Hiring a Personal Financial Adviser
If you had a toothache, you’d go to the dentist, right? And if you were building a house, wouldn’t you hire a contractor to oversee the project? So when it comes to something as important as your finances, it makes sense to hire a financial planner—someone who can provide you with not only the expertise but the peace of mind that comes with knowing that your hard-earned money is well taken care of.
“Managing your finances, especially as a small-business owner, can get complicated,” acknowledges Kimberly Palmer, senior money editor at U.S. News & World Report and author of The Economy of You: Discover Your Inner Entrepreneur and Recession-Proof Your Life. “If you don’t want to dedicate several hours a week to budgeting, managing investments and other essential financial tasks, then it makes sense to outsource the work so you can focus on the core of your business and your life.”
But how do you find the right planner, and how much will it cost?
Where to Look
A personal recommendation is always a good start. Ask trusted colleagues for the names of the advisers they work with.
Professional associations are also great sources. The Financial Planning Association (FPANET.org), Certified Financial Planner Board (CFP.net) and National Association of Personal Financial Advisors (NAPFA.org) all have “find an adviser” tools plus other hiring tips.
How to Choose
To narrow candidates to the best one for your needs, start by checking their backgrounds, education and credentials. Anyone can call himself a financial planner, and even a bunch of initials after a person’s name can be meaningless—because some designations can be bought rather than earned. Do your due diligence and note that certain certifications, including CFP, PFS (personal financial specialist) and CFA (chartered financial analyst), require legitimate time and expertise to acquire. Also ask candidates about any professional and/or trade organizations they belong to, because membership in these groups usually indicates that the adviser has met certain standards and obligations.
“The most important factor is that your adviser has extensive experience working with clients who have similar financial issues,” Palmer says. “Do they have many small-business owners as clients? Are they familiar with the types of financial issues you’re likely to face?” Your industry’s trade organization may even offer names of qualified planners.
For a comprehensive list of topics to cover with potential advisers—everything from compensation to accountability, go to https://bit.ly/1d1eIeQ. Another concern is compatibility. “This is where the interview process comes in,” Palmer says. “Meet with [candidates] and ask questions. Get a sense of how they work and communicate. Don’t hesitate to ask for references from clients who can speak to what it’s like to work with them.”
And if you want to work with the adviser face to face, then you might want someone who’s local or will video-chat via Skype or FaceTime. “A growing trend is for people to stick with online-only advisers because they tend to cost less,” Palmer says. “Websites like LearnVest offer this service, for example.” Personal Capital and FutureAdvisor are other web-based investment management options.
The basic billing models are:
• Fee-only planners, paid strictly for their advice. They typically charge by the hour (rates vary but average about $175 an hour) or a percentage (generally 1 to 2 percent) based on a client’s assets.
• Fee-based planners, who charge for advice and also earn commissions on some products they sell.
• Commission-based planners, paid solely from products they sell.
Fee-only planners are best. “If you’re paying a commission,” Palmer explains, “then you don’t know if they really think the product is best for you or they just want the commission.”
Choosing the right adviser—“someone who will help you plan financially and make sure you’re getting the most out of your money—will pay for itself many times over,” Palmer says.
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