Choosing a Good Financial Advisor...the most important investment you'll ever make

By J.D. MacRae, CFP

Many people spend more time planning for a vacation or buying a sofa than they do planning for their financial future. When they finally decide it’s time to put their financial house in order, they don’t know where to start.

Start by getting professional help. You shouldn’t hesitate seeking professional financial advice any more than you would avoid seeking a doctor when you're sick. A professional financial advisor can help you set up a financial plan. He or she can help determine which investments are best suited to achieve your financial goals, establish a savings program to build your assets, and explain potential risks and rewards of different investments.

Probably the most important contribution an independent financial advisor can make is to help you stick to your plan. Research conducted by Dalbar Financial Services found that during an 11-year period ending June 1995, U.S. investors with a financial advisor held their funds longer and earned almost 17 percent more in total cumulative return on their investments than those who purchased their funds directly.

Finding a financial advisor is no different from finding a doctor. People are willing to give a good reference. Ask your friends and relatives for recommendations. Ask about the advisor’s experience, track record, services, investment approach, and fees. And don’t be afraid to request credentials. Remember, it’s your money and your future. If the person you’re considering makes you feel like you’re wasting his or her time, chances are, you’re wasting your money.

Interview any financial advisor you’re interested in to be sure he or she fits your style and risk tolerance. The candidate must understand your investment needs. He or she must be someone you trust and who can tailor a portfolio to meet your personal requirements. A conscientious planner will use the initial meeting to discuss your financial situation, objectives and risk tolerance level.

Consider asking your prospective financial advisor the following specific questions:

• What are your qualifications?
• Do you understand my attitude towards risk?
• May I see a sample of a completed financial plan?
• What services will you provide and how often?
• What fees or commissions do you charge?
• Can you provide references?
  

If you’ve decided to invest in mutual funds, be sure to ask these additional questions:

• How much will it cost to buy into the fund after commissions and fees?
• Will I receive an annual review of the fund and the fund manager’s strategy?
• How often will I receive detailed information about the fund?
• Will my investments be compared periodically with competing funds?
• Will you check with me on a regular basis to see if my investment needs have changed?
  

If you’re ready to get your finances in order, start by investing in professional financial help. Ultimately, seeking out a financial advisor is the most important investment you’ll make.

J.D. MacRae is a Certified Financial Planner with Investment Planning Counsel of Canada, London, Ontario. (519) 663-9662 E-mail: jdmacrae@jpccherryhill.com

Published in Networking Today, October 1999.