A Guide to Finding Your Financial Advisor
When do you need a financial advisor?
The role of a financial advisor has evolved tremendously over the past 20 years and you may not even realize how a financial advisor can be invaluable to you today. The financial professional of years ago usually played one of two roles: A commissioned broker who helped you with an investment portfolio by suggesting investments to you or an investment manager that took over your portfolio and managed your investments without regular interaction other than a quarterly report and perhaps an annual in-person meeting. These descriptions may sound a bit extreme, but historically, financial professionals helped with investments and offered little advising. Today’s advisors may see your investments as the center of a discussion, but they also offer a range of analyses and advice to help you answer many financial questions in your life. In our experience, you should seek out a financial advisor when you relate to one of these situations:
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You no longer enjoy or feel confident managing your wealth yourself.
Many people successfully manage their own finances and prefer the control, privacy and minimal costs that come with a do-it-yourself approach. Often, however, you realize one day that you have accumulated meaningful wealth and you are not sure you are doing the best you could. It takes too much time to follow your investments and make decisions in changing market conditions. Also, maybe you believe you have done well, but are not sure how to address future financial challenges. You are not sure how to determine how much of your wealth you can live on without a regular paycheck. You want to pay for college, weddings or structure your legacy and you realize these goals take broader expertise. If this sounds like you, it is time to find a financial advisor.
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You have outgrown your current financial advisor.
Maybe you’ve worked with your advisor for years. You meet annually to go over your investments; you review charts and graphs and statements. He’s a nice guy, but there’s a nagging feeling that perhaps it’s no longer enough. Your life is more complex than when you started together. You may be facing college expenses, paying for weddings or considering the retirement you would like. You know your will is outdated or perhaps you never got around to getting one; you wonder if your insurance is still adequate. If your advisor hasn’t been asking about these aspects of your life and offering guidance, perhaps you have outgrown your advisor. He still is a knowledgeable financial advisor, but you have reached a level of wealth in which you need someone with a different range of expertise to help you consider the dynamics of your current life. It’s time to do some research and find the right person to help you with your next steps in your journey.
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You have had a recent change in circumstances.
Your best-fit advisor is someone who works with clients very similar to you. When your circumstances change, you often need to rethink your whole team. Whether you have sold a company, accepted a large pension payout or received an inheritance, you may find yourself in a very different financial situation. When this happens, it is usually best to move slowly and carefully. You will want to take some time to consider any changes to your lifestyle and what new dreams inspire you.
While you may feel very loyal to any advisors that have helped you get to this point, often, they are not the same professionals best suited to advise you for the future. It is time to slowly, but steadily, start meeting new professionals that have experience working with people like you.
How do you choose a financial advisor?
The process of selecting the right advisor is a little like dating, as a colleague once put it. Just like you want to find a partner who understands your goals, has integrity, inspires trust, and communicates clearly, you want to find a financial professional who exhibits those same qualities. So, take your time, ask the right questions and make sure you are comfortable that this person has your best interests at heart.
Before you start searching for an advisor, put some thought into what areas of guidance you would like and how you hope to work with this person. Understanding what your goals and needs are will help you narrow the search. For example, if you primarily need investment guidance and retirement planning, you may select a firm that emphasizes financial planning. If you have complex needs in which you would like your tax strategies, estate goals and investments coordinated, you will seek a firm with a broader range of expertise. Select an advisor that understands your set of circumstances and who works regularly with other clients similar to you in terms of complexity and wealth.
Before you talk to potential advisors, it is good to actually write down your questions. This helps you compare their answers consistently and objectively. Be sure to add a comment area for yourself too though, because just like dating, there is an important intangible element to a successful relationship. If you’re set to discuss your financial situation with an advisor, here are five of our suggested questions you may want to ask.
- What is your background and what are your credentials?
- What services and products do you offer?
- How are you compensated?
- How will we work together?
- What is your approach for someone like me?
When it’s time for a new financial advisor, put some time and effort into the search. If you have been referred by friends or found a few potential names on the web, you can do some preliminary screening about their business model, compensation and disciplinary history by looking at their website and their Form ADV on the SEC’s website. You can also check their regulatory history on FINRA’s website. Once you have done your homework and clarified what you are looking for, get ready for some "dating." Some advisors will take you to coffee and others will have a personalized “welcome” sign in their office. Use your list of questions to find the qualified advisor that can deliver the expertise you seek and also offers the comfort and confidence that comes from building a genuine relationship with your financial advisor.
To Learn More, visit our website at www.summitplacefinancial.com