Financial advisor, manager, consultant? Who is the real deal, how can I tell?
By Marc D. Langva, CFP®, Founder & CEO at WorkOptional | firstname.lastname@example.org
According to the Wall Street Journal, there are more than 200 different designation for financial advisors, some common names are “financial consultants,” “wealth managers,” “financial advisors,” “investment consultants,” and “wealth advisors.”
Regardless of the title, what you need to know is that the majority of financial advisors in America are actually just brokers. In other words, they’re paid to sell financial products to customers like you and me in return for a commission.
This matters because brokers have a vested interest in pushing costly products, which might include actively managed mutual funds, whole life insurance policies, and variable annuities. These products typically pay them a onetime sales commission or ongoing annual fees. A broker at a major firm might be required to produce hundreds of thousands in sales. So, these are salespeople under intense pressure to generate revenues. This does not mean they are dishonest. But it does mean they’re working for the house. And remember, the house always wins.
The best financial advisors will add extraordinary value by helping you with everything from investing, to taxes and insurance. They will give you more help than just designing your investment strategy. They will provide holistic advice that’s truly invaluable.
So, how can you tell who is the real deal? I have outlined 5 guidelines below that you should use when evaluating any advisor.
1. If you hire anyone to watch over your money, start by asking them one simple question: are you a fiduciary? If the answer is not a clear yes, it’s time to move on.
2. Then you need to know if your advisor is a Registered Investment Advisor (RIA). They should have no affiliation with a broker dealer or as a dually registered advisor. Of all the financial advisors in the USA, there are only a minority that are RIAs.
3. Certified Financial Planners (CFP®) take a fiduciary oath to act in a customer’s best interest. In addition to showing their competency by taking the test, they are also there to help, and not just sell you the latest financial products. With the combo of a fiduciary and CFP®, your chances of finding the real deal are pretty good at this point.
4. Next, it is extremely important for your advisor to have at least 15 years of experience working with people just like you. Do they have a proven track record? Are they themselves successful with their financial plan? If not, how could they create a successful plan for you?
In an anonymous survey, the Journal of Financial Planning found that 46% of advisors had no retirement plan of their own! Can you imagine hiring a personal trainer who is not fit themselves, or a nutritionist who’s eating junk food while telling you to eat vegetables?
5. Finally, it’s important to find an advisor you can relate to on a personal level. A good advisor will be a partner and ally for many years, guiding you to make true lasting results.
The bottom line is to find a world-class advisor who will help you immeasurably from start to finish: defining your goals, keeping you on a steady path toward them – in particular, by helping you to weather market volatility – and drastically increasing the probability that you’ll actually achieve your goals.
After all, it’s your wealth that’s at hand. And so, finding that right person to preside over your assets in a way that’s in your best interests is essential to the security of your retirement.