The right fit: Tips for hiring a financial adviser


By David Pitt


Hiring financial help is hard.

Anyone looking for assistance managing their money will quickly encounter an alphabet soup of professional designations. Two of the more common are CFA, which stands for chartered financial analyst, and CFP, for certified financial planner.

Although some of these labels indicate specialized training and experience, industry regulators say fake certification claims are on the rise. One recent example surfaced in Utah where a broker listed C.H.S.G. on his business card. Upon investigation, the broker revealed it stood for “Certified High School Graduate.”

Investors are increasingly looking for advice on managing their retirement savings and recent stock market volatility has only made them more nervous. So it’s with eyes wide open that they need to begin their search.

The reality is that getting help can literally pay off. A recent study found that workers who received some form of help pocketed annual returns an average of 3 percent more than workers who handled their own accounts. Conducted by human resources consultant Aon Hewitt and investment adviser Financial Engines, the study examined the 401(k) returns of more than 425,000 individuals from 2006 through 2010. Workers who used target-date mutual funds, professionally managed accounts or accessed online advice were all deemed to have used help for purposes of the study.

So where to start? For many 401(k) account holders, the administrator of their company’s plan will likely be their first stop for assistance. However, they may want a greater level of service to help develop a more comprehensive financial plan.

“Because you just don’t know exactly what you’re going to need as time goes by, the planner can become kind of a quarterback,” said John Diehl, a Wayne, Penn.-based certified financial planner with The Hartford Financial Services Group Inc.

Here are three key steps to find a suitable adviser.

1. Confirm any certifications.

It’s easy to get hung up on titles. You’ll come across financial planners, financial consultants, investment consultants, wealth managers and financial analysts. These are general labels that can be used by anyone.

But you’ll also encounter a range of acronyms for certain credentials, only some of which merit your attention.

CFP, for example, means the person has completed academic study in a variety of courses including topics like risk management and estate planning. The holder of a CFP also must have a bachelor’s degree or equivalent, pass exams and have at least three years of personal financial planning experience. It also signifies a commitment to ethical standards. CFP certification can be checked at the website of the Certified Financial Planner Board of Standards Inc. at

By comparison, the CFA designation requires four years of investment work experience, completion of exams and coursework and other requirements — including adherence to a code of ethics. A search engine on the CFA Institute’s website can confirm an adviser’s credentials,

Although certifications can indicate a basic level of professional competence, you must also assess the person and your potential to have confidence in his or her decisions.

At the outset, it’s also important to determine what additional resources the person has available. Can the adviser tap into a network that includes tax professionals and estate lawyers?

Yet the most important quality is whether your potential adviser listens attentively and understands your situation. If someone is pushing products or trying to impress a preset philosophy upon you without considering you as an individual, look elsewhere.

2. Check an adviser’s professional history.

Most advisers must fill out a document called a Form ADV. Depending on the amount of assets they manage, it’s filed with the Securities and Exchange Commission or a state securities agency.

The SEC database of registered investment advisers can be searched at

To check on individuals registered with state regulators, start with the North American Securities Administrators Association website. NASAA is a voluntary association that provides information on past employment, disciplinary actions and other details. State contacts are available at

More advisers will soon need to register at the state level. The Dodd-Frank Act, which toughened financial regulations, requires investment advisers with assets under management of between $25 million and $100 million to switch from SEC to state registration by mid-2012.

Another resource is the Financial Industry Regulatory Authority Inc., the securities industry’s independent regulator. Its BrokerCheck searchable database is available at .

3. Understand how you will pay.

Financial advisers can collect their pay in several ways. This can include an hourly fee, a flat fee, a commission on a product they sell or a percentage of the assets they manage. Combinations are also possible. For example, a broker might collect a commission on particular securities but also get paid a percentage of assets or a flat fee.

You should also know whether the adviser gets paid additional sales incentives for selling certain investments. You’ll want to know whether the person has a vested interest in pushing certain products or mutual funds.

With that in mind, don’t just seek out the lowest cost adviser. Try to balance the cost of service with quality and the volume of work you expect the person to handle.

Meet with several candidates and use your intuition. You need to be comfortable with the person’s judgment.

Once selected, you can’t tune out. You should monitor your accounts regularly. FINRA offers 10 tips for keeping track of your investments at — AP