Physicians can spend over a decade working on their credentials. While their financial planner need not go to medical school, they should go through some sort of accreditation process. Whether you’re hiring an advisor or back checking your current one, the following four areas are a good place to start:
- Utilize the resources of regulatory agencies to ensure they have a clean record. Look up Registered Investment Advisors (RIAs) and brokers.
- Experience – What kind and how much? The planner should have at least five years of actual planning experience working with individual clients.
- Don’t get lost in the vast sea of credentials and designations. Focus on the three that matter – CFP®, CFA and CPA.
- Certified Financial Planner (CFP®) – Requires 18 to 24 months of coursework followed by a rigorous 10-hour exam. Three years working as a financial planner. Bachelor’s degree or higher. Thirty hours of Continuing Education (CE) every two years.
- Certified Financial Analyst (CFA) – More technically oriented than the CFP®, but equally valuable. Rigorous studies, testing and CE requirements.
- Certified Public Accountant (CPA) – Having tax planning help on hand is hugely beneficial. Rigorous studies, testing and CE requirements.
- Transparent fee structure. My advice? Align the economic incentives.
- Fee only – Fee is based on the amount of money managed (i.e., 1% of a $1 million portfolio). Economic incentives aligned in the sense that if the account grows, everyone is happy – 1% of $1.5 million is greater than 1% of $1 million and, most importantly, you have more money.
- Commission based – Fees are associated with specific products and transactions. Client/advisor incentives misaligned. The more your advisor trades the account, the more they will make. They’re also incented to sell expensive “fee-centric” products.
- Fee based – Fee only plus Commissions. Not ideal.
Do your due diligence. You, your significant other, your heirs and any charitable benefactors of your estate will all thank you.
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Lowell developed a passion for finance in high school, after some hard lessons learned. Now as a Wealth Advisor, he appreciates the opportunity to help his clients articulate, achieve, and expand on their financial and associated life goals. He particularly enjoys working with mid-career technology professionals.
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