Finding the best financial advisor for you can be a stressful process. Finding someone you know you can trust right off the bat is difficult, and knowing who has your best interest in mind can seem impossible.
But, there are a few terms and designations to know to help you narrow your search.
First, start your search looking for fee-only advisors. This is not the same as fee-based, a term that has come up recently as more and more salesmen try to market themselves as financial advisors or planners.
Fee-Only means that the advisor does not accept any other form of payment besides payment from the client.
This means Fee-Only advisors do not accept commission from any insurance products, or kickbacks from investment companies. This is one easy way to ensure that your advisor has your best interest in mind, and is not incentivized to sell you something or place you in investments that are not right for you.
Fee-Based means that the advisor collects fees from the client, and also commission from selling products like insurance or mutual funds.
“How are you compensated?”
“If you accept commissions, will you itemize the amount of compensation you earn from products you recommend to me?”
“Do you provide comprehensive financial planning, or just investment management?”
The next term to know is fiduciary. Finding a fiduciary advisor means finding someone who is required to work with your best interests in mind. An advisor following a fiduciary standard has much more strict requirements for any recommendations they are going to make.
The alternative is something that is called a suitability standard. This is common for many brokers that you may come across who are also calling themselves financial advisors, but are really just salesmen.
When interviewing potential financial advisors, be sure to ask if they follow a fiduciary standard. If they mention only a suitability standard, you should at least be sure you understand the basis for how they make recommendations. And preferably, you should find someone better.
“Would you sign a fiduciary oath committing to put my financial interests first?”
“How will you help me reach my financial goals?”
“Have you even been disciplined by the SEC or FINRA?”
If you need a place to start your search for a good financial advisor, a few organizations that we are members of are:
NAPFA (the national associate of personal financial advisors)
Or, the XY Planning Network
Both of these organizations require their members to be Fee-Only, and Fiduciary, to help ensure you find a financial advisor that you can trust and have search features on their website to help you find a financial advisor near you.
After ensuring any prospective advisors have the Fee-Only and Fiduciary designations, the next step should be to schedule time to sit down and talk with any advisors you are considering.
Make sure you feel comfortable with the advisor. Make sure they can provide sample work they have done for other clients like you, are responsive, and listen to you as you address your concerns and goals.
We are a fee-only, fiduciary financial advisor in Cedar Rapids Iowa, serving clients across the state. All of our advisors are CFPs (Certified Financial Planners) or are working towards earning the designation.
We work with about 140 households, and focus on the areas of investment management, retirement planning, tax planning, and estate planning/charitable giving strategies. Here’s a look at all the elements of our financial plans.
Want to know more about how we work with clients to see if we’re the right fit for you?