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Not All Financial Planners Are Alike

Financial Planning

June 2005

Not All Financial Planners Are Alike

Most folks think of words like @##*!*and similar words unfit to be included in this article as bad four letter words and you’ve got to admit, those are bad four letter words, but what is the worst four letter that comes to your mind? In the world of your finances, if it’s not the absolute worst four letter word, loss has to rank among the top five.

Unfortunately, if you put any money into any asset other than cash, you will most likely experience the L word many times before you end your investing career. The trick is to limit the number of times you see the L word in your portfolio, but how do you do that? The short answer is you pick the best qualified individual you can find to help you in investing your assets. To some folks, that’s themselves. Some folks rely on their horoscopes or other "life advisors." Still others swear by this, that, or the other financial guru and others find a financial advisor. This article will talk about only one of those helpers - the financial advisor.

How do I find a financial advisor?

If you are serious about finding a true financial advisor, your first step should be to talk with your other advisors. Talk with your CPA, attorney and insurance agent, along with trusted friends, to get their suggestions on good financial planners. You may be pleasantly surprised to find that your CPA has an ongoing financial planning practice and you might not need to go further. If, however, you do find that your CPA is not licensed to give investment advice, you will benefit from his or her knowledge of the good financial planners in your area. You can also look online at the AICPA, CFP and NAPFA websites. All of these organizations have a referral database to help you find qualified professional financial advisors.

What should I look for in a financial advisor?

Any of the foregoing websites could probably give you a checklist based on a widely published listing of ten questions you should ask before choosing an advisor. Below is the basic list with none of the underlying detail explanations. To get these explanations, you can go to the Federal Citizen Information Center. The ten questions are:
  1. What experience do you have?

  2. What are your qualifications?

  3. What services do you offer?

  4. What is your approach to financial planning?

  5. Will you be the only person working with me?

  6. How will I pay for your services?

  7. How much do you typically charge?

  8. Could anyone besides me benefit from your recommendations?

  9. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?

  10. Can I have it in writing?
These are the ten basic questions to ask a prospective advisor, but you have to ask yourself a few questions also. These questions can be of the utmost importance because no matter how good, the planner is not able to force you into following his or her recommendations. While there can be instances where the planner is truly at fault or even negligent, by-and-large, you will have to remember that a planner can only recommend investments. You will have to decide whether or not to follow those recommendations.

Here are a few questions to ask yourself before you go to the interview:
  1. What are my financial goals? Am I interested only in planning my retirement, do I need money to pay for my kids education, etc?

  2. Where am I in terms of meeting my financial goals? What are my current savings and financial accounts worth? What is the value of my other assets? How much am I making now and what do I expect in the future? You should have some idea of your present financial position before your meeting.
  3. What is my risk tolerance? Truthfully, you already have some idea of your risk tolerance. Are you willing to risk market losses on higher yielding investments or is your main goal in preserving capital? Your answer to this question will have a major effect on what the planner ultimately suggests.
  4. Anything else you might think of.
Here are a few questions to ask yourself during and after the interview, aside from evaluating the results of your questionnaire:
  1. How well is/did this planner answer my questions? Was she or he open and forthright or evasive? Did I like the feeling I got as I listened to the answers?

  2. How well is/did this planner listen to my concerns? Can I expect this person to listen to me instead of sales goals? Am I a person to this planner or am I a potential business asset?

  3. How comfortable am I with this planner? Is this person all business and no chit-chat or vice-versa? Can I trust this person? Do I think I will enjoy working with this person?

  4. Just about anything you might think of.
You see, a planner could answer every question you ask, but if you lack confidence or trust in the person, you won’t sleep very well. Even if the planner is the best in the universe, if you dread talking to the planner because he or she makes you uneasy in some way, or you simply don’t like his or her personality, do you really want to work with that person?

Will a financial advisor make me more money than I can on my own?

If you go into a financial advisory relationship because you expect the advisor to make you money, forget it. Yes, you should expect to receive good solid advice that will prove correct over the long haul, but unless you give the advisor the ability to initiate and execute trades without talking with you, the only product the advisor has to give you is advice. It’s up to you to act on the advisor’s recommendations and for that, you should take responsibility for gains and losses. And just like any other advisor, if you find you can’t rely on the advice you receive, you can always find another. You obviously should expect to do better with the financial advisor than on your own, but ultimately your actions make you or break you and let’s hope it is the former.


We have offered you a number of tools and some questions to answer to help you evaluate a potential financial advisor. These are must - ask questions to make sure you are dealing with an ethical person and someone you trust, but in the end, you will be the one making the investment decisions. This is true even if you simply accept your advisor’s recommendation. If you don’t know where you should start or need help finding an advisor, call this firm. Let’s discuss your needs before you start spending a great deal of time searching for an advisor. Not all advisors are alike and not all advisors are ethical, but you can trust this firm to keep your best interests at heart.

Have a great June and for those of you who will be June brides, congratulations!

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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