Hiring a Financial Advisor

Hiring a Financial Advisor

by | Sep 5, 2017 | Tech Focus, Wealth Protection, Words of Wisdom, Your Professional Team

So you’ve decided to hire a financial professional to help you navigate your future. You’ve talked to friends and family members, and while you trust their recommendations, putting your financial future into the hands of someone else is a very big deal. You need to do your own due diligence, but where do you start? Not all financial firms/advisors are created equal. And with all the options available to us, many people decide to go it alone out of fear. They fear they could be hiring the next Bernie Madoff, or that they might end up being a number in a long list of clients. The task can seem so daunting that it’s often easier to hire the first advisor you meet, or do nothing at all.

It’s a big decision and many don’t know what questions to ask and what to look for. The below can help provide anyone looking to hire a financial professional a place to start. The questions are not meant to sway anyone in a certain direction, but rather to help ensure you hire someone you feel comfortable with and confident in.

Understand how the advisor is compensated.

Find out exactly how your advisor is paid and make sure you understand any fees and charges – and have them in writing – before making any final decisions. Fee-only means the advisor does NOT earn any commission, while fee-based advisors can earn commissions.

I believe fee-only advisors are best. I formed this belief working for firms that were fee-based and fee-only, and witnessed the practices at each. Fee-only advisors do their best to align their interests with their clients. They don’t make money off the investments they recommend. In a fee-only structure, anything that comes out of your bottom line in turn comes out of the advisor’s bottom line. Therefore, it’s in the advisor’s best interest to only recommend investments they truly believe are in your best interest.

Fee-based advisors might have incentives to sell certain products. (Have you ever heard: “If you want to buy your financial advisor a new Mercedes, buy an annuity?”) Fee-based advisors can fall prey more easily to their clients’ views and emotions, especially during volatile markets. You want to make sure you are hiring someone that will give you the best advice, even if it isn’t what you want to hear. “The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffet. You don’t want a “Yes” man. (more…)

Want to be a Certified Financial Planner™?

by | Oct 21, 2011 | Eric Jonson, Why Merriman

As I read many articles about how to select a financial advisor I frequently see mentioned the importance of working with a Certified Financial Planner™ (CFP®). But what does the designation mean, and how does a person become one?  Since I am in the middle of working on my designation, I thought I would provide some insight.

If you decide to become a CFP®, here’s the process you would face.  First, you must have a Bachelors degree from an accredited university and a minimum of three years of applicable work experience. I’ve got these requirements covered and am working on the next step, which is the educational work.  The courses are offered by numerous sources and follow the same general topics. I chose the College of Financial Planning for my coursework.

Each course listed below is similar to a college quarter of studies with approximately 1000 pages of reading and 500 pages of questions and casework.  Each course takes about 160 – 220 hours of study and has a final exam.  My program includes the below five courses, and starting in 2012 the college will add a sixth “capstone” course that will be casework on the entire program.

  • Financial planning process and insurance
  • Investment planning
  • Income tax planning
  • Retirement planning
  • Estate planning

When you finish your coursework, you can then sit for the comprehensive exam given by the CFP® board three times a year.  It’s a two day test of your knowledge, comprehension, and your ability to apply what you know to cases.  The approximate pass rate is 50% and it’s recommended to have an additional 250 hours of study for the exam.  The course, materials, testing fees and test prep can easily cost you $5000 – $7000.  After passing the exam there are ethics requirements and continuing education.  To see a complete listing of requirements and topics, visit www.cfp.net.

To become a CFP® is a rigorous and costly endeavor.  The process has helped me to do a better job advising my clients and I can see the value in the recommendation that people work with a CFP®.