Q. I am recently retired and have always managed my portfolio. Given the volatility and market instability, I think it’s time to have a fee-only advisor help with a portion of my portfolio and to provide feedback and advice on the market. How can I choose the right financial planner?
— Looking for help
A. We’re glad you asked.
Your relationship with a financial advisor or financial planner is one of the most important for your financial life.
There are several things you should look for.
Start by asking yourself what services you are looking for.
Such as retirement planning, investment planning or comprehensive planning, said Deva Panambur, a fee-only planner with Sarsi, LLC in West New York and an adjunct professor of personal finance at Montclair State University. He said an independent advisor may be a good choice for you because they have affiliations with many firms that assist with tax planning, estate planning, investments products and more. Independent advisors choose the best products and services and do not sell any proprietary products, he said. “It is important for you to understand how the advisor is compensated and who pays the fees,” he said.
“Independent advisors are often fee-only, with no commissions, and only their clients pay them fees, so their interests are aligned with yours and they are incentivized to act in your best interests.”
You should ensure that the advisor manages your assets in an account that is opened for you with a third-party custodian, such as Charles Schwab, Panambur said. “The account should be in your name and operated by you. You can login to your account anytime and the custodian sends a statement to you periodically. The advisor only gets the ability to buy and sell investments in the account and gets paid the fee,” he said.
Be sure to check the advisor’s credentials to ensure that he or she has the required expertise.
Some common credentials are certified financial planners and chartered financial analysts, for example. These credentials are earned by passing rigorous exams and by satisfying adequate work experience and education. You can confirm these credentials on the websites of the organizations that offer them: cfp.net and cfainstitute.org.
“A few other important things are how the advisor works with you, how approachable he is and his philosophy towards investment planning for someone like you,” he said. “You should feel comfortable with his answers.”
There are several additional ways you can check out the advisor. He said every advisor and his company are required to be registered and publicly disclose details about their business by filing a Form ADV. You can review the form here. Other sources of information are the advisor’s website and organizations the advisor may belong to such as the Financial Planning Association and the National Association of Personal Financial Advisors.