Do I need a financial advisor? If so, what kind?
Here’s what a good one should do for you.

Many people find that working with a financial planner makes the difference between achieving the important goals they set…and watching time go by while those goals aren’t met.  Saving more, making sense of taxes, paying off debt, funding your children’s college education and retiring someday — all some of the goals people set and reach sooner with the help of a financial planner.  Big life events are also times when people really benefit from the guidance an experienced advisor can provide — from a big career event to divorce and death.

The first step is determining what type of adviser to work with.

Just starting out  – You probably don’t have a lot of assets, but you do have a lot of questions.

College is behind you (and maybe medical school, law school or graduate school, too.).  You’re early in your career and may be thinking about paying off student loans and saving to buy a home. An advisor will also help you make sense of your employer’s benefits — which healthcare plan to use and how much to save into your retirement plan?  Cash flow is important at this stage of life and you want someone who can be available to answer questions like which credit card to get, how much should you save for a home down payment and how to begin looking for a house and mortgage?

Look for:  a Certified Financial Planner™ Professional who works with people like you, offers either a monthly fee or works on an hourly basis, will put their fiduciary duty to you in writing and can work with you virtually and answer questions as they come up.

Mid Career – Life’s getting complicated…lots to juggle!

Money used to be pretty simple: you didn’t have much, so you didn’t spend much.  And, you had just one person to think about. Are you saving enough, and to the right places?  Do you need to consolidate your 401(k)s from former employers? Do your investment choices still make sense for you?  How about saving for college? Do you have enough insurance coverage? What about a Will and other important documents?  There are so many important things to address, and it can be stressful to think about it.

A Certified Financial Planner™ Professional will help you define your goals so you can develop a plan to meet them.  They will bring clarity to your financial situation and advise you on simplifying your investments, making the most of your employer benefits, thoroughly reviewing all of your insurance coverage (home, auto, liability, disability income, life), make sure you have and understand your estate plan, develop a plan to fund your children’s education, and to be financially independent some day.

Look for:  a Certified Financial Planner™ Professional who works with people like you, is Fee-Only, will put their fiduciary duty to you in writing and can implement their recommendations for you.

Established Career – Looking for the exit.

Now that you have amassed some wealth, you have a complex financial situation.  You might have employer restricted stock (RSUs), stock options, deferred compensation, or you are looking to reduce your equity in your business so you can move onto a new phase in life.  Taxes have become a major budget item.

Financial planning can make all the difference to you and your family by identifying strategies to make your cash flow tax-efficient for years into the future, and developing optimal strategies for charitable gifting, protecting all you have built and passing along values to your family.

Look for:  a Certified Financial Planner™ Professional with the experience to guide you through this part of life and on the road ahead.  You want a Fee-Only advisor who will will put their fiduciary duty to you in writing and focus on the strategies that will put you in the best financial position, not someone who focuses on selling you products that line their pockets.

Retirement – happily not relying on a paycheck.

What does retirement mean to you?  Some people want to keep working, but on their terms, and others are happy to pursue other pastimes.  Everybody wants to be able to meet their expenses, be prepared for the unexpected and know they have taken care of their loved ones when they “call for the lilly”.  A financial advisor will help you develop a plan that allows you the cash flow for decades to come. Determining an optimal strategy for claiming Social Security benefits, recommend Medicare and Medigap policies, help you build a “cash bucket” to serve as a buffer between your expenses and an unpredictable stock market and manage your portfolio for you in a tax efficient way.  You already have Wills, perhaps a trust, advance medical directives and medical powers of attorney, and a good advisor will help you make sure these are current, understood and properly implemented. It’s important to have a plan to take care of what’s most important should you become unable to manage your affairs, and your financial advisor should make sure that plan is documented — not just who pays your bills, but who takes care of your dog or cat?

Look for:  a Certified Financial Planner™ Professional with the experience and empathy to help you develop a plan that makes sense to you, and who will welcome your family members in meetings if you wish.  You want a Fee-Only advisor — someone who does not sell products or charge commissions — and who takes the time to make sure you are comfortable with their recommendations and will will put their fiduciary duty to you in writing.

Everyone – there are some things we all need.

There are over 300,000 people in the U.S. who hold themselves out as financial advisors. They’re not all the same. Only 84,000 have worked to earn the CFP® Professional (Certified Financial Planner™) credential. About 8,000 are Fee-Only, and of them, only 3,500 are NAPFA Registered Financial Advisors and have submitted to the peer-review process, signed a fiduciary oath and committed to twice the continuing education requirement.

We all need an advisor who works ONLY in our best interest. That means they will sign a fiduciary oath and not be swayed by commissions or other incentives from…anyone that is not you. Look for a NAPFA member — all are Fee-Only, fiduciary, who offers comprehensive financial planning to their clients.

What to avoid

  • An advisor is not willing to put their fiduciary duty to you in writing.  Fiduciary duty means they must place your interests first, at all times.  Technically, some advisors are fiduciaries part of the time, and sales people the other part of the time — we recommend you steer clear of “part time fiduciaries”.  Who would want to work with someone who won’t commit to placing their client’s interests first?!
  • Someone who isn’t showing a sincere interest in what you want to do.  Financial planning is about you, and what you want out of life should guide the professional relationship.
  • Anyone who moves quickly to recommend products as solutions for you.  This is a red flag that they may be more interested in selling you a certain financial product than  understanding what you need.
  • Advisors who talk down to you or use lots of industry jargon — a professional advisor will make sure you can understand what they recommend, and must meet you as an equal.
  • Another red flag is an advisor who represents a broker-dealer or is an agent for an insurance company. Both of these relationships mean the advisor must place their employer’s interests (or broker dealer or insurance company if they are “independent”) above yours. This is harder to determine with an alphabet soup of job descriptions and titles floating around, so make sure you ask lots of good questions (click here to see NAPFA’s Financial Advisor Diagnostic).