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How Do You Find a Financial Advisor? (Part 1)

Get the scoop on how to find and prepare to meet with a financial advisor.

By
Laura Adams, MBA
July 10, 2013
Episode #319

You know you should be investing your money wisely to build wealth for the future. But if you’re like most people, you may not have enough time, knowledge, or motivation to get the job done on your own.

In this 2-part series we’ll discuss how to find and prepare for your first meeting with a financial advisor.  

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When you think of a financial advisor, what comes to mind? A greedy Wall Street type who’s screaming out buy and sell orders in the middle of the stock exchange? Although those people exist, that’s not what the typical financial advisor for individuals is really like.

There are many different kinds of advisors in the financial industry. Therefore it’s important to get to know who they are and how they can help you. No matter if you’re choosing an advisor for the first time or switching to a new one, the right advisor can be your best ally for achieving your financial dreams.

Here are 3 of the most common types of financial advisors for individuals:

Advisor Type #1: Certified Financial Planner (CFP)

A Certified Financial Planner or CFP will assess your finances from a high level and help you create a financial plan to achieve your goals. These professionals must pass rigorous exams that cover investing, retirement, estate planning, taxes, and insurance.

Additionally, a CFP must have 3 years of planning experience under his or her belt and stay up-to-date by completing continuing education every year.

Use a CFP when you need guidance about how to accomplish a variety of financial goals, like planning for retirement, sending a child to college, or buying life insurance. They can educate you about product options, help you manage financial risk, and create a detailed plan to accomplish your financial dreams.

You might use a CPF one time or get advice on a regular basis to make sure you stay on track to meet important financial milestones.

Advisor #2: Registered Investment Advisor (RIA)

But what if you just want help making investments? In that case, a Registered Investment Advisor or RIA can be an invaluable resource. An RIA must be licensed to sell investments and is registered with the federal Securities and Exchange Commission (SEC) or state securities authorities.

Although a regular stock broker is also licensed to sell investments, they’re not the same as an RIA. An RIA is held to a higher standard because they must act as your fiduciary. This means that an RIA has a professional obligation to give you investment advice that’s in your best interest.

In other words, an RIA can’t recommend an investment simply because they’ll get paid a high commission. They must understand your financial situation and recommend products that are suitable for your objectives and tolerance for investment risk.

In most cases, you’ll want to develop a long-term relationship with an RIA so they can build your investment portfolio over time.

Advisor #3: Estate Planner

An important part of financial planning is making sure that what you own, or your estate, will be handled according to your wishes if you die or become incapacitated. Estate plans are typically set up with the help of an attorney who specializes in estate law.

Your estate plan should include many tasks, such as creating a last will, a living will, naming an executor to oversee your will, establishing a guardian for surviving dependents, and setting up a durable power of attorney who can make decisions on your behalf.

Another important element of estate planning is limiting the taxes your beneficiaries will eventually have to pay. An estate planner can advise you on whether setting up a trust is right for your situation. And if you own property, you estate plan should consider the best way to hold title to real estate.

Now you have an overview of 3 common types of advisors you might seek out. In part 2 of this series, you’ll learn how to locate these advisors, snoop into their backgrounds, and prepare to meet with them for the first time.

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More Articles and Resources You Might Like:

7 Days to Healthier Personal Finances

Do You Need a Financial Advisor?

How to Make Decisions About Personal Finances?

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