Looking for an adviser? - MoneySense

Looking for an adviser?

Ensure your financial planner has what it takes.


Go shopping for a doctor and all you need to see is her “M.D.” to know she has the educational background to do the job. Go shopping for a lawyer and all you need to see is his “LL.B.” Go shopping for a financial adviser and the myriad designations are enough to addle your brain. Even within the industry there’s conflict as the camp promoting a single designation meets the camp that thinks designations do diddley for consumers.

Part of the problem is that advisers are so busy fighting over what to call themselves that they can’t come up with a single designation. All consumers want is reassurance that a planner has the essential training, experience and insurance to be included on the short-list when they’re out shopping for an adviser. Without a single, easily recognizable designation, it’s pretty hard for consumers to know just what to expect from a body.

The squabbling isn’t likely to be resolved anytime soon. So if you’re in the market for an adviser, here are five steps to lessen the risk:

1. Ask for a referral from a friend, family member or co-worker. At least you know the adviser recommended has one satisfied customer. Check client and professional references.

2. Ask where your prospective adviser invests her money. Check to see how her investments are doing. If she won’t answer you or hedges, look elsewhere.

3. Ask how he is compensated. Some advisers earn commissions on products they are suggesting to you. Fee-only planners may be more objective, but there will be up-front charges. Be sure to find out how many times per year the fee will be charged. Others charge a combination of fees and commissions.

4. Understand any product you’re buying before you buy, including the rules and restrictions if you need to get at your money in an emergency. And remember the golden rule of investing: If it sounds too good to be true, it probably is.

5. Get everything in writing before you make a commitment. Regardless of the designations involved, ask for the strategy and the products suggested to implement the strategy in writing. At least then if the strategy isn’t followed, you’ll have something to work with when you find yourself in arbitration.

Regardless of the designation your adviser uses, the true test will be how good he or she is at establishing and maintaining a relationship with you. Designations aren’t, after all, the be all and end all. But they are a good place to start. Don’t be disheartened if your first relationship with an adviser isn’t all that great once the initial wooing is over. It may take two or three tries to get yourself mated with someone you can really trust and rely on.