Why didn’t I title this post “How to Hire a Financial Advisor”?
If you read last month’s post, you’ll know there are a wide variety of professionals with various titles, and a Financial Advisor may or may not be what you need.
The key to hiring the right financial professional is knowing your needs and which type of professional is qualified to meet those needs. Then, it’s a matter of asking a few key questions.
First, let’s look at the different professionals you might engage.
The Pros
While this list isn’t exhaustive, these are the most common types of professionals most people need at one point or another.
Tax Advisor
If most of your questions involve taxes and tax planning, a tax advisor is likely the person you need. That person might be a qualified tax preparer, a CPA, or a tax attorney.
Investment Advisor
If most of your questions involve investments and portfolio management, then an Investment Advisor (often called a Financial Advisor) may be right for you.
Financial Planning Professional
If most of your questions are around reaching your financial goals (think higher education, retirement, buying a second home), then a Financial Planning Professional is likely a good fit.
Wealth Management Professional
If you seek investing and financial planning advice, someone who calls themselves a Wealth Manager is likely the best fit. Because Wealth Manager is a generic title, be sure they have the requisite training to give investment advice and perform financial planning.
Read: Financial Advisor vs. Financial Planner: What is the Difference?
Pick Your Financial Professional
The first step is to pick the type of professional you think best suits your needs. It may not be clear to you yet what kind of Pro you need. To get a better idea, start with the end in mind.
Ask yourself:
“What is the outcome I am looking for?”
“What specific problem am I trying to solve?”
“What specific question am I trying to answer?”
If you can answer those questions, you’ll have a clearer picture of the type of pro you need.
Shopping Around
Now that you know what kind of pro you need, it’s time to build a list of candidates.
Asking for referrals from friends, family, and trusted advisors is a great place to start.
When asking for these referrals, be specific about the type of pro you are looking for and the main problem you want to solve. You’re much more likely to get the right names on your list.
If finding a referral isn’t an option, you can do a web search. Most professionals who are looking to take on new clients have websites to attract those new clients. When you do your search, make it specific.
It’s a best practice to have at least three candidates on your list.
How to Research a Financial Professional
With your candidate list in hand, do some poking around.
Do your candidates each have a LinkedIn page, Facebook page, website, or other ways to help you learn about them and their practice? Are there reviews posted publicly about them? Is there a publicly available tool to check for any disciplinary history?[1]
This initial research can help you decide early on if one candidate has more or less potential than the others. You may even be able to eliminate a candidate from your list.
Next, get in touch and ask for a short conversation. This gives you and each candidate a chance to ask some initial questions to see if you might be a good fit for each other.
If there might be a fit, it’s time for an interview.
Interviewing a Financial Professional
If you’ve done a thorough job with the first two steps, you should have two to three viable candidates to interview.
The interview is your opportunity to ask key questions to help you decide which candidate fits you best. In the days before your meeting, write down questions as they come to you. Before the interview, organize them in a list so you can be sure you ask them all.
I find that potential clients often have questions they fail to ask because they didn’t write them down.
Questions that I feel are important but that may not be on your list include:
- What is your duty of care to your clients?
- What is your policy on disclosing conflicts of interest?
- Can you explain the costs of working with you and how you are compensated?
- Does another member of your firm directly supervise you?
- Do you have a disciplinary history? Has your professional license or specialist designation ever been revoked? If so, please explain.
- What education, training, and experience do you have that qualify you for the work I want to hire you to do?
- Are you a specialist in [problem you need to solve]?
Once the interview is complete, reflect on how you felt during the session.
Did the candidate make you feel uneasy or uncomfortable? Conversely, did they set you at ease and give you control and confidence?
Beyond the cold hard facts, how a person makes you feel will greatly impact your satisfaction with their work.
Choosing Your Financial Professional
There is no right or wrong way to choose.
Some people sleep on it and then go with their gut.
Others might develop pro/con lists, spreadsheets, or seek the advice of a trusted friend or family member. If you’ve followed all the steps up until now, you’ve got all you need to make the right choice.
When you decide, let your candidates know what you’ve decided.
While it may make you uncomfortable to tell someone they were not selected, it’s better to let them know than to leave them hanging. A true professional will know how to take no for an answer.
The process I’ve outlined above may seem time-consuming and overly thorough, but when you select a Financial Professional, you put great trust in them. A careful selection process can help you avoid buyer’s remorse and set you up for a lifetime of sound advice and guidance.
[1] For Financial Advisors, you can use FINRA’s Broker Check tool at https://brokercheck.finra.org/
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