What to Keep in Mind When Shopping for a Financial Advisor

Choosing an investment professional may be one of the most important financial decisions you make. Finding one with the credentials and experience to suit your individual needs may require a little legwork.

Professional Credentials
The initials following an investment professional’s name indicate a level of achievement or license from an authorized body. Here are some common professional designations.

CFA — Chartered Financial Analysts are experts in the areas of portfolio management, analysis, and asset valuation.

CFP — Certified Financial Planners offer advice on an array of topics, including tax, investments, goal funding, retirement, insurance, and estate planning.

ChFC — Chartered Financial Consultants have supplemented their CLU license with education in the areas of wealth management, retirement planning, income taxes, and estate planning.

CLU — Chartered Life Underwriters specialize in life, disability and long-term care insurance; financial, estate, and retirement planning; and business and employee benefits, including pensions and group benefits.

CPA/PFS — Certified Public Accountants/Personal Financial Specialists provide professional tax planning and other services.

What to Pay
Investment professionals will usually explain early on how they are compensated. Although one method is not necessarily more advantageous than another, you may have a preference. There are three basic methods of compensation:

1. Fee-only advisors charge a fixed fee for their time and service based on an hourly rate or percentage of assets, but sell nothing.
2. Commission-only advisors offer free advice, but charge a commission for transactions on investments and insurance products.
3. Some combine both methods, charging a fee for plan service and a commission for transactions.

Whether your needs involve retirement, estate, or tax planning, it is important to know that — like doctors, lawyers, and accountants — investment professionals have different backgrounds and areas of specialization.

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