You’ll make a handful of major decisions in life. One of those is selecting the professional who will manage your savings and handle your investments. This choice will impact everything in your life, including sending your child to college, buying a house and living comfortably in retirement. Here are seven criteria for vetting a financial or investment professional:
Type of Professional
Determine what you need. Generally, a planner handles your overall financial picture, including estate planning, tax planning, investment planning and retirement. A certified financial planner is licensed and regulated, and required to pass a test on personal finance by the Certified Financial Planner Board of Standards. A financial adviser (or full-service broker) typically focuses on investment decisions. Ask an adviser what licenses and additional designations or education trainings he or she has obtained or undergone. Money managers generally hold the Chartered Financial Analyst designation and focus on managing investment portfolios on behalf of their clients according to an agreed-upon strategy.
Ask upfront if any conflicts of interest exist. An investment adviser should be objective while providing solutions for your financial planning needs, says Rashida Lilani, a CFP and principal of Lilani Wealth Management in Roseville: “Will that professional be working for you, or for someone else?”
Ensure the professional is completely transparent. For instance, ask the adviser to disclose the manner in which she is compensated — is there an hourly charge or fee for services? “If an adviser cannot clearly and articulately explain their background, educational credentials, experience, compensation and why they’re making recommendations — those are absolutely red flags,” says Jason Bell, a CFA for Wells Fargo Private Bank in Roseville.
Use BrokerCheck on the Financial Industry Regulatory Authority’s website (www.finra.org) to check whether your adviser has any disciplinary actions in her professional background.
Expect your adviser to be accessible and responsive, says Lilani: “Whether it’s email, phone call or in-person meetings, you should be able to communicate with her in an ongoing manner, usually every three to six months, depending on the depth of services you need.” A client should feel empowered to ask tough questions. “What would be their recommendation — their plan to get you from point A to point B?” Bell says. “They should be able to articulate that and lay that plan out.”
Request periodic reviews. As life changes, so do our objectives. “A diligent adviser will make sure that your investments and financial plan reflect your current goals and risk tolerance,” Lilani says. Clients should be able to answer one question: What do I want this person to do for me? “You should be able to articulate what you want out of the relationship,” Bell says.
Ask yourself if you feel comfortable with this person. “These are typically long-term relationships where you build trust with someone over time, and you want to know they are making decisions in your best interest,” Bell says. Trust your instincts.