How to Choose a Financial Advisor—Learn the right questions that you need to ask when you are choosing a financial advisor

Moral, Honest, Loyal, Helpful, Knowledgeable, Reliable—Do those words come to mind when you think of your financial planner?

Always do your due diligence when selecting a financial planner or advisor. 

You must properly educate yourself prior to meeting or communicating with an advisor or planner at your highest level of excellence.

Part of doing your due diligence is your eagerness and determination to educate yourself on the issues that you need answers to “prior to" your engagement with a planner or advisor.

It is imperative that you find financial advice that you can trust if your goal is to improve your finances and that of your family's.

If you have had problems in the past or are new to investing and money management this site will provide much needed information for you and your family so that you can improve your and your family's living conditions.

After having gone through two major stock market crashes from 2000 to 2010 many who have selected financial advisors feel that they were not dealt with fairly by their financial advisor.

In the political arena (as of spring 2011) there is also major debate about how to make the financial industry and particularly Wall Street more trustworthy.

First and foremost when selecting an advisor the first question you need to ask yourself is do you have a need for a financial advisor based on your current financial position.

You must get into a habit of thinking twice about financial advice!

Don’t be fooled by impressive sounding titles and years of experience as they can both be misleading!

What are you looking for your advisor to do for you?

Do you want your advisor to help you formulate goals and objectives and show you how you can most effectively meet them, help you with your investment choices, help you get control of your finances in all areas etcetera?

These are the questions you must ask (and get answers to) prior to your written engagement with a planner or advisor.

A better approach is to look at the companies or planners business model and determine if they are working for your best interest or their own best interest based on the companies that they refer you too and/or their fee structure.

Even mass market brokerage companies such as Vanguard, Schwab, Fidelity and others that provide individual planning, normally only do that for their high net worth clients and generally not for those with a net worth of $500,000 or less.

Regardless of the type of planner you choose (fee-only, commissioned or fee-based—be sure to interview at least three) you want to be sure to have a third party custodian actually hold and manage the investment.

Is it any wonder why Bernie Madoff was able to swindle many out of their investments when he actually had custodial management and the actual funds under his management and control and not a third-party custodian?

Those who invested with Bernie Madoff violated an elementary rule of investing in allowing their advisor to manage and control the funds which put him in position to manufacture false financial documents with false returns relatively easy.

You want to make it as difficult as possible for that to occur—even if you are dealing with a dishonest advisor, therefore always have a third party manage and control your funds even though you may be getting advice from an advisor and paying them a monthly or annual fee to manage the accounts or funds.

What are the advisors education, experience and credentials?

Choose a planner whose typical client is a lot like you from an income or portfolio size and life stage demographic point of view.

It is wise to choose someone who has been around a while as they will have seen various economic cycles whereas a new advisor may not have that same experience.

Always ask and get the right answer upfront on the type of services they “do” and “don’t do” as that will give you a good feel as to whether they are the right fit for you!

A good advisor will work within their expertise and have resources both people and non-people to help them get things done if need be.

What is the track record of the advisors that you are considering?  Have the advisors provided good advice in the past? 

In the financial industry this can often be difficult to ascertain!

Just because an advisor has the credentials and training does not mean that they have a history of using good judgment and working in their client’s best interest.

It is important that you determine what strategy the advisor uses by asking poignant questions about their investment strategy!

Do they suggest low or high cost fund selections, do they explain risk and returns in a manner that you are comfortable with, do they try to time the market?

Asking these and other ascertaining questions—show that you will be an active participant in the management of your money.

You should know the funds that they have recommended in the past if they are an advisor that manages assets!

You can then compare the funds that they have recommended with a similar fund, and if the advisor was honest you will have a good point of comparison on how the advisors selections have fared relative to other similar funds.

Your goals and your advisors goals should be congruent.

Avoid advisors who offer you products that pay the highest commission and are not the best choice for you and your situation.

Only a RIA (Registered Investment Advisor) is required to put your interest first (fiduciary relationship) and many operate as fee-only. 

They are paid by you and therefore they don’t depend on commissions, however they too can cause financial hardships for you, therefore you should use caution with all planners.

RIA typically charge you a fee based on assets under management and the fee is normally 1% or more depending on the advisor and your specific financial condition (most won’t consider you if your net worth is less than $500,000).

Always know how your advisor is paid!

Is it fee-only (you pay) or commission (others pay) or a combination of the two (fee-based)?

The front-end loads on mutual funds can be quite high and you should know what the loads are and what the advisor makes on each transaction.

Be particularly cautious of an advisor who pushes nontradable REITS, variable annuities, index annuities, private placements, whole life insurance products and structured products as they all have high fees and sales charges (possibly more money for advisor) and are seldom suitable for most investors.

When interviewing an advisor always think at your highest level and ask the right questions.

If something does not make sense to you or seems too good to be true—ask for clarification and if you are still uncomfortable with the answer use caution on moving forward.

Always ask yourself what could be wrong with the recommended strategy and how this strategy or advice could be wrong!

If you don’t like the answers you get consider another advisor and whoever you select—give yourself several days to think it over as it is a major decision and should be thought through wholeheartedly.

You should know the frequency of communication and how it will be done with the advisor you are considering.

If the advisor does not communicate in the manner which they stated prior to engagement they are adding financial stress to your life. 

Therefore, they should be informed by you to correct their communication to the level that was agreed to in the engagement or you should take your business elsewhere if they don't comply.

When they do communicate make sure that the communication is clear and done in a manner that you can understand! 

