How to Find a Good Financial Advisor
Stop. Before you read this post, go read the article on what "financial advisor" even means, if you haven't already. There are lots of different types of financial advisors out there, and lots of combinations of those types -- you need to know what you're looking for before you can learn how to find it!
Go ahead. I can wait.
Done? Good. I'm going to assume that you're in agreement that a "fee-only financial planner and investment advisor" is the way to go; otherwise, this article isn't going to be terribly helpful!
What Does "Financial Advisor" Even Mean?
John Oliver's bit on financial advisors is an excellent (and hysterical) segment, and he hits the nail on the head: the term "financial advisor" is so ill-defined as to be meaningless. If someone calls themself a "financial advisor", that actually could hold a wide variety of meanings, both in terms of the work they do and in terms of how they get paid (and, therefore, potential conflicts of interest).
Here's a breakdown of the four major types of "hats" a financial advisor might wear. Note that these are by no means exclusive -- any given advisor may be virtually any combination of the four, which can muddy the waters even further!
10 Reasons Why We Choose to be a Fee-Only Financial Advisory Firm and Where to Find Others Like Us
The Department of Labor’s Fiduciary Rule is officially dead after a key deadline recently passed without action. Of course, once the big banks, insurance companies, and brokerages got ahold of the bill, it had been significantly watered down anyways. For example, many of these companies argued that their advisors (who hold the title financial advisor and market themselves, as such) aren’t actually financial advisors from a technical standpoint, but salespeople. Therefore, they would not be beholden to any fiduciary rule!!!
My guess is you feel just as outraged reading this as I feel writing it, but it’s true. So next time you see a commercial sponsored by a national brokerage company about the high quality of their financial advice, trust that they aren’t talking about themselves – they are, as they admitted in legal documents, just salespeople.
The False Equivalency of Financial Advice
All financial advice is not the same. For far too long, the leaders and lobbyists of the largest financial services companies have intentionally confused the public about what is or isn't advice. Do most financial professionals give advice? Yes. Are they all willing to take legal responsibility for that advice? No.
Depending on whose numbers you use, there are just over 300,000 US based financial advisors in the country. That number is deceptive because the use of the title "advisor" or "adviser" is not yet regulated so your grandma could wake up one day and call herself a financial advisor.
Do I Need a Financial Planner?
Financial planning has evolved over the years. Since I’ve entered the profession, technology has enabled planners to help more and more clients. The financial planning software has improved and reduced the amount of time it takes to gather financial data. Real-time account aggregation and encrypted “vaults” to store sensitive financial information are now a cornerstone of any planning practice. Today, planners are able to focus more on the qualitative side of our professions. Getting to understand our clients at a deeper level, what behaviors and habits drive their financial decision making, and helping them articulate goals.
Are you searching for a financial advisor? Be sure to check out our Find an Advisor portal, where you can browse through hundreds of financial advisors based on what's most important to you.
Following along with the blogs of financial advisors is a great way to access valuable, educational information about finance — and it doesn’t cost you a thing! Our financial planners love to share their knowledge and help everyone regardless of age or assets.