Whether you are looking for the first time or interested in changing who you work with, figuring out what to look for and where to look for a financial adviser can feel overwhelming.
When evaluating the top factors to consider, people commonly point to someone who gets good investment returns or who has a lot of credentials or experience. These are indeed important aspects, but your search should go beyond that if you want to end up with a great long-term relationship.
Not all advisers are created equal. Though I’m not an adviser myself, I have nearly 20 years’ experience in the wealth management industry, and I work very closely with our firm’s advisers. I have come to recognize how important it is to find the right fit, especially because choosing an adviser is a very personal decision and critical to your long-term financial success. This article will explain how you should start your process and where to look for information about advisers.
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First, Why Should You Hire a Wealth Adviser?
An important first step to finding the right adviser for you is understanding why you need one in the first place. It helps to be really clear on this before you begin your search. Did something happen in your life that made it obvious you need help, such as an unexpected inheritance or a divorce? Are you planning for a big event, such as retirement, and want to see if you are financially ready to make this transition? Or maybe you’re a careful planner yourself and simply want to ensure you’ll be able to reach your long-term goals with a step-by-step plan.
Maybe you recently lost or changed a job unexpectedly? We know it’s counterintuitive, but this is the time to lean in – transitions are critical!
The list is endless: There are lots of reasons to seek out an adviser’s help, and understanding why you personally need one will help tailor your search. Some firms are better than others at providing different solutions. Wealth management firms offer a variety of services, from detailed savings plans over decades to personal advice on buying a home or various ways to invest a recently inherited large sum of money.
A good adviser should be able to advise you on any big financial decision in addition to managing the details of your portfolio. If you have a more specialized need, like selling your small business or going through a divorce, there are advisers who specialize in these topics, so it’s important you seek them out.
Evaluate Key Skills and Characteristics
When evaluating advisers, a top criterion should be: Do they listen to me? This might surprise you, but it’s actually the most critical component of a successful relationship. You want your adviser to know your current situation and what your short-term and longer-term goals are so that your planning is based on those personal factors. If they’re not digging in to hear where you stand, how can they suggest the right path forward?
Here are some questions to ask yourself when evaluating your conversation with an adviser:
- Did you feel like your questions were answered? If not, then maybe they were not listening well enough and might miss things in the future.
- If you are part of a relationship – did both individuals feel heard and did they both contribute to the conversation? If not, then maybe it’s time to evaluate other advisers.
- Did the adviser uncover detailed things about how you think, your passions, your family and those things most important to you? If they stayed surface level with age, income and assets, then I might reconsider how in depth they will go with their planning.
There’s no one size fits all in planning. You will want your relationship to feel right, for you as well as any significant other who may be involved. For example, if you don’t understand something, such as all of the different investment options, your adviser should be willing to explain them to you to the degree you feel comfortable – so that you can have a good understanding of their use in your portfolio. You should also feel comfortable enough asking questions, so meeting in person or speaking on the phone is important to see how well you “jive” with someone.
A Personal Experience Backs Up the Comfort Factor
You’ll also want to feel comfortable that the adviser is willing to step up and respond to your individual needs. Here’s an example: A couple of years ago, we contemplated having my husband make a transition from full- to part-time work. Our adviser ran a series of analyses on our income and his pension options. We decided not to make a change, but it sure was helpful to have that sounding board of someone who listened to us and then came back with different options.
Other critical skills to consider when choosing an adviser might be a little more obvious. You definitely would want someone who is knowledgeable about both planning strategies and investments, who is constantly learning and staying current with new solutions and strategies and, finally, who can be flexible. Life can be crazy sometimes, so they should be ready to adjust your plan when those curve balls land.
Here’s another example: We had sold our house unexpectedly – it wasn’t planned, but we got an unsolicited offer we couldn’t pass up. With a 30-day closing right before Christmas, my husband and I had to pivot quickly, deciding to rent. Our adviser helped us evaluate tax consequences, what to do with our next down payment and how to invest our excess savings. With our adviser being available and offering multiple factors to consider, we felt confident in our big decisions.
Consider Certifications – and Legal Obligations
Various designations can lend insight into what type of experience an adviser has, and a good place to start is finding a Certified Financial Planner® (CFP) (opens in new tab). Having this designation requires these professionals to continue to learn, as they have mandatory hours of education each year – and they are regulated by a board of ethics.
And while we’re on the topic of ethics: Fiduciaries are required by law to put your interests before their own.. In addition to that, a subset of fiduciary firms are fee-only, which means they don’t sell any products or services beyond their relationship with you and act as a fiduciary in all parts of their business. The word fiduciary gets used incorrectly all the time, but a true fiduciary has very few conflicts of interest, with all decisions made in the client’s best interest. For me, these two criteria – being a CFP and a fiduciary – should be non-negotiable when choosing an adviser.
There are many other types of advisers out there, though – some work for broker-dealers, banks or even insurance companies. Just make sure you evaluate how they work with clients and how they get paid. Some advisers earn a commission from services they sell, which can be a red flag if you feel any pressure during your conversation to add on or upgrade your initial request. Or they may suggest an investment that isn’t perfect for your situation because they receive a higher payout on that specific investment – there is a level of conflict of interest to consider!
Where to Look for a Financial Adviser
There are a number of good places to look for advisers. Here are several that I’ve found handy over the years:
- CFP Board. The CFP Board (opens in new tab) also lists vetted advisers – you can sort by criteria such as location, gender, etc. Everyone on this list will have that CFP designation I mentioned earlier, which means regular training and updated education.
- NAPFA.org. NAPFA (The National Association of Personal Financial Advisors) (opens in new tab) is a key resource for finding advisers who are vetted and fiduciaries. This is also a good option if you prefer to work with an adviser only on projects or on an hourly basis – such as a one-time financial plan, an insurance review or maybe a 401(k) allocation check. NAPFA only has fee-only advisors available.
- Rankings. Many reputable organizations provide rankings. For example, CNBC’s Top 100 Advisors List (opens in new tab) curates a list of the top advisory firms. They evaluate companies based on compliance record, years in business, AUM, etc. The firms that do make the list can also be a little smaller and thus have less marketing and advertising budgets, but they can offer tailored services, company cultures and advisers. The best thing to do is check out their websites and see if their approach and type of planning/investing matches with what you are thinking.
- Word of mouth. Talk to people you trust or deem successful. They may have an adviser they would recommend. Ask them specific questions about how their adviser helped them or why they think they’re a great adviser. This can be a great resource if you’re looking for a local adviser whose office you want to visit, but it’s important to remember the adviser who worked with your brother through his divorce maybe not be the best person for you if you’re looking to start a business.
Not Ready to Commit?
If you aren’t ready to make a decision or want some extra time to get to know a company or an adviser, try getting on their mailing list. Most firms have a newsletter or updates that they send out periodically. These newsletters usually contain advice on what to be planning for or thinking about now and in the future.
Also, check out their websites, as new content might be produced there frequently – whether it be a new article, video or even information about an upcoming event. These communications will enable you to know how an adviser thinks about planning and investing, what they do when markets get crazy and, overall, who they are as a company.
Choosing the right adviser is a critical step in your financial success. There are many more factors to consider other than just good returns or their familiar name.
You also don’t have to stick with the same adviser the rest of your life. If something isn’t working, and you lose your confidence in their ability to guild you through your life course, don’t hesitate to start the search over all over again.
But the more you know going into the process, the better your outcome will be.
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com. This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.