Here are several questions to ask yourself when considering paying for financial advice.
What kind of adviser should I work with?
If you’re thinking about hiring a financial planner, read this primer first.
You’ll want to hire the type of financial adviser who promises to act as a fiduciary all of the time, with all of your money, which is a fancy way of saying that person must be loyal to you first. In fact, you should ask your financial planner to sign a fiduciary pledge, a promise not to profit at your expense. We’ve written a version of the pledge that you can use the next time you’re shopping for an adviser. Find it here.
After your financial planner has signed the pledge, make sure to ask these 21 questions.
But being a “registered investment adviser” alone doesn’t qualify a professional to answer your most challenging money questions. You also need to check that person’s educational background and training. Certified financial planners, for example, must satisfy some of the more rigorous curriculum and experience requirements. Chartered financial consultants undergo something similar.
Brokers, who may call themselves advisers, don’t necessarily carry any of these credentials. Instead, they may simply pass licensing exams that permit them to sell certain investments. Outside of your retirement money, they are required only to recommend products that are “suitable,” which isn’t necessarily the best or most cost-effective. And why should you settle for less?
How much advice do I need?
If you want to get started saving — or make sure you’re on track to meet certain goals — you may want to pay a financial adviser for a financial plan (which could cost somewhere in the neighborhood of $1,200 in New York). Otherwise, you may want to pay a planner by the hour — or some other flat fee arrangement — for time and advice.
People who want to hand over the reins of their portfolio to be managed by a professional may pay a percentage of their assets, typically around 1 percent. The key is to find an adviser who does not get compensated only if that person sells you something.
What if I don’t want a full-time human adviser?
This is a tricky area where a lot of people get talked into buying products they don’t really need. If you want to buy life insurance, you might pay a financial planner, for example, for a couple of hours to analyze what’s appropriate for your situation.
Then, you can seek out a sales agent with access to policies from several providers or buy a policy through online brokerages like PolicyGenius or AccuQuote. This is especially important as employers are increasingly pushing the onus of disability insurance onto their employees. Read our guide to purchasing disability insurance here.
Where can I start my search?
Peruse the Garrett Planning Network, the National Association of Personal Financial Advisors and XY Planning Network for someone with expertise working with people like you.
And be sure to check their history for any black marks. Try the Investment Adviser Public Disclosure website. It scans data from the Securities and Exchange Commission, as well as BrokerCheck and state securities regulators’ sites.
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