Having a financial advisor on your team is no longer a privilege only for the 1%! In the wonderous modern era, everybody can have access to a financial advisor that can steer your investments in the right direction.
However, financial advising is a largely unregulated field with many different acronyms that can leave anybody feeling confused.
That is not to mention the inherent conflict of interest that can arise with a financial planner. Many financial planners earn their salary by selling commission-based products, even if these products are not the best fit for the individual.
Because of this conflict, there is a whole category of financial advisors who choose to work as fiduciaries to their customers. (“A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.” – Wikipedia definition)
Because these planners are fiduciaries (ask them to sign a fiduciary oath before you start working with them, just to be sure) they put your interests above their own. This means that any investment opportunities that they suggest are an honest suggestion, without any hidden motives.
Photo by Amy Hirschi on Unsplash
Here are the three things to look for in a financial planner:
1) The CFP acronym is behind their name.
The Certified Financial Planner Board of Standards requires:
- 12-18 months of coursework (+ a bachelors degree in any field)
- Passing of a 170-question exam (with a 67% pass rate)
- Either 6,000 hours of work related to the financial planning process or a 4,000-hour apprenticeship to a financial planner
- An oath to the CFP Ethics Declaration and a full background check
If there is any question about the legitimacy of an individual’s CFP accomplishment, you can verify their status here.
2) They Have Worked with People in Your Situation
If you racked up 5 figure debt with payday loans but your financial advisor has never heard of a payday loan, keep looking.
3) Fiduciary and Fee-Only
These were mentioned above. Have your financial planner sign the fiduciary oath for you so you know that they are on your side. Also, it is best to have your financial planner on a fee-only payment.
Typically, financial advisors are paid on a percentage of your “total assets under management.” But when a planner is fee-only, there is less conflict of interest without hidden referrals or commission-based products.
Now, where do you start searching for a financial advisor?
Here are three networks of financial planners that have been recommended by Erin Lowry in her book Broke Millennial:
X Y Planning Network – These advisors must be CFP’s and fiduciary advisors, no asset minimum requirements
Garrett Planning Network – CFP’s, fiduciaries, fee-only, no network minimum requirements
NAPFA – (The National Association of Personal Financial Advisors) Also CFP’s, fiduciaries, fee-only, possible asset minimums
There we have the basics to finding your first financial advisor! If you have more questions, I highly suggest the book Broke Millenial, Erin Lowry has a whole chapter on this exact topic.
If you found this article to be helpful, please upvote or clap for it and follow me for more!
Here’s my etsy store (feedback encouraged): https://fancypantsanimals.etsy.com