1. A decade of the right experience
Focus on someone who has experience with clients who have assets and goals that are similar to yours, says Cindi Hill, a former financial planner in San Diego.
2. A clean record
Check the disciplinary record to make sure the adviser hasn’t had any run-ins with regulators or the law. Advisers who manage more than $110 million in assets must file Form ADV, a Securities and Exchange Commission document that contains a treasure trove of details about an adviser’s business, including a firm’s disciplinary record (lower asset thresholds apply in New York and Wyoming). Search by firm name to find the Form ADV. Smaller firms are regulated by state authorities, but you can check on those firms at the same site. Brokers are regulated by the Financial Industry Regulatory Authority (Finra). Check their records here.
3. A transparent fee structure
Some money managers charge a fee for services—a flat fee, an hourly rate or a percentage of assets managed—and are called fee-only advisers. On the other end of the spectrum are commission-based brokers, who make money on the products you buy or sell. But these days, many brokers, such as John Burke, of Burke Financial Group, who is also a certified financial planner affiliated with Raymond James, forgo commissions and charge clients a fee for their services instead. And some fee-only or fee-based advisers may make commissions on some products they sell you. That’s why it pays to ask your adviser whenever he recommends a new product: Are you being compensated in any way if I buy it?
4. A CFP, CFA or CPA designation
There are more than 100 different financial adviser certifications and designations. But only three truly matter. A Certified Financial Planner (CFP) has to complete 18 to 24 months of study, pass a rigorous ten-hour exam and work for three years as a financial planner or do a two-year apprenticeship with a CFP professional before earning the designation. A Chartered Financial Analyst (CFA) has to pass three six-hour exams and have four years of qualifying work experience to earn the title. A Certified Public Accountant (CPA) knows his or her way around tax planning. Money managers will also have licenses that required them to pass tests.
5. Good references
After an interview, ask the adviser for at least two references from existing clients with profiles similar to yours—and call them! Also ask an adviser for retirement-income plans for current clients or samples of such plans. Are the plans logical, do they make sense and do you understand them? If not, ask questions until you do. If you’re not satisfied, walk away.
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