How do you choose an advisor that is right for you? First – ask around. Friends, family members, and colleagues are a great place to start. Ideally, someone you know is in a similar financial/philosophical situation and has a long term advisory relationship in which they feel personally and professionally comfortable.
In the world of financial planning, there are two main types of professionals ready to fill that role. Your first step is understanding the difference and deciding between the two: (i) A registered investment advisor, or (ii) an investment broker. An investment advisor is bound to a fiduciary duty and must act in the client’s best interest. In addition, advisors often charge a fee for investment advice. An investment broker, however, is typically paid a commission that is contingent on the sale of an investment product to the client, and is held to merely a suitability standard when it comes to making investment recommendations.
When you have made the decision between the advisor and the broker, the next decision is to dig a little deeper into the educational background and current credentials of the professional you are considering hiring. In today’s technologically advanced society it is easy to create websites and social media presences that give the illusion of competence. It is very common to embellish expertise, experience, accomplishments, etc. Some “professional designations” can be purchased for a small fee and/or by completing a short open book test. Financial advice primarily consists of investment, tax, and estate planning, and, as such, you may want to consider looking for an advisor with a CFP certification at a minimum and a CFA, CPA or JD after that would be a great compliment. The knowledge and expertise that comes with these credentials provides insight into the advisor’s experience. The ability to coordinate with other professionals (accountants, attorneys, insurance brokers) will ensure that every angle of your financial plan is analyzed to make the best recommendations for you and your family.
The next decision is one we at Moneta Group are very passionate about. We have been focusing on multi-generational sustainability planning for 10-15 years, and have and will continue to build multi-generational teams of advisors to provide advisory services to our multi-generational client families. The seamless transition of wealth from one generation to the next is beneficial to our clients and our firm. We believe having a succession plan in place is a key aspect of successful advisors, because no clients wants to risk losing their ability to receive advice, even if an unforeseen event were to impact their advisors ability to provide services.
The final decisions to make, or things to think about, are more subjective and personal. If you find a highly referred investment advisor with quality credentials/professional designations and a solid succession plan, you are almost there. The decisions we all must make when it comes to our finances are very personal. Needs, goals, and expectations should be clearly articulated to the prospective advisor, and the answers you receive should be in language you can understand. The best advisor is going to be someone who you can trust and confide in. The advisor you choose should be someone you are confident in, who will provide recommendations based on your best interests, particularly during those times when you need it the most.
