Which Professional Is Right for You?
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The good news is that you have plenty of choices when it comes to working with a financial professional. However, before you reach for the phone book or start asking friends for referrals, it's wise to first spend some time considering your financial goals and needs, and the way you might enjoy and benefit from working with a professional. Your answers to the following questions can point you in the right direction.
What financial issue do I need help with?
Your answer to this question will help you to narrow your seach. Some financial
professionals will work with you to identify your life goals, develop and
implement an investment plan, and provide ongoing advice. Others will assist
you with very specific concerns, such as choosing the most advantageous 529
college savings plan, purchasing a long-term care policy, or developing a
retirement savings plan for your small business. Once you decide exactly what
you need help with, you can match your needs to the expertise and experience of
a financial professional.
- Financial Planners
These professionals generally take a broad view of your financial affairs and function in the role of your personal chief investment officer. The most comprehensive financial planners assess every aspect of your financial life, including your savings, investments, insurance, taxes, retirement, and estate planning. Financial planners can work with you to identify your financial goals, develop a plan to meet those goals, and regularly review your progress. In many cases, these planners also manage your investment portfolio. - Investment Advisors
As the title implies, investment advisers focus more specifically on managing your investments. Of course, this is not to say that investment advisors don't provide financial advice. In fact, some investment advisors are financial planners. The majority, however, are focused on providing you with investment advice and are compensated on an annual basis by a percentage of the assets they manage for you. - Stockbrokers
These professionals have acted traditionally as intermediaries between buyers and sellers of stocks and bonds, and were compensated by commissions. However, today there are brokers who, while they still earn their living on commissions, also provide financial planning services. Of course, the flip side is also true. Advisors can call themselves financial planners and do little more than sell investments. - Insurance Agents
An insurance agent can help you with your insurance needs, from property and casualty insurance to life insurance and annuities. In addition, they can help you sort out health insurance and long-term care options, as well as offer overall risk management strategies. - CPA/Accountants
A CPA is a professional licensed by a state to offer a variety of accounting services such as simple tax preparation, financial audits, business valuations and succession planning for small businesses. - Estate Planning Attorneys
These lawyers focus on estate needs and can draft your will, durable powers of attorneys, and health care proxies, or develop sophisticated wealth transfer strategies to ensure your estate passes to your heirs in the most tax-efficient manner. In addition to creating trusts so your assets can pass directly to your beneficiaries without going through probate, estate planning attorneys can develop strategies that enable your favorite charities to make the most of your gifts.
How do I pay for services?
Financial professionals charge for their services in numerous ways. Before you
hire any financial professional, make sure you understand how that person gets
paid. And, make sure that it matches how you want to pay. Below are some of the
ways many financial professionals are paid:
- A percentage of the value of the assets they manage for you
- An hourly fee for the time they spend working for you
- A fixed or retainer fee
- A commission on the products they sell
- Some combination of the above
Each compensation method has potential benefits and possible drawbacks, depending on your needs.
Am I comfortable with brand names or independents?
As you begin your search, there will be company names you recognize and have
seen advertised. In addition to benefiting from the company's big
advertising budgets, financial professionals who work in the branch offices or local outlets of major financial services firms have first-rate marketing
materials to educate you on various products and services and sophisticated
technology to analyze and report on your portfolio. On the flip side, big
companies can be impersonal and corporate mandates can drive sales of
proprietary products.
Conversely, independent financial professionals, those who are self-employed and unaffiliated with major companies, are unencumbered by corporate policies and may have more flexibility in terms of their product offerings. Yet, while you benefit from their independence and greater attention, these advisors often do not have the impressive resources, in terms of research and support, of the larger firms.
The Process
Regardless of which professional you need and decide to employ, it's
important to interview several candidates before making your final decision.
And remember that while a financial professional may have all the right
qualifications and expertise on paper, it is also important to have a personal
connection. You need to select someone you can be honest with and respect. Once
you have a final list of candidates, you can check on their qualifications and
records using the resources listed below.
Take Action
If you've decided upon a particular financial professional, check them out:
- To check out a CPA or public accountant, locate your state board of accountancy.
- To check out a stock broker, The National Association of Securities Dealers (NASD) at 1-800-289-9999 provides information about the broker's licensing and any consumer or regulatory complaints.
- You can check out stock brokers and investment advisers by calling your state securities regulator to see if he or she is licensed or has a record of complaints. The North America Securities Administrators Association (NASAA) at 1-888-846-2722 can give you the phone number of your state securities regulator. You can also check on investment advisers registered with the Securities and Exchange Commission (SEC) at www.adviserinfo.sec.gov.
- To check out an insurance agent, locate your state insurance commissioner.
- To check out an estate planner, visit the American Bar Association.
AARP Resources
What do all those letters mean? Learn about the credentials of various financial professionals.
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Because your Money Matters, get more tips and action steps on Working with Financial Professional - PDF file |
Additional Resources
Read the Coalition for Investor Education's brochure, Cutting Through the Confusion, about where to look for professional help.
