Tips for Finding the Right Investment Advisor Part 2

Markets got you down? Now may be a good time to team up with a good investment advisor - Part 2

Andrew Horowitz
5-minute read
Episode #80

Part II: Finding the Right Advisor

We continue with Part 2 of How to find a good investment advisor, which I took right from Chapter 9 of my audiobook, The Disciplined Investor - Essential Strategies for Success.

We left off with Part One, which covered advisor basics...the things you need to look for in an advisor. Now we will explore some tips to finding the best advisor to work with. The key word there is WITH. This should be a team effort as you need to be involved.

You need to take some time to assess what type of investor you are. Once you have a good idea, start to think about whether or not you want to even consider using an advisor. Either way, you now have a good base of knowledge and are on the road to becoming a Disciplined Investor.

What to Look for In An Investment Advisor

If you feel that you would like to explore the advisor route, here are a few important points you can use as a checklist in the interview process. These are the main areas to focus on, though they are definitely not the only ones you should ask about. A capable advisor has any number of the following to his or her credit:

  • Certified Financial Planner™ (CFP) certification
  • Experience
  • Independent status
  • Full-time status
  • State insurance license
  • An excellent and well-supported reputation

Not all of these are requirements. For example, if you are only interested in an advisor working with your investments, an insurance license may not be of consequence. On the other hand, a full-time status is non-negotiable. There is no way that this important profession can be moonlighted. If someone tells you that they can help you in their spare time, run fast. Look once more at the list. CFPs occupy the first position for one good reason: They are committed and hard working enough to pass the rigorous and exhaustive examination process that comes with the territory.

Why CFP Certification is Important

Becoming a CFP certificant is not easy, as evidenced by how relatively few there are in this country. To put this into perspective, it is reported that as of 2007, there are approximately 50,000 Certified Financial Planners as compared to over 500,000 Certified Public Accountants (CPAs). The main benefit to the consumer is that the CFP certification is a sign that shows advisors who are serious, committed and careerminded. Of course there are also several other designations that may help to identify qualified advisors such as ChFC, CLU, PFS, CFA, among others. However, realize that “qualified” does not necessarily mean they are “good.”

CFP certificants are usually able to take a broader and more balanced look at your goals, your future, and your investment needs. They are also better equipped to provide you with a wide range of non-investment-related services. The curriculum they study covers the gamut of financial planning matters, which is in sharp contrast to similar certifications that focus more time on insurance sales and marketing.