Ok, so in the last two posts of this series, 1 and 2.

We talked about how I don’t really like financial advisors and then how some of them are ok.

Now we move on to the last of this series: how to find a good one

So let’s review first.

We want a financial advisor who is:

1. Educated
2. Experienced
3. Fee-Only

Preferably one that aligns with your risk portfolio.

Education:

As I discussed in my previous post the most rigorous certifications are:

CFP® – Certified Financial Planner

ChFC – Chartered Financial Consultant

If I had to choose one of the above, I would probably go with CFP® – Certified Financial Planner. Its certification requires:

• Bachelor’s degree (or higher), or its equivalent in any discipline, from an accredited college or university
• 18 semester credit hours (~6 courses) in financial planning
• 170 question computer based test in a 6-hour testing period
• Pass rate fluctuated historically between a low of 42% and a high of 66%
• Three years full-time or equivalent (2,000 hours per year) part-time experience in the financial planning field
• Two years of full-time experience under the “Apprenticeship Experience” option, which requires experience focused exclusively on personal delivery of all the steps of the personal financial planning process to a client under direct supervision of a CFP professional
• Be approved by the CFP Board during initial certification, which also involves an extensive background check—including an ethics, character and criminal check.
• Adhere to the CFP Board Code of Ethics and Professional Responsibility and to the Financial Planning Practice Standards

So basically, this isn’t a certification you can just get over a weekend. It requires some coursework, a test,  and at least some degree of experience. Having a code of ethics is also helpful.

Experience:

Now, experience is relative. Just because someone has 10, 20 or 30 years of experience as a financial planner doesn’t mean they are actually good. And just because someone only has 1-5 years of experience doesn’t mean they are bad. However, I think it’s a good idea to have someone with enough experience to have been through a down market.

A financial advisor should not base their advice for you strictly based on how much money you make and how much money you have. Those two items, while important, are just two pieces to the whole picture. A good financial advisor will want to know how much debt you have, when you plan to retire, if you ever plan to buy/sell your house, get married,  have kids, etc. Any major life event or major financial event in your life that has happened or will potentially happen are important items that a good financial advisor will want to know about in order to plan things out for you.

Fee-Only:

As I stated before, this means you pay a planner an agreed-upon fee for their time. This can either be a flat rate or an hourly rate. Which you choose is up to you.

Just remember, most of the time, you get what you pay for.

Watch out for Fee-Based advisors. This sounds like Fee-Only, but is very different. Fee-Based means this particular advisor receives a commission based on the products they sell. This is an inherent conflict of interest. Now then, they sound similar, so you might forget which one is the one you want. So just remember this:

Fee-Based means Fee-Biased  

You don’t want someone who is biased to handle your money.

Also:

Make sure there is transparency. You should have easy access to see all of your money at all times (ie. online access through a major broker).

*Ok ok ok, I understand now. CFP, enough experience to have seen a down market, and fee-only. Now what?

If you agree with everything I’ve said above, the next step is to find your financial advisor. You will want to start here:

the National Association of Personal Financial Advisors (www.napfa.org)  Click here to search

Let’s do a fake search. I’m going to search in the 21286 area code. This is Towson, MD, close to where I did my fellowship (University of Maryland).

***Please note, I have no affiliation with any of these groups and have no opinion of them. This is just for the purposes of illustration.

So the first one to come up is:

Greenspring Wealth Management  – Towson, MD

So let’s look at their home page… right there on the home page it says: “Greenspring is an independent, fee-only firm specializing in wealth management and retirement plan consulting services.” Well, that’s nice. Wait a second, what’s this. Fees

Hmm, AUM. I don’t think I like the sound of that. In fact, I can’t find anywhere on their site how much their “fee-only” price is.

Email and get a quote.

So, let’s move on:

&Wealth – Baltimore, MD

This is a slick website, but after much looking around, I can’t find their prices anywhere. However it does state that they are “fee-only”.

I suppose another one to consider emailing.

Ok moving on:

Financial Fountains – Baltimore, MD

This website makes it pretty easy for us. Click on Services and Financial Planning and BAM, $2000 for a 12 month period. I haven’t actually heard of a flat rate over such a long period. However, that might be worthwhile for someone trying to get their “life in order”. $2000 over a 12 month period is $167 a month. That might be something for someone who has never read my website and doesn’t know what a 401k and 403b is…

But you know more than that right? You can Talk the Talk. So let’s look at the other option “Financial Consultations”. It says $200 an hour with at least the “lesser of $500 or 50% of the estimated aggregate fee”. I think that is very reasonable, especially if you come prepared to talk with them. You can get a lot of information in a few hours of sitting down with an expert.

This is a good starting point to get more information about because you have their prices right in front of you.

Ok then, I actually live in Baltimore… so I should use Financial Fountains then? I’m done right?

NOOOOOO. Like I said, I have no idea whether any of these places are good or bad or whatever. That is something you will need to look into yourself. Send out some emails to a few places and get some quotes for their flat rate and hourly rate. Make sure their philosophy aligns with yours. Make sure they have an adequate amount of experience.

TL;DR

Fee-Based is Fee-Biased. Stay away.

CFP (or ChFC), Experienced, and Fee-Only.

Flat Rate or Hourly Rate. You decide.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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