By Sheryl Rowling
SAN DIEGO–Choosing your advisor may likely be one of the most important financial decisions you make. All financial advisors are not created equal! Borrowing from the National Association of Personal Financial Advisors (www.napfa.org), I will discuss why choosing a Fee-Only advisor is best!
A Fee-Only advisor is not a stockbroker or insurance salesperson. A Fee-Only advisor is a Registered Investment Advisor (RIA) who has a legal fiduciary requirement to put your interests first. And, as Fee-Only®, he/she does not get compensated with commissions.
A financial planner who has a financial stake in the course of action that he/she recommends to a client faces an inherent conflict of interest and cannot be considered objective and unbiased. This is true even if the planner truly believes that he/she has only the best interests of the client at heart.
Unfortunately, the vast majority of financial advisors in the United States are sellers of financial products. Some or all of their income may be dependent upon their ability to steer their clients to a limited number of the thousands of financial products available today. These advisors include stockbrokers, analysts, insurance agents and financial planners. Many of their clients are not aware of their advisors’ dependence on selling products, or do not recognize its difference.
In fact, NAPFA believes that many of the problems that beset Americans today in their financial affairs – including the mismanagement of debt, failure to protect retirement assets and poor allocation of savings and investments – relate directly to the conflicts of interest that pervade the marketplace.
What should you look for in a financial advisor? I recommend the 4 “C”s:
Competence – Check for experience, education, and reputation.
Compensation – A Fee-Only advisor will not be motivated by commissions!
Credentials – Choose an RIA. He/she is legally required to put your interests first. Also look for credentials such as CPA/PFS or CFP®.
Comfort – You will be trusting this person with your financial future as well as your goals and dreams. Please make sure you feel comfortable talking to your advisor and that you feel like your advisor really listens to you! After all, you want a mensch!
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Rowling is a certified public accountant, personal finance specialist, and principal of Rowling & Associates. She may be contacted at sheryl.rowling@sdjewishworld.com