You’ve worked hard, saving and investing to build a nest egg to last you through your retirement years and, hopefully, to leave a little something to your heirs. You think you’ve done a good job managing your finances thus far but you can’t help but wonder if you could have done better. Maybe you’re just too busy to devote the time and effort to manage your assets effectively. Maybe, like many,you are simply in over your head and know you need professional help to make your money work harder for you.

Regardless of your reason there are many time you need to seek the advice of a financial professional. But with all the scams and so-called ‘experts’ out there you can’t just open the yellow pages or take the word of your neighbor to find someone to entrust your hard-earned dollars. You must do some real research to find a reliable and reputable financial adviser. You must understand what you need to look for and what to avoid. What follows are some keys to selecting a trustworthy professional financial adviser.

Understand Yourself

Before you start your search for a financial professional you need to give some serious thought to what it is you’re looking for in a financial plan and financial planner. Are you looking for someone to manage all your assets or just advise you for future retirement? Are you planning for your childrens education? Are you wishing to start an investment portfolio? What is your tolerance for risk?

Ask Others

A good way to find candidates is by talking with others. Ask family and friends to referrals for professionals they know and trust. Ask your co-workers, maybe the accountant at work for recommendations. Collect the names of at least three professionals before you proceed.

Interview Your Candidates

Once you have gathered your candidates, schedule an appointment to meet with each of them. During these meetings you should talk not only about their qualifications, experience and the services they provide but their particular areas of expertise.

They should not only be interested in your income and assets but in your family, your goals and risk tolerance level. Be wary of those that charge for this initial meeting. Before leaving this interview, you need a clear understanding of:

1. What are their professional qualifications?

There are quite a few different designations and certifications in the area of financial services and the names and the acronyms can be dizzying. Becoming familiar with a few of them will help you whittle down the field to a professional fitting your needs.

CPA – Certified Public Accountant

A CPA is an accountant that has met stringent educational and licensing requirements. CPAs are normally a good option if you are looking for tax planning advice.

PFS – Personal Financial Specialist

A PFS is a CPA that has obtained additional experience and training in the area of financial planning and passed additional examinations. CPAs meeting these requirements may use the CPA/PFS designation.

CFP – Certified Financial Planner

CFPs provide a broad array of financial services. They must have 3 years of experience as well as pass a battery of 3 exams. CFPs must also adhere to a strict code of ethics.

RPC - Retirement Planning Counselor

These planners specialize in retirement planning. Like CFPs they must pass an exam and adhere to a code of ethics.

2. How much experience do they have?

You should be looking for someone with at least 5 to 10 years of experience advising people like you. This is no time to hire a rookie. Those new to the field can’t provide this. You are looking for experienced professionals with a proven track record. You are also looking for experience with clients in situations similar to yours. Just because a professional had years of experience in commercial banking doesn't mean they will be successful handling your personal finances.

3. How are they paid?

There are many ways that financial planners can be paid. You need to have a clear understanding of this so that you can be confident they have your best interests in mind and not merely interested in lining their own pockets with your hard-earned cash.

Ask for a copy of their ADV Form, Part II which planners are required to file with the Securities and Exchange Commission. It details information about the planner’s background, services provided and fees. Be wary of any one that is hesitant or evasive regarding exactly how they are compensated.

There are a number of compensation plans for advisers but three of the most common follow.

Commission

Payment on commission means a percentage of all investments sold to you goes directly to pay the advisor. This has historically been the most common form of compensation for financial planners. It is not necessarily bad but you must be sure that the products being sold you are actually in your best interests. Planners have been known to push investments solely to increase their commissions, a clear conflict of interest.

Fee Based on Assets

This method is becoming increasingly popular. The advisor receives a fee, usually annually, that is based on the total amount of the assets invested with them. The higher the value of your portfolio, the more the adviser receives for managing it.

Flat Fees

A flat fee can take the form of a flat hourly rate or a flat fee for developing a complete financial package. Hourly rates can range from as little as $50 to $300 per hour. You should be able to find a competent adviser in the $50 to $100 per hour range. While there is less concern of a conflict of interest with a flat fee schedule the planner can still pad their wallets by working at a snails pace.

4. Can they provide a list of clients that you may contact?

You can learn much from talking with the clients of your candidates. Ask them how well the adviser has done for them. How well and often does he communicate with them? What are the adviser’s strengths and weaknesses? Have they had any problems working with him or her? Be wary of any adviser that is hesitant to provide such references.

You should feel confident that you are getting honest, straightforward answers to your questions. If you feel the advisor is being dishonest or evasive, excuse yourself and beat a path for the door immediately!

Do a Background Check

Most professional financial planning organizations have education and experience requirements to earn their professional credentials. Most require the candidate to pass 1 or more examinations and have minimum experience requirements. Almost all of these organizations maintain searchable online databases you can check for information on your candidates. Check out some of the following:

Certified Financial Planner Board of Standards

Financial Planning Association

National Association of Personal Financial Advisors

The American Institute of Certified Public Accountants

Also, check with your state’s securities regulator to verify the candidate’s licensure and to check for any history of complaints. You can find contact information for your state at the North American Securities Administrators Association website.  The CFP Board of Standards investigates all complaints against Certified Financial Planners. Any history of complaints and disciplinary actions can be found on their website. If the adviser is a registered broker/dealer, do a check at finra.org. FINRA, the Financial Industry Regulatory Authority website will have details of any broker/deal that has been the subject of disciplinary action.

In Closing

If you are diligent in researching your candidates, you will no doubt be rewarded with a valuable friend in your path to financial prosperity. Remember, though, your finances are ultimately your responsibility. You must exercise due diligence in selecting an adviser and, once selected, in working with them.

Once you have selected an advisor you can trust you shouldn’t just go on autopilot and leave it all to them. This is a partnership and you need to be in frequent communication. They will need to know about any changes to your financial situation and goals. Finally, he needs to be reminded, respectfully but firmly, that you are watching and holding him accountable for managing your assets.