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Selecting a trustworthy, competent financial advisor may be one of the most important and challenging decisions you will make regarding your personal finances.  The following are a few considerations as you begin your search.

First, although we are using the general label “financial advisor” here, there is no consensus on what exactly allows someone to identify themselves as a financial advisor or financial planner. Indeed, you may encounter insurance agents, stockbrokers, accountants, attorneys, and financial planners all offering to provide financial advice.  Each of them could legitimately claim to be a financial advisor, despite great differences in the types of advice and expertise each provides.

Second, methods of compensation can vary greatly, the nature of that compensation may not always be transparent, and each way of compensating your advisor has the potential for creating conflicts of interest. While some advisors may bill for their work on an hourly basis, two other arrangements are more common. First, the advice might include recommendations to purchase financial products (such as a mutual funds, annuities, or insurance policies) which then provide a commission payment to the advisor. Alternatively, an advisor who is “fee based” will provide ongoing investment management and financial planning guidance in exchange for an ongoing fee. While none of these are inherently right or wrong, a particular compensation method may not be most appropriate for your needs. If you suspect you need more life insurance and would like a general financial checkup, using a commission-based insurance agent could be an excellent choice.  However, if you are seeking ongoing financial advice as you get closer to retirement, a fee-based advisor has an incentive to meet with you year after year, while his commission-based counterpart probably does not.

Third, any advisor who has managed to stay in business for more than a few years is invariably someone with above-average interpersonal skills. Convincing people to pay for intangibles and helping them to understand financial concepts require specific talents:  verbal facility, empathy, persuasiveness, and the appearance of trustworthiness are essential.  Unfortunately, if these traits are not anchored to rock solid ethics, and ideally God-honoring ethics, the advisor may turn out to be a charlatan. Choosing an advisor primarily because “he seemed like such a nice guy” could become a costly mistake.  Sadly, many church members have fallen prey to unscrupulous or merely incompetent advisors who found their way into the flock and seemed to be “one of us.”

Here then are recommended steps you can take to evaluate whether an advisor might be the right one for you:

1. Obtain a referral from someone you trust. While a solid referral can be helpful in finding a competent, ethical professional, do not blindly hire someone because your neighbor says he is a nice guy (or gal!). Ask the referrer:

  • How did you find this individual? What kind of research did you perform?
  • How long have you worked with him or her?
  • What is the nature of the work they have done for you?
  • How are they compensated?
  • Have you experienced any mistakes by the advisor, and if so, how were they rectified?

When you meet with a potential advisor to interview him or her, consider bringing along a trusted friend or relative who may have greater experience in financial matters. Inquire about how often they would expect to meet with you in the years after the initial work has been done. Will they recommend regular review meetings or are they assuming you will raise your hand if you need help? Ask for details in writing regarding what you will be paying and how the advisor will be compensated. Ask if the advisor has any upcoming client events, such as an update on the financial markets, which you might attend as a guest. If so, speak with several existing clients and learn as much as you can about their experience with the advisor and his staff. There should be no pressure on you to make a decision at a first meeting, but you should also be respectful of the advisor’s time and not draw out your decision unnecessarily.

2. Check with the appropriate regulatory agencies to determine if there is any disciplinary history for the individual you are considering:

  • Investment representatives: anyone handling or recommending investments for compensation must be registered through FINRA (Financial Industry Regulatory Authority) as a representative of a broker/dealer or as a representative of an investment advisory firm regulated by the SEC (Security and Exchange Commission) or (for small firms) by the state. Visit https://brokercheck.finra.org.
  • Insurance & annuity agents: anyone selling insurance or annuity policies must have a state insurance license issued by the state in which they reside. They must also be licensed as a non-resident agent in any other states in which they conduct business. Contact your state department of insurance to ask if the agent has any disciplinary history or customer complaints, although the amount of information they will share varies by state.
  • Accountants: there are various specialties within the accounting profession, many of which have little bearing on matters of personal finance. The AICPA (Association of International Certified Professional Accountants) confers the Personal Financial Specialist (PFS) designation on CPA’s who have completed an extensive course of study on personal financial planning and passed an exam.  While other accountants may be able to assist you, a CPA with the PFS designation would be the ideal choice. Visit https://nasba.org to find your state’s board of accountancy and then search for the individual accountant to determine if they have any disciplinary history.
  • Financial Planners: unfortunately, many practitioners may identify themselves as “financial planners,” but the use of the term provides little guidance as to their background and experience. However, the designation Certified Financial PlannerTM can only be used by an individual who has completed an extensive course of study on personal financial planning, passed an exam, and has attained a certain amount of experience. Since most CFP® professionals handle investments or provide investment advice, you should find them in the Broker Check database (https://brokercheck.finra.org). Visit the website of the CFP board to determine whether there is any disciplinary history: https://letsmakeaplan.org.
  • Attorneys: an attorney will rarely be a primary source for personal financial planning advice, but his or her services can be invaluable for formulating or updating your estate plan (wills, trusts, powers of attorney). To determine if an attorney has a disciplinary history, perform an internet search for “ABA National Lawyer Regulatory Data Bank.”

Finally, don’t forget to bathe this process in prayer.

Gregory S. DeJong serves as a ruling elder at Bethel Orthodox Presbyterian Church in Wheaton, Illinois, and is a member of the OPC’s Committee on Ministerial Care and serves on the board of the OPC Loan Fund. Ordained Servant Online, January 2021.

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