Hiring a Financial Advisor – What Qualification You Should Look At

At some point, you will probably need the services of a financial advisor. Depending on your understanding of financial matters, you may need answers to tax questions or a complete saving and spending plan. When you start looking for a financial advisor, you will find no shortage of candidates. However, finding one that meets your needs may be a challenge.

Types of Financial Advisor Certifications

Start by understanding the various certifications you will encounter.

Certified Financial Planner (CFP): This designation is awarded to anyone who passes a series of tests, has at least three years’ experience, an undergraduate degree, and has completed a curriculum of study outlined by the International Board of Standards and Practices of Certified Financial Planners. Fifteen hours of continuing education are required each year.

Chartered Financial Consultant (ChFC): This certification is granted by the American College in Bryn Mawr, PA. There is a comprehensive course of study followed by 10 two-hour exams. The American College also grants a graduate degree in financial services.

Accredited Personal Financial Specialist (APFS): This designation is issued by the American Institute of Certified Public Accountants. Recipients must be Certified Public Accountants (CPA), then pass a one-day exam and have at least 750 hours of experience in personal financial planning in the three preceding years. Twenty-four hours of continuing education directly related to personal financial planning are required each year.

Methods of Compensation as Financial Advisor

Financial advisors are paid for their services in one of the following three ways. It is important to understand ahead of time how an advisor is paid.

Hourly Fee: Fee-only advisors charge for the time spent with a client and working on the client’s business. Total charges can become substantial for a comprehensive plan and implementation.

Sales Commissions: Some advisors offer free planning service with an expectation of making a commission on the investments you select. If you choose this type of advisor, be sure of financial advisor qualifications and that the investments offered fit your needs.

Combination: Some advisors calculate a fee based on the time spent on your business. Then, you may choose to pay the fee and go elsewhere to implement your plan; or, if you buy investments from the advisor, any commissions received are credited to your account. Most people prefer this approach as it offers some savings along with freedom to choose who handles their investments. Good financial planning is a combination of analysis and application tailored to your specific needs and circumstances. It is not a sales approach for marketing investment products. Therefore, you need to sort out the method of compensation that best suits your situation.

Choosing an Advisor

When you decide to engage the services and hiring a financial advisor, start by sort of based on their financial advisor qualification. Then you may do checking with others for recommendations. Then, schedule meetings with two or three to see which one best fits your needs. Here are some questions to ask on your first visit.

- What are your background and experience? Look for someone who has been in the business 10 years or more.
- What degrees and designations do you hold? Look for someone who holds one of the three designations mentioned earlier. While they are not guarantees of qualifications, they are indicators of education and experience.
- Do you consult other professionals? Seldom is one person an expert in everything. Expect an advisor to consult with a CPA, insurance specialist, investment advisor, estate attorney, and a tax attorney in developing a comprehensive plan.
- How do you charge for your services? You need to know if there is any chance of advice being tainted with greed.
- What are your typical client’s financial circumstances? You want to hire an advisor who deals with clients similar to you.