Objective information about financial planning, investments, and retirement plans

Choosing the Right Financial Advisor – Key Considerations


Happy young couple in discussion with a financ...

With the holidays behind us and taxes on the horizon, many folks are looking to find a qualified financial advisor who is right for their situation.  Maybe getting your finances in order was a New Year’s Resolution.  Perhaps you’ve realized that retirement is getting closer.  Whether you will be looking to work with a financial advisor for the first time or feel that your current advisor isn’t meeting your needs, here are some issues for you to consider in your process of choosing the right financial advisor for your situation.

Understand yourself first 

The first question that I ask a perspective client is:  What prompted you to seek the services of someone like me?  While you may not be totally sure of all of the areas in which you need help, thinking about what you want from a relationship with a financial advisor up-front will help you to find the right advisor for your unique situation.

Some common answers to my initial question over the years:

  • Retirement is looming and I want to make sure that I have everything in order.
  • We inherited some money and want to know how to best invest it.
  • Our investments are all over the place and we have no plan.
  • We want an independent review of our situation and a financial plan to help us move forward. 

How would you and the advisor interact? 

What is the advisor’s communication style?  How often would you meet?  Will the advisor be proactive about bringing relevant ideas and suggestions to your attention?

There is no right answer here, but you should be sure to ask about this so that should you enter into a relationship with this advisor your expectations are realistic.

Does the advisor work with clients like you? 

An advisor who focuses on clients who are retired might not be the right advisor for you if you are in your 30s with small children for example.  Does the advisor have a minimum level of net worth or investible assets?  Where does your situation fall in comparison to these minimums?

If, for example, you are a corporate employee seeking advice on how to best manage the stock options granted to you by your employer does the advisor have experience helping clients deal with their stock options?

Advisor or product seller? 

Does the prospect advisor focus on selling financial products?  Do they offer financial planning services?  Are they compensated on a fee-only basis or do they depend upon commissions from the sale of financial products for all or part of their compensation?

It is important that you fully understand how the advisor is compensated so that you understand if there are potential conflicts of interest that might be driving their advice.

What are this advisor’s qualifications? 

There are an increasing number of designations in the financial advice world.  The two that hold the most weight as far as financial planning goes are the CFP® designation and PFS designation.  The latter is the personal finance designation awarded to CPAs who qualify.

Make sure to ask about the designations held by a prospective advisor and also about their education and experience.  While none of these ensure that the advisor is right for you the answers to these questions will give you a sense of their commitment to gaining the knowledge needed to address your financial planning and advice needs.

Do some checking 

Check on the prospective advisor’s record.   FINRA’s Broker Check database of federally and state registered investment advisers allows you to search by name, and lets you check up on firms as well. Several private services, such as BrightScope, have services to check an adviser’s regulatory record. If the adviser is a Certified Financial Planner you can also look up their information at the CFP Board’s website. None of this is a guarantee, but it is a great starting point.

The right financial advisor can help you build the wealth you need to reach your various financial goals.  Take the time and put in the effort to select the right advisor for your unique needs.

Please contact me at 847-506-9827 for a free 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.   

Check out our Resources page for links to a variety of tools and services that might be beneficial to you.

Photo credit:  Flickr

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A BrightScope Success Story


For those of you who are not familiar, BrightScope is a start-up company that has introduced an online-database and ranking tool for 401(k) plans. They use information culled from 5500 reports and the DOL to gather data and rank plans along six key factors:

  • Total Plan Cost
  • Company Generosity
  • Investment Menu Quality
  • Participation Rate
  • Salary Deferrals
  • Account Balance

While some criticize BrightScope’s methodology and the quality of their data, one thing is for sure. BrightScope has contributed to the needed conversation about 401(k) costs and the overall quality of plans companies offer to their employees.

I recently received an email from a client for whom I had done a financial plan for his personal situation in early 2009. At the time I had mentioned to him that I could also be of help with his small company’s 401(k) plan. His recent email cited the fact that he had looked at his plan’s BrightScope ranking and was disturbed by the fact his company’s plan had the lowest rankings for both plan cost and investment menu quality. His plan is with a well-known insurance company so I was not surprised by his note.

Where will this go, to be determined. Is this a success story and an example of what BrightScope can facilitate? Yes.

The next step is for the client and I to sit down and review the details of his plan. If there are indeed cost and investment quality issues I will see if I can propose a better solution.

To me the power of BrightScope is getting the conversation started. I would encourage anyone charged with making decisions on their company’s 401(k) plan to check their plan on BrightScope. If your plan isn’t ranked or if you feel the ranking is based on inaccurate data (currently the data is accurate through the 2008 5500s) I would encourage you to contact the company and provide them with data that is more up to date.

Plan participants, you can also use BrightScope to see how your company’s plan stacks up. There is a link on the site for participants to register.

Plan sponsors if you need help in doing an in-depth review of your your company’s plan (investments, cost, investment process, etc.) or if you feel that it is time to engage an independent third-party advisor, please feel free to contact me.

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