How to vet and choose one.
When it comes to choosing a financial planner, most people will accept an introduction from a trusted source who has experience in dealing with that professional. While this is the most common method, and perhaps one of the best, your diligence and selection should be based on a whole lot more than the fact that your neighbor loves that firm. You want to make sure that they are qualified to architect your specific situation.
Find out what types of clients comprise the bulk of the client base. For this topic, you don’t want to be the client who stands out if your situation is very different from what the firm typically does on any given day. Ask about how they acquire new clients, what the typical profile looks like and ask them to describe a few situations that didn’t work out well in terms of client satisfaction.
Equally important is to find out how many clients they work with. In my experience, many firms work with way too many clients. I believe that for a comprehensive wealth management relationship, the maximum number of clients that any one team can handle is 100–125. Some firms may be led by one individual, but have several client service teams. You may prefer not being one of 400 being served by your team. That makes it very difficult for them to deliver the personal attention needed to provide a well-executed comprehensive financial planning service.
If there are any special situations in your family, start inquiring about their experience in those specialized areas early in the conversation. A few that come to mind may be family special needs or dependency issues, ownership of assets in multiple countries or an owner of a business with multiple owners and a sticky succession issue. Financial plans are not created the same, and working with someone who’s experienced in the areas most appropriate to your situation will be very helpful.
Understand how they are paid. Generally, the public is leaning away from commission based financial planners in favor of a more fiduciary like model offered by most fee only financial advisors. If your financial planner does offer or has the capacity to offer commission based products to you, be certain to ask for full disclosure any time the advisor may be receiving compensation from anyone but you. It’s easy to see how advice can become conflicted if a large commission is awaiting the advisor for recommending a specific product.
Check the firm’s regulatory record. All of the information about an advisors past, including any regulatory or disciplinary actions will be found in the firms disclosures. When they give you their form ADV, which is in effect their registration documents as a financial planner with the SEC or state, read it. You’ll probably be asked to sign something that states you received the disclosure, now it’s your responsibility to read it and attempt to understand who you are hiring and what you may be getting.