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Finding a Reputable Financial Advisor

Dollars and Sense

Just because your father has been working with the same financial guy for 25 years doesn't necessarily mean that you should work with him, too. Perhaps, though, that service record should point you toward the firm the guy works for, where you might find someone else that you'd like.

Dollars and Sense

It's important to find somebody who shares your views and philosophies on invesments, so don't hire someone without first having a meeting to get to know that person. Remember that you should have some good financial information and understanding under your belt before the meeting, because you've been doing your homework and reading about investments and other financial matters that may affect you.

A good way to find a financial advisor is by using your ears. Listen to people at work when they talk about money at the water cooler and make a note if somebody's raving about an advisor with whom he or she's been working. Do any of your friends have financial advisors? How about your relatives? If you have a lawyer or accountant, you can ask her for the names of some good financial advisors. If you keep hearing the same name in the context of good financial help, that person is probably worth checking out.

When you're with your prospective advisor, there are some questions you should ask. Let's get one thing very clear, though, before we start. Don't forget, even for a minute, that you're the person who will be hiring the financial advisor, and you'll be paying his fees. It's not the other way around.

Many people are intimidated by professionals, because they feel stupid or uninformed around them. Hello! That's why you're meeting with the advisor in the first place. It's understood that he has more expertise in the finance area than you do, and hopefully you can benefit from his knowledge. That's the point, right? You don't need to im-press the financial advisor; he needs to impress you. Some questions you should ask the financial advisors you consider are listed here:

  • How long have you been in this business? As with most professions, experience is important. You want to find someone who fully understands the financial industry and all its nuances.
Pocket Change

When choosing a financial advisor, ask to see a Form ADV. This provides a person's background, and whether there has been any trouble in the past with the law or with investment regulatory offices. If an advisor refuses to make this form available, it should set off warning bells.

  • How have you prepared for this job? You'll want to know about your potential advisor's education and previous job experience.
  • What was your job before you became a financial advisor? Look for a logical progression, such as moving into a financial advisor position from a banking job. If the progression doesn't seem logical, be sure to ask for an explanation.
  • Can you give me the names of some other clients, please? References are very important. If you talk to other clients and don't get all the information you're looking for, don't be afraid to ask the candidate for more names.
Pocket Change

Some financial advisors cater to particular groups of people, claiming they can better serve their needs with specialized advice. American Express has trained some of its advisors to handle the particular financial needs of gays and lesbians. Several large financial firms offer specialized advice for women, college students, nonprofit groups, and so forth. Some planners cater to ethnic groups such as African Americans or Asians.

Finding a Financial Advisor Online

There are lots of online brokers these days, with more and more showing up all the time. If you're going to use one, do your homework and compare what different brokers offer, not just what fees they charge. Look for quality trade executions, online newsletters and reports to keep you informed about what's happening in the financial world, 24-hour telephone service, personal access to representatives in case you need face-to-face service, and customized stock alerts to let you know when something is happening that might affect your account. Also, be sure to find out how you'll be able to access your accounts in the event that you don't have a computer handy. Is there an interactive voice response phone system? Or can you access through a PDA?

Some popular online brokers include Ameritrade at wwww.ameritrade.com, Datek Online at www.datek.com, Fidelity Investments at www.fidelity.com, Waterhouse Securities at www.waterhouse.com, and E*Trade at www.etrade.com.

Go With the Gut

There's one more important factor when you're choosing a financial advisor: your gut. Some people click, and others don't. Although you should never hire somebody just because you like him, you probably shouldn't hire somebody whom you just don't like.

If you like somebody, and you're assured that he's professional and good at what he does, then it sounds like you've got a match. You need someone who will take the time to talk with you, teach you, and be there for you. If you don't like someone, it probably will be very hard to work together effectively, even if he's the best financial advisor in the business. Ultimately, the decision is up to you. Consider all the factors, throw in your gut feeling, and go for it.

More on: Family Finances

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Excerpted from The Complete Idiot's Guide to Personal Finance in your 20s and 30s © 2005 by Susan Shelly and Sarah Young Fisher. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

To order this book visit the Idiot's Guide web site or call 1-800-253-6476.


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