What Kind of Financial Advisor Am I Looking For

[Sebastian (a lady)]

We need to do a lot with our finances over the next few years. Right now we have investments that don't necessarily reflect the best choices, or the most current situation for our family.

 

When we moved last year, we had a couple meetings with a local rep from one company we do business with. But we were very unhappy with her.

 

So while we may try to use a different rep from this company, we're also thinking that the company in question doesn't have the expertise in taxes and college financial aid planning that we need.

 

So what sort of planner am I looking for? Is there a title or a certification that would help us sort through planning for retirement savings, post-military career transition and college financial planning?

[Jane in NC]

Certified Financial Planner?

 

One thing to consider is how the person is paid. Some take a percent of assets, but others charge a flat fee. I have heard that the latter are preferable.

 

Also, as military people, do you belong to a credit union that might have planning services available? My credit union is expanding its services to include investments, retirement planning, etc. Because it is a non-profit, I want to believe that the best interests of the client (not commissions) come first.

[Janice H]

Credit unions may or may not offer the best rates and advice—here's a discussion I found of some people's experiences through Googling http://www.early-retirement.org/forums/f28/credit-union-investment-advisors-want-me-61226.html.

 

Many small banks and credit unions farm out to third parties the investment advisory/sales business and thereby receive referral fees. (You will probably notice little signs signifying you have left the bank area and are now in the investment area.) Typically, the advisor's income is commission based. Regarding the financial professional's titles—at various times "financial advisor" may be the same as "registered representative" (FINRA's Series 7 securities license) = stockbroker= account representative, etc. Unless the regulations change, these commission-based advisors must recommend suitable investments, which may or may not be the same recommendation made by an advisor who has a fiduciary relationship with a client. Fiduciary responsibility is a higher level of looking out for the client's best interests.

 

Here's a humorous list of today's popular credentials, entitled "Everyday [sic] is Graduation Day." http://www.wesselinvestment.com/pdf/Credentials_07.pdf

 

I would look for advice from someone with a fiduciary responsibility who does not get paid via commissions. (Some outfits mischaracterize their commissions as fees, so you may have to ask some pointed questions.) Most fee-based planners/advisors charge a percent of assets managed.

 

A small proportion of fee-based planners charge by the hour—that's what I would look for if there's one near you. I would rather pay a consulting fee for unbiased advice on suitable investments and planning and then put the money in the appropriate funds myself. You can schedule follow up visits as necessary.

 

Credentials with the highest credibility include CFA, CFP, and CPA, which all differ in their core curriculum. Then of course, the individual holding one or more of these certifications has his/her own career experience, specializations, interests, and client base.

 

Invest in funds with the LOWEST management fees (check Vanguard Company, for example). For basic stock (= equity) or bond funds I would choose index funds; I wouldn't pay for actively managed stock or bond funds. (It's a "loser's game," the term made famous by Charles Ellis.) Especially over the long haul, unnecessarily high management fees charged by a mutual fund and/or fees charged by an advisor could eat away your investment returns.

 

 

About me: This is my opinion. I am not currently in the investment industry. During my investment career I have always had corporate, not individual clients. I have taught finance at a small uni. and written finance material for a professional ed. publisher.

[EmilyK]

I would look for a certified financial planner. Either a flat fee or a percentage is fine, but not someone who works on commission.

 

Can you get a recommendation from someone else you know in the military? It seems like there might be some specialized issues there.

[Sebastian (a lady)]

Alas, one of the well known companies that markets to the military is the one we're seeking alternatives to.

[Dana]

I asked my mom's opinion. Dad's retired army & mom's done their finances for years & has done a lot of research about it in recent years. HTH...

 

USAA is quite good with their advise I think, though their

investments are too expensive. Vanguard's investements are the lowest

cost in the industry, though some other companies have some that are

also low. (USAA has a couple and Fidelity has some.) Vanguard has

some advisors online and phone that you pay for. Or, finding a real

person who is fee only Certified Financial Planner would be good (CFP

-- many of the other certifications are worthless.)

 

And Fiduciary responsibility is a technical term that any advisor

should have to the client. Fee ONLY not fee based also is the way to

go, so they not getting commissions or some sort of advantage to sell

you particular investments.

 

bogleheads.org is a great site with lots of educational help.

[Sebastian (a lady)]

Thanks everyone. I had a meeting with our current rep to sign some routine paperwork. In the process of chit chatting about our account, she again made comments that would be applicable to a great number of her clients, but not to us. Irritating.