Thank the adviser for her interest — and then look for someone who wants to focus on people in your income bracket. Not only will such an adviser be more attentive, but she’ll be more fluent with the issues you face.
8. "Your friend referred you; you know you can trust me."
If friends and family really knew what was best, blind dates would have better odds. Conventional wisdom says that personal references are the best place to start. But most people don’t really know how their adviser stacks up compared with others.
When Minda Cutcher, a manager in San Jose, California, got married in her early 40s, she transferred most of her assets from her longtime financial adviser to an acquaintance of her husband’s. "They played racquetball together," says Cutcher, now 50. "He hadn’t been in business long, and my husband wanted to help him out." Unfortunately, the new adviser was more conservative than Cutcher’s old adviser. He put much of their money into certificates of deposit, locking it up at rates that were below market. Cutcher finally returned to her old adviser, but some of her funds are still in those CDs.
Be prepared to grill potential advisers; use the checklists at napfa.org. And go online to see advisers’ track records. Ask only the most money-savvy people you know — say, CPAs or estate-planning attorneys — for recommendations.
9. "Let’s start with just one portion of your investments."
It may work to have an adviser handle just one part of your assets. But only if you first get a plan from a comprehensive financial planner. And don’t give your adviser incomplete information. You could be setting him up to fail.
Find a financial planner you trust, and tell all. Your adviser has to know everything — even about the cash you hide from your husband — to write a solid plan that will help you reach your goals.
What Financial Titles Mean
Line up a bunch of business cards from financial advisers, and you’ll see an apparently random jumble of words, followed by baffling acronyms. But if you want trustworthy advice, you can’t just ignore the alphabet soup. Here’s a cheat sheet.
Financial adviser, planner, investment consultant, analyst, wealth manager: Generic terms, not official or regulated titles. No training or experience required; anyone can hang out these shingles. Typically works for a brokerage house and earns commissions.
Broker or broker-dealer: Legal term for anyone licensed by the National Association of Securities Dealers (NASD) to buy and sell securities (stocks, bonds, mutual funds) on commission. At brokerages, officially referred to as "registered representatives."
Insurance agent or broker: A "captive" agent works for a single company and sells only its products. Independent agents can comparison shop among insurance companies to find you the best deal.
Chartered financial consultant (ChFC): An insurance agent with extra credit. A ChFC has at least three years of experience and has passed an exam on financial-planning basics, such as taxes, investment, and estate planning. (For information, go to chfc-clu.com.)
Certified financial planner (CFP): A planner with at least three years of experience who has passed an exam issued by the Certified Financial Planner Board of Standards. Subject to disciplinary process if they violate ethics code. (For information, go to cfp.net.)
Fee-only planners: Earn an hourly or flat fee or a percentage of the assets they manage for you. Never paid on commission. Go to napfa.org (National Association of Personal Financial Advisors). Hybrid or fee-based may earn both fees and commissions.
Useful Web Sites
Consumer Federation of America. Click on "Publications" to download a brochure, "Cutting Through the Confusion."
U.S. Securities and Exchange Commission. Information aimed at investors.