This was originally posted on June of 2007 when this space was “The Tentative Personal Finance Blog”. The entire site was stripped down to its bare bones, but entries (“greatest hits”) may appear every so often.
Who is the best person to handle your finances? It’s you, but let’s say you’re the kind that can make money but don’t know what to do with it once it’s yours. Or perhaps you know a bit about personal finance but need some help on the more complicated matters associated with managing your money. Or maybe you don’t want a thing to do with handling your finances. You simply want to turn them over to someone else. In all of these cases, you may be in the market for a financial adviser. But the world of financial planners is full of sharks. In most states, anyone can call themselves a financial adviser, even if they don’t have any training. So how do you pick a financial planner who knows what they’re doing and won’t rip you off by only working to turn your money into theirs? A few thoughts…
Financial pros will ask you questions such as your expectations for returns and tolerance for risk, but because you’re doing the hiring, you should also do some interviewing.
- What process do you follow to identify goals and evaluate performance?
- What are your sources of research and information?
- How often will you hold formal meetings and reviews with us?
- Are you available for informal meetings?
- What is the fee structure?
- How are you compensated?
- If I have a complaint, where do I take it?
- Does your firm have a formal dispute-resolution process?
- Can you show me representative portfolios or actual client case studies?
The first step is making sure the planner’s expertise meets your needs. Then there’s another issue of compatibility. Is the adviser someone you can confide in, someone you feel comfortable going to with questions, problems, and concerns? The answers won’t tell you everything. References will be self selected. Even clients’ overall portfolio returns are of limited value because of timing differences. What’s helpful is the actual performance of the funds or accounts an adviser proposes for you, which you should ask for.
You’ll also want to check to be sure your planner hasn’t had any run ins with regulators. But your real goal is to smoke out bluster and get a sense if someone is candid and intelligent. That takes face time. The more research you do and questions you ask before signing on with someone, the fewer problems you’re likely to experience down the road.