Question for the Boston Money Coach:
I’ve had bad luck with a financial advisor. I paid $600 and got a folder of charts depicting my financial situation and a sales pitch for a roster of insurance products. How can I ensure that my next advisor is worth his/her commission?
Response from the Boston Money Coach – Steve Stanganelli:
Regardless of the type of advisor you select or the way you pay them (fee or commission), you really need to spell out the type of advice you’re looking for as well as your expectations. Then ask the advisor how they approach dealing with a client in your situation. Ask if they’ve handled the kinds of things you’re asking about.
Too often the public, those in the profession and those in the media simply equate financial planning with investing. Not every client needs investing help. Not every client has assets to invest. And regardless of how much and whether or not you are investing, true financial planning can benefit you and anyone else.
Generally, someone with a financial planning designation ascribes to a certain set of standards for ethics and professionalism. And they follow a certain approach to planning engagements. The CFP Board outlines this (see www.CFP.net). But many other professional designations do, too: ChFC (more insurance focused), CPA/PFS (the financial planning side for accountants). When interviewing an advisor, you may find the checklist and questions on the public site of the Financial Planning Association of use here: https://www.fpanet.org/FindaPlanner/ChoosingaPlanner/ .
What it sounds like you need is a combination of cash flow management, tax planning (key for small business owners), help creating an Investment Policy Statement – an investment road map (to add structure to your investing process and take the emotion out of it – especially useful if you are a DIY investor) and estate plan. You may find that one adviser has these skill sets or works as part of a team or a larger firm with access to these resources. But you first need to ask and be clear of what you expect for your fee.
You may find it best to work with a fee only or at least a fee-based advisor – someone affiliated with a Registered Investment Adviser firm that offers planning. Some may even offer investing help as needed.
The general approach that the adviser you’re looking for should take is leading with the plan and not simply trying to lead with an investment or insurance product. Or worse, using the time you’ve paid for as a sales pitch. There’s a time for everything and eventually you may need a particular type of product to get the job done. A good adviser focuses on solutions first and does not lead with products. Remember the old adage about the carpenter: When the only tool in the box is a hammer, then all problems look like a nail.
To help you with your due diligence in choosing a Boston-based financial advisor, use the guides available through the CFP Board and Financial Planning Association (noted above). In addition to website like BrightScope, you can also check out sites that list advisers based on certain pre-screened criteria: www.NAPFA.org, www.FPAnet.org, www.adviserrating.com, www.PaladinRegistry.com, www.NAEPC.org.