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How to choose your financial advisor

HandshakeAre you a fiduciary? That’s a question I’ve been asked numerous times since I joined Allen & Company and became a financial advisor. It’s an important question often asked by those who are looking to choose a financial advisor to work with for the long term.

What is a fiduciary?

A fiduciary is a person legally required to act in the best interest of their client, generally for a fee. Anyone who has passed the Series 66 exam is a fiduciary .

“Investment advisers are fiduciaries, recognized and regulated as such by the commission,” an SEC spokeswoman said in a statement provided to InvestmentNews in 2019.

Financial advisors are bound ethically to act in the client’s best interest. It’s worth mentioning that what’s in the client’s best interest does not mean— and often is not — the cheapest option. A financial advisor may recommend an investment that will better meet your needs but will cost you $5, instead of an investment that won’t meet your needs but costs only $1. A financial advisor must also explain the reasoning behind that recommendation.

TeamworkThe underlying question of trust

Perhaps you’ve read somewhere that you should ask this question of financial advisors (“Are you a fiduciary?”) when considering them to manage your money, or before working with them to create your financial plan.

However, at the root of this question is another, more straightforward one: “Can I trust you with my money?”

Tips to help you choose your financial advisor

Here are some additional ways to help you get to that answer — and choose the financial advisor who is right for you.

Calculations

  • Find out who your friends and family members have selected as their financial advisor. Ask what they like/dislike about that person.
  • Interview financial advisors before choosing one, so you can understand the personality and communication style of each of them. Do you feel like they understand you and your objectives? Relationships with financial advisors can span decades. Choose someone who leaves you feeling as though you’ve been heard after your meetings — and of course, that you like.
  • Look for a financial advisor who suggests ahead of time that you bring your financial information to your initial meeting. That’s likely a professional who values your time and seeks to help you get the most benefit from the meeting.
  • Ask if the financial advisor is a CERTIFIED FINANCIAL PLANNER™. Having this designation means the advisor has worked in the field at least three years, has demonstrated proficiency in the subject matter, meets continuing education requirements, and adheres to an ethics policy.
  • Research to determine if there have been any complaints made against the financial advisor. This can be checked through the Financial Industry Regulatory Authority, the National Association of Insurance Commissioners or the U.S. Securities & Exchange Commission.

 

March 2020

 

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