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Selecting The Right Financing Advisor

16 September 2005 Leave a comment Go to comments

These 8 questions will help you find an advisor who fits your needs and financial goals.

Q: What should I look for in a financial advisor?

A: As a business owner, you undoubtedly receive numerous referrals by friends and colleagues to meet with a financial advisor. How do you discern whether to go with one advisor over another? How can you tell if an advisor is the best fit for you and your financial goals?

When it comes to choosing financial expertise, one size does not fit all. Here are eight questions to help guide your selection:

1. What are the advisor’s credentials?
What professional designations does the advisor carry? These could include RFC (Registered Financial Consultant), CFP (Certified Financial Planner) or ChFC (Chartered Financial Consultant), among myriad others. Professional designations tell you that an advisor has undergone rigorous training to achieve an advanced level of expertise in the industry.

2. How many years experience does the advisor have in financial services?
Look for someone with at least five years in the industry. It typically takes an advisor in the financial services industry that long to build a practice. (The attrition rate prior to five years is astounding.) If you choose someone with any less experience, you have little to bank on that the advisor will still be in business next year.

3. Does this advisor have experience working with entrepreneurs?
As a business owner, you have different financial priorities and concerns than a salaried corporate employee. Look for an advisor who has a successful track record in helping business owners build and protect their wealth.

4. How does this advisor get paid?
Ask this question directly. If the advisor balks or talks around the issue, that’s a red flag. But if the advisor is open and clear about how he or she makes money, then it’s a matter of choosing what compensation structure best fits your objectives. Different ways financial advisors are compensated include: a flat fee for services, commission on sales of investment products, a combination of flat fee and commission, or a management fee based on a small percentage of your assets under the advisor’s management.

5. Does this advisor have a clean track record?
If the prospective advisor has anything on his or her disciplinary record, don’t expect the advisor to tell you upfront. So, how do you find out? If the advisor is licensed, you can do a background check with the Securities and Exchange Commission at www.sec.gov to see if any complaints have been filed against this person.

6. How’s the chemistry?
In order for the relationship between you and your advisor to succeed, you must divulge very sensitive personal information. Would you feel comfortable sharing confidential information with this person? Is this someone you think you could work with for several years as you pursue your financial goals?

7. Is this advisor genuinely concerned about your success?
You’ll get a good feel for this in the first meeting. Look for an advisor who makes it a priority to learn more about you and educate you before offering any recommendations.

8. What client references can I contact?
Ask for a list of three to five clients you can contact to get a better feel for the advisor’s expertise, professionalism and customer service. When you call a reference, ask questions like:

* Why did you choose this advisor?
This gives you insight into what attracted the client to the advisor and whether you’re looking for the same things in someone to help you with your financial goals.

* How long have you been working together?
The more experience the reference has had in working with the advisor, the more insight his or her comments will be.

* How well does the advisor work with your attorney or CPA?
You want to find out how the advisor views the client’s other counsel–as teammates to ensure that the client makes the best decisions concerning employee benefits, or as adversaries out to shoot down the advisor’s proposals. If it’s the latter, take the candidate off your list.

* Do you anticipate working with this advisor for the long haul?
Why or why not? This gives you a feeling for how positive the experience has been for the client.

Remember, with your financial goals as stake, do your homework before selecting a financial advisor. You’ll save yourself time, money and heartache–and increase your investment earning potential for the long term.

By Phillip L. Pennartz, November 04, 2002

Categories: Business
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