5 Steps to Finding the Right Financial Advisor

5 Steps to Finding the Right Financial Advisor

You’re a busy woman. Between work, friends and family, you can barely find the time to cook dinner and walk the dog, let alone squeeze in a doctor’s appointment or take care of that much-needed mani-pedi (Um, when are they going to come up with a truly quick-dry polish?).

If all this running around has left you too exhausted to deal with your finances, it might be time to consider hiring a financial advisor. Now, don’t run out and hire the first financial planner you find in the phone book ... or the woman your coworker uses. You need to hire someone who meets your needs. So do your homework. Solicit recommendations from people you trust and check out NAPFA.org, the National Association of Personal Financial Advisor’s Web site, for more candidates. Compile a list of potential financial advisors that you’d consider. Remember that it’s probably a good idea to go with someone who has national certification such as a CFP or ChFC.

Once you’ve done that, follow these five tips to get the right financial advisor for you:

Look for a Fee-Only Advisor

These advisors do not work on commission, so they won’t push investments that don’t make sense for you. You pay them a flat fee—usually by the hour. Shop around for the best rates.

RELATED: Why You May Want a Fee Only Financial Planner

Interview the Advisor

Yes, this will take some time, but remember, if you find a good one, you won’t have to do this again for a long time (Translation: You’ll have time to squeeze in that mani-pedi in the coming months). Visit napfa.org for a great questionnaire to present to potential advisors. You will want to ask them about the following:

  • Credentials: Is he or she a CFP? ChFC?
  • Experience: Includes time on the job and number of clients.
  • Compensation requirements: Includes commissions, fees, and whether the advisor (or a member of his or her firm) is compensated for recommending certain investments or financial products.
  • Whether he/she is a registered investment advisor: Ask to see documentation of this, which in many cases will be Form ADV, see #3 below.
  • Services: Make sure that the services the advisor offers are the same services that you need. Ask whether she will personally deal with you or whether an associate will be the one who really talks to you.

Ask to See the Advisor’s Form ADV

Form ADV is the form used to register as an investment advisor with the Securities and Exchange Commission (SEC). This form can tell you if they’ve had problems, lawsuits, or complaints against them in the past, which should be a warning sign to you.

Go With Your Gut

Sure, all these questions and documents are important, but even if the advisor passes your tests with flying colors, this does not mean he or she is right for you. Remember how much you hated the good-on-paper guy once you got to know him? Same situation here. Ask yourself whether you trust this person and think he/she will do a good job. If there’s doubt, move on.

Consider Asking the Advisor to Sign a Fiduciary Oath

A fiduciary oath is a document that lays out ground rules for advisor behavior, including a promise to act in the best interest of the client—you. A sample of this oath can be found in the Comprehensive Advisor Diagnostic manual on the National Association of Personal Financial Advisors’ Website at napfa.org.

Once you’ve found the right advisor, it is important that you don’t blindly trust him or her. After all, you’re smart, successful, and savvy, so don’t doubt your ability to do this on your own. Don’t stop yourself from telling your advisor that you simply don’t understand her rationale if something seems unclear.

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Catey Hill is the money editor for the New York Daily News online and author of "Shoo, Jimmy Choo! The Modern Girl’s Guide to Spending Less & Saving More" (Sterling, January 2010).

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