A few years ago, I had a brief chat with a financial advisor provided to me by my company, which also happens to be in financial services. I listened to what he had to say, but he was searching for commissions. His only offerings were expensive mutual funds.
I decided to wait until I had more knowledge about financial products before going back to an advisor. But when I do, David Bach will help me out through his five rules — the best five out of ten of his tips — for hiring a financial advisor. Here are Bach’s suggestions:
Get a referral. The referral should come from someone who has some experience and knowledge, not from a high school buddy you haven’t spoken with in ten years. Don’t take just a name and phone number, ask questions about their style, fee structure, customer service, and performance. Bach’s article has a checklist.
Do your own research. I’ve mentioned some resources in the past. Here are some ways to find an advisor online. Bach lists these additional resources: The Financial Planning Association, The National Association of Personal Financial Advisors, and The Certified Financial Planner Board of Standards, Inc.
Go to your first meeting prepared. Bring your bank and brokerage statements, last year’s tax returns, and insurance information. Have some questions in mind for the first meeting and be ready to talk about your goals.
Treat the first meeting like an interview. This is how I looked at my first meeting with that company-provided financial advisor. He didn’t get the job. It wasn’t because he didn’t tell me what I wanted to hear, but I didn’t feel the service he was prepared to provide was worth the fees. I could have asked more questions, and David Bach has a list.
How long have you been a financial advisor? What makes you a good financial advisor? What’s your educational background and what licenses, credentials, and other certifications do you have?
Have you ever been disciplined by the NASD or any regulatory agency during your career? What type of client do you specialize in? What services do you and your firm offer?
Do you create a written financial plan, and if so is there a cost? Do you spend time educating your clients about money? How do you service your clients?
How do you charge your clients (commission, fee-based, fee only, combination plan)? How many clients do you have and how much money do you manage?
Check out a prospective advisor’s background. You must research any advisor you choose through the National Association of Securities Dealers (NASD). You will find the advisor’s educational background, work history, and complaints filed.
All of this due dilligence is necessary in order to ensure your money will be handled properly if you choose to work with a financial advisor. You have to thoroughly vet your options.
Published or updated October 10, 2006.