There’s nothing like doing your homework and being selective.
When we buy a car or a house, consider a school for our children, or plan our next vacation, what kind of approach do we take? For one thing, we take our time. We shop around and consider our choices.
Yet when it comes to selecting a financial consultant, not everyone takes such care. Chuck Jaffe, for many years a MarketWatch columnist, often spoke to audiences on this topic, and when doing so, he liked to conduct an informal poll. He started by asking people to raise their hand if they had ever worked with a financial advisor. Typically, many hands went up. Next, he asked them to keep their hands in the air if they hired the first financial advisor they met with in their search. Seldom did a hand lower. Then he asked them to keep their hands up if they did a background check on that person before agreeing to work together. Jaffe noted that when that third question was asked, “[I] never had a single hand stay in the air.”1
Credibility and compatibility both matter. When it comes to the “alphabet soup” of financial industry designations, some of them carry more clout than others. Some of the most respected professional designations are Certified Financial Planner™ (CFP®), Chartered Financial Consultant® (ChFC), and Chartered Financial Analyst® (CFA). These designations are earned only after thorough examinations and a required curriculum of college-level studies in financial planning applications, retirement, insurance and estate planning fundamentals, and other topics. Real-world experience complements this course of study.2
Beyond a financial professional’s credentials and designations, you have the matter of compatibility. You don’t want to work with someone who insists that you fit into a preconceived box, for you are not simply Investor A, Investor B, or Investor C who deserves this or that generic strategy. Better financial professionals really get to know you – and they will not be offended if you make the effort to get to know them.
This is a relationship-based business, and when a financial consultant offers a thoughtfully considered, personalized strategy to a client resulting from one or more discovery meetings, they have taken a step to earn the respect and trust of that client. Finer financial professionals abide by a client’s preferences and risk tolerance and take the client’s values, needs, and priorities into account.
How do you “check out” a financial professional? You can visit www.finra.org (the Financial Industry Regulatory Authority) and use FINRA BrokerCheck to see if anything questionable has occurred in their career. If that financial professional is an investment advisor, you can go to the Securities and Exchange Commission website and look at that advisor’s Form ADV at advisorinfo.sec.gov. Part 1 will tell you about any issues with clients or regulatory agencies; Part 2 will tell you about the advisor’s services, fees, and investment strategies.3,4
In addition, AARP offers you a Financial Adviser Questionnaire, and websites like ussearch.com and paladinregistry.com can provide you with further information.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – marketwatch.com/story/7-mistakes-investors-make-in-hiring-advisers-2010-05-20 [5/20/10]
2 – csmonitor.com/Business/Saving-Money/2017/0205/A-simple-guide-to-the-many-financial-advisor-designations [2/5/18]
3 – brokercheck.finra.org/ [6/13/18]
4 – adviserinfo.sec.gov/ [6/13/18]