January 20, 2021

4 Steps To Find A Good Financial Adviser

4 Steps To Find A Good Financial Adviser


We used to go to barbers for dentistry and no one would take seriously free advice about a suspicious mole from the face-cream saleslady at Macy’s

or about a seriously sore knee from a personal trainer.

So why do people take advice from broker dealers and not restrict their most intimate and precious money conversations to salespersons? According to the 2019 report from the agency that trains and fines professionals, The Financial Industry Regulatory Authority (FINRA) there are about 13,000 Registered Investment Advisors and about 630,000 federally registered representatives. These people share the common name “registered,” and that could be confusing, they are as different as a personal trainer is to a orthopedic surgeon.

Tax time is here as is the time for holiday spending remorse so January is a traditional month for money hygiene. I have a more in depth article in Bloomberg Opinion outling four things you might consider doing in the next few weeks.

1.   Fire your “guy” – your guy could be a woman, but it’s that person you refer to in the sentence, “I have a guy who helps me with investing, he is really good.” That guy. Do not ask friends and family for replacements. Why scrutinize your advisor and avoid family advice? Most advisors are conflicted. Brokers and insurers sell financial products and they typically call themselves financial advisors and retirement planners. A salesperson poising as an advisor can cost 25% of your account in unnecessarily high fees and the wrong products.

2.   Find the right kind of advisor. See Ashlea Ebling, Forbes writer, on conflicted advice. In what could be a forlorn internet search you’ll see lots of advertising and a “toddler-sized” playroom of letters denoting various certifications. Concentrate on the 78,000 people who are CFPs (certified financial planners) by using The National Association of Personal Financial Advisors (NAPFA) to find a Registered Investment Advisor. You are aiming for a fee-only (not fee-based) adviser who abides by fiduciary duty.

3.   When you get to the person with the right credentials ask two key questions and only accept yes as the answer. If you don’t get yes, comment on the weather and leave politely.

1.      Will you put in writing that you do not accept commissions, referral fees, and that you are flat fee-only?

2.      Will you sign a fiduciary oath?

4.   Come prepared to the meeting. You are your own first best adviser. Don’t hand over power, knowledge, and responsibility. It is an adult to adult relationship. You don’t want a pseudo husband, daddy, or authoritarian. Also, the more homework you do the cheaper and better will be the advice.

Know how much you spend, prepare a budget and assess your wealth and debts. Most of American’s wealth is Social Security worth about $360,000, retirement accounts, and housing wealth minus mortgage, credit card, and student debt. List the value of all.

Today as Joseph Biden takes office he will be signing some executive orders on public health, climate, racial justice and economics. It doesn’t look like an executive order for financial advice is on the docket, but I expect that the Department of Labor will take up the Obama-Biden administration initiative on ending conflicted advice the Trump Administration abandoned and as the LA Times reported the sales of financial products soared.

President Biden, you moving to better regulation of financial advisors can’t come too soon. Retirement income is falling short and as we see more people headed into their retirement years and a nation of people headed into retirement crisis.


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