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Almost half of Americans — 47% — don’t have a written financial plan, according to a recent retirement study from the Allianz Center for the Future of Retirement.
Working with a financial advisor can help turn haphazard financial preparations into a clearer retirement path.
But if you don’t know any financial pros, where do you start?
Experts in the field say it should be as much about finding the right chemistry as it is about finding the right credentials.
“Interview at least three,” said Brad Wright, a certified financial planner and managing partner at Launch Financial Planning in Andover, Mass.
“It’s easy to go with the first advisor you meet, but don’t,” he said.
Instead, make it a priority to find someone you like, because they may be your “financial partner” for years, Wright said.
“You almost want to sit down with as many people as you can until you find that good fit,” said Robert Jeter, a CFP and financial advisor at Back Bay Financial Planning & Investments in Bethany Beach, Del.
Once you start working with a financial advisor, it can take a “really, really bad experience” to leave, due to the hassle involved with upending your financial life, Jeter said.
Industry experts say taking these steps can help you get it right the first time.
1. Conduct a background check
Certain industry organization websites offer tools to search for financial advisors by geographic area or other preferences. That includes the Certified Financial Planner Board of Standards, the Financial Planning Association, the National Association of Personal Financial Advisors and XY Planning Network.
Gather the names of six or seven financial planners, and then visit the websites for their practices, said Dan Galli, a CFP and principal at Daniel J. Galli & Associates in Norwell, Mass.
Also check with regulators to make sure they are professionally registered and to see whether they have client complaints or other blemishes on their records. FINRA’s BrokerCheck and the Securities and Exchange Commission’s Investment Adviser Public Disclosure website can provide access to those records for registered professionals. State securities regulators may provide additional information, particularly for smaller practices.
After you’ve whittled down your list based on personal preferences and excluding advisors with any regulatory red flags, it’s time to set up some meetings.
2. Set dates with different professionals
If you’re thinking of working with an advisor, set dates to meet with several prospective candidates. This can be either in person or online.
Whatever the format, keep in mind that you are interviewing the planner.
“It’s not your job to talk,” Galli said. “It’s their job to answer you in a way that’s clear to understand.”
Ask short but direct questions. Examples may include “How did you get to be a financial planner?” and “How do you do financial planning?” The CFP Board provides a list of suggested questions.
If you get long, rambling answers, that is not a good sign, Galli said.
“Frankly, if you don’t understand what they’re saying, this isn’t a good fit,” Galli said. “It means when they go over your financial plan that they’ve done, you won’t understand that, either.”
Advisors expect that you will be reaching out to at least several professionals, so there shouldn’t be an expectation that an initial meeting will necessarily lead to a long-term relationship.
3. Look for someone who understands your circumstances
Make sure the professional you’re working with has the credentials necessary to understand your personal financial situation. For starters, financial advisors should have a license showing they are qualified to provide advice.
Experts recommend looking for a certified financial planner, or CFP, designation, which is considered the industry gold standard. Individuals who have that designation are required to act as a fiduciary and put their client’s best interests first.
If you’re at or near retirement, you may want to look for an advisor who specializes in that area, such as a retirement income certified professional, or RICP. If you have pressing tax needs, you will want to work with someone who is an enrolled agent, or EA, or a certified public accountant, or CPA.
Ask questions that gauge the advisor’s level of experience with the issues you expect to crop up, Jeter said. For example, if you have looming Social Security claiming or Medicare coverage decisions, how have they handled those issues with other clients?
The answers should be more involved than what you would get if you ran the same queries through ChatGPT, Jeter said.
“Let the advisor show you that they do or don’t work with people like you,” said Eric Roberge, a CFP and the founder and CEO of Beyond Your Hammock in Boston.
For example, if you’re planning to have children and know that child care will be a big issue in your financial planning, ask financial advisors about their experiences with those circumstances. The right professional will be ready with questions to delve into choices you may not have fully thought through, such as whether day care, a nanny or one parent staying home makes the most sense, Roberge said.
Likewise, if you’re a young professional who’s just starting out and juggling student loans, you can find a financial advisor who specializes in those circumstances, he said. Some advisors are a certified student loan professional, or CSLP.
4. Watch out for product pushes and other red flags
Another question that should be high on the list to ask a prospective advisor is, “How do I pay you?” Galli said. The answer to that question should be “really simple and easy to understand,” he said.
Advisor compensation models can vary based on clients’ needs.
A recent graduate who’s just starting out may pay an hourly planning fee, a one-time planning fee or a lower fee service model that’s like a monthly subscription, Roberge said.
More financially established clients may pay a percentage of assets under management, if the advisor handles those assets, or a fee for financial planning, which is often charged hourly.
“Fee-only” advisors, whose sole compensation is fees from clients for planning or advice, may have fewer conflicts of interest. However, it is not necessarily a warning sign if a financial professional also makes money through commissions, such as for selling insurance, Galli said. However, they should be able to clearly explain the differences in how they get paid, he said.
“There’s no right or wrong way,” Wright said. “You just want to have transparency there and make sure there’s value for what you’re paying.”
If an advisor requires a quick decision or pushes the sale of a product, be wary.
“There are very few things in financial planning that need to be done that day, that week,” Jeter said.
“The hard push can definitely be a caution sign,” he said.