Finding a Financial Advisor

By Virginia B. Morris

Finding a financial advisor isn't as hard as it might sound. First, you should decide what you want from an advisor. For example, do you want to start formulating a long-term financial plan, begin investing to meet a specific goal, or establish a trust? Remember that the best person for providing investment advice may not be the ideal candidate for creating a financial plan to handle other financial matters, such as insurance or retirement strategies.

You can start your search for an advisor the same way you'd look for a doctor, lawyer, or other professional. Ask your family, friends, and colleagues if they'd recommend the person with whom they're working. Ask your accountant or attorney for a reference. Contact the branch manager at a local bank or brokerage firm. In those cases, be sure to be explicit about the type of person you're looking for and the qualifications he or she must have.

Call each candidate on your list, explain that you're in the market for a financial advisor, and ask to set up an interview. While it's likely that most of your future communications will be conducted over the phone, a good working relationship depends on your ability to interact frankly and comfortably with your advisor. And while it might seem like a waste of time to meet with several potential advisors to find the one with whom you want to work, remember that your financial security may be at stake.

The key to a productive interview is knowing what you want to learn before the start of the meeting and having a clear understanding afterward of what was said. Obviously, asking good questions is one of the best ways to get good answers, not to mention a fail-safe way to find out if the advisor is knowledgeable enough to provide them. So write out 8 to 10 questions and be sure you get the opportunity to ask them. With a list in hand, you're less likely to get nervous or distracted and miss the information you'll need to make your final decision. Here are some questions you might want to ask:

What do you think I should be doing right now to build my financial security?
In what specific ways can you help me achieve those goals?
Who is your typical client?
Do you sell investments as well as advice?
What type of investments do you recommend or sell the most?
How are you paid? If you get commissions, who pays them? If you collect fees, how are they calculated?
What should I expect to spend for your services over the next year?
Will you help me evaluate the progress I'm making toward my goals? How?
What professional credentials do you have? How can I check them?
How long have you been working with clients like me?
Do you have clients whose interests are like mine that I could contact as references? (You should know, however, that advisors are not legally required to supply references.)

Taking notes during conversations, and jotting down specific answers to your questions, is a good way to record what was said. And the fact that you're taking notes might encourage the person you're interviewing to give added thought before committing to an answer. After each meeting, you should include your personal impression of the person you met. If you've interviewed several people over a relatively short period, these notes can help you weigh your choices more evenhandedly. Remember, though, that an interview is a conversation, not a performance or a test. The more candid you are about your goals and expectations, the clearer you'll be at describing your objectives, and the better chance the advisor will have of responding to your concerns.

Before you decide among the candidates, check their personal and professional references. This may be the hardest or most tedious part of the process, but it's essential nonetheless. If you call individuals for references, decide ahead of time what you want to find out. A good starting question is to ask if and how the person feels she is better off for having worked with the advisor. The answer should give you a sense of the advice she has received and how well it has helped her realize her goals.

If it's easy to select the best advisor from your list of finalists, your work is done. If, however, you're still wrestling with the decision, ask yourself:

Could I understand the answers to the questions I asked? Were the explanations of investment choices clear? Was I asked about my financial goals? Was I asked about my income and assets? Was I asked about my tolerance for risk? Was I treated with respect? Was the conversation more about what I want to accomplish than about what the advisor could do for me? No search process is foolproof, and you may find that your first impressions do not hold up at a second meeting. Remember, you're never obligated to stay with an advisor with whom you're not comfortable, and you can always switch. But if you do the screening carefully, the chances are you'll find an advisor that can help you accomplish the financial goals you've set for yourself.