How to Select a Financial Professional
Once you’ve decided to get serious about financial planning or investing, one of your next steps may be to seek professional assistance. Perhaps relatives or friends are recommending financial professionals to you. Maybe you know some financial professionals yourself. What is the smart way to choose financial planning advice and service? Consider these 10 ideas:
- Focus on the person – You probably want a relationship that will continue for many years. This relationship usually is built on a personal level, not with companies. That’s why it’s best to set aside the hype and focus instead on the integrity, style, values and work habits of the individual. Attending seminars is a great way to compare financial professionals because it allows you to evaluate styles before you make a commitment. It’s also a good idea to obtain referrals from people you know and trust, ideally those who are clients of the same professional.
- Find a good fit – Interview several professionals who have been recommended by friends and family – or perhaps those whom you’ve met at networking events or seminars.
- Go slow – Some of the best financial relationships are built gradually, so don’t feel pressured to make a commitment right away. Tell the professional what you need to accomplish, and don’t let yourself be pushed into complex processes. If you’re buying a financial product, evaluate how well the professional serves you after the first sale. Continuing service is a true test of a dedicated professional.
- Listen – In your first or second interview, most financial professionals will tell you how they work and what they do best. Sit back, make eye contact and listen carefully. You’ll learn that some professionals are comfortable recommending high-risk investments, while others are more conservative.
- Expect to be educated – Ask professionals how financial concepts work, and then evaluate how much clarity and care they put into their answers. The best financial professionals are good communicators and educators who don’t mind teaching their clients. Beware of professionals who brush off questions with flip answers. True professionals don’t bully clients with superior financial knowledge. They share it.
- Discuss fees – Financial professionals can be paid in many ways – such as through commissions, hourly fees, or fees based on assets invested with the professional. Any method can work, provided you understand and are comfortable with it up front. Ask candidates how they wish to be paid and approximately how much you should expect to pay them in the first year of your relationship.
- Ask for documents – Ask to see documents before choosing a financial specialist. If your financial professional acts as an Investment Advisor Representative providing investment advice, ask to see a sample plan and make sure you are comfortable with its depth and style.
- Evaluate the process – At some point early in your relationship, the financial specialist probably will make a specific recommendation to you, which can involve buying an investment or insurance product, participating in a planning analysis, or opening a brokerage account. Before accepting or rejecting the recommendation, ask yourself if the financial professional learned enough about you and your needs to make an appropriate recommendation at that point. If a recommendation comes too fast, it’s a sign that the financial professional is focusing on his or her needs more than yours.
- Credentials and background – Many financial specialists have college degrees, and many also have earned professional designations such as CERTIFIED FINANCIAL PLANNER™ (CFP®), Chartered Life Underwriter® (CLU®) or Chartered Financial Consultant® (ChFC®). Once you are comfortable with a financial professional’s style and methods and have checked out personal recommendations, consider degrees and designations as the “icing on the cake.”
- Remember your financial professional’s role – Your financial professional isn’t your parent, buddy or psychiatrist – and he or she won’t set strict rules on how you can invest or cheer you up when your investments are dropping. Your financial professional will prove most valuable by listening to your needs, making clear recommendations, helping you avoid mistakes, and always telling you the truth. When financial professionals exaggerate their skills or promise success, consider that a red flag.
The best financial professionals are helpful and dedicated people who, whenever you have a serious need or question, will make time to address it. Even if you aren’t their wealthiest client, they’ll recognize that your financial goals are very important. They won’t make investing or planning difficult for you. At every opportunity, they will try to simplify your life without glossing over difficult decisions or unpleasant results. A good financial specialist will remind you that you are in charge of achieving your own goals, and you can do that best when you have the benefit of accurate information, objective analysis, and clear recommendations.