Financial Life You Need Help With
Everyone’s financial needs are going to be different so before you speak to a financial advisor, decide which aspect of your financial life you want help with. This will help save you time and find one who can best serve your needs.
A financial advisor can help you with:
– investment portfolio
– money market accounts
– savings accounts
– CD rates
– stock market
– Roth IRA
– retirement calculators
– mutual fund
– plans to save for retirement
debt consolidation & debt repayment
– credit card
– personal loan
– student loans
– mortgage refinance
– homeowners insurance
– car insurance
– travel insurance
– life insurance
– estate planning
Some people have simple financial needs while others are more complex. No matter where you fall on the spectrum you want to find someone who can answer your questions and doesn’t have too many clients so that they don’t have time for you. Nothing is worse than feeling that you’re being ignored when you have important questions about your money.
“We make it a point to really listen to our clients. We want to know your financial goals and what you hope for in the future. Understanding your life plan can help us guide you down the different avenues of financial responsibility. Even if you end up taking a different road later on and find yourself in a place you hadn’t planned, we can help you pivot to account for these life changes.” – Karen Spence, CRPC, Wealth Advisor at Virtus Wealth Management
2. Understand the Types of Financial Advisors
Unfortunately, not everyone who carries the title of financial advisor has your best interests in mind. This is why you need to understand the types of financial advisors. Some financial advisors are bound by fiduciary duty. These are advisors who are legally required to work in your best financial interest.
Then some are simply held to a suitability standard. This means they must only suggest products that are suitable for you even if they are more expensive and result in a higher commission. Keeping these distinctions in mind will help you determine which type of financial advisor is right for you. Many times people opt for those bound by fiduciary duty.
3. Seek Financial Advisors with Reputable Credentials
As you sort through the sea of personal financial advisors know that not everyone has the same credentials. Some people may have gone through a crash course and now think they are reputable advisors. These are not the people you want helping to manage your money.
Look for someone who is designated as a CFP (Certified Financial Planner) or a PFS (Personal Financial Specialist). Someone who has their CFA (Chartered Financial Analyst) is also a good choice if you’re looking for a great financial advisor. It’s important to note that those who are CFPs are bound by a fiduciary standard so they are always keeping their clients’ best interests ahead of theirs and won’t try to sell you a product that doesn’t work for you.
Financial advisors get their credentials by passing exams to demonstrate they know the subject matter. An advisor must adhere to an ethics policy as well as meet continuing education requirements.
4. Know How Financial Advisors Are Compensated
Financial advisors are not all compensated the same. They can charge for their services in different ways. You should be aware of the options so that you choose the financial advisor that fits the model you like best. While there are no right or wrong ways when it comes to compensation, some people prefer to only work with financial advisors who get compensated a certain way.
These are the various ways financial advisor compensation works:
Fee-only financial advisors earn money from the fees you pay for their services. These may be charged as a percentage of the assets that they are in charge of managing for you, a flat rate, or an hourly rate. This can vary from company to company.
Almost all fee-only advisors act as fiduciaries. Since they get their income from their clients, it is in their best interest to give you financial plans and products that work best for you.
Financial advisors who are fee-only are designated as registered investment advisors (RIA) or investment advisor representatives (IAR). They are usually extremely knowledgeable and are held to a high-degree of accountability.
A fee-based financial advisor gets paid by the client as well as other sources. These can be in the form of commissions from financial products clients buy. This can be problematic if an advisor is trying to sell financial products that would give them a high commission but are not in the best interest of the client. This is one of the reasons why many people shy away from these types of financial advisors.
Some commission-based financial advisors may make money by earning sales commissions from third parties. Some of these financial advisors may advertise themselves as “free” financial advisors because they are not charging you fees for their advice.
Financial advisors who fall under this category are making money from selling you certain financial products. Some of these products may not be in your best interest. Commission-based advisors are not fiduciaries. They are only held to suitability standards.
If you are buying an investment that you plan on having for a long time and don’t plan to ask for any advice, a commission-based situation may be the most cost-effective plan. But, if your situation changes and you need to ask questions about your finances, this may not be the best decision.
It’s important to understand that some financial products are mostly sold under a commission model. Life insurance is a prime example. A financial advisor may receive compensation for helping you buy a life insurance policy that is still in your best interest.
5. Use Search Engines to Screen for Criteria
Just as you would search for the best restaurant in your local area, you can use the internet to search for a great financial advisor. You can input certain criteria you’re looking for whether it’s finding a financial advisor in a particular area or one that focuses on certain areas of money management. This can help you narrow down the field to find the perfect fit.
6. Verify Credentials, Check for Complaints
As you use the internet to search for your financial advisor, pay attention to complaints as well as compliments. You can check their complaint history by checking their records with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), the CFP Board, or another organization your advisor may be linked to.