Ask for clarification if needed!

How quickly will the firm respond to your questions or concern about service and who will you communicate with? 

It is important that you know the answer "prior to" selecting an advisor.

Those with less than $500,000 to invest often have annual fees of 2 to 3 percent!

That fee is quite high and with such a low balance to start with their retirement account is being eaten away on an annual basis.

Many advisors state they lose money on smaller accounts and if they continue to increase fees it would not make sense to manage the account as the returns would be mostly eaten away by the high fees.

Finding independent, objective advice for the low net worth client is often difficult.

Be sure you get the total cost of your assets under management and not just the fees as many advisors charge you for advisory and other investment fees that can easily take the 2% mgt. fee to 6% or more for accounts of $500,000 or less.

Keep in mind that investment advice is only a part of financial planning, but a very important one.

You still have to address your cash flow, credit and other areas of your finances. 

If you have routine financial matters there are a number of websites that offer advice for a flat fee of anywhere from $150 to $300 per hour.

There are many consumers who based on their net worth and current investments who don’t need ongoing financial advice, just an occasional checkup or a good start or blueprint (structured approach) of how to improve their finances and financial life.

The clients that we deal with usually have a net worth of $500,000 or less and like to control and manage their own assets—which in many cases can be appropriate.

Our clients—do however, find incredible value in the way we assist them in structuring their mind or thought process to a level where they understand all areas of their credit and finances that they need to address in a manner that gives them clarity.

They also find value in a comprehensive financial plan that we assist them in that can change their financial condition.

In many cases middle income consumers don’t initially see the value of a financial plan and what it can do for their lives until we properly educate them on the way we do it—and the benefits they will receive.

In almost all cases the amount we charge is recouped within one year based on the strategies and advice that we offer and the consumer implements.

Even though we feel we offer an incredible service with high value—some consumers are hesitant about spending any amount of money on financial planning—and we understand that.

For those who don't see the value of financial planning, please take a moment and review our finance improvement and other pages on this site.

With all of this complimentary (free) data and advice alone you would put yourself well ahead of most consumers when it comes to understanding your finances and making decisions that are good for you and your family.

In addition, with the services we offer we go much further than giving you a blueprint.

We are actively involved in helping to insure that you improve your finances and that of your family if that is your desire.

However, look for consumer reluctance—even among middle income consumers to change in the coming years as 401(k)s must start sending quarterly notices to participants detailing how much they are paying in plan fees and fund expenses.

You can expect sticker shock by many plan participants, however it is important that you realize that investment and financial advice comes with a cost!

It is important that you realize that paying for financial advice at your earliest life stage possible can set you up for a lifetime of financial success and help you avoid the mistakes that other consumers make.

Do your financial planning at your earliest possible time so that you can save a lot of time and money and you won’t have to deal with your finances in a comprehensive way after a problem has occurred.

The key is you must select the right financial planner for your current financial situation!

Those who serve the $500,000 or less investment market are normally:

1) Banks

2) Insurance Companies

3) Mutual Funds

4) Select Group of Financial Advisors

5) Online Advisors

On many occasions the advice received from the advisors or companies listed above are often nothing more than a sales pitch once you get down to the details.

Many online advisors staff their call center on a rotating basis with advisors and very seldom would you get the same advisor or advice if you called back.

However, there are some financial planning networks that deliver cost effective personal finance advice to a number of consumers, over the phone, online, or in face to face meetings.

Also realize that starting in 2011 advisors must provide updated ADV Part 2 brochures written in plain English that describes their fees and other compensation arrangements, investment strategies, and any disciplinary action.

OK—Let’s Recap the key questions that you must ask—and get the right answers to:

• Do you have a need for financial planning or advice?

• What are you looking for your advisor to do?

• Always ask and get the right answer upfront on the type of services they “do” and “don’t do” as that will give you a good feel as to whether they are the right fit for you.

• What is the company or advisor’s business model—fee only—commission—fee based?

• Be sure to interview at least three and whoever you choose—be sure to have a third party custodian actually hold and manage the investments and be sure the third-party sends your financial statements directly to you—be sure to verify that the third-party is involved!

• When interviewing an advisor always think at your highest level and ask the right questions.

• What are the advisors education, experience and credentials?

• What is the track record of the advisor that you are interviewing? Has the advisor provided good advice in the past?

• Always know how your advisor is paid. Is it fee-only or commission or a combination of the two (fee-based)?

• You should know the frequency of communication and how it will be done with the advisor you are considering.

• How quickly will the firm respond to your questions or concern about service and who will you communicate with?

It is important that you know the answer to all of the above questions prior to selecting an advisor.

Always ask and get the right answer upfront on the type of services they “do” and “don’t do” as that will give you a good feel as to whether they are the right fit for you.

Listed below are organizations that can further assist you in selecting a financial advisor or planner.

Fpanet.org Designationcheck.com Nafpa.org is a good starting point if you are considering a fee only financial advisor.

Other Helpful Sites:

Garrettplanningnetwork.com—$180 to $240 per hour—$400 to $600 for two hour planning session


Myfinancialadvice.com—$150 per hour


Smart401k.com—$200 per year


Financial Engines.com—$150 to $300 per year


Flatfeeportfolios.com—$199 per month ($129 per month for accounts under $250,000)


Realty 1 Strategic Advisors—$240 per hour—you communicate with the same experienced advisor every time

https://www.ptindirectory.com/tax-preparers/georgia/peachtree-city-ga/652454/tfa-financial-planning/tom-j-underwood-afsp-rtrp

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