Help!

By Carrie Schwab-Pomerantz

December 29, 2014 6 min read

Dear Carrie: Though I've always managed my own money, it's getting harder for me to stay on top of everything. I'm considering a financial adviser, but I feel wary. Any tips on what/whom to look for? -- A Reader

Dear Reader: Financial advice can come in a lot of forms and be delivered by a variety of professionals, so it's not surprising that you're feeling unsure. Just wading through what has been referred to as the alphabet soup of financial certifications -- RIA, CFA, CPA, CFP, to name just a few -- is enough to make you hesitate.

The positive side is that you have a choice. But finding appropriate and reliable advice at a reasonable cost takes careful thinking and research.

Start by Deciding How Much Advice You Need

Financial advice isn't all or nothing. You are in control and can choose the type and amount you want.

--One-time or periodic consultation. If you just want help keeping your portfolio on track, you could simply check in with an adviser now and then. A consultation would give you the opportunity to discuss strategy and review investments. For a little more help, you could arrange to meet with an adviser on a regular basis. Either way, after the adviser's recommendations, you'd be the one making the decisions. This is often a good choice for young adults or others who are just starting out.

--Ongoing management. This is a bigger proposition and is generally best-suited for people with at least $250,000 in assets to manage, although minimums vary. In this arrangement, an adviser will work with you to devise a long-term investment strategy and then manage your accounts for you. You're still very much involved, but you turn day-to-day control over to your adviser.

--Complete financial plan. Basically, this includes all aspects of your financial picture -- investments, retirement planning, estate planning, taxes and insurance -- and makes sure that all the parts are working together. In my mind, almost everyone could benefit from having this type of holistic analysis on a periodic basis. However, it also takes a fair amount of your time and effort as you gather all the necessary information and communicate your long-term goals.

Understand What the Credentials Mean

It's important to understand that there is a wide variety of financial credentials, representing an equally wide variety of experience and regulatory oversight. Perhaps the most important distinctions (and most often confused) are those among a broker, an investment adviser and a financial planner.

A broker works for a broker-dealer and is registered with the Financial Industry Regulatory Authority to buy and sell securities on your behalf. A broker can help you evaluate your portfolio, make buy and sell recommendations, and execute trades.

In contrast, an investment adviser is registered with either the Securities and Exchange Commission or a state securities regulator specifically to provide financial advice and management, which can include buying and selling securities. A distinction is that registered investment advisers are held to a fiduciary standard, which means they are required to act in your best interest at all times, whereas a broker is held to a different suitability standard, meaning recommendations must be appropriate to your needs.

Another option is to work with a Certified Financial Planner, who is required to complete extensive training and continuing education and can help you with big-picture planning, as well as portfolio management. A good resource for finding a CFP is the Financial Planning Association's website, at http://www.plannersearch.org.

Know What You're Paying for and How

Another important issue is compensation. A one-time consultation might be free, or it could be charged by the hour. For ongoing management, it's common to be charged a percentage of assets managed, typically averaging about 1 percent. A comprehensive financial plan may be included in your investment management service, or it may entail a separate fee.

It's also critical to look out for potential conflicts of interest, so you should understand whether your adviser stands to benefit from incentives such as commissions by selling you a specific type of investment. The bottom line is that your goal is to make certain an adviser's counsel is based on what's best for you, not what's best for his or her own paycheck.

Ask the Right Questions

Finding the right adviser is about asking the right questions. Arrange for an initial consultation (it's usually complimentary), and ask about education, time in the business, number of clients, types of services and the amount of money under management. Find out about the person's investing philosophy and preferred types of investments. And get very specific about how you would be charged and why.

Plus, don't overlook the importance of a good rapport. If you expect to have a long-term relationship, you want to be comfortable personally, as well as professionally.

Stay Involved

Lastly, even with an adviser, stay on top of things. Meet with your adviser regularly. Make sure you understand the thinking behind any recommendations and advice. And remember that it's your money; the final decisions are ultimately yours.

Carrie Schwab-Pomerantz, Certified Financial Planner, is president of the Charles Schwab Foundation. Her weekly column, "Ask Carrie," can be found at creators.com.

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