The Boomerater™ Report, our weekly collaboration with online baby boomer resource Boomerater, this week explores questions you should ask when choosing a financial adviser. Here is the question from a Boomerater member: “What are the things to consider when choosing a financial adviser? I don't have a lot to invest, but want to make sure the investments I do have are safe and positioned to grow. Also, I want to make sure I'm on the right track to maximize my retirement income.”
[See Should You Manage Your Own Portfolio?]
Here are 10 questions to ask a potential adviser:
1. What experience do you have? Ask about the financial planner’s philosophy and their previous work experience. They should be able to convey how this relates to their practice.
2. What are your qualifications? Anyone can call themselves a financial planner, so be sure and ask what qualifies them to offer financial planning advice and whether they are recognized as a Certified Financial Planner (CFP), a Certified Public Accountant-Personal Financial Specialist (CPA-PFS), or a Chartered Financial Consultant (ChFC). Ask about continuing education and how they stay current on changes in the financial planning field.
3. What services do you offer? Find out what services are offered and if they match your needs. Generally, financial planners cannot sell insurance or securities products such as mutual funds or stocks without the proper licenses, or give investment advice unless registered with state or federal authorities.
4. What is your approach to financial planning? Most financial planners have a typical type of client and financial situations they like to work with. Some planners offer comprehensive plans while others work on a project basis or hourly rate.
5. Will you be the only person working with me? The financial planner may work with you themselves or have others in the office assist the planner. Ask who will be your main contact and who will be working with you.
[See How to Get Your Finances Back on Track in 6 Steps.]
6. How will I pay for your services? Know the financial planner’s fee model before you engage in their services. The standard fee models are: A) Fee-only – all fees are paid by the client, no commissions. B) Commissions – payments are based on the products sold to you. C) Salary – the planner is paid from commissions you pay the company.
7. How much do you typically charge? The cost will depend on your needs. The estimate could be an hourly rate, flat fee or percentage of commissions. Always ask for an estimate.
8. Could anyone besides me benefit from your recommendations? Be sure and ask about conflicts of interests. Does the planner receive fees based on referrals or do they participate in company incentive programs.
9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career? Check for disciplinary actions for CFP practitioners on the CFP Web site. Be sure they are registered with the state or the U.S. Securities & Exchange Commission. The planner must be able to provide you with a disclosure form called Form ADV Part II or the state equivalent of that form.
10. Can I have it in writing? Ask the planner to provide you with a written agreement that details the services that will be provided. Keep this document in your files for future reference.
This information was provided by Kimberly J. Howard, CFP. You can find a comprehensive directory of financial advisers in your area by searching Boomerater’s financial adviser directory.
Ask a professional you trust for a reference. Another Boomerater member wrote: I asked my attorney for a reference for a good adviser to help me with estate planning. He knew of an excellent adviser who was well versed in all aspects of estate planning. Your CPA could refer qualified tax advisers he has worked with. Not only will you get experienced, knowledgeable advisers, but by going with references from trusted professionals you will be building a team that works together for your best legal and financial interests. Read other member tips on choosing a financial adviser on Boomerater.
Boomerater is an online resource for baby boomers, with local directories to help you find everything from a Houston financial adviser to New York Alzheimer’s care facilities. The site also contains forums where boomers can post questions and swap first-hand experiences. If there are questions on your mind that you would like answered by other people who have faced similar situations, or you have advice of your own to share, go to Boomerater.com and participate in the forums. Say that The Best Life sent you.