How to choose a financial advisor

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By Nicholas Ibello, CFP®, AIF®

Since your current and future depends on how well you invest or save money, you might find it necessary to seek professional help. The first person that comes into mind is a financial advisor. Who you hire to advise you on finances and to manage your investments is important. Here, we'll show you how to find a financial advisor who has your interests at heart.

Do You Have Comprehensive Financial Planning?

A good place to start is to determine whether you need a financial advisor. Not everyone needs one. If you're living off a paycheck and want to start saving, a financial advisor might not be interested in working with you. Sorry if that sounds harsh. But the truth is financial advisors make money from their clients' money. If you're only able to save $50 a week, you might not be able to meet their fee demands.


Once you have a regular and stable income and can comfortably sock away 20% of your annual income, it might be time to get a financial planner. But that's not the only situation that might motivate you to get comprehensive financial planning help. Major life changes can also drive you to find a financial planner.


Decide the type of advisor that suits you

Financial advisors have different titles and specializations. Here are a few that you might want to consider depending on your needs:

  • Retirement planning specialists: They help you prepare for life in retirement.
  • Wealth planners: They manage the investments of high net worth individuals, typically with $1 million in assets or more.
  • Estate planners: Help you prepare the management or transfer of your estate or assets to your beneficiaries.
  • Wealth managers: These financial planners handle complex financial issues and coordinate investments for their clients.
  • Brokers and investment advisors: Authorized to buy and sell stocks, mutual funds, bonds, and other financial products on their client's behalf.
  • Certified exit planners: These financial planners help business owners to sell or exit their businesses.
  • Certified financial transitionist: Help their clients through major life transitions such as losing a spouse or business.

If you're looking for a professional that'll offer your holistic financial advice, we strongly suggest you work with a CERTIFIED FINANCIAL PLANNERTM Professional. Such a person has a firm grasp of financial planning and can be an invaluable resource in your journey to financial freedom. In addition, financial planners are often registered as investment advisors and usually adhere to the fiduciary standard.


Decide what services you need.

Once you know the type of professional that suits you, determine the financial planning services you'll want from the advisor. For example, if you focus on growing your investments through stock trading, investment brokerage services might suit you. On the other hand, if you're thinking of securing your future, you want to focus on retirement planning.


Most financial advisors provide comprehensive financial planning and wealth management, not just investment advice to their clients. They can help you with debt management, insurance coverage, tax planning, college planning, estate planning, budgeting, and more. The right financial planner will help chart a course for your financial goals. In addition to offering financial planning and investment portfolio management, the right financial planner will provide you with emotional support during tough economic times.


Determine what you can afford

As with everything that involves money, choosing a financial advisor has a cost factor. Your focus now shifts from what type of advisor you want to what type you can afford. In the past, financial advisors took a percentage of the assets or finances they managed as fees. 


Modern advisors have an overall fee structure, ensuring clients with different financial means and standing can access their services.

Personal financial advisors earn their money in three ways. First, they can charge annual fees, hourly or flat fees, or commissions on investments. The average annual cost is one percent per year, charged on a sliding scale. That means the more assets you have, the smaller the fee.


Robo advisors have a fee-based structure that's typically cheap, and it's between 0.25% and 0.35%. However, if you'd like to access a human advisor to help you with financial planning, you might incur up to 1.5% annual fees. Some personal advisors charge a flat fee or one-time fee for their advisory or investment management services. For example, an investment advisor can charge you $1500 to tailor an investment plan for you. Afterward, you will be left to implement the program on your own or pay for continued services.


Still, other advisors and investment advisory services stake commissions only. What this means is they'll receive a fraction of what you purchase or invest. This arrangement is common with investment and insurance brokers.


Get some names

While it's easy to walk right into an investment or brokerage service down the street, it's advisable to research and get a list of financial planning candidates from multiple sources. You might be surprised to know some of the unaffiliated financial experts are better suited to your needs.

Nearly one in four people seek financial advice from parents and close friends. Ask them for recommendations on who to approach for comprehensive financial planning. You might also want to check the major industry associations. For example, the Financial Planning Association and the National Association of Personal Advisors have robust search tools to help you discover professionals in your city or town.


Check the financial advisor's credentials.

When shopping around for a financial advisor, it's a good practice to do background research to determine their background and credibility. Every industry has good and bad apples. Lucky for you, the financial planning industry is well-regulated and has tools like BrokerCheck that help you look up advisors.


The website provides information such as how long a financial advisor has been practicing, where they've worked, and whether there are consumer complaints or regulatory issues against them. Registered investment advisors are likely to have a good standing with the Securities and Exchange Commission (SEC).


If any of the advisors have disclosure, it may not necessarily mean they're a fraud. It's common for financial planners and advisors to have consumer complaints lodged against them. But make sure you investigate the issue further before making a decision.


A quick Google search and a review of local news and information released by state securities agencies are good ways of uncovering vital details about the financial advisors you intend to work with.


Set up an initial meeting with the financial planner

Once you complete your online checks, it's advisable to arrange face-to-face meetings with the advisors on your list. Remember, this is a person that you'll be looking up to for sound financial advice and potentially working together for years. So you must know how they operate and make sure you're on the same page.


The Certified Financial Planner Board has a useful questionnaire that can help you interview candidates for wealth management, retirement planning, estate planning, or investment management. Please find out about their education and professional qualifications, experience, and the services they offer.


You need to be comfortable and click with your financial advisor. So take time to interview them properly. If working with a potential advisor feels like a visit to the dentist for a painful procedure, you're likely to struggle to take their advice or meet up with them regularly.


Hire a CERTIFIED FINANCIAL PLANNER™ professional in Maryland, Columbia

Whether you want to create a strategic investment portfolio or need help planning for retirement, the financial advisors at William Asset Management can help you bridge the gap between your current situation and your future financial goals. We are an investment advisory firm with years of experience in the financial services industry and can walk with you in your financial journey. Call 410-740-0220 or send us a message online to schedule a financial planning consultation with our financial planners in Maryland, Columbia.