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How to Choose a Financial Advisor


This is not a pitch for our services, but I will tell you I am biased towards our way of doing business.  I will try to remove my bias for this blog, but I can't say that I will be able to.  Even if you are not considering us as your financial planner, make sure that you look for the three words that I call the Big Three:  CFP(R), Fiduciary, and Fee-only.  

The CFP(R) (Certified Financial Planner) designation is one of many designations that a financial planner can obtain, but it is considered by many to be the highest designation that a financial planner can achieve.  To become a CFP(R)today, an individual must complete the 4 E’s, Education, Examination, Experience, and Ethics. 

The Education requirement says that a CFP(R) must have a Bachelors degree (this wasn’t always the case) from a regionally accredited college or university, as well as have completed a college-level program of study in personal financial planning.  Alternatively, you can be accepted through challenge status or transcript review, but this is reserved for people who have completed equivalent courses of study for other designations such as the CFA. 

The Examination portion is the infamous CFP(R) test.  This test is given by the CFP(R) Board several times per year, and it has a notoriously low pass rate.  I’m happy to say that we both passed it on the first try, but that is not the case with many people. 

There are a two ways to meet the Experience requirement.  The first is to have 3 years of industry experience in a variety of different capacities, and the 2nd is to do a 2 year apprenticeship under another CFP(R) professional. 

The Ethics portion says that all CFP’s must adhere to the high standards and ethics outlined by the CFP(R) Board, which can be found on their website.  This includes a background check and investigation into any criminal or civil matters you have been involved in. In addition, there is a continuing education requirement that must be met annually which includes 30 hours of CE training every 2 years. As you can see, just obtaining the CFP(R) marks and then keeping them are no easy task.

The second major word to look for is the word fiduciary.  The word fiduciary is defined by legal-dictionary.com as “An individual in whom another has placed the utmost trust and confidence to manage and protect property or money.  The relationship where one person has an obligation to act for another’s benefit.” 

To find out if the planner you are considering holds themselves to the fiduciary standard, I would first ask them.  They will be very eager to tell you if they are.  If they are evasive about the question, be wary.  You can always look in the firm’s code of ethics or form ADV to find out if they hold themselves to this standard as well.

In contrast to a fiduciary, some planners use the suitability standard.  These planners are only legally required to make sure that the investments are suitable for you.  They don’t necessarily have to be your best option.  Since many of these types of planners are commission based, they are going to try to sell you what makes them the biggest commissions, not necessarily what is best for you. 

The last part of the big three is that the advisor you are considering is fee-only.  Why fee-only?  A fee only advisor will never try to sell you anything that you don’t need in order to make more money for themselves.  They typically get paid on a percentage of assets under management.  In other words, the more money that they manage for you, the more they get paid.  Your goals are aligned, in that they want to grow your investments, as do you.

I am in no way trying to imply that all commission-based or fee-based (a mix of fees and commissions) advisors are going to rip you off.  I believe that there good people in any profession, and that there are crooks in any profession. Many commission based jobs have wonderful people in them that will help you make good decisions.  We have business partners that we recommend who only work on fees that we trust to sell our clients the right products for them.  We refer people to insurance agents, mortgage brokers, and real estate agents frequently and they all work for commissions. We simply believe that when your financial planner has the same goals that you do, and they are held to a fiduciary standard, that it will greatly increase your probability of success. 

Outside of the big three, there are other things to keep in mind when interviewing a financial planner. 

  • Do they pass the smell test?  If you feel in any way uncomfortable by things you hear in your first meeting, the condition of their office, their business practices, then trust your gut.  This is an extremely high trust business, so if you are not comfortable with your planner, you will probably not have a successful relationship with them in the long-term.
  • Do they listen to what you are saying, or simply try to fit you in a category of client and tell you how you should be invested? 
  • Do they ask you the right questions to get to know you on a personal financial basis?
  • Are their goals for you the same as your goals for you?

Lastly, if you are considering going through this process and interviewing planners, we would certainly like to be one of the ones that you do.  You can always call us in the office at 904.685.1505 to set up a free initial meeting.  Even if you don’t use us, we promise that you will leave that meeting with more knowledge than when you came in!