When it comes to investing money, most people focus on how their investments perform in the market. However, what is equally important is the investor’s satisfaction with his financial advisor. In fact, a 2013 survey by J.D. Power indicates client satisfaction, and the relationship they have with their advisor, is as important as the investment dividends.
If you are looking to hire a financial advisor remember, you may not have control over the market, but you do have control over who you choose to manage your investments. This is why it’s important to make sure you select the right person for the job.
Building Your Candidate Pool
You can find financial advisers almost anywhere. Most banks offer them, they are listed in the phone book and – if the phone book seems too archaic – they also advertise online. However, if you use any of these approaches you could end up with more candidates than you will ever have time to screen.
Consider getting referrals from friends or family members, especially if they have similar financial needs and goals as yours.
Another option is to search for a planner through a professional organization like the Financial Planning Association and the National Association of Personal Financial Advisors.
After you have built your candidate pool, the next step is to interview each candidate using the following questions:
1. What certifications and licenses do you have?
There are four major types of financial advisors:
· The Certified Financial Planner (CFP)
· The Chartered Financial Consultant (ChFC)
· The Registered Investment Advisor (RIA), and
· The Certified Public Accountant.
Each type of advisor performs a different function, and not all types are appropriate for every investor. For example, a CPA is best for high-income individuals or small business owners who also need help with advanced tax planning; a CFP or ChFC is best for individuals who want someone to manage their total finances in addition to their investments; and, an RIA is best for individuals who only want investment advice.
Professional advisors can also get additional certifications specific to their area of expertise. For example, a CFP who specializes in wealth management could get an IMCA.org Certified Private Wealth Advisor (CPWA) certification.
The advisor you choose should have at least one of the four major certifications or licenses. Additional licenses are not necessary, but can enhance their abilities.
2. What is your specialty?
Some advisors specialize in areas that might not fit your needs. Also, if the advisor specializes in clients like you, he will be more likely to understand your goals. For example, an advisor that specializes in family financial planning might not be a good fit for a confirmed bachelor. Conversely, an advisor that specializes in high-net-worth individuals might not be the best fit for new parents trying to plan for college and retirement.
3. What is your investment approach?
Even if you’re new to investing you probably have a basic idea of your investment approach. For example, you might prefer aggressive, high-risk trading with the potential for an immediate and high return; or you might feel more comfortable with conservative, low-risk investing with the potential for long-term growth. To avoid conflicts, and increase your satisfaction, you should choose an advisor with an approach similar to yours.
4. How hands-on are you with your clients?
Just as your advisor’s specialty and investment approach should complement yours, so should his philosophy on client contact. If you need a lot of hands-on, having an advisor who only sees clients once a year won’t work for you. Conversely, if you prefer minimal contact, an advisor that sends monthly reports and does weekly phone calls will be way too much. If you’re not sure what you prefer, then an advisor who is willing to be flexible could be your best bet.
5. Will I be working with you exclusively?
Some financial firms work more on a team concept. One advisor might conduct the initial interview, but the actual day-to-day management of the account is handled by multiple team members. Other companies use the one advisor/one client approach. Both approaches are valid, and each has its benefits, but neither works for every client. If you prefer a one-on-one approach, you should make sure that’s how your advisor works before you sign on.
Join the Thousandaire newsletter
Subscribe to get our latest content by email.