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November 30, 2012

Picking a financial adviser

Aparna Narayanan’s November 5th article in The Wall Street Journal  provides tips on how to decide on which financial adviser you should work.  The article is the basis for this discussion.

Determining what help you are seeking is the first step.  You could be looking for an answer or guidance to one or more questions, a comprehensive plan and/or investment management.  Generally people are trying to provide a framework to improve their financial well being.  Often the issue that motivated someone to see a financial adviser is not what needs the most attention.  This cannot always be determined in the introductory meeting.

Understand how the adviser is paid.  You want to understand if the compensation arrangement could create a conflict of interest.  Some advisers get paid only by their clients, in fees that are hourly, a fixed amount or a percentage of investment assets.  Others get commissions or a combination of fees and commissions.  Some advisers are legally required to put their client’s interests first as fiduciaries.

Each adviser has their own approach to an introductory meeting.  Many will offer a free introductory meeting.  The information required for an initial meeting varies among advisors.  The more information you have available the broader the initial discussion can be.  It is best that your partner or spouse is also at the initial meeting.
Understand the purpose of an initial meeting is generally not to provide answers.  The purpose is to see if you (and your spouse or partner) wants to work with the advisers.  The reverse is also true.    The adviser is trying to determine if there is a good fit with you and your needs.

There is no such thing as a bad question.  Listen to the responses to see if the adviser you want helping you with your financial issues.

Let the adviser know once you have made a decision as to who you want to work with.  Also let those you are not going to work with know you will be working with someone else.  This will eliminate unwanted follow-up with you.

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