My Sunday column this week is chock full of tips on how to find a financial adviser and and how to make sure they're managing your money properly.
I decided to write this column because I frequently get requests from readers asking for help with finding an adviser. I never endorse advisers or financial planning companies. But I can educate you about what you need to know when making this potentially life-changing decision.
I also wrote the column this week because the CFP Board just released "The Consumer Guide to Financial Self-Defense." Don't hire an adviser without it.
As promised, I said I'd list the guide's top 10 red flags right here along with my brief interpretation of each. But I urge you to go out and read the entire guide. It's only 20-some pages and worth the investment.
- Do your homework - Just because you've known the person you're thinking about hiring as your adviser since high school doesn't mean you know him or her. Take the time to research the person's background and understand how the person does business.
- Fill in all the blanks - Don't let your adviser fill out your paperwork. It's tedious, sure, but it's a job for you. Ask for copies too.
- Beware of rogue advisers - Don't trust secret, private or exclusive deals.
- Make sure it all adds up - Look at your statements closely. You might hate numbers, but it's your responsibility to take a look now and then and make sure you understand what you're seeing.
- Don't give away the keys - Don't write checks directly to your adviser and don't loan any money.
- Step back - Say an adviser swoops in after a divorce or a death and promises to make everything right. Be suspicious of pressure tactics and consult a trusted loved one before doing anything. That's good advice at any time, but especially during times of stress.
- Look for the downside - If it sounds too good to be true ... Need I say more?
- Don't let yourself be pressured - See red flag #6. Beware the free steak seminars and advisers who show up on your doorstep too.
- Follow the money - Always ask how much a proposed investment will cost you and how much the adviser will get paid. To me, this is such an important point, I would have placed it in the top three.
- Ask, ask and ask again - Always ask questions and never be afraid to say "I don't understand."
