A financial advisor is only for rich people. Wrong.
And, it’s really all about the portfolio. If I know I am well-invested, I’m all set financially. Wrong again.
Financial planning is for anyone who wants to figure out how to grow, manage and protect their wealth to achieve their dreams. You don’t have to be wealthy to hire a financial planner. And, let’s face it, hiring a financial expert for help is a good idea if you’re overwhelmed or confused, are planning a big life change, or your finances have grown too complex for that do-it-yourself plan.
Let me ask you this: If you hear strange sounds coming from under the hood of your car, do you try to fix it yourself or do you take it to a professional auto mechanic? I am guessing you choose the latter, and the same case can be made about hiring a financial professional.
You may wonder, why do I need a financial advisor at all? If you’re maxing out a 401(k) plan and truly living within your means, you might believe that hiring an advisor is an expense you can live without. However, financial planning is about setting up future goals. That’s why the best time to hire an advisor is before your personal and financial life gets too complicated and before big decisions need to be made.
Meanwhile, kudos to you if you have created a diversified investment portfolio. However, it’s only one piece of the financial puzzle.
Beyond investments, a comprehensive financial plan looks at your overall financial situation – debt, income, savings and cash flow. It considers insurance to protect those assets, retirement and estate planning and a tax strategy. This is where a financial expert comes in.
Before hiring that expert, however, you need to do some research and spend the time to connect with the advisor who will fit your needs.
So, how do you start to find a potential advisor match?
First, ask around — word-of-mouth recommendations from family, friends and colleagues are a good first line of vetting. Then, there are online resources. The CFP Board, for example, offers a searchable online database of CFPs at LetsMakeAPlan.org, and you can vet advisors on the Investment Adviser Public Disclosure website from the SEC.
Once you set time to interview some advisors, you should have a list of questions ready. Here are some recommended by the CFP Board:
What are your qualifications and credentials? What services do you offer? Will you have a fiduciary duty to me? What is your approach to financial planning? What types of clients do you typically work with? Will you be the only advisor working with me? How will I pay for your services? How much do you typically charge? Do others stand to gain from the financial advice you give me? Have you ever been publicly disciplined for any unlawful or unethical actions in your career?
Finally, a financial advisor friend told me the most important question to ask an advisor is: What value are you providing me, the client?
For more cool stuff like this, check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow.