There are some relationships in life that are, let’s just say it, more important than others. Dry cleaner? Not super important. Your hairdresser? Pretty important. Your best friend since childhood? Ultra important. You get the idea. A financial advisor fits somewhere near the top.
There is perhaps no question I get asked more often than how to find a financial advisor you can trust, and this is why. My answer is: Start with your inner circle and use it to build a short-list of advisors who are already doing well by your friends and colleagues. The Certified Financial Planner website or the site for the National Association of Personal Financial Advisors (NAPFA), both of which allow you to search by zip code to find an advisor in your area, are also good resources. Plan to meet with at least three candidates before you make your final decision, and make sure you have a short list of must-haves before you go in.
At the meeting, you’re looking for someone with at least several years of experience, who can explain how he or she gets paid and how much this relationship will cost you, who listens as much if not more than he or she talks and who passes your gut check. If you don’t feel like you can communicate openly and honestly, they might be the best advisor on the planet but they’re not the advisor for you.
And that’s just the beginning. Your journey to financial freedom is a marathon, not a sprint. Here’s how to get the most out of your time together.
Put yourself first—it’s okay to be ambitious.
Don’t hold back with your ambitions—it’s okay to be a little bit selfish when it comes to your finances. It’s important to start your relationship with your advisor being completely honest about what you want for yourself, because they are there to work for you. You are paying them to make your life better and help you achieve your goals—so be bold.
What would your ideal retirement look like? Where would you love to see yourself 10, 20, 30 years from now? A good advisor will want to help you nail down your objectives, assess how you’re progressing so far, and provide you with a road map—filled with benchmarks—to help you get where you want to go. If you want to retire at 60, own a second home, start a business, pay for your kids’ college in full, then don’t be afraid to say just that. If one or more of your goals isn’t realistic given your current financial situation, your planner can walk you through the changes required in order to get there. Your advisor should always be a person with whom you can dream big, so don’t hold back.
Know your limits and feel good about your gut decisions.
There’s a difference between someone pushing you to get better and someone pushing you completely out of your comfort zone and into unknown territory. That’s why it’s so important for you to talk to your advisor about the amount of risk you’re willing to take—and approaching it as something that needs to be agreed upon rather than simply stomached.
If the thought of choosing risky investments fills you with anxiety and dread, then express that to your advisor and he or she can help you work around those fears. On the flip side, if your attitude tends toward the devil-may-care, have your advisor offer up a worst-case scenario: If the markets dropped the same amount that they did in 2008, how would it feel to lose your money? A good advisor will be willing to walk you through all possibilities and permutations until you’re comfortable with (even excited about) how your money is working for you.
Never be afraid to press them for supporting details on their advice. For instance, if your advisor tells you that you shouldn’t buy a house, he or she should be able to walk you through the exact numbers and details of that scenario and help you understand where they’re coming from.
"Don’t hold back with your ambitions—it’s okay to be a little bit selfish when it comes to your finances."
Come to every meeting fully prepared.
Before your meetings with your advisor, ask if they have a particular agenda for things they’d like to discuss. A formalized agenda can not only help your meeting stay on track, it can also jog your memory about questions you may have, which you can jot down before you’re in the room. (It’s along the lines of taking a list of questions to your annual physical.) When you’re formulating questions, it’s a good idea to break things down into categories. You could divide things according to topic: retirement, college savings, house fund, etc., or you could think about things in terms of your past, present, and future.
For example, with the past, perhaps you have old credit card debts, or a 401(k) from a previous job that needs attention. For the present, maybe you need help tightening your budget, and for the future, you may want to look at taking out an annuity or an IRA for retirement. No matter how you structure your questions, make sure they’re written down so you don’t forget anything important. During the conversation, take notes, and if your financial planner needs to circle back to you on something, then make sure he or she follows up with a satisfactory answer.
Don’t be afraid to get personal.
Don’t be afraid to open up when your advisor asks about your personal life—this is an important part of the process. Not all of us are comfortable answering questions about marriage, divorce, a child’s struggles, or aging parents who need money, but you have to open up. Your advisor isn’t just being nice when he or she asks—it’s incredibly important that you answer the questions honestly, and be willing to discuss your pain points, because they all eventually connect back to your finances. If you ever get uncomfortable, just take a deep breath and remind yourself that without a complete picture, your advisor won’t be able to help you—much like a physician wouldn’t be able to make a proper diagnosis with an incomplete list of symptoms. The insight you provide to your financial advisor allows them to better serve you and get you on the right path to achieving your money goals.
Read more about How to Find the Right Financial Advisor for You on the Studio.
Kathryn Tuggle contributed to this story.
*What is an annuity:
Annuities, including variable annuities, are long-term, tax-deferred vehicles designed for retirement, involve investment risk and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½.
Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please contact your representative or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.
Investing involves risk, including possible loss of principal.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.