Which Financial Advisor Should You Choose?

There are financial aspects like saving money, living frugally, saving for retirement or investing a certain portion of your pay check that I, as a financial blogger, can advice. I can write about importance of having insurance or how can you go about earning money on the side. But, there are specific scenarios where we can’t help you. We are not supposed to provide such personalized financial help to anyone. Financial advisors or planners are there for you when you need to consult your finances with someone well qualified.

There are also tons of financial advisors, with an alphabet soup of letters behind their names, ready to give you guidance for a fee. Not all advisors are created equal, however, and the fact that someone is certified does not necessarily mean that they are the right advisor for you. The same way there are good guys and excellent guys at your work, financial advisors also come with various skill levels and qualifications. Before you pick a financial advisor, you should know what there qualification mean.

Also, you should inquire about his credibility and rating. There are online forums where you can find such reports if a financial planner is really good or not. You also can go by word of mouth and recommendation.

(SEE ALSO – Do you need a money coach?)

Here’s a list of degrees a financial planner can have:

Certified Financial Planner (CFP)

A certified financial planner is a kind of Jack of all trades. He has completed coursework in a variety of financial fields including insurance, estate and retirement planning, taxes, and investing. He has also taken coursework on ethics and had to pass a 285-question exam to earn his certification.

Additionally, he has to have at least three years of experience with financial planning before he begins his coursework, and must complete a two-year apprenticeship under another CFP. A CFP may also have additional certification, such as one for investment consulting information or wealth management.

If you want advice on all aspects of your financial life, a CFP is your best bet. They can help you with everything from budgeting and expenses to estate planning.

Certified Public Accountant (CPA)

Certified public accountants have training in multiple financial areas including accounting, auditing, bookkeeping and taxes. CPAs must also have at least five years’ experience in accounting industry, with two years’ experience in public accounting. Many CPAs work in a business context, but some may also handle personal finances. Like the CFP, the CPA can get additional training and certification in other areas. If you run a small business, or need help with bookkeeping or in getting the best tax breaks for your investments or estate planning, a CPA is your best bet.

Chartered Financial Analyst (CFA)

The chartered financial analyst is required to finish three years of coursework, have four years of professional work experience, and pass an exam to qualify. CFAs focus solely on investments and many of them work as money managers at financial institutions, or head their own investment companies.

If you are only interested in investments, especially if you are looking to run a hedge fund, CFA is your best bet.

Chartered Financial Consultant (ChFC)

The Chartered Financial Consultant completes much of the same coursework as a CFP but is not required to pass a comprehensive board exam. Also the ChFC is a fairly new designation, introduced in 1982 by the insurance industry. Like the CFP, the ChFC can offer comprehensive financial planning and many ChFCs also have Chartered Life Underwriter (CLU) designation, which means they also specialize in life insurance.

If you need general financial advice, with an emphasis on life insurance, the ChFC is your best bet.

Other Considerations

Finding someone with the right credentials is important; after all, it’s your money. However, there are other factors that you should also consider, such as personality traits. You might find an advisor that has the credentials you need, but it won’t do you much good if you can’t get along.

Always take the time to interview any potential financial advisor, and have a list with a few names to choose from. You should have a list of questions that covers everything from his training and certification to his philosophy and approach to financial management.

Pay attention to how you communicate during the interview. If you find that a potential advisor spends most of the time talking about himself, and not much time asking you about your financial goals, that could be a sign that he’s not a good fit.

Readers, share with us some of your experience in dealing with a financial advisor.