How to find the right financial advisor for your financial goals

With so many financial advisors to choose from, where do you begin? The answer involves research, which includes sifting through online recommendations and professional directories. Friends, family members, and colleagues also can be a good source of quality referrals.

As you evaluate advisors, you’re likely to encounter an array of professional certifications listed after their names. Each one has its own educational, experience, and testing requirements, as well as areas of focus. Here are two of the most common:

• CERTIFIED FINANCIAL PLANNER® (CFP) indicates expertise in a wide variety of financial topics and the ability to help clients develop personal finance strategies in areas such as investments, insurance, tax, estate, and financial planning. To earn the CFP® designation, advisors must demonstrate significant experience, pass rigorous examinations, and pledge to follow the CFP® Board’s code of ethics.
• Chartered Financial Analyst (CFA) is used for advisors who often work in financial analysis for institutions rather than personal finance. To earn the CFA designation, an individual must show 4,000 hours of relevant work experience and pass a rigorous three-part examination that demonstrates their knowledge in areas such as accounting, portfolio management, securities analysis, and economics.

Consider the questions you should ask a potential financial advisor to assess whether they are a good fit for you . You’ll want to know about their experience, financial philosophy, approach to working with clients, and fee structure.

Also be sure to ask whether they are a fiduciary. This designation means that the advisor is legally committed to working in their clients’ best financial interest. Not having this designation can lead to misalignment of your personal financial goals and those of your advisor, creating a potential conflict of interest.

Additionally, it’s important to look into the background of the advisors you’re considering. Organizations, including the Finance Industry Regulatory Authority, the U.S. Securities and Exchange Commission, and the American College of Financial Services, also provide information on advisors’ credentials and employment history.

Once you understand an advisor’s experience and credentials, determine how well you might work together on a personal level. Consider their communication style:

• Do they actively listen to you?
• Do their explanations of financial concepts make sense to you?
• Does it feel like they’re being transparent with you?
• What methods do they use to stay in touch with their clients?

Answers to these questions can help you determine whether the relationship dynamic between you will work long-term.

You can also gain insight into how transparent financial advisors are about the fees they charge and the way they measure performance. Vague or confusing answers are a red flag because successful advisor–client relationships are built on trust and clarity.

Try not to rush the selection process. And don’t ignore credentials or make a choice based solely on price. The wrong advisor can potentially hurt your ability to meet your long-term financial and life goals. Take your time to make sure the advisor you choose will be a valued resource not just today but in the years ahead.

A core element of choosing the right financial advisor is understanding the fee structure they use. There are two basic fee types charged by financial advisors:

• Fee-only: Where fees charged by advisors are for services provided, whether annual, monthly, or hourly, or the fees are based on a percentage of the total value of assets being managed.
• Fee-based: This includes commissions advisors earn on selling financial products or completing certain transactions. It also includes fees received directly from clients as per the above.
  

The value you receive for the fees you pay can be measured over time by the quality of the advice you receive, the performance of your portfolio relative to benchmarks, and how much the advisor charges vs. their peers.