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Friday, February 27, 2009

Nine Issues to Consider When Selecting a Financial Advisor

By Hank Brock

First, is the advisor experienced? When meeting with the advisor for the first time, you will want to ask how long they have been in business, the types of clients they typically handle, and the breadth of experience they possess. Although your issues may not seem overly complex, you may not be fully aware of all the strategies available to employ. Challenges facing seniors can be especially tricky, make sure you are not the advisor's guinea pig. Many novices present public seminars with only have a very basic knowledge of tax and estate planning issues.

Second, as mentioned earlier, what is your advisor's educational background? Look for bonafide credentials such as ChFC, CFP, CPA, CLU, JD, or other legitimate credentials. These signify background in investments, taxation, estate planning, finance, business, insurance, law, economics, etc. and require comprehensive examinations from accredited educational institutions, years of experience, and advanced continuing education requirements. Beware of those that solely have one of the many "quickie" designations proliferating these days.

Third, is the planner committed to high ethical standards? The advisor should hold membership in at least one industry association (Society of FSP, NAIFA, etc.). Most of these associations require adherence to a code of ethics. Of higher concern are planners that use their affiliations to bypass the establishment of trust.

Fourth, is there a commitment to continuing education? Complex laws are ever-changing and the economy never holds still. How many hours are spent each year keeping skills sharp? Are the continuing education hours at a beginning, intermediate, or advanced level?

Fifth, what services do you need? Comprehensive retirement, tax strategies and estate planning? Solely tax advice? An investment advisor? Real estate advice? Or, is he just an insurance salesman? Identify an advisor that emphasizes the services you need.

Sixth, what is your advisor's support structure? Is he a solo-practitioner, or is he part of team of specialists that can strategize on the various issues? Is the firm large enough to have the resources to provide the services that you require?

Seventh, what is their clientele like? You want to find a financial planner that handles similar clients to yourself. If you have a net worth of $200,000, but your advisor primarily handles people with a net worth of $5 million and up, are you going to receive the attention that you deserve? Are there other advisors with the firm that may be better suited to your situation? Does the advisor have a particular age demographic, or preferred client type?

Eighth, how is the consultant compensated? The three most common planning types include: fee-only, fee-based, and commission only.

Finally, is your advisor a full-time professional? Be wary of those individuals who only do their planning on the side or part time, lack membership in societies, do not subscribe to high ethical standards, avoid continuing education, lack legitimate credentials, or suggest that these things aren't important. There are many charming salespersons out there, ready and willing to sell their services to you. These individuals are dangerous because they don't know what they don't know.

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