Ray Levitre is a Certified Financial Planner who shares his 7-step method for choosing someone who will do the job you need.
Step 1: Find an advisor with at least 10 years of experience
Step 2: Find an advisor with a CFP designation
It is estimated that there are over 800,000 people calling themselves “financial advisors.” However, only 59,317 have earned the designation of Certified Financial Planner.
Step 3: Hire a fee-only advisor, not one who works on commission
Fee-only advisors get paid by the hour, the project, or as a percentage of the assets they manage for clients. These fees are negotiated and agreed upon in a contract. Unlike the fees that are buried into to commissioned products that clients never see, the fees that fee-only advisors charge, by law, are fully disclosed and regularly reported to clients. Hourly fees range between $100 to $300 an hour. Projects, like preparing a financial plan, may cost between $500 and $5,000 depending on the complexity of the financial situation.
Only 2,093 financial advisors are members of NAPFA, the nation’s largest association of fee-only financial advisors.5
Step 4: Insist on a plan and a well-defined investment strategy
Step 5: Insist that your advisor has an action plan for servicing your account
You shouldn’t have to call your advisor; your advisor should have a system in place to make sure you are consistently being contacted. Find out your advisor’s plan of attack to monitor your financial plan and review your investments over time before you begin investing your money. If your advisor is not willing to meet with you semiannually to review and update your financial and investment plan, go elsewhere.
Step 6: Shop at the supermarket (avoid proprietary products)
Step 7: Investigate the advisor’s practice: Interview
Use the Web resources at the end of this article to locate experienced advisors in your area. Then simply call the advisors you feel are the most qualified. You can explain your situation and get some initial feedback on what types of things they may suggest you do. If you like what you hear, arrange for a face-to-face interview. The questionnaire below, provided by the Forum for Investor Advice, will give you a sampling of questions you can ask during this meeting.
1. What is your educational background? College degree and area of study? Financial-planning education?
2. What financial planning certifications or designations do you hold?
3. What securities licenses do you hold?
4. What is your professional experience? How many years have you been a financial advisor?
5. How do you keep your financial knowledge base and planning skills current?
1. How would you prepare my financial plan? Do you recommend specific investments or investment products?
2. Can I see a sample financial plan? (Make sure that the plan is clear and comprehensive.)
3. What is your investment philosophy? What types of investments do you favor? Get a sense of the types of investment products (load or no-load, etc.) and methodology that the advisor uses.
4. Do you have certain areas of expertise: insurance, estate planning, retirement planning, education planning, and tax issues?
5. Do you collaborate with professionals in accounting, law, and insurance to offer specialized services?
1. What is the minimum and maximum asset value of your clients? (Make sure your assets fall within this range.)
2. Do most of your clients have financial situations similar to mine?
1. Describe how you and I will work together.
2. Will I be working with only you, or do you have an assistant?
3. How often will we meet or talk? Can I reach you by e-mail? Can I view my accounts and research online? How often will I receive reports?
4. How do you help clients implement their financial plans? Do you only give advice or do you also make the transactions? Will you have discretionary power to buy and sell assets in my account?
1. What are your fees? Do you operate on a fee-only, fee-based, commission-only, or fee-plus-commission basis?
2. If fee-only, is the fee based on an hourly rate, a flat fee, or a percentage of assets?
1. Can you provide me with references from long-term clients and professional associates?
2. Is your business registered with the SEC? With the state’s securities office?
Make sure your advisor can provide the following products and services:
A comprehensive financial plan
A no-load mutual fund supermarket (at least 5,000 funds)
No-load fixed and variable annuities from multiple companies
Individual stocks and bonds with low commission rates
Separate accounts from multiple managers
No-load life insurance from multiple companies
Online account access
For more information, you can contact Ray at www.networthadvice.com. That’s where you can request a free copy of his book “20 Retirement Decisions You Need to Make Right Now”.