One complaint may not be reason enough to totally rule someone out. Formal customer complaints can stay on a financial advisor’s record for a long time. The longer someone has been in business, the more likely it is that they’ll have a complaint on their record. But if you notice multiple complaints that may be enough reason to cross their name of your list and look for someone else.
You can also look at online reviews. Many people are brutally honest and often write about bad experiences they’ve had. You can also find many gleaming reviews here. If you notice many positive reviews, you’ll likely want to proceed. If all you can find is negative information, it’s time to move on.
7. Learn How to Spot Fraud Risks
Fraud is more common when someone has custody of your assets. Many reputable financial advisors use a “third-party custodian” to hold your assets. This means your assets would be opened at a large well-known firm. The advisor can place trades and offer services but it is the third-party custodian that reports the transactions and verifies action on the account.
You want to be on the lookout for advisors or firms who have custody of your money and own another firm that serves as the custodian. This is one way you may become a victim of fraud.
Ask These Questions Before Hiring
Besides following the tips above, you also want to ask questions before hiring your financial advisor. These include:
– What are your credentials?
– How long have you been in business?
– Do you have experience in many types of financial accounts?
– How do you get paid?
– Can you track my investment cost basis?
– Can you help plan my estate and distribution of wealth?
– Can you refer me to another professional if your firm can’t provide the service I need?
– Can you file my tax return and help with tax-related questions?
It’s also important to know what happens if your financial advisor changes firms. Your financial advisor may decide to work for another company and may not be allowed to contact you at their new firm. Your account may get sent to someone else with who you don’t feel comfortable working with. It’s important to know ahead of time what happens in this type of situation.
You also want to know how the firm your financial advisor works for measures performance. This can give you insight into what is motivating your advisor. While they may say they are working for you, their bonus could depend on them doing something else that doesn’t have your best interest in mind.
Ask About Communication
It’s also important to understand how frequently financial advisors communicate with their clients. Some meet quarterly, others meet semi-annually or even annually. Have an idea of how frequently you would like to meet and see if your financial advisor agrees.
These days a lot of communication is done through online conferencing. This can allow for more frequent meetings between clients and advisors. If you feel comfortable working like this, it’s always an option. If not, you can see if your advisor communicates by phone or email. This can also make it easier to talk about your financial planning without having to wait too long.
Ask About Financial Expertise
There’s also nothing wrong with asking about an advisor’s expertise, especially if you are looking for a great financial advisor that concentrates on one area. You can ask the advisor about their experience in dealing with clients like you. A financial advisor who deals with similar clients can be beneficial for you and your financial situation.
The Bottom Line
When it comes to finding a financial advisor, you want to do your homework. After all, it’s your money. You don’t want to trust just anyone, and you want to work with someone who has experience in the area you’re looking to focus on.
You also want to look into how an advisor gets compensated. Often if a fee-based advisor may try to sell you services you don’t need. You want to feel comfortable with the way an advisor gets compensated so that they can still keep your best interests in mind.
When you’re looking for a financial advisor, don’t be afraid to ask questions and research reviews. The answers to your questions can help you make your decision when it comes to finding a financial advisor. Reviews, both positive and negative, can also help to lead you in the right direction.
You also want to be on the lookout for frauds. There are many people out there who will go to extreme measures to get their hands on your money. You may come across people offering financial advice with no financial advisor credentials. You may want to ask about advisor credentials before you officially hire any specific advisor.
It’s also a good idea to talk about how frequently you’ll be communicating with your advisor and by what method. Be comfortable with this setup because you don’t want to have to constantly change advisors when you’re unhappy.
“Wealth management is more of a lifestyle or a mindset than just something you do. We work closely with clients to create a goal-based process with customized choices and solutions. It’s really a partnership to help you pursue your financial goals.” -Brian Tillotson, CPWA, Certified Private Wealth Advisor with Virtus Wealth Management.
When you need an experienced financial advisor, the team at Virtus Wealth Management is here to serve you. Our team has years of financial wisdom in many different areas. Our areas of concentration include retirement planning, wealth management, risk management, and more. If you’re wanting to evaluate your plan to save for retirement, get into or change your approach to the stock market, or if you just need overall investment advice, we’re here to answer your questions.
Call us today at 866-407-4320 to learn more about how our services and how we can help you find a great financial advisor.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Good Life Advisors, a registered investment advisor. Good Life Advisors and Virtus Wealth Management are separate entities from LPL Financial.
About the author
Lisa Parziale is an independent author that writes about various topics and owns a marketing company in North Texas. If you would like to contact Lisa, please use the information below.
Portside Marketing, LLC
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Flower Mound, Texas 75022