Why (and How) to Engage a Financial Adviser

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Recently, I wrote a series on financial advisers. I shared my bad experiences and covered many of the worst practices of financial advisers.

Not all financial advisers are predatory and dispense generic or lousy advice. But to get my money's worth in terms of fees and commissions, I realized that I need to choose an adviser carefully and make sure my choice doesn't overreach his or her boundaries in terms of professional expertise and credentials.

 

I could start this process by figuring out why I may want to hire a financial adviser and what types of advice I'm seeking. Here are a few reasons to engage an adviser, particularly one who specializes in financial planning:

  • I need help setting priorities. Getting finances in order and setting financial priorities can be difficult, especially when I have little free time to focus purely on financial issues. Plus, I may not know exactly where to start and what priorities I should (or shouldn't) have to manage.

    A financial adviser, particularly one who is a Certified Financial Planner (CFP), may be able to provide some guidance on how to establish and manage financial priorities.

  • I need unbiased guidance.When I have financial questions or concerns, I most likely have access to a variety of opinions and perspectives from friends, family members, representatives of various financial institutions, etc. But what I really need is expert guidance, not product promotions with promises of rosy returns or scary stories of stock market losses.

    Though I can certainly glean valuable information from friends and close colleagues, I may need an outside adviser to take a look at my personal situation and provide unbiased guidance on steps I should take to improve my financial situation.

  • I want to understand how to deal with a specific financial dilemma.I may find an adviser useful when I'm struggling with a difficult issue, such as the timing of retirement plan distributions or the best ways to use an inheritance. Often an experienced adviser has dealt with clients who have faced similar dilemmas and can bring a fresh perspective to a situation.

    An adviser may not tell you precisely what to do. But the right professional should be able to clarify options, and present the advantages and disadvantages of various financial paths.

    Note that I may want to establish a professional relationship before I have a life-altering decision so that I can vet the financial adviser and acquaint him or her with my long-term goals and values over several years instead of a single meeting.

  • I need to buy specific financial products and services.Though I don't want to be sold a product or service that is not suitable or appropriate for my situation, I still need to buy certain financial products and services. For example, I most likely will have an ongoing need for access to a brokerage firm and possibly portfolio management services; tax planning and preparation services; and insurance products.

    The right adviser may be able to guide my selection, and either make a referral to an outside agent or make the sale himself.

  • I have some pointed questions for which I seek answers. The time spent with a financial adviser may involve sessions in which the adviser plans and manages the agenda. He or she may develop a financial plan, make recommendations for implementation, make referrals to specialists, and review the status of the plan.

    But I may have questions for the adviser, who should be willing and able to give me answers. For example, I may want her to review investment recommendations; determine the best approach for college or retirement savings; assess the value of employee benefits and offer guidance on purchasing health insurance on the open market; or give clarification on investment fees. An adviser should be able to field these questions and give me an immediate response or follow up with insights.

  • I need help getting started in investing or managing your investments.Though I started investing on my own, I may want to get outside help in either determining an appropriate asset allocation (mix of stocks and bonds, domestic and international, etc.) or selecting investments.
  • I want someone to review my entire situation periodically.Having someone review my financial situation in entirety may be helpful, especially as my financial life becomes more complex. A good adviser should be able to tell me when a money move in one area makes sense in isolation but does not sync with a more comprehensive plan.

    For example, I may find that the structure of certain investment accounts provide tax benefits in the short term but can be less advantageous when children apply for financial aid to attend college. An adviser can alert me to trade-offs and may be able to formulate recommendations that can help me achieve all of my financial goals, not just one or two of them.

If I've decided I could benefit from the services of a financial adviser, it makes sense to be intentional about my selection. Get recommendations from trusted friends and colleagues. Check credentials and references. Conduct a brief interview, if possible, to gauge whether I'm a fit for the adviser's practice and vice versa. Consider why I'm interested in engaging a financial adviser so I can evaluate whether this person's professional expertise and approach meshes with my requirements.

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