Investment Advisor Certifications
First of all, you will want to choose someone who is experienced, has completed a course of study, passed a challenging exam and is fully certified. There is literally an alphabet soup of designations for financial advisors and you will want to confirm your advisor has at least one of them. This is by no means a complete list, but some of the common types of certifications are:
Certified Financial Planner (CFP) - They must complete a program which covers stocks, bonds, taxes, insurance, retirement planning and estate planning.
Chartered Financial Analyst (CFA) - Their courses of study include accounting, economics, portfolio management and security analysis.
Investment Advisory Representative (IAR) - Like the others, they must take classes and pass an exam. They are also required to register with the SEC. They give advice on investing in stocks, bonds, mutual funds and other types of investments. They may also manage portfolios.
As mentioned above, there are also other types of certifications. Some advisors may have more than one designation. It is important to make sure the advisor you use is properly registered, is in good standing with the government agency which regulates them, and adheres to a code of ethics as a fiduciary, which means the advisor will put your interests above their own.
Questions to Ask Your Investment Advisor
You will want to get recommendations from friends, your lawyer or your CPA when you choose your investment advisor. Find out how much experience they have and if their clients have been satisfied with their service.
Once you have found an investment advisor whom you trust, you need to ask them an assortment of questions which will help you decide if they have your best interests at heart and if they can provide the services you need:
1. How do they get paid? What fees and commissions can you expect to pay? How often? Will you pay a quarterly management fee or will you pay a commission for each transaction? Which will be the better value for your account?
2. Will they manage your portfolio prudently? Will they keep your costs to a minimum? Will they diversify your investments and re-balance your portfolio periodically? Do they avoid conflicts of interest such as steering you towards certain types of investments which would pay them higher commissions?
3. Are they willing to work with your attorney to help with your estate planning?
4. Are they willing to coordinate with your CPA to help you decide the type of IRA you should have, when you should take investment losses and when you should make charitable contributions?
5. Can they help you set up a stream of income during retirement? Will they help you decide the best time to take your Social Security? Will they help you learn how much you are required to withdraw from your IRA each year and how to make your IRA last as long as possible? Will they help you plan a realistic retirement budget?
What You Cannot Expect from a Financial Planner
No matter how experienced and careful they are, there are a couple of things you cannot expect from your financial planner.
Do NOT expect them to be able to time the stock market. The best experts in the world can rarely guess when the stock market has peaked and when it has hit its bottom during a recession. The best you can hope for is that they can help you survive recessions with most of your assets intact ... while maximizing your income when times are good.
Do NOT expect them to magically cut your taxes. There are only so many legal and wise deductions you can take. It does not make sense to cut your taxes by making foolish decisions such as intentionally taking out an excessively large mortgage, choosing a bad investment in order to get a tax loss, or giving more money to charities than you can afford.
What are Your Responsibilities in Working with a Financial Planner?
It is just as important for the client to be honest in their financial dealings as it is for the financial planner to be honest. A planner does not want to be pulled into a shady investment scheme because, in the long run, it will not benefit either of you.
In addition, you should pay attention to your portfolio and consider the suggestions of your financial planner thoughtfully. You should also carefully review your statements and transaction confirmations. Sometimes, even when you and your planner do everything right, the traders or corporate offices for the company could make an error. When this happens, you want to catch it as quickly as possible. It is your money, so you need to pay close attention to what is happening in your portfolio.
If you pick a planner carefully, have reasonable expectations, and do your part in following your money, you will get the most value out of having a professional financial advisor manage your assets.
If you are interested in additional information about retirement planning, where to retire, common medical problems, Social Security, Medicare, family relationships and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.
Watch for my book, Retirement Awareness: 10 Steps to a Comfortable Retirement, which will be published by Griffin Publishing in 2018.
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