It often helps to be joined in life's journey by a financial advisor — someone who knows the latest financial rules and can advise us today and help us with our future financial needs.
How to choose a financial advisor
The National Association of Personal Financial Advisors has developed a questionnaire for use when interviewing financial advisors. See these profiles of financial advisors in your area. When choosing a financial advisor, consider:
- Designations and affiliations. Like many other professions, financial advisors often have many abbreviations after their names. Some are CFP (Certified Financial Planner), which requires 30 hours of continuing education every two years; ChFC (Chartered Financial Consultant), which requires the same; and CPA/PFS (Certified Public Accountant/Personal Financial Specialist), which requires continuing education every three years.
- References. Ask the advisor for names and numbers of current clients who can talk with you about their experiences.
- Compensation. How is the advisor's fee calculated? Some examples are fee only; commission from securities, insurance or other products clients buy; and hourly rate or fee offset, which means charging a flat fee against which commissions are offset.
- Service types. Financial advisors provide a wide range of services, including budgeting and management, setting goals, insurance and product needs, and retirement planning. Be sure to match your needs with the advisor's expertise.
The Securities and Exchange Commission requires that advisors who charge a fee to manage your money must register either with the state (for those who manage less than $25 million) or with the SEC (those who manage $25 million or more). Check your financial advisor's credentials and make sure he or she is properly registered.
The bottom line: You must be able to trust your financial advisor. He or she may have the right pieces of paper to show qualification, but don't be discouraged if it takes you a few interviews with a few different advisors to find one that fits your needs and personality.