How the Middle Class Can Pick the Right Advisor

At first glance, it might seem like only wealthy people really need financial planning. After all, aren’t they the ones with all the money? But those with modest means still have plenty of financial issues to contend with, and the demand for financial planners from this segment of the population has continued to grow. And while some financial advisors only cater to the wealthy, middle-class consumers still have a wide range of choices when it comes to financial planning.

When it comes to financial planning, there are three or four main categories of advisors. Some of them are paid on commission for selling products to clients, while others charge a percentage of assets under management for their services. Some advisors also charge a flat fee for a comprehensive financial plan while others charge by the hour.  Any type of advisor may manage assets, provide comprehensive planning or other services, depending upon their licensure and business platform. And, of course, some advisors are more qualified than others. (For more, see: see Paying Your Investment Advisor - Fees or Commissions?)

If you have no idea where to begin looking for an advisor, you may want to start by looking for a certified financial planner (CFP) practitioner, as they are required to take a series of courses that cover all aspects of financial planning and pass a rigorous board exam. They must also have at least three years of experience in the financial field and are required to adhere to a strict fiduciary code of conduct, which requires them to unconditionally place their clients’ best interests ahead of their own.

Registered investment advisors and investment advisor representatives are also held to a fiduciary standard in their jobs, while financial advisors who are not CFPs or have a Series 65 license are only held to a suitability standard. This standard is considered to be much lower than a fiduciary standard, as it only requires advisors to determine that a particular investment is “suitable” for the client at the time of purchase. However, there are many “suitable” investments that are still not the very best ones for the client to use. (For more, see: Choosing a Financial Advisor: Suitability vs. Fiduciary Standards.)

There are several organizations that clients can use to search for an advisor. The CFP Board of Standards has a CFP search engine on its website at www.cfp.com, while the National Association of Fee-Based Planners has a similar service on its site at www.napfa.org. The National Association of Insurance and Financial Advisors can be found at www.naifa.org and the Society of Financial Service Professionals is located at www.financialpro.org. Although many of the advisors that you may find on the latter two sites may not necessarily be held to a fiduciary standard per se, most of their members embrace fiduciary standards in their practices.

You can also ask some of your friends or family whether they have an advisor who they can refer you to. Don’t be afraid to visit with three or four different practitioners before you settle on one. This process is remarkably similar to finding the right doctor or other medical professional. And just as you would not want to use a doctor that you feel uncomfortable with, don’t settle for a planner that makes you feel that way either. (For more, see: Fiduciary Designations for Financial Advisors.)

Finding the right financial advisor can be a challenge for those who have never worked with one before, but the time and effort that it takes to do this can be richly repaid when you find that you are able to achieve your financial goals as a result of getting good advice. Visit the websites listed above to start your search for an advisor that you feel comfortable with and has your best interests in mind. Also, consider a robo-advisor. (For more, see: Shopping for a Financial Advisor.